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 P ayment System Rate Update for Calendar Year 2013, Hospice Quality Reporting Requi rements, 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 Ho me Health Prospective Payment System (HH PPS) rates, including the national standardiz ed 60-day episode rates, the national per-visit rates, the low-utilization pa yment amount (LUPA), and outlier payments under the Medicare prospective payment system for home health agen cies effective January 1, 2013. This rule also proposes requirements for the Hospice quality da ta reporting program. This proposed rule would also establish requirements for unannounced, sta ndard and extended surveys of home health agencies (HHAs) and provide a number of alterna tive (or intermediate) sanctions that could be imposed if HHAs were out of compliance with Fe deral 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 progra m, which could remain in effect up to a maximum of 6 months, until the HHA achieve d compliance with the HHA Conditions of Participation (CoPs), or until the HHA’s pr ovider agreement was terminated.CMS-1358-P 2

DATES : To be assured consideration, comments mu st 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 ca nnot 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,CMS-1358-P 3
Baltimore, MD 21244-1850. 4. By hand or courier . If you prefer, you may deli ver (by hand or courier) your written comments before the close of the comment period to either of th e 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 Hube rt 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 stampin clock is available for persons wishing to reta in a proof of filing by st amping 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.CMS-1358-P 4 For information on viewing public co mments, see the beginning of the "SUPPLEMENTARY INFORMATION" section.
FOR FURTHER INFORMATION CONTACT: Kristine Chu, (410) 786-8953, for information a bout the HH payment reform study and report. Robin Dowell, (410) 786-0060, for information a bout HH and Hospice quality improvement and reporting. Kim Evans, (410) 786-0009, for information about HH therapy policies. Mollie Knight, (410) 786-7948, for inform ation about the HH market basket. Hillary Loeffler, (410)786-0456, for information about the HH PPS. Lori Teichman, (410) 786-6684, fo r 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, includi ng any personally identif iable 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 si te as soon as possible after they have been received: http://www.regulations.go v. Follow the search instructions on that Web site to view public comments. Comments received timely will also be av ailable for public inspection as they are received, generally beginning approximately 3 w eeks 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.CMS-1358-P 5 To schedule an appointment to vi ew 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 Diseas es, 10th Edition (ICD-10) Transition Plan and Grouper Enhancements IV. Quality Reporting for Hospices A. Background and Statutory Authority B. Public Availability of Data SubmittedCMS-1358-P 6 C. Quality Measures for Hospice Quality Reporting Program and Data Submission Requirements for Payment Year FY 2014. D. Quality Measures for Hospice Qualit y Reporting Program for Payment Year FY 2015 and Beyond E. Additional Measures Under Considerat ion 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 th eir 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. 105-33CMS-1358-P 7
BBRA Medicare, Medicaid, and SCHIP Bala nced 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, P ub. 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 Assessme nt of Healthcare Pr oviders and Systems SurveyCMS-1358-P 8 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 Expend itures Panel Survey MMA Medicare Prescription Drug, Improve ment, 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 Reconciliati on 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 DemonstrationCMS-1358-P 9 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 Flexibil ity 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 paymen t rates for home health agencies (HHAs) for Calendar Year (CY) 2013 as required unde r section 1895(b) of th e Social Security Act (the Act). The proposed update to th e prospective payment system addresses the market basket update, case-mix adjustments due to variation in costs among different units of services, adjustments for geogra phic 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 met hods described in the CY 2012 HH PPS finalCMS-1358-P 10 rule (76 FR 68526) to update the prospective payment rates for CY 2013 using a proposed rebased and revised market bask et described in section III.C .1 of this rule. This rule discusses the proposed case-mix up-coding adjustment. In addition, we propose additional regulatory flexibility regarding therapy documen tation and reassessments as well as face-toface 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 therapyrequirements and faceto-face 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.

Survey and Certification Requirements The components of the rule which address survey and certification The overall benefit of this rule is the expected increase in provider participationCMS-1358-P 11
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. 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 This is in compliance with OMB Circular A-87.CMS-1358-P 12
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).

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 PP S for all Medicarecovered HH services provided under a plan of care (POC) that were paid on a reasonable cost basis by adding section 1895 of the Social Secur ity Act (the Act), enti tled "Prospective Payment For Home Health Services". S ection 1895(b)(1) of the Act require s the Secretary to establish a HH PPS for all costs of HH serv ices 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 in itially based on the most recent audited cost report data available to the Secr etary; and (2) the standardized prospective payment amount be adjusted to account for the effects of case-mix and wage levels among HHAs.CMS-1358-P 13 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 ad justed for case-mix and geographic differences in wage levels. Section 1895(b)(4 )(B) of the Act requ ires the establishmen t of an appropriate case-mix change adjustment factor for significa nt variation in costs among different units of services. Similarly, section 1895(b)(4)(C) of the Act requ ires 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 a pplicable national average level. Under section 1895(b)(4)(c) of the Act, the wage -adjustment factors used by the Secretary may be the factors used under section 1886(d)(3)(E) of the Act. Section 1895(b)(5) of the Ac t gives the Secretary the opt ion 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 tota l outlier payments in a given year would not exceed 2.5 percent of total paymen ts 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 th e new HH PPS for HH serv ices as required by section 4603 of the BBA, as subsequently amended by section 5101 of the OmnibusCMS-1358-P 14 Consolidated and Emergency Supplemental Appr opriations 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 Budg et Refinement Act (BBRA) of 1999, (Pub. L. 106-113, enacted November 29, 1999). The require ments include the implementation of a HH PPS for HH services, consolidated billing requirements, and a numbe r 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 servi ces 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 Reduc tion 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 th e 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 w ith the statute. The Affordable Care Act made additional changes to the HH PPS. One of the changes in section 3131 of the Affordable Ca re Act is the amendment to s ection 421(a) of the Medicare Prescription Drug, Improvement, and Mode rnization Act of 2003 (MMA) (Pub. L. 108-173, enacted on December 8, 2003) as amended by s ection 5201(b) of the DRA. The amended section 421(a) of the MMA now requires, for HH se rvices furnished in a ru ral area (as defined in section 1886(d)(2)(D) of th e Act) with respect to episodes an d visits ending on or after April 1,CMS-1358-P 15 2010, and before January 1, 2016, that the Secretar y 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 unde r the HH PPS on the basis of a national standardized 60-day episode paymen t rate that is adjusted for the applicable case-mix and wage index. The national stan dardized 60-day episode rate includ es the six HH disciplines (skilled nursing, HH aide, physical therapy, speech-langu age pathology, occupational therapy, and medical social services). Payment for non-routin e 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 c onversion factor (See section II.D.4.e). Payment for durable medical equipment covered under the HH benefit is made outside the HH PPS payment system. To adjust for case-mix, the HH PPS uses a 153-category case-mix classification system to assign patients to a hom e health resource group ( HHRG). The clinical severity level, functiona l severity level, and se rvice utilization are computed from responses to selected data elements in the OASIS assessment in strument 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, Medi care 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 ut ilization payment adjustment (LUPA). Medicare also adjusts the national standard ized 60-day episode payment rate for certain intervening events that are subject to a partial episode payment adjust ment (PEP adjustment). For certain cases that exceed a specific cost threshold, an outli er adjustment may also be available.CMS-1358-P 16 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 nationa l episode rates and the national per-visit rates under the Medicare prospective payment syst em 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. Su bsequently, a more detailed analysis was performed on the 2005 case-mix data to evaluate if any portion of the 12.78 percent increase was associated with a change in the actual clinical condition of HH patients. We examined data on demographics, family severity, and non-HH Part A Medicare expenditures to predict the average case-mix weight for 2005. We identified 8.03 percen t of the total case-mix change as real, and therefore, decreased the 12.78 perc ent of total case-mix change by 8.03 percent to get a final nominal case-mix increase measure of 11.75 percent (0.1278 * (1 – 0.0803) = 0.1175). To account for the changes in case-mix that we re not related to an underlying change in patient health status, we implemented a reductio n over 4 years in the national standardized 60- day episode payment rates and the NRS conversion factor. That reductio n 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) th at set forth the update to the 60-day national episode rates and the national pe r-visit rates under the Medicare prospective payment system forCMS-1358-P 17
HH services. In addition, as discussed in th e CY 2012 final rule (76 FR 68528), our analysis indicated that there was a 22.59 percent increas e in overall case-mix from 2000 to 2009 and that only 15.76 percent of that overall obs erved case-mix percentage increase was due to real casemix change. As a result of our analysis, we id entified a 19.03 percent no minal increase in casemix. 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 paym ent 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 propos ed rule, we have stated in HH PPS rulemaking that we would continue to monito r 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 (nom inal). 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 growt h, 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 average case-mix weight from2009 to 2010. Specifically, the 2009 average casemix 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 dia gnoses from 2009 to 2010, thereby contributing to the growth in total case-mix. In addition, we l ooked at the change in the distri bution of episodes by number of therapy visits from 2009 to 2010 and saw that th e percentage of non-ther apy episodes decreasedCMS-1358-P 18 by 1.56 percentage points and the percentage of ep isodes with therapy increas ed 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 per centage of episodes with 14-19 and 20+ therapy visits. For the remainder of this section, we will disc uss our latest analysis of real and nominal case-mix change. Section 1895(b)(3)(B)(iv) of the Act give s CMS the authority to implement payment reductions for nominal case-mix 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 rulema king, 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 casemix growth, changes in case-mix which are related to changes in patient ch aracteristics, using a regression-based, predictive mode l of individual case-mix weights. The predictive model contained measures of patients’ demographic characteristics, clin ical status, i npatient 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 es timation of the change in real case-mix. We then determined the nominal case-mix grow th from 2000 to 2005 using the regression modelpredicted real case-mix change and the total case- mix change for the time period of interest. Our analysis indicated that there was a 12.78 percent increase in overall case-mix 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 inCMS-1358-P 19 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 acc ount 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 th e 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 cas e-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 da ta 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 coefficien ts in the model were a pplied 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 over all real case-mix change from 2000 to 2008. Our analysis indicated that there was a 19.40 percent incr ease in overall case-mix from 2000 to 2008 and 10.07 percent of that overall observed case-mix cha nge was identified as real case-mix change. Consequently, as a result of our analysis, we id entified a 17.45 percent no minal increase in casemix (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 di fferences in patient ch aracteristics, reflecting changes in coding documentation and other behavior al responses to the ho me health prospective payment system rather than the treatment of mo re resource-intensive patients. To fully account for the 17.45 percent nominal case-mix growth identified from 2000 to 2008, in the CY 2011CMS-1358-P 20 proposed rule, we proposed a 3.79 percent pa yment reduction (replaci ng the planned 2.71 percent payment reduction) in CY 2011 and an a dditional 3.79 percent payment reduction in CY
2012. We received many comments on our CY 2011 HH PPS proposed ru le that criticized our methodology for assessing real and nominal cas e-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 co mments 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 cr iticisms we received about our models to measure real and nominal case-mix change, we procured an indepe ndent 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 allo w a closer look at nominal case-mix growth by categorizing the growth according to provide r 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 risk-adjust payments to managed ca re organizations in the Medicare program. During CY 2012 rulemaking, based on Dr. Gra bowski and his team’s recommendation and our previous consideration to incorporate HCC data in our m odels 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 gr owth from 2000 to 2009, we incorporated the HCCCMS-1358-P 21 community scores, HCC demographic variables, and disease indicator variab les into our models. It should be noted that we e nhanced 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 accommoda te the shift to the 153-group system in 2008, we analyzed real case-mix ch ange for 3 different periods, from 2000 to 2005, from 2005 to 2007, and from 2007 to 2009. The real case-mix cha nge 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 ea ch of the 3 periods (0.0207 case-mix units for 2000 to 2005, 0.0061 case-mix units for 2005 to 2007, and 0.0122 case-mix units for 2007 to 2009). We then compared the real change in case-mix (0.0390 case-mix units) for 2000 to 2009 to the total change in case-mix from 2000 to 2009 (0.2476 cas e-mix units). The total change in casemix from 2000 to 2009 was calculated as the di fference between the average case-mix in 2000 (1.0959) and the average case-mix in 2009 (1.3435). Based on the results from our models, we estimated 15.76 percent (0.0390/0.2476 = 0.1576) of the to tal case-mix change as real. It should be noted that there is a 0.01 pe rcentage 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 estimate d 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.CMS-1358-P 22 This year, we updated our estimates of real and nominal case-mix growth using 2010 data. To determine the amount of real case-mi x 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 rulemaki ng, which was developed using 2009 data. We note that when developing an estimate of r eal case-mix change for 2007 to 2010, we used 2010 data for all of the variables in the model ex cept 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 base d on trends from 2007 to 2009. After obtaining the estimate of real case-mix change for 2007 to 2010 (0.0150 case-mix units), we added this estimate to the 2000 to 2005 estimate of real case-mix change (0.0207 case-mix units) and the 2005 to 2007 estimate of real case-mix change ( 0.0061 case-mix units). After adding together the estimated real case-mix change in case-mix un its 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 fr om 2000 to 2010 was 0.2619 case-mix units (1.3578 – 1.0959 = 0.2619), we estimate that 15.97 percent of th e total percentage ch ange in the national average case-mix weight since the interim pa yment system baseline through 2010 is due to change in real case-mix (0.0418/0.2619 = 0.1597). It should be noted th at there is a 0.01 percentage point difference betw een the calculated and actual va lue 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 cas e-mix 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 2000CMS-1358-P 23

to 2010. Our estimates of real and nominal case-mix cha nge are consistent with past results. Most of the case-mix change has been due to impr oved 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 Nomina l 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 nati onal 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 implemente d 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 cha nge from 2000 to 2009. To account for the nominal case-mix growth through 2009, we finali zed a 3.79 percent paymen t reduction to theCMS-1358-P 24 national standardized 60-day ep isode rates for nominal case-mix 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 percen tage 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 th e remaining increase in measured nominal case-mix, and seek comments on that proposal, rath er than moving forward with the 1.32 percent reduction promulgated in last y ear’s CY 2012 HH PPS final rule. However for CY 2013, we propose to move forward with th e 1.32 percent payment reduction to the national standardized 60-day episode rates as promulgated in th e CY 2012 HH PPS Final Rule (76 FR 68532). Analysis, to date, would seem to indicate a high likelihood of continued growth in nominal casemix going forward. As such, we will continue to monitor both real and nominal case-mix change and make updates as appropriate. CMS will cons ider 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 pr ovision of an addition or adjustment to the national standardized 60-day case-mix and wage-a djusted episode payment amounts in the case of episodes that incur unusually hi gh costs due to patient home heal th (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 aCMS-1358-P 25 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 th e sum of the national wage-adjusted per-visit payment amounts for all visits de livered during the episode. The outlier threshold for each casemix group or partial episode payment (PEP) adju stment 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 th e wage-adjusted estimated cost beyond the wageadjusted threshold. The threshold amount is the sum of the wage and case-mix 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, prim arily 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 out lier pool of approximate ly 2.5 percent. (The previous outlier pool was 5 per cent of total HH expenditures.)CMS-1358-P 26 For CY 2010, we first returned 5 percent of these dollars back into the national standardized 60-day episode rates, the nationa l per-visit rates, the low utilization payment adjustment (LUPA) add-on payment amount, an d the non-routine supp lies (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 polic y 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 th e Act, ‘‘Adjustment for outliers,’’ states that ‘‘The Secretary shall reduce the standard prospective payment amount (or amounts) under this paragraph applicable to HH services furn ished 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 ba sed on the prospective paym ent system under this subsection for the period.’’ In ad dition, 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 Secretar y, ‘‘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 ne cessary 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 project ed or estimated to be made based on the prospective payment system under th is 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 fi rst returned the 2.5 percent held for the target CY 2010 outlier poolCMS-1358-P 27

to the national standardized 60-da y episode rates, the national pe r 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 ame nded 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 loss-sharing ratio. A high FDL ratio reduces the number of episodes that can receive outlier payments, but makes it possi ble 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 paymen ts, 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 per cent aggregate level (a s required by section 1895(b)(5)(A) of the Act). In th e past, we have used a value of 0.80 for the loss-sharing ratio, which is relatively high, but pres erves incentives for agencies to attempt to provide care efficiently for outlier cases. With a loss-shar ing 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 pr oposed 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 rati o in CY 2012. The national standardized 60-day episode payment amount is multiplied by the FDL ra tio. That amount is wage-adjusted to deriveCMS-1358-P 28 the wage-adjusted FDL, which is added to the case-mix and wage-adjusted 60-day episode payment amount to determine the outlier threshol d 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 outli er 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 ab le 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 ap plies the cap to HHAs who have not reached it yet, resulting in underpayments. System cha nges are currently underway, and thus the CY 2010 data file used in our analysis for this proposed rule reflects outlier paym ents with these claims processing errors. Furthermore, another consider ation 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 lik ely 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 the final rule, we will update our estimate of the FDL ratio using the best analysis the most current and complete year of HH PPSCMS-1358-P 29

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 de veloping 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 th e Home Health Market Basket a. Background Section 1895(b)(3)(B) of the Ac t requires that the standard prospective payment amounts for CY 2013 be increased by a factor equal to th e applicable home health market basket update for those HHAs that submit quality data as required by the Secretary. Effective for cost reporting periods beginni ng 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 th e mix of goods and services used to produce home health care, this term is also commonly used to denote the i nput price index derived from that market basket. Accordingly, the term “home health market ba sket” used in this document refers to the HHA input price index. The percentage change in the home health ma rket basket reflects the average change in the price of goods and services purchased by HHAs in providing an efficient level of homeCMS-1358-P 30

health care services. We first used the home health market bask et 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 gr eater discussion on the home health market basket, see the notice with comment peri od published in the February 15, 1980 Federal Register (45 FR 10450, 10451), the notice with comment peri od published in the February 14, 1995 Federal Register (60 FR 8389, 8392), and the no tice 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 e ffective 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-weig ht Laspeyres-type pric e 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 expenditu re. Then the proportion of total costs that each spending category represents is determin ed. 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 appr opriate price/wage variable, called a price proxy. These proxy variables are mainly drawn from publicly availa ble statistical series pub lished on a consistent schedule, preferably at least quarterly.CMS-1358-P 31 In the third and final step, the price leve l for each spending category is multiplied by the expenditure weight for that category. The sum of these products for all co st categories yields the composite index level in the market basket in a given year. Repeating th e third step for other years will produce a time series of market bask et index levels. Dividi ng 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-we ight index because it answers the question of how much more or less it would cost, at a later time, to purch ase 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 Ho me 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 Medica re 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 m oving 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 cate gories, and/or price proxies used in the input price index.CMS-1358-P 32 For this proposed rebasing and revising, we mo dified the wages and salaries and benefits cost categories to reflect re vised occupational groupings of BLS Occupational Employment Statistics (OES) data of HHAs. As a result of the revised gr oupings, we are also proposing changes to the wage and benefit price proxies us ed in the HH market basket. We are also proposing to break out the Admini stration and General (A&G), Oper ations 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 Economi c Analysis (BEA) Input-Output (I-O) Table for HHAs. We are proposing to revi se 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 revi sed and rebased home h ealth 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 f acilities 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 pe riod for all price proxies and weights are set to
CY 2010. We propose to maintain our policy of usi ng data from freestanding HHAs because we have determined that they better reflect HHAs’ act ual cost structure. E xpense data for hospitalbased HHAs can be affected by the allocation of overhead costs over the en tire 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 unrepre sentative of the average HHA costs.CMS-1358-P 33 Data on HHA expenditures for nine major e xpense categories (Wages and Salaries, Employee Benefits, Transportation, Operation a nd Maintenance, A&G, Professional Liability Insurance (PLI), Fixed Capital, Movable Capita l, 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 Wa ges and Salaries, Employee Benefits, A&G, and Other Expenses. After totals for these cost cate gories were edited to re move reports where the data were deemed unreasonable (for example, when total costs were not gr eater than zero), we then determined the proportion of total costs that each category repres ents. The proportions represent the major rebased home he alth 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 arti cle, "Benchmark Input-Output Accounts of the U.S., 2002" (December 2002). These data were ag ed 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 co st categories. We repeated this practice for each year. This methodology reflects a slight revision from th e 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. OurCMS-1358-P 34 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 th e MCR showed a decrease in the cost weight obtained directly from the MCR data from 2003 to 2010, despite rapid incr eases 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 weig ht. The resulting methodology shows an increase in the Utilities cost weight ove r the same time period, which we believe to be a more reasonable result. We believe this change in the methodol ogy 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 th e 2003-based home health market basket. The additional cost categories (Adm inistrative and Support Services , Financial Services, Medical Supplies, and Rubber and Plasti cs) stem from further disagg regating 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 e xpenses for a range of day-today office administrative servi ces including but not limited to billing, recordkeeping, mail routing, and reception services. Th e Financial Services cost wei ght would reflect expenses for services including but not limite d to banking services and secu rity and commodity brokering. The Medical Supplies cost weight would reflect expenses for medical and surgical instruments as, well as laboratory analysis equipment. Th e Rubber and Plastics cost weight would reflect expenses for products such as plastic tras h cans, and carpeting. We are proposing theseCMS-1358-P 35 additional cost categories in or der to proxy price inflation in a more granular fashion. We provide our proposed price proxies in more detail below. The differences between the major categor ies for the proposed 2010-based index and those used for the current 2003-based index are su mmarized 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 th e 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 cate gories and weights are listed in Table 3. TABLE 3: Cost Categories, Weights, and Price Proxies in Proposed 2010-Based Home Health Market Basket Cost Categories Weight Price Proxy Compensation, includin g 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)CMS-1358-P 36

Cost Categories Weight Price Proxy 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 appr opriate 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 co sts for employee benefits per hour worked. These indexes are fixed-weight indexes and stri ctly 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 i nput price indexes for two reasons: (a) theyCMS-1358-P 37 measure pure price change; and (b) they are available by occupationa l 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 a ppropriate Producer Price Indexe s (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 exam ple, a PPI for movable equipment is used rather than a CPI for equipment. PPIs in some cases are preferable price pr oxies for goods that HHAs purchase at wholesale levels. These fixed-weight indexes are a measure of price change at the producer or at the intermed iate stage of production. We evaluated the price proxies using the criteria of reliability, timeliness, availability, and relevance. Reliability indica tes 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 memb ers of the population. (S ampling variability is variation that occurs by chance because a samp le 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 di sseminated frequentlyCMS-1358-P 38 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 pref er 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, th is enables the public to be able to obtain the price proxy data on a regular basis. Finally, relevance means that the proxy is applicable a nd 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. Ther efore, we believe that th ey 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 blen ded 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-base d home health market basket. A more detailed discussion is provided below. c. Price Proxies Used to M easure Cost Category Growth

● Wages and Salaries For measuring price growth in the 2010-based home health market basket, we are proposing to apply six pr ice proxies to six occ upational subcategories within the Wages and Salaries component, which would reflect the HHA occupational mix. This is the same approach used for the 2003-based in dex 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 compri sed of four occupational subcategories proxied by five wage proxies. For the 2010 ble nded wage index, we are proposing to furtherCMS-1358-P 39 disaggregate the service workers oc cupations into health and soci al assistance service and other service occupational gro ups. We are also proposing to expl icitly 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 Indus try-Specific Occupational Employment and Wage estimates for North American Industrial Cla ssification System (NAICS) 621600, Home Health Care Services, published by the BLS Office of Occ upational Employment Stat istics (OES) as the data source for the cost shares of the home h ealth specific blended wa ge 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 th e May 2010 estimates in place of the November 2003 estimates. Detailed information on the me thodology 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, health-related P&T, non health-related P&T, health a nd social assistance service, other service occupations, and administrative/c lerical) for the wages and salaries component were tabulated from the May 2010 OES data fo r NAICS 621600, Home Health Care Services. This is a refinement to the four categorie s used for the 2003-based wage proxy. Table 4 compares the proposed 2010 occupational assignme nts of the six CMS designated subcategories to the 2003 occupational assignments of th e four CMS designated subcategories.

TABLE 4: Proposed 2010 Occupational A ssignments 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 OccupationsCMS-1358-P 40

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 RepairCMS-1358-P 41
Occupations 51-0000 Production Occupations
53-0000 Transportation and Material Moving Occupations 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 calculat ed 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 Wa ge and Salary index weights. TABLE 5: Proposed Home Health Occupa tional Wages and Salaries Index (Wages andCMS-1358-P 42
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 hea lth 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 HH Wage Blend 2003 1.5 1.5 1.8 2.4 Source: IHS Global Insight, Inc, 2 nd Quarter 2012 for ecast with historical data through 1 st 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 Occupati onal Benefits Index (Employee BenefitsCMS-1358-P 43
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-Relat ed 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, In cluding Clerical Workers

Health and Social Assi stance 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 be nefits to wages and salaries for CY 2010 for the six BLS ECI series we are proposing to use in the blende d 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 normaliz ed. 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 201 0 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 we ight 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 hea lth benefit blend is shown in Table 8. TheCMS-1358-P 44 average annual increase in the tw o price proxies is similar, an d in no year is the difference greater than 0.3 pe rcentage 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, 2 nd Quarter 2012 for ecast with historical data through 1 st Quarter 2012

● Administrative and Support : We are proposing to use the ECI for Compensation for Office and Administrative S upport Services (private indu stry) (BLS series code #CIU2010000220000I) to measure price growth of this cost category. The 2003-based index did not reflect this detail ed cost category.

● Financial Services : We are proposing to use the EC I for Compensation for Financial Activities (private industry) (BLS series code #CIU201520A000000 I) to measure price growth of this cost category. The 2003-based index did not reflect this detail ed cost category.

● Medical Supplies : We are proposing to use the PPI for Medical Surgical & Personal Aid Devices (BLS series code #WPU156) to meas ure price growth of this cost category. The 2003-based index did not reflect th is 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 gr owth 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.CMS-1358-P 45

● Professional Liability Insurance : We are proposing to use the CMS Physician Professional Liability Insurance pr ice index to measure price growth of this cost category. The 2003-based index used the CPI for Household Insura nce 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 sp ecific 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 asso ciated with physician PLI, each year, we solicit PLI premium data for physicians from a samp le of commercial carriers. This information is not collected through a survey form, but inst ead is requested direc tly from, and provided by (on a voluntary basis), several national commercial carriers. As we requi re for our other price proxies, the PLI price proxy is inte nded 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 obt ain 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 collecte d for every State by physici an specialty and risk class. Finally, the State-level, physician-specialty data are aggr egated by effective premium date to compute a national total, usi ng counts of physicians by State and specialty as provided in the AMA publication, Physician Characteri stics and Distribu tion in the U.S

.CMS-1358-P 46

● Telephone : We are proposing to use CPI for Te lephone 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 pri ce growth of this cost cate gory. The same proxy was used for the2003-based market basket.

● Professional Fees : We are proposing to use the ECI for Compensation for Professional and Related Workers (priva te industry) (BLS series code # CIS2010000120000I) to measure price growth of this category. Th e 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 gr owth 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 th an 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 se ries code #CIU2010000300000I) to meas ure price growth of this category. The same proxy was used for the 2003-based market basket.

● Transportation : We are proposing to use the CPI fo r Transportation (BLS series code #CUUR00000SAT) to measure price growth of th is 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 reflec t price inflation of bot h private and public transportation costs.CMS-1358-P 47 We are proposing this change as further investig ation of the MCR instruc tions 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 m easure 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 ma rket basket, we allo cated the Contract Services’ share of home health agency e xpenditures 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 Bask et and the Proposed 2010-Based Home Health Market Ba sket, 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, 2 nd Quarter 2012 for ecast with historical data through 1 st Quarter 2012;CMS-1358-P 48

Table 9 shows that the forecasted rate of growth for CY 2013, beginning January 1, 2013, for the proposed rebased and revised home heal th market basket is 2.5 percent, while the forecasted rate of growth for the current 2003-base d 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 revi sed wage and benefit blended i ndex 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 fa ster 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 per cent. 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 al located contract labor costs. The proposed nonlabor-related share would be 21.465 percent. The increase in the labor-related share using the 2010-based HH market basket is primarily due to the increase in co sts associated with contract labor. Table 10 details the components of the labor-related share for th e 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 HHAsCMS-1358-P 49 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 mark et 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 w ith 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 mo re recent data are subsequently available (for example, a more recent estimate of the market basket), we would use such data, if appropriate, to determine th e CY 2013 annual update in the final rule. 2. CY 2013 Home Health Payment Update Percentage Section 3401(e) of the Affordable Care Ac t 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 reduc e such percentage ... for each of 2011, 2012, and 2013, by 1 percentage point. The ap plication of this clau se may result in the home health market basket percentage increase under clause (iii) be ing less than 0.0 for a year, and may result in payment rates under the system under this subsecti on for a year being less than such payment rates for the preceding year.” Therefore, th e proposed CY 2013 market basket update of 2.5 percent must be reduced by 1 percentage point. Thus, the proposed CY 2013 home healthCMS-1358-P 50 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 a ppropriate 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 stat es 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 y ear, the HH market basket percentage increase applicable under such clause for such year sh all be reduced by 2 per centage 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 st ates 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 re view 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 th at the quality reporti ng 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 availabl e to the public by placing the information on theCMS-1358-P 51 Home Health Compare Web site. The selected m easures 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 FR68575), 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 startof-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 quali ty 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, including transfer and discharge assessments, is failure to comply with the CoPs. Home Health Agencies do not need to subm it OASIS data for those patients who are excluded from the OASIS submission require ments under the Home Health Conditions of Participation (CoPs) §484.1 through §484.265. As de scribed in the Medicare and Medicaid Programs: Reporting Outcome and Assessment Info rmation Set Data as Part of the Conditions of Participation for Home Health Agencies Fi nal Rule (CMS-3006-F) ( 70 FR 76202), these are:CMS-1358-P 52

● Those patients receivi ng only nonskilled services;

● Those patients for whom neither Medicare nor Medicaid is pa ying for home health care (patients receiving care unde r a Medicare or Medicaid Mana ged 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; Ho me Health Prospective Payment System Refinement and Rate Update for Calendar Year 2008 Final Rule (C MS-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 requi rement nor any payment penalty for quality reporting purposes for the following year. Fo r 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 qua lity reporting requirements and do not affect the HHA’s reporting responsibilities under the Conditions of Part icipation and Conditions of Payment (70 FR 76202). c. Home Health Care Quality Reporting Pr ogram 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 Participa tion 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 pe riod would allow for 12 full months of data collection and would provide us with the time necessary to analyze and make any necessaryCMS-1358-P 53 payment adjustments to the payment rates for CY 2013. We propose to con tinue this pattern for each subsequent year beyond CY 2013, consider ing OASIS assessments submitted in the time frame between July 1 of the ca lendar 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 fu lfilling the OASIS portion of the quality reporting requirement for the subsequent APU. (2) Acute Care Hospitali zation Claims-Based 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 contin ue to be reported on the agency-specific Certification and Survey Provider Enhan ced Reporting system (CASPER) reports. Due to technical issues with Home Health Compare files, we will delay the reporting of both “Emergency Department Use Without Hospita lization” and “Acute Care Hospitalization” until such time as the technical issues are resolved. The OASIS-based Acute Care Hospitalization measure will continue to be ma de 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)CMS-1358-P 54 In the HH PPS Rate Update for CY 2012 HH PP S final rule (76 FR 68577), we stated that the expansion of the home health quality measures reporting requirements for Medicarecertified agencies includes the Consumer A ssessment 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-for-reporting (P4R) requirements affecting the HH PPS rate up date for CY 2012. We are maintaining the stated HHCAHPS data requirements for CY 2013 th at were set out in the CY 2012 HH PPS final rule, for the continuous monthl y 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 pu blicly report patient experiences with home health care, using a su rvey 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 he alth care. The HHCAHPS survey presents home health patients with a set of standardized ques tions 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 fo r HHCAHPS has been given in previous rules, but it is also available on our Web site https://homehealthcahps.org and also, in theCMS-1358-P 55 annually-updated HHCAHPS Protoc ols 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 mi x 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 a nd 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 th e overall rating of care gi ven by the HHA’s care providers (Q20), and the patient’s willingn ess to recommend the HHA to family and friends (Q25). The HHCAHPS survey is not supposed to meas ure the aspects of hom e health clinical care that can be captured through a medical r ecord. Rather, the HHCAHPS survey focuses on areas where the home health patient is the best or only source for the information. We believe that the HHCAHPS survey is a valid measure of patie nt’s perspectives of ho me health care. The developmental work for the HHCAHPS survey began in mid-2006, and the first HHCAHPS survey was field-tested (to validate the lengt h and content of the survey) in 2008 by the AHRQ and the CAHPS® grantees, and the final HHCAH PS 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, HHC AHPS was only available in English and Spanish translations. InCMS-1358-P 56 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 tr anslations. We now offer HHCAHPS in English, Spanish, Chinese, Russian, and Vietnamese languages. We will continue to consider additional translations of the HHCAHPS in respons e 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 HHCAH PS 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 in clusion in HHCAHPS surveys if one of these conditions pertains to them:

● Are under the age of 18;

● Are deceased prio r to pulling sample;

● Receive hospice care;

● Received routine maternity care only;

● Are not considered survey el igible because the state in wh ich the patient lives restricts release of patient information for a specific condition or illness that the patient has; or

● Requested that their name s not be released to anyone. We stated in previous rules that Medicare-certif ied agencies are required to contract with an approved HHCAHPS survey vendor. This requ irement is also codified. Beginning in summer 2009, interested vendors applied to become approved HHCAHPS survey vendors.CMS-1358-P 57 HHCAHPS survey vendors are requir ed 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 rule s that vendors and HHAs would be required to participate in HHCAHPS oversight activities to ensure complian ce with HHCAHPS protocols, guidelines, and survey requirements. The purpose of the overs ight activities is to ensure that HHAs and approved survey vendors follow the HHCAHP S Protocols and Guidelines Manual . As stated previously in the CY 2010, CY 2011, and CY 2012 fi nal rules, all approved survey vendors must develop a Quality Assurance Plan (QAP) for su rvey 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 subm ission deadline date af ter the vendor’s first quarterly data submission. The QAP must be upda ted and submitted annually thereafter and at any time that changes occur in staff or vendor capa bilities 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 AttachmentsCMS-1358-P 58 As part of the oversight activities, the HHCAHPS Survey Coordination Team conducts on-site visits to the approved HHCAHPS survey ve ndors. The purpose of the site visits is to allow the HHCAHPS Coordination Team to obs erve 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 HHC AHPS data are stored. The HHCAHPS Survey Coordination Team reviews the survey vendor’s survey systems, and assesses administration protocols based on the HHCAHPS Pr otocols and Guidelines Manual posted at https://homehealthcahps.org . The systems and program review in cludes, but is not limited to the following:

● Survey management and data systems;

● Printing and mailing ma terials and facilities;

● Telephone call cen ter facilities;

● Data receipt, entry an d 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 a nd provide follow-up documentation of corrections for review. HHCAHPS survey vendors are subject to follo w-up site visits on an as-needed basis. We are proposing to codify the curren t guideline that all ap proved HHCAHPS survey vendors fully comply with all HHCAHPS oversight act ivities. We are pro posing to include this survey requirement at §484.250(c). HHCAHPS Requirements for CY 2014 For the CY 2014 APU, we propose to conti nue monthly HHCAHPS data collection and reporting for four quarters. The data colle ction period for CY 2014 would include secondCMS-1358-P 59 quarter 2012 through first quarter 2013 (the m onths of April 2012 through March 2013). HHAs would be required to submit thei r 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, 2 013; and for the first quarter 2013 by 11:59 p.m., Eastern Time on July 18, 2013. As noted, we exempt HHAs receiving Medica re certification on or after April 1, 2012 from the full HHCAHPS reporting requirement fo r the CY 2014 APU, because these HHAs were not Medicare-certified in th e 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 undup licated or unique patients in the period of April 1, 2011 thr ough March 31, 2012 would be exempt from the HHCAHPS data collection and subm ission requirements for the CY 2014 APU. Such agencies would be required to submit thei r 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 d eadline 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 c ontinue to require th e continuous monthly HHCAHPS data collection and repor ting 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 theCMS-1358-P 60

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 thir d 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 r eceiving Medicare certification after the period in which HHAs do their patient count (Apr il 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-cert ified throughout the pe riod 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 U pdate. We propose to maintain this stated exemption for new HHAs. Likewise, we would requir e that all HHAs that had fe wer 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 pa tients in the period of April 1, 2012 through March 31, 2013 would be re quired 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 d eadline would be firm, as would be all of the quarterly data submission deadlines. HHCAHPS Reconsiderations and Appeals Process We believe that HHAs should monitor th eir respective HHCAHPS survey vendors to ensure that vendors submit their HHCAHPS data on time, by accessing their HHCAHPS DataCMS-1358-P 61 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 pr ocess for HHCAHPS should not be burdensome to HHAs. We have modeled the HHCAHPS reconsiderati ons 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 memorandu m 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 a nd 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 th e proportion of the payment am ount under the HH PPS that account for area wage differences, using adjustment factor s 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 theCMS-1358-P 62 HH PPS rates on the most recent pre-floor and pr e-reclassified hospital wage index. We would apply the appropriate wage index value to the labor portion of th e 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-recl assified hospital wage i ndex data to adjust the labor portion of the HH PPS rates. We believe the use of the pre-floor, pr e-reclassified hospital wage index data results in an a ppropriate 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 O ffice of Management and Budget (OMB) Bulletin No. 03-04 (June 6, 2003). This bulletin announc ed 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 change s 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 th e methodology discussed in the CY 2007 HH PPS final rule (71 FR 65884) to address those geogra phic areas in which there were no IPPS hospitals and, thus, no hospital wage data on which to ba se 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 averag e wage index from all contiguous CBSAs as aCMS-1358-P 63 reasonable proxy. For rural Puerto Rico, we do not apply this methodology due to the distinct economic circumstances that exist there, but instead continue usi ng the most recent wage index previously available for that area (from CY 2005). For urban areas without IPPS hospitals, we us e the average wage index of all urban areas within the State as a reasonable proxy for the wa ge 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/Medi care/Medicare-Fee-forService-Payment/HomeHealthPPS/Home-Health-Pro spective-Payment-Syst em-Regulations-andNotices.html 5. Proposed CY 2013 Payment Update a. National Standardized 60-Day Episode Rate The Medicare HH PPS has been in effect si nce 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 ep isode rate. As set forth in §484.220, we adjust the national standardized 60-day episode rate by a case-mix re lative weight and a wage index value based on the site of service for the beneficiary. In the CY 2008 HH PPS final rule with comment period, we refined the case-mix methodology and also rebased and revised the ho me health market basket. To provide appropriate adjustments to th e proportion of the payment amount under the HH PPS to account for area wage difference, we apply the appropriate wage index value to th e 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 21.465CMS-1358-P 64 percent. The proposed CY 2013 HH PPS ra tes use the same case-mix methodology and application of the wage index adju stment to the labor portion of the HH PPS rates as set forth in the CY 2008 HH PPS final rule with comment pe riod. 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 in to a labor (78.535 per cent) and a non-labor portion (21.465 percent). (3) Multiply the labor portion by the applicable wage index based on the site of service of the beneficiary. (4) Add the wage-adjusted portion to the non-labor portion, yielding the case-mix and wage adjusted 60-day episode rate, subject to any additional applicable adjustments. In accordance with section 1895(b)(3)(B) of the Act, this document constitutes the annual update of the HH PPS rates. The HH PPS regulati ons at §484.225 set forth the specific annual percentage update methodology. In accordan ce with §484.225(i), for a HHA that does not submit home health quality data, as specifi ed by the Secretary, the unadjusted national prospective 60-day episode rate is equal to the rate for the prev ious calendar year increased by the applicable home health market basket in dex amount minus two per centage points. Any reduction of the percentage change will apply only to the calendar year involved and will not be considered in computing the prospective pa yment amount for a subsequent calendar year. For CY 2013, we propose to update the nationa l per-visit rates for each discipline by the applicable home health payment update percenta ge of 1.5 percent. We propose to adjust the national per-visit rate by the a ppropriate 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, forCMS-1358-P 65 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 ca lculate 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 in itial percentage payment on the submission of a request for anticipated payment (RAP) and th e 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 cas e-mix and wage-adjusted episode payment. The end date of the 60-day episode as reported on th e claim determines which calendar year rates Medicare would use to pay the claim. We may also adjust the 60-day case-mix and wage-adjusted episode payment based on the information submitted on the claim to reflect the following:

● A low utilization payment provided on a per-visit basis as set forth in §484.205(c) and §484.230.

● A partial episode payment adjustme nt 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 Standa rdized 60-Day Episode Payment RateCMS-1358-P 66 In calculating the annual update for the CY 2012 national standard ized 60-day episode payment rates, we first look at the CY 2012 ra tes 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 th e 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 paym ent rate for an HHA that submits the required quality data is shown in Table 11. The proposed CY 2013 nationa l standardized 60-day episode payment rate for an HHA that does not submit the required qu ality data is update d 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 X 1.015 X 0. 9868 $2, 141.95CMS-1358-P 67
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 nominalchange in casemix Proposed CY 2013 National Standardized 60-Day

Episode Payment Rate. $2,138.52 X 0.995 X 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 ty pe 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 upda ted by the proposed CY 2013 home health payment update of 1.5 percent. The national per-vis it rates are adjusted by the wage index based on the site of service of the beneficiary. The per-visit rates are not case-mix ad justed nor are they subject to the 1.32 percent reduction related to the nominal increase in case-mix.CMS-1358-P 68 The per-visit payment amounts for LUPAs are se parate from the LUPA Add-On amount which is paid for episodes that occur as the only epis ode or initial episode in a sequence of adjacent episodes. The CY 2013 national per-vis it rates are shown in Table 13.

TABLE 13: Proposed CY 2013 Nation al Per-Visit Payment Amounts

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 differe nces. 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 For HHAs that DO submit the required quality data For HHAs that DO NOT submit the required quality data Home Health Discipline Type CY 2012PerVisit Amoun

ts 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 X 1.015 $51.90 X 0.995 $50.87 MSS $180.96 X 1.015 $183.67 X 0.995 $180.06 OT $124.26 X 1.015 $126.12 X 0.995 $123.64 PT $123.43 X 1.015 $125.28 X 0.995 $122.81 SN $112.88 X 1.015 $114.57 X 0.995 $112.32 SLP $134.12 X 1.015 $136.13 X 0.995 $133.45CMS-1358-P 69 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

For HHAs that DO submit the required quality data For HHAs that DO NOT submit the required quality data CY 2012 LUPA Add-On Amount 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 X 1.015 $96.04 X 0.995 $94.15

e. Nonroutine Medical Supply Conversion Factor Update Payments for nonroutine medical supplie s (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 pr oposed payment update of 1.5 percent. The final updated CY 2013 NRS conversion fact or for 2013 appears in Table 15.CMS-1358-P 70
TABLE 15: Proposed CY 2013 NRS Conversio n 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 X 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 qual ity data, we again begin with the CY 2012 NRS conversion factor. We first increase th e 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 X 0.995 $53.01

The payment amounts for the various severity levels based on the updated conversion factor for HHAs that do not submit quali ty data are calculated in Table 18.CMS-1358-P 71
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

6. Rural Add-On Section 421(a) of the MMA required, for home h ealth services furnished in a rural areas (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 th e 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 serv ices furnished in a rura l 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 othe rwise 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 percen t of the payment amount otherw ise 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 neutra lity related to this provisi on, as the statute specifically states that the Secretary sha ll not reduce the standard prospe ctive payment amount (or amounts)CMS-1358-P 72 under section 1895 of the Act applic able to home health services furnished during a period to offset the increase in payments resulting in the application of this sect ion of the statute. The 3 percent rural add-on is applied to th e national standardized 60-day episode rate, national per-visit rates, LUPA add-on payment, and NRS conversion factor when home health services are provided in rural (non-CBSA) ar eas. Refer to Tables 19 through 23 for these payment rates. TABLE 19: Proposed CY 2013 Payment Amo unts 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 X 1.03 $2,206.21 $2,099.74 X 1.03 $2,162.73

TABLE 20: Proposed CY 2013 Per-Visit Amount s for Services Provided in a Rural Area For HHAs that DO submit quality data For HHAs that DO NOT submit quality data Home Health Discipline Type Proposed CY 2013 per-visit rate Multiply by the 3 Percent

Rural Add-On Proposed Rural CY2013 pervisit rate Proposed CY 2013 per-visit rate Multiply by the 3 Percent

Rural Add-On Proposed Rural CY2013 pervisit rate HH Aide $51.90 X 1.03 $53.46 $50.87 X 1.03 $52.40 MSS $183.67 X 1.03 $189.18 $180.06 X 1.03 $185.46 OT $126.12 X 1.03 $129.90 $123.64 X 1.03 $127.35 PT $125.28 X 1.03 $129.04 $122.81 X 1.03 $126.49 SN $114.57 X 1.03 $118.01 $112.32 X 1.03 $115.69 SLP $136.13 X 1.03 $140.21 $133.45 X 1.03 $137.45CMS-1358-P 73
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 2013LUPA AddOn Amount Multiply by the 3 PercentRural AddOn Proposed Rural CY 2013 LUPA

Add-On Amount Proposed CY 2013LUPA AddOn Amount Multiply by the 3 PercentRural AddOn Proposed Rural CY 2013 LUPA

Add-On Amount $96.04 X 1.03 $98.92 $94.15 X 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 X 1.03 $55.70 $53.01 X 1.03 $54.60

TABLE 23: Proposed CY 2013 NRS Paymen t Amounts for Services Provided in Rural Areas 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) Severity

Level Points (Scoring) 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 Ca re Act requires that, prior to certifying aCMS-1358-P 74 patient’s eligibility for the home health benefi t, the physician must document that the physician himself or herself or an a llowed nonphysician practitioner (NPP) has had a face-to-face encounter with the patient. Specifically, the Affo rdable 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 w ith State law, or a certified nurse-midwife (as defined in section 1861(gg) of the Act) as auth orized by State law, or a physician assistant (as defined in section 1861(aa)(5) of the Act) under the supervisi on of the physician may perform the face to face encounter and inform the certi fying physician, who documents the encounter as part of the certification of e ligibility. In the CY 2012 HH PP S final rule (76 FR 68597), we stated that, in addition to the certifying physic ian and allowed NPPs, the physician who cared for the patient in an acute or post-acu te care facility, and who had priv ileges 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 follo wing care in an acute or post-acute care facility, the home health industry has asked whet her 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 post-acute care physician and communicate his or her clinical findings to the acute or post-acute care physician and, then, fo r the acute or post-acute care physician to communicate the NPP’s findings to the certifying physician. In pr actice, it is our understanding from these stakeholders that acute or post- acute care physicians utilize NPPs to obtain information about the patient’s clin ical condition. As such, the i ndustry suggests that it would be reasonable and appropriate for an allowed NPP wo rking in an acute or post-acute facility toCMS-1358-P 75 perform the face-to-face encounter and communicate the clinical findings to the acute or postacute care physician who would then comm unicate information regarding the patient’s homebound status and need for ski lled services to the certifying physician. However, we do not believe the statute specifically addresses this situation. . Currently, in guidance in the form of Qs a nd As and a recent MLN article available on CMS’ Home Health Agen cy Center Web site ( http://www.cms.gov/Center/Provider-Type/HomeHealth-Agency-HHA-Center.html ), we have communicated that physician residents, under the supervision of a teaching physician, would be allo wed 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. Howe ver, we stated that because a resident does not have privileges, the teaching physician w ould be responsible for informing the certifying physician of the patient’s homeboun d status and need for skilled services. Since we recognize this exchange of information between reside nts and teaching physicians as allowable under existing face-to-face requirements we believ e that NPPs should not be precluded from performing the face-to-face encounter in colla boration with the acute or post-acute care physician who has privileges and cared for the patient in the acute or post-acute facility, informing the acute or post-acute care physicia n of the patient’s clin ical condition, and having the acute or post-acute care physician inform th e certifying physician of the patient’s homebound status and need for skilled services.CMS-1358-P 76 Therefore, for patients admitted to home hea lth 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-f ace 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 pr oposed changes to part 424, see the regulation text of this proposed rule. We encourage stak eholder comment on these proposed changes. In addition to meeting the goals of the f ace-to-face encounter provision, we believe this proposed policy change will result in more effi cient care coordination between the acute or postacute NPP and physician, and the certifying physic ian. We believe this more efficient care delivery will result in an improve d transition of care from the acute or post-acute facility to the home health setting. Improving a patient’s transition from one h ealthcare setting to another is widely regarded to be directly related to impr oved patient care and improved patient outcomes. We believe that this policy change would enc ourage the acute or post-acute NPP who is best informed of the patient’s most current clinic al condition to collabora tively communicate the patient’s need for home health services to the phy sician who cared for the patient in the acute or post-acute facility, who would then inform the cer tifying physician. Becaus e a standard protocol of communication or documentation is not manda ted between the acute or post-acute NPP, 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 facili ty, such a policy would be consistent with what believe is the goal of the provision, which is in creased physician involvement in a patient’s homeCMS-1358-P 77
health certification, without creating additional burden or prev enting access to care. We believe that increased physician and NPP communication re garding the patient’s clinical condition fits within the framework of Congress’ goals associat ed with the face-to-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 no tice that claims are being denied if the face-to-face documentation is not “clearly titled” by the certifying physician. Our intent was that the face-toface documentation be clearly titled, but not nece ssarily by the certifying physician. As such, we propose to revise our regulat ory language so as to not be prescr iptive as to what entity must title the documentation. The face-to-face documentati on must still be signed by the certifying physician, and the content requirements are not ch anging. 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 polic ies related to how therapy services are to be provided and doc umented, and began requi ring additional therapy documentation to support medical necessity to address continuing conc erns regarding the provision of unnecessary therapy in the home health setting. Specifically, we required that: (1) Measurable treatment goals be desc ribed in the plan of care and that the patient’s clinical record demonstrate that the method used to assess a pa tient’s function include objective measurement and successive comparisons of measurements, t hus enabling objective measurement of progress toward goals and/or therapy effectiveness; (2) a qualified therapist (instead of an assistant)CMS-1358-P 78 perform the needed therapy service, assess the patient, measure progress, and document progress toward goals at least once least every 30 days dur ing a therapy patient’s c ourse of treatment; (3) for those patients needing more than 13 or 19 ther apy visits, we require th at a qualified therapist (instead of an assistant) perfor m the therapy service required at th e 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 pr ogress 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 th e qualified therapist fr om making the required visit; and (3) patients receive mo re 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 resu mption of coverage occu rs 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 reasse ssment visits, once the therapist has completed the required reassessment, coverage resumes after this reassessment visit. Some agencies and therapists believe th ey 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 mo re than one type of therapy and the lack of coverage for all therapy discip lines if the required reassessmen t visit is missed for any one ofCMS-1358-P 79 the therapy disciplines for which therapy servic es 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 serv ices 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 requireme nts. Therefore, even if qualified therapists from the other therapy di sciplines have completed all their required reassessment visits, therapy visi ts 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 se rvices. That is, if an agency anticipates a visit will not be covered because one qualifie d therapist has not completed the required reassessment, it might be reluctant for any therap y 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 reassess ment, not the visit after the therapist completed late reassessment. We would e xpect 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-rela ted home health resource groups (HHRGs) preand post-implementation.CMS-1358-P 80 In addition, we propose to revise our regula tions at §409.44(c)(2)(i)(E ) to state that in cases where multiple therapy disciplines are i nvolved, if the required reassessment visit was missed for any one of the therapy disciplines fo r which therapy services were being provided, therapy coverage would cease only for that particul ar therapy discipline. Therefore, as long as the required therapy reassessments were completed timely for the remaining therapy disciplines, therapy services would continue to be covere d for those therapy disc iplines. We encourage stakeholder comment on these proposed changes. 2. When Therapy Reassessment Visits Are To Be Conducted We continue to receive questions regardi ng 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 control prevent her or hi m 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 vis it 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. Th erefore, 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, qualifie d therapists could comp lete their reassessment visits during the 11th, 12th, or 13th visit for the required 13th visit reassessment and the 17th,CMS-1358-P 81 18th, or 19th visit for the required 19th visit r eassessment. 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 se rvices (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 performe d by a qualified occupational ther apist 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 occ upational 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 correct ion to this terminology in G0158, so that the new desc ription 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 a dopt selective admission patterns, section 3131(d) of the Affordab le 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, be neficiaries with “high levels of severity of illness”). As part of the study, we plan to assess whether these vulnerableCMS-1358-P 82 populations (low-income Medicare beneficiaries, benefi ciaries in medically underserved areas, and beneficiaries with high levels of severity of illness) experience acce ss 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 curr ent HH PPS could include payment adjustments for services that involve either more or fe wer resources, changes to reflect resources involved with providing home health services to low-inco me Medicare beneficiaries or Me dicare beneficiaries residing in medically underserved area, and ways outlier paym ents could be revised to reflect costs of treating Medicare beneficiaries with high severity of illness. In additi on, 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 re visions 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 th e study. The contractor performed a literature review of HH PPS payment vulnera bilities and access is sues, established and convened technical expert panels and open door forums to help defi ne the vulnerable populations and to gain insight on access issues these populations may face, a nd performed preliminary analysis looking at resource costs versus Medicare reimbursement. In September 2011, we awarded a study contract to develop an analytic plan, perform deta iled analysis, and if necessary, develop recommendations for changes to the HH PPS. We ar e in the preliminary stag es of our analyses. We plan to provide updates re garding our progress in future rulemaking and open door forums.CMS-1358-P 83 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 fo r legislation and admi nistrative action, and recommendations for whether further research is needed. The Congress also provided CMS with the authority to conduct a separate demonstratio n project to test recommended HH PPS changes resulting from the study. G. International Classification of Diseases, 10th Edition (ICD-10) Tran sition 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 Nationa l Provider Identifier Requ irements; and a Change to the Compliance Date for ICD–10–CM and IC D–10–PCS Medical Data Code Set” (77 FR 22950) that proposed, among other things, to de lay, from October 1, 2013 to October 1, 2014, the compliance date for the International Classi fication of Diseases, 10 th 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 pr oposed, we continue to work with the HH PPS Grouper maintenance contractor to revi se 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 pati ents, the data collection so ftware invokes HH PPS Grouper software. The HH PPS Grouper will be revised to utilize ICD-10-CM codes. If determined to beCMS-1358-P 84 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 th e draft grouper in April 2013. We plan 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 Hea lth, Hospice and DME Open Door Forums, and provider outreach sessions for ICD-10. In December 2008, we updated and released Atta chment D: Selection and Assignment of OASIS Diagnoses to promote accurate selecti on and assignment of the patient’s diagnosis ( https://www.cms.gov/Medicare/M edicare-Fee-for-ServicePayment/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 mainte nance contractor reve aled that many HHAs do not comply with these guidelines. The anal ysis demonstrated that HHAs are not limiting the number of diagnoses assigned to M1024 and con tinue to not comply with ICD-9-CM coding guidelines. We have reviewed the diagnos is codes identified in the HH PPS Grouper and confirmed that the only codes that cannot be repo rted as a primary or secondary diagnosis code (M1020 and M1022) are the fractur e codes (V-code). As a re sult, we are proposing two enhancements for the HH PPS Grouper which we believe will encourage compliance withCMS-1358-P 85 coding guidelines. We propose to restrict M1024 to only perm it 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 en sure compliance with pr oper coding guidelines, we propose to pair the fracture codes (V-code) wi th appropriate diagnosis codes and only when these pairings appear in the pr imary and payment diagnosis fiel ds will the groupe r 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 ma y score additional points. In situations where ICD-9 coding guidelines have required a V-code to be s ubmitted in the M1020 position, HHAs have been instructed to report the etiology c ode in the payment diagnosis field (M1024) and receive equivalent scoring. Sp ecifically, we are proposing a re vision in HHRG logic to permit equivalent scoring when the Diabetes, Skin 1 or Neuro 1 codes ar e submitted immediately following the V-code in the M1020 position with out requiring utiliza tion of the payment diagnosis field. These grouper enhancements w ill 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 fi eld) until we move to ICD-10 where there is no longer an issue with fractur e 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 amen ds 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 ActCMS-1358-P 86 requires that beginning with FY 2014 and each s ubsequent 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 respec t to that fiscal year. Depending on the amount of the annual update for a particul ar year, a reduction of 2 percen tage points could result in the annual market basket update being less than 0.0 pe rcent for a FY and may re sult 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 da ta 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 Secr etary under section 1890(a) of the Act. This cont ract 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. U nder section 1814(i)(5)(D )(iii) of the Act, the Secretary must publish selected measures that will be appli cable with respect to FY 2014 no later than October 1, 2012. B. Public Availability of Data SubmittedCMS-1358-P 87 Under section 1814(i)(5)(E)of th e Act, the Secretary is requi red to establish procedures for making any quality data submitted by hospices av ailable 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 18 14(i)(5)(E) of the Act, the Secretary is authorized to report quality m easures that relate to services furnished by a hospice on the CMS Web site. We recognize that public reporting of qual ity data is a vital component of a robust quality reporting progr am and are fully committed to developing the necessary systems for public repor ting of hospice quality data. We also rec ognize it is essential that the data we make available to the pub lic be meaningful data and that comparing performance between hospices requires that measur es be constructed from data collected in a standardized and uniform manner. The developmen t and implementation of a standardized data set for hospices must precede public reporting of hospice quality measur es. 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 Fis cal Year 2012 Final Rule (76 FR 47302, 47320 (August 4, 2011)), to meet the quality repor ting requirements for hospices for the FY 2014 payment determination as set forth in section 1814( i)(5) of the Act, we fi nalized the requirement that hospices report two measures:

● An NQF-endorsed measure that is rela ted to pain management, NQF #0209: The percentage of patients who report being uncomfort able because of pain on the initial assessment (after admission to hospice services) who report pa in was brought to a co mfortable level withinCMS-1358-P 88 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 pe riod, regardless of payor.

● A structural measure that is not e ndorsed by NQF: Participation in a Quality Assessment and Performance Improvement (QAPI) pr ogram that includes at least three quality indicators related to patient ca re. 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 QAP I indicator. The data collec tion period for this measure is October 1, 2012 through December 31, 2012, and th e data submission deadline is January 31, 2013. Hospices are not asked to re port their level of performan ce on these patient care related indicators. The information being gathered w ill 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 purpos es of the quality reporting program based on whether or not they respond, not on how they re spond or on performance level. No additional measures are required for payment year FY2014. 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 othe r downloadable materials before the data submission date. Though similar to the data entry site utilized during the hospice volunt ary reporting period, theCMS-1358-P 89 site will be changed to accommodate the addi tion 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 comple te 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 measur e and the structural measure will be provided on the CMS web site at http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/Hospice-Quality-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 repor ting requirements for hospi ces for the FY 2015 payment determination and each subsequent year, as set fo rth in section 1814(i)(5) of the Act, we propose that hospices report the following:

● The NQF-endorsed measure that is rela ted to pain management, NQF #0209: The percentage of patients who report being uncomfort able because of pain on the initial assessment (after admission to hospice services) who report pa in was brought to a co mfortable level within 48 hours.

● The structural measure: Participation in a Quality Assessment and Performance Improvement (QAPI) Program that Includes at Leas t Three Quality Indicators Related to Patient Care. Specifically, hospice programs would report wh ether or not they have a QAPI program that addresses at least three indicat ors related to patient care.CMS-1358-P 90 We are not extending the require ment 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 subseq uent 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 pe riod 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 de termination. For FY 2015 and beyond, the data submission deadline w ill 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 Considerati on and Standardization of Data Collection While initially we will build a foundation for quality reporting by requiring hospices to report one NQF-endorsed measure and one struct ural measure, we seek to achieve a comprehensive set of quality measures to be available for widespread use for quality improvement and also informed decision maki ng. 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 measur es 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 theseCMS-1358-P 91

measures should be considered for future rule making. A potential timeline and titles of future measures under consideration are included below. To support the standardized collection and cal culation of quality m easures specifically focused on hospice services, we believe the requir ed data elements would potentially require a standardized assessment instrument. We ar e committed to developing a quality reporting program for hospices that utilizes standardized methods to coll ect 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 da ta item set. This patient level item set could be used by all hospices at some point in the futu re 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 tes ting 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 informati on needed to calculate the hospice-appropriate quality measures that were endorsed by NQF in Fe bruary 2012. We are considering a target date for implementation of a standardized hospice da ta item set as early as CY 2014, dependent on development and infrastructure logistics. We welcome comments on the potential implementation of a hospice patient -level data item set in CY 2014. In developing the standardized data item se t, 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 ScreeningCMS-1358-P 92 Starting with data collection in 2015, we envi sion these measures as possible measures that we would implement subject to future ru lemaking. We welcome comments on the potential future implementation of these measures a nd the associated projected timeframe for implementation. We are also considering future implementati on 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 su rvey in the same year and wo uld 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:

PROPOSED IN THIS PROPOSED RULE:
Data Collection Data Submission APU Impact MEASURES 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 It em Set for implementation in CY 2014

TARGET DATES FOR POTENTIAL IMPLEMEN TATION OF FUTURE MEASURES UNDER CONSIDERATION
Data Collection Data Submission APU Impact MEASURES 1/1/2015- 12/31/2015 4/1/2016 FY 2017 (10/1/2016) Structural measure without QAPI list NQF 0209,CMS-1358-P 93
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 requiremen ts for Home Health Agencies A. Background and Statutory Authority In the 1980s and 1990s, home health servic es became a rapidly growing segment of Medicare expenditures. During that time, Congr ess enacted several laws that dramatically expanded the authority of CMS in its administra tion of the home health benefit. The Omnibus Budget Reconciliation Act of 1987 (O BRA ’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 we ll as long-term care servi ces. It also provided the Secretary with the authority to change th e manner in which CMS regulated and carried out enforcement actions with respect to HHAs partic ipating in the Medicare program. Changes in both the HHA and long-term care arenas requi red significant adjustments and increased workload for CMS in its operation and regul atory 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 sectionCMS-1358-P 94 1891(c)(2)(C)(i)(II) of th e Act. We responded to that mandate by creating an outcome-oriented survey process for HHAs that included specific pr ocedures 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 Ac t. This proposed rule would codify these types of surveys in regulation. To participate as an HHA in the Medicare pr ogram, an agency or organization must meet the definition of an HHA in sect ion 1861(o) of the Act. Secti on 1861(o) of the Act defines an HHA as a public agency or private organizati on or a subdivision of such an agency or organization, which among other things, is prim arily 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 license d under State or local law, and meets the health and safety standards established by the Secretary. Additionally, section 1 891(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 In surance (Part B) benefits of the Medicare program. Section 1861(m) of the Act defines the te rm “home health services” as services that must be furnished by, or under arrangement wit h, 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:CMS-1358-P 95

● 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 unde r the direction of a physician.

● Part-time or intermittent home health aide services.

● Medical supplies, other than drugs and bi ologicals, but including osteoporosis drugs.

● Services of interns and re sidents if the HHA is owned by or affiliated with a hospital that has an approved medical education program.

● Services at hospitals, skill ed nursing facilities, or reha bilitation 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 secti on 4021 of OBRA’87, which added section 1891(a) to the Act. Additional minor revisions to the CoPs have be en 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 th e Act, the Secretary is res ponsible for assuring that the CoPs, and their enforcement, are adequate to pr otect the health and safety of individuals under the care of an HHA and to promote the effec tive and efficient use of public monies.CMS-1358-P 96 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 or ganization (AO) under section 1865(a) of the Act, with oversight by CMS Regi onal Offices, to determine whether HHAs meet the Federal participation requirements for Medica re. Section 1902(a)(33)(B) of the Act provides for SAs to perform the same survey tasks for faci lities participating or seeking to participate in the Medicaid program. The results of Medicare and Medicaid-related surveys are used by CMS and the Medicaid State Agency, respectively, as th e basis for a decision to enter into, deny, or terminate a provider agreement with the ag ency. To assess compliance with Federal participation requirements, surveyors conduct onsit e 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 ca re 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 ce rtification, respectively. The genera l requirements regarding the survey and certification process are codi fied at 42 CFR part 488 and speci fic survey inst ructions 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 ac credited by an AO whose program is approved by CMS to meet or exceed Federa l requirements under section 1865( a). However, these deemed providers and suppliers are subj ect to validation surveys under §488.7. On August 2, 1991, we published the Survey Re quirements and Alternative Sanctions for Home Health Agencies proposed rule (56 FR 37054) that proposed to establish survey andCMS-1358-P 97 enforcement requirements, as well as alternat ive 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 othe r regulations, together with the demands of additional improvement efforts, impeded the promul gation of a final rule. Indeed, in response to the August 2008 Office of Inspector Genera l (OIG) Report, “Deficiency History and Recertification of Medicare Home Health Agen cies,” (OEI-09-06-00040), we noted that the August 2, 1991 proposed rule would require substant ial revisions and republication to implement the alternative sanctions. Due to the consid erable 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 enfo rcement 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 am ended the Act by adding sections 1891(c) through (f) to establish requirements for survey ing and certifying HHAs as well as to establish the authority of the Secretary to utilize va rying enforcement mechanisms to terminate participation and to impose altern ative 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 surv ey and certification guida nce while new subpart J would outline the basis for enforcement of co mpliance standards for HHAs that are not in substantial compliance with Medica re participation requirements.CMS-1358-P 98 In addition, we propose to amend certain sections of 42 CFR part 488, subpart A – General Provisions. Currently, the general provi sions include specific references to survey, certification and enforcement proce dures for long term care faciliti es and the residents of those facilities. We are proposing to amend several regulations, wher e 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 (sec tion 1861(m) of the Act), HHAs (sect ion 1861(o) of the Act), and the Conditions of Participation (CoP s) for HHAs and home health quality (section 1891 of the Act). We propose to amend §488.3 by revising pa ragraph (a)(1) to in clude 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. Furtherm ore, we propose to revise the heading for §488.28 to include referen ce to HHAs with deficiencies. Rules for certification, documentation of fi ndings, periodic review of compliance and approval, certification of noncompliance, and de termining 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- Surv ey 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 in part 488 that establish the requirements for surveying HHAs to determine whether they meet the Medicare conditions of participati on. In general, this proposed rule is based on the rulemaking authorit y in section 1891 of the Act as well as specific statutory provisions identified in the preamble where appropriate.CMS-1358-P 99

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”, “ex tended”, “ partial extended” and “complaint” surveys, as well as specifyi ng the minimum components of the standard and extended surveys. Therefore, we are proposi ng 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 l ongstanding 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 woul d 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 sta ndard surveys, to the extent practicable, to review a case-mix stratified sample of individua ls 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, a nd 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 guar dian 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 th e highest practicable f unctional capacity ofCMS-1358-P 100 each patient as reflected in the patient’s written pl an of care and clinical r ecords. Other forms of communication with patients, such as through telephone calls, could be used to complete surveys, if determined necessary by the State Su rvey 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 ot herwise legitimate determinations that deficiencies existed in an HHA. For example, if the Statement of Defici encies 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 surv ey would be conducted to determine if deficiencies and/or deficient pr actice(s) exist that were not fu lly examined during the standard survey. It would be conducted when a standard -level noncompliance was identified; or if the surveyor believed that a defici ent practice existed at a standard or condition-level that was not examined during the standard survey. During th e 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. Th e surveyors could also review any additional standards under the same or related CoPs whic h 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 adversel y affect the health and safety of patients. A CoP may be considered out of compliance (and t hus condition-level) for one or more standard level deficiencies, if, in a surveyor’s judgment, the standard level deficiency constitutes aCMS-1358-P 101 significant or a serious finding that adversely affects, or has the potential to adversely affect, patient outcomes. Surveyors are to use their pr ofessional judgment, in concert with the Federal forms, policies and interpretive guidelines in their assessment of a pr ovider’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 cond ucted 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 de fine in proposed §488.705 as noncompliance with one or more Conditions of Participation at the co ndition-level. The extended survey would be conducted no later than 14 calenda r days after the completion of a standard survey which found the HHA had furnished substandard care. Additiona lly, the survey would review any associated activities that might have contribut ed to the deficient practice.
f. Unannounced Surveys ( § 488.725) Section 1891(c)(1) of the Ac t requires that standard su rveys 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 sche duling that renders th e onsite surveys as unpredictable in their timing as possible. In addition, secti on 1891(c)(1) of the Act requires CMS to review State scheduling and survey proce dures to ensure that th e agency has taken all reasonable steps to avoid givi ng advance notice to HHAs of im pending surveys through these procedures. Generally, as with re spect to other provider-types, St ate survey agencies make everyCMS-1358-P 102 effort to lessen the predictability of a surv ey occurring at a specific time, day, or month. Moreover, section 1891(c)(1) of th e Act states that any individua l who notifies (or causes to be notified) an HHA of the time or da te 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 re quirements for survey frequency and the substantive content of the surv ey, 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 co mmensurate 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 qual ity home health services by determining whether an HHA complies with the CoP or to confirm the co rrection of previous defi ciencies. 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 woul d 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 survey s must be conducted when an HHA is found to have furnished substa ndard 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.CMS-1358-P 103 h. Surveyor Qualifications ( §488.735) Section 1891(c)(2)(C)(iii) of the Act requires “an indivi dual who meets the minimum qualifications established by the Secretary” to co nduct 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 cr iteria for surveyor minimum qualifications in §488.735. We are proposing that he or she succe ssfully complete the relevant CMS-sponsored Basic HHA Surveyor Training Course and any a ssociated course prerequisites prior to conducting an HHA survey. Proposed §488.735 would also set out the circum stances that would disqualify a surveyor from surveying a particular HHA as required by section 1891(c)(2)(C)(i ii) of the Act. A surveyor would be prohibited from surveying an HHA if the surveyor curren tly 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 ha ve 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 woul d also be disqualified if he or she has a family member who has a financial inte rest or ownership intere st 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 Non-compliance (§488.740) We propose in §488.740 to cross reference the rules for certificati on, documentation of findings, periodic review of compliance and a pproval, 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 certifiesCMS-1358-P 104 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 condition-level survey findings following an HHA's receipt of the official statement of deficiencies. We propose addi ng an IDR process that woul d provide HHAs an informal opportunity to resolve disputes in the surv ey 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 mon itoring (either through a complaint or validation survey). Whenever possible, we want to provide every opportunity to settle disagreements at th e 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 conditionlevel deficiencies cited on the official Statem ent 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 conditionlevel 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 appr opriate, would notify the HHA in writing of its opportunity to request an IDR of those deficiencies. This no tice 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 calenda r day period that the HHA has for submitting an acceptable plan of correction.CMS-1358-P 105 An HHA’s initiation of the IDR process w ould not postpone or otherwise delay the effective date of any enforcement action. The fa ilure to complete an IDR would not delay the effective date of any enforcement action. Furthe r, if any findings are revised or removed based on IDR, the official Statement of Deficienci es is revised accordingly and any enforcement actions imposed solely as a result of those re vised or removed deficiencies are adjusted accordingly. We believe that the IDR proce dures 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 ac tions 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 ag reement 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 substant ial compliance). We may also terminate an HHA that fails to correct its deficien cies within a reasonable time (ord inarily 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, wh ich expanded the Secretary’s options to enforce Federal requirements for HHAs. Under secti on 1891(e)(1) of the Ac t, if the Secretary determines on the basis of a standard, extended, or partial extended survey or otherwise, that a home health agency that is cer tified for participation under this title is no longer in complianceCMS-1358-P 106 with the requirements specified in or pursuant to section 1861(o) or section 1891(a) of the Act and determines that the deficien cies involved immediately jeopardiz e the health and safety of the individuals to whom the agency furnishes items and services, th e 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, and may provide, in addition, for one or more of the other sa nctions described in section 1891(f)(2)(A). We are proposing to set out the statutor y basis for the new subsection at proposed §488.800, which is sections 1891(e) and (f) of the Ac t. Section 1891(e) provides for termination of home health agencies that fa il to comply with Conditions of Participation. This section also provides for ensuring that the procedures with re spect to the conditions un der which each of the alternative sanctions developed by the Secretary shall be designed to minimize the time between identification of deficiencies and impositi on 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 jeopa rdy,” “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)CMS-1358-P 107 We propose in §488.810 general rules for en forcement actions against an HHA with condition-level deficiencies. Se ctions 1891(e)(1) and (2) of the Act provide that if CMS finds that an HHA is not in compliance with the Medi care home health CoPs and the deficiencies involved either do or do not immedi ately jeopardize the he alth 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. Ther efore, 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 cons tituting 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 accr editation by a CMS-approved AO. Accreditation by a CMS-approved AO is voluntary and not necessary to participate in Medica re. 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 re sumption 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 f ound at a branch of the HHA would be counted against the HHA as a business entit y. Therefore, regardless of wh ether the deficient practice is identified at the branch or th e parent location, all sanctions im posed would apply to the parentCMS-1358-P 108 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 requ ired 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 cond ition-level as a plan developed by the HHA and approved by CMS that is the HHA’s written response to survey findings deta iling 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 writte n notification of the intent to impose a sanction including the specific sa nction, the statutory basis for the sanction and appeal rights including an opportunity to participate in the proposed Inform al Dispute Resolution process. An HHA may appeal the determination of noncompliance leading to the imposition of a sanction under the provisions of 42 C.F.R. Pa rt 498. A pending hearing does not delay the effective date of a sanction against an HHA and sanc tions continue to be in effect regardless of any pending appeals proceedings. Civil money pe nalties continue to accrue during the pendencyCMS-1358-P 109 of an appeal, but will not be collected until a fi nal 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 Co Ps 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 di scretion for a period not to exceed six months. The choice of any alternative sanction or termination woul d reflect the impact on patient care and the seriousness of the HHA’s patterns of noncomplian ce 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 de ficiencies, 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 sec tion 1891(f)(3) of the Act, procedures for selecting the appropriate altern ative sanction, including the amount of any CMP and the severity of each sanction, have been designed to mini mize the time between the identification of deficiencies and the final impositi on of sanctions. To determine which sanction or sanctions to apply, we propose that we woul d 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;CMS-1358-P 110

● The presence of repeat deficiencies, th e HHA’s compliance history in general, and specifically with reference to th e cited deficiencies, and any hist ory 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 syst em wide failure of providing quality care. Section 1891(f)(3) of the Act provides for th e 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 noncomplian ce issued within the pr eceding 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 provid es 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 defi ciencies. The Act exp licitly provides for the following: civil money penalties, suspension of payment for new admissions, and temporary management. We are proposing those alternative sa nctions in this proposed rule. In addition to those specified in the statute, we are proposi ng to add the following additional alternative sanctions: a directed plan of correction, direct ed in-service training, and/or suspension ofCMS-1358-P 111 payment for new PPS episodes. The list of altern ative 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 jeopar dy situation and the HHA must correct the deficiencies. We are proposing to implement the statutory requirement by pr oposing that if the IJ situation was not addressed and resolved w ithin 23 days because the HHA was unable or unwilling to correct the defici encies, 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 immediat e jeopardy situations, we would terminate the HHA and we would give notice of the terminati on 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 regula r survey process, providers are advised of any immediate jeopardy findings upon discovery of the immediate je opardy situation during th e survey or as part of the exit conference at the end of the surve y. 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 jeopar dy situation, we would terminate the provider agreement no later than 23 days from the last da y of the survey. Cons istent with the notice process established for hospital emergency depart ments with deficiencies that pose immediateCMS-1358-P 112 jeopardy (set out at §489.53(b)), we are proposing at §488.825 that if an immediate jeopardy situation was not resolved with in 23 days because the HHA was unable or unwilling to correct deficiencies found during a surv ey, 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), es tablishing that we would terminate an HHA’s provider agreement if the HHA failed to correct a deficiency or de ficiencies within the required time frame.

The notice of our intent to impose a sa nction 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 leadi ng 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 tran sfer its patients to a nother local HHA within 30 days of termination. The HHA would be responsib le 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 c ondition-level, but do not pose immediate jeopardy (§488.830) While section 1891(e)(2) of the Act provide s for termination of the HHA’s provider agreement as an enforcement option in non-immedi ate jeopardy situations, we are interested in providing incentives for HHAs to achieve and main tain full compliance with the requirementsCMS-1358-P 113 specified under sections 1861(o) and 1891(a) of the Act before termination becomes necessary. Accordingly, our proposed regul ations 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 disconti nue alternative sanctions when it proposes to terminate an HHA’s participation in Medicare; thus, these sancti ons, if imposed, could continue while CMS initiated termination pr oceedings. Therefore, alterna tive sanctions could be imposed before the termination became effective, but coul d not continue for a pe riod that exceeded six months. Also, to protect the he alth and safety of individuals receiving services from the HHA, alternative sanctions would apply until the HHA achieved comp liance or had its Medicare participation terminated. For example, the su spension of payment sanction would end when the HHA corrected all condition-level defi ciencies or was terminated. We propose in §488.830(b) that for a defici ency 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 effec tive until the effective date of an impending termination (at 6 months) or until the HHA ach ieved 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 determin ing the conditions under which alte rnative sanctions are to be applied, including the amount of any penalties a nd the severity of each sanction. The following sections describe each possible sancti on 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 tran sfer its patients to a nother local HHA within 30CMS-1358-P 114 days of termination. The HHA would be responsib le 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 proce dures 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 admini strator (based on qualif ications 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 st aff, obligate HHA funds, alter HHA procedures, and manage the HHA to correct deficiencies identif ied in the HHA’s operation. We could impose temporary management when we determine that an HHA has condition-le vel 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 comp liance with the CoPs within the required timeframe. We would impose te mporary 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 immediat e 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 corr ection of deficiencies so that the HHA couldCMS-1358-P 115 achieve substantial compliance with the Medicare requirements. Each State Survey Agency will maintain a list of recommended individuals w ho 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 condition-le vel deficiencies within 6 mont hs from the last day of the survey, the HHA’s Medicare partic ipation would be terminate d. Additionally, if the HHA resumes management control without CMS’s approva l, it would be deemed to be a failure to relinquish authority and control to the temporar y manager and we would impose termination and could impose any additional sanctions. The a ppointment 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 regulat ions 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 th e HHA’s operations. Temporary mana gement would be provided at the HHA’s expense. Before the temporary mana ger was installed, the HHA would have to agree to pay his/her salary directly for the duration of the appointment. We believe that theCMS-1358-P 116 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, pursu ant to section 1891(e)(1), t hough 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 in curred 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 de scribing when and how CMS would apply a suspension of payment for new Medicare admissi ons 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 Me dicare patient admissions to the HHA that were made on or after the effective date of the sanc tion. 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 e ffective date of the sa nction could be imposed anytime an HHA was found to be out of substant ial compliance. The CMS would provide theCMS-1358-P 117 HHA with written notice of non-comp liance at least two calendar days before the effective date of the sanction in immediate je opardy situations (pr oposed §488.825(b)) or at least 15 calendar days before the effective date of the sanction in non-immediate jeopar dy 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 non-compliance; the effective date of the sanction; and the right to appeal the de termination 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 definitio n of “new admission” to include new payment episodes because we believe that each new paym ent episode (the 60 day 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 befo re 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 provi des that a suspension of payment sanction shall terminate when CMS finds that the HHA is in substantial complia nce with all of the requirements specified in, or developed in accord ance with, sections 1861(o) and 1891(a) of the Act. That is, the suspension of payment sanc tion would end when the HHA was determined to have corrected all condition-level deficienci es, or upon termination, whichever is earlier. We would notify the HHA of the impositi on of this sanction under proposed §488.840 (b)(1). Once such a sanction was imposed, we propose that the HHA would be required to notifyCMS-1358-P 118 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 woul d 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 pa tient or representative could understand, that Medicare payment might not be available. The suspension of payment would end when CMS terminated the provider ag reement 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 accord ance 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 elig ible 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 epis ode 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 co me 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 b ack into compliance as quickly as possible.” See H.R. Rep. No. 100-391(I) at 423 (1987). In acco rdance with the Committee’s intent, we would construe the term “suspend” to mean to te mporarily 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 prospectiv ely from the date that CMS had determined correction. In proposed §488.840(c), the suspension of pa yment would end when CMS terminatesCMS-1358-P 119 the provider agreement or CMS finds, in accord ance 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, re gardless 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 duri ng 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 iden tify a particular instance or in stances 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 correc ted during a survey, for which th e statute authorizes CMS to impose a sanction. While there may be a single event which leads to non compliance, there can also be more than one instance of noncomplian ce 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 inst ance. 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.CMS-1358-P 120 Since the range of possibl e 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 f ound. Thus, we believe that each deficiency would fit into a range of CMP am ounts, 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 w ould 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 servic e 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 built-in, self-regulating quality assessment and performance improvement system to provide prop er care, prevent poor outcomes, control patient injury, enhance quality, promote safety, and avoi d risks to patients on a sustainable basis that indicates the ability to meet th e 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 CM P would not be imposed simultaneously for the same deficiency. At proposed §488.845(b)(2), we would give ou rselves the discretion to increase or reduce the amount of the CMP during the peri od of noncompliance depending on whether the level of noncompliance had changed at the time of a revisit survey. CMS could increase a CMPCMS-1358-P 121 in increments based upon an HHA’s inability or unwillingness to corr ect deficiencies, the presence of a system wide failure in the pr ovision of quality care or a determination of immediate jeopardy with potential for harm. CM S 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 earne st efforts have been made to address the causes of deficiencies a nd sustain improvement, If an HHA cured the immediate jeopardy situation, but no t the condition-level deficienci es, we could reduce penalties from the upper range to a lower range imposed in non-immediate jeopa rdy situations. However, section 1891(f)(2)(A)(i) of the Act sp ecifies that the sanc tions 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 es tablish the amounts of fines and the levels of severity, we propose to establish a three-tier system with sub categories 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 pos es 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 c ondition-level deficiencythat did not pose immediate jeopardy, but is directly related to poor quality patient car e outcomes, we would assess a penalty within the range of $2,500 to $8,500 per day of noncompliance with the CoPs.CMS-1358-P 122

● Lower range – For repeated and/or condition- level deficiencies that did not constitute immediate jeopardy and were deficiencies in structur es 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 relations hip between the existing survey protocols and proposed ranges of CMP imposition. This table di stinguishes proposed ranges based in IJ, NonIJ, repeat deficiency and first time deficiency. It uses the terminology of structure, process, and outcomes, which is used in the quality improve ment field as a hierar chy of measures. This structure would be further develo ped in the policy guidance stage a nd 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
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 $8,500

First time deficiency
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 $5,000

Structure or process issues 42 CFR 484.10 Patient Rights $2,500CMS-1358-P 123
Level of Seriousness CMP Fine Ranges/Amount 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 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 $4,000

First time deficiency 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 $500-$3000

Other structure or process issues 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 $500-$3000

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 pena lty; the proposed amount of the penalty per day/instance of noncompliance; th e criteria we considered when determining the amount per-day or per-instance; the date on which the penalty would begin to accrue; wh en the penalty would stop accruing; when the penalty would be collecte d; and instructions for responding to the notice, including a statement of the HHA’s appeal rights, including an opportunity to participate in theCMS-1358-P 124 proposed IDR process and, as discussed below, th e right to a hearing, and the implications of waiving a hearing. In accordance with our existing regulations at §498.22(b)(3) and §498.40 and at proposed §488.845(c)(2), once a no tice of intent to impose the CMP had been sent to the HHA, the HHA would have 60 days from the receip t of the notice to request an administrative hearing under §498.40 or waive its right to an ad ministrative 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 expe ditiously 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 wri ting within 60 calendar days from the date of the no tice initial dete rmination. The per-day CMP would begin to accrue on th e day of the survey that identified the HHA noncompliance, and would end on the date of corre ction of all deficienci es, 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 cont inue 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. Additiona lly, we are proposing at §488.845(d)(2) that the per-day and per-instance CMP w ould not be imposed simultaneously in conjunction with a survey. In no instance will the period of nonc ompliance 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 thos e 6 months, we would terminate the HHA. TheCMS-1358-P 125 accrual of the CMP stops on the day the HHA prov ider agreement is terminated or the HHA achieves substantial compliance, whichever is earlier. Total CMP amounts would be computed after a fi nal agency determination; that is, after: (1) Compliance was verified; (2) the HHA provider agreement was involuntarily terminated; or (3) administrative remedies had been exha usted. 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 th e HHA that was terminated, we would send the HHA any CMP notice of final amount or a due and pa yable 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 deci sion, which is after:

● The time to appeal had expired without th e HHA appealing its initial determination;

● CMS received a request from the HHA wa iving its right to appeal the initial determination;

● A final decision of an Ad ministrative 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 impos ition 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 hearingCMS-1358-P 126 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 effe ctive 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 achieve d 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 recei pt of the notice of imposition of a penalty, the HHA could file a request directly to the Departmental A ppeals Board in the Office of the Secretary, Department of Health and Human Serv ices 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 a nd conclusions of the law with which the agency disagreed, and the specific bases for contending that the survey findings and de terminations were invalid. A hearing would be completed before any penalt y was collected. However, sanctions would continue regardless of the timing of any app eals 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. OffsetsCMS-1358-P 127 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 asse ssed 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 ow ed to any Federal agency that is more than 180 days delinquent to be transferred to the De partment 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 mo nies owed or owing to the HHA. To initiate such an offset, we would instruct the appropriate Medicare Administrative Contr actors/ 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 th e Medicare and Medicaid progr ams, based on a proportion that is commensurate with the comparative Federa l expenditures under Titles XVIII and XIX of the Act, using an average of years 2007 to 2009 base d on Medicaid Statistical Information System (MSIS) and HHA Prospective Payment System ( PPS) claims. Based on the proportions of HHA claims attributed to Medi care and Medicaid, respectivel y, for the FY 2007-2009 period,CMS-1358-P 128 approximately 63 percent of the CMP amounts r ecovered 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 th ese rules are finalized and become effective, these proportions would be update d annually based on the most re cent 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 imposedCMP amounts collected, this propo sed rule would provide that St ate 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 standa rd-setting and survey agencies) to apply to HHA surveys the same cost accounting principles th at are now applied to nursing home s. In other words, we are adding a reference to HHAs, along with nursing fac ilities (NFs) and Intermediate Care Facilities for Individuals with Intellectual Disabilities (IC F/IIDs). We project th e initial cost to the Medicaid program would be approximately 37 per cent of the cost of su rveys for dually-certified 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 th e 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 deficien t practices. Specifically, CMS would be able toCMS-1358-P 129 impose a directed plan of correction on an HHA wh ich is out of complian ce with the Conditions of Participation. A directed plan of correcti on 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 pl an of correction would have to be developed by us or by the temporary manage r, 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 pati ent and before accepting any new admissions; (2) assess every patient’s drug regimen according to th e regulations at §484.55(c); and (3) train staff in correct policies and proce dures and implement them. Th e HHA would be responsible for achieving compliance. If the HHA failed to achie ve compliance within th e timeframes specified in the directed plan of correction, we would impo se one or more addition al alternative sanctions until the HHA achieved compliance or was terminat ed from the Medicare program. Before imposing this sanction, we woul d 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 deficienci es. Some compliance problems are a result of a lack of knowledge on the part of the health care provider re lative 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 situa tions where staff performance resulted in deficient practices. ACMS-1358-P 130 directed in-service training pr ogram would correct this defici ent practice through retraining the staff in the use of clinically and professiona lly sound methods to produc e quality outcomes. Directed in-service training would be imposed if CMS determined that the HHA had a deficiency or deficiencies that indicated noncompliance, an d 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 woul d require specific training, so that positive changes would be achie ved and maintained. HHAs would be required to participate in programs devel oped 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 agi ng. 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 a ny resulting expenses. The ultimate evaluation of the training program would be in the demonstrated competenci es 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 trai ning, we could impose one or more additional sanctions. The HHA itself would pay for the di rected in-service training for its staff. m. Continuation of Payments to HHAs with Deficiencies §488.860 We propose in §488.860 rules concerning the co ntinuation of Medica re payments to HHAs with condition-level defici encies. 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:CMS-1358-P 131

● 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 th e Secretary, and to th e office the Secretary has delegated the authority to appr ove the plan of correction; and

● The HHA agrees to repay the Federal government the payments under this arrangement should the HHA fail to ta ke the corrective action as set fo rth 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 agre ement before the end of the 6-month correction period in accordance with proposed §488.865 if th e requirements proposed at §488.860(a)(1) are not met. If any sanctions were also impose d, 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 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 termin ation of an HHA’s Medicare provider agreement, as well as the effect of such term ination. Termination of the provider agreement would end all payments to the HHA, includi ng any payments that were continued underCMS-1358-P 132 proposed §488.860. Termination would also end a ny alternative sanctions imposed against the HHA, regardless of any proposed timeframes for th e sanction(s) originally specified. In proposed §488.865(b) we would terminate the pr ovider agreement if (1) the HHA failed to correct condition-level deficiencies within si x 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 faile d to relinquish control to the temporary manager, if that sanction is imposed or (4) th e 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 patien t health and safety, we would terminate the provider agreement. The provider could also voluntarily terminat e its agreement. CMS and the SA would, if necessary, work w ith 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 t hose procedures for an enforcement action terminating an HHA at §488.865(d). These procedures form the basis fo r 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 ac cordance 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 wh en an HHA failed to correct any deficiency (either standard-level or condi tion-level), we could terminate its provider agreement. The notification requirements in §489.53(d )(1) requires that CMS give not ice 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 thisCMS-1358-P 133 general notice rule. Specifically, we propose th at for HHA terminations based on deficiencies that posed immediate jeopardy to patient health and safety, we would gi ve notice to the HHA of such termination at least 2 days before the e ffective 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 i nvoluntary 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 civ il money penalty is imposed, we could, at our discretion, issue a public notice. The issuance of additional p ublicly-reported notices when certain sanctions are imposed would offer inform ation to patients who we re choosing a provider of home health services, as well as to current recipients of ho me health care. A home health patient does not necessarily know when a su rvey has been conducted at an HHA and if deficiencies had been determined or any sancti ons imposed unless a survey or 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 informati on collection requirements, this rule does notCMS-1358-P 134 add new or revise any of the existing informati on 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 bur den with regard to OASIS as discussed in preamble section III.C.3. and approved under OCN 0938-0760 or Home Hea lth Care CAHPS as discussed in the same preamble section but approved under OCN 0938-1066. All of the requirements and burden estimates associated wi th these collections are currently approved by OMB and are not subject to additional OMB re view 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 surv ey agency provision concerning State Plans. Since the State Medicaid Plans already in clude 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 incl usive of all Medicaid work being performed by the State Survey Agency. Consequently, the provisio n 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 s ections 1864 and 1891(c)(1) of the Act. CMS believes that the additional survey agency admi nistrative activity required to impose alternative sanctions created by this rule will not genera te a significant amount of additional paperwork burden at the State survey agen cy or HHA level. Imposing sanc tions may require that states engage in some additional communication and ca rry out follow-up surveys, and CMS Regional Offices may need additional time for determ ining, imposing and tracking sanctions. In estimating appeal volume and costs, we note that in 2010 only 260 providers out of 11,821 hadCMS-1358-P 135
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 Medica re surveys; and Federa l Medicaid funds will generally pay 75 percent of the re maining 37 percent share of costs, since there is an increased Federal match for State survey ac tivities as referenced in sec tion 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 Memora nda, 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 disc ussed in the Background and Statutory Authority section. State Surveyor recordkeeping requirements already exist as Forms CMS-1515 and CMS-1572 (OMB control numb er known as information collection 0938- 0355) and CMS-2567 (OMB# 938-0391). CMS anticip ates enhancing survey protocols and Interpretive Guidelines and providing additi onal 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 w ould be required to complete the CMSsponsored Basic HHA Surveyor Training Course be fore 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 tr aining courses are funded entirely by the Central Office and there is no bu rden to States since our annual budgets to theCMS-1358-P 136 States (for the performance of surv ey activities) includes the cost of the salaries and the travel for participating in all national training courses. These training courses ar e designed to teach the surveyors how to conduct the survey process in a ccordance 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 CM S-1515, -1572, and -2567 above) have been approved by OMB through the PRA process. Section 488.810(e) requires each HHA that ha s deficiencies constituting noncompliance to submit a plan of correction for approval by CM S. This is a current requirement for both standard and condition level defici encies, 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 bo dy, potentially prepare for IDR or to issue a check for a CMP. While there is paperwork bur den associated with th is plan of correction requirement, it is already required and curre ntly 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 Reducti on 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 requ irements; (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 anCMS-1358-P 137 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 Regard ing 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 aut horize a quality reporting program for hospices. Section 1814 (i)(5)(C) of the Act requires th at 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 th e Secretary. As added by section 3004(c), new section 1814(i)(5)(A)(i) of th e 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 qua lity data submission requirements with respect to that fiscal

year. In implementing the Hospice quality reporting program, CMS seeks to collect measurerelated information with as little burden to the providers as possible and which reflects the full spectrum of quality performance. Our purpose in co llecting 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 inte nded 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 m easure 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 associ ated with this proposed rule but is discussedCMS-1358-P 138 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 subse quent 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 (Septemb er 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regul atory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, secti on 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; P ub. 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 an alysis (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 accordanceCMS-1358-P 139 with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget. B. Statement of Need This proposed rule adheres to the followi ng 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 Fo r 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 in itially based on the most recent audited cost report data available to the Secr etary, and (2) the standardized prospective payment amount be adjusted to account for the effects of cas e-mix and wage levels among HHAs. Section 1895(b)(3)(B) of the Act addresses the annual up date to the standard prospective payment amounts by the HH applicable percentage increa se. Section 1895(b)(4) of the Act governs the payment computation. Sections 1895(b)(4)(A)(i) a nd (b)(4)(A)(ii) of the Act require the standard prospective payment amount to be adju sted 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 th e Act requires the esta blishment of wage adjustment factors that reflect the relative level of wages, and wage-related co sts 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,CMS-1358-P 140 gives the Secretary the option to make changes to the payment am ount otherwise paid in the case of outliers because of unusual variations in th e 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 Ca re Act requires that HH services furnished in a rural area (as defined in secti on 1886(d)(2)(D) of the Act) with respect to episodes and visits ending on or after April 1, 2010, and before Januar y 1, 2016, receive an incr ease of 3 percent the payment amount otherwise made und er 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 distri butional effects of an updated wage index ($70 million decrease) the +1.5 percent HH paym ent 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 expenditu res when comparing the current CY 2012 HH PPS to the proposed CY 2013 HH PPS. The RFA require s agencies to analyze options for regulatory relief of small entities, if a rule has a significan t impact on a substantial number of small entities. For purposes of the RFA, small entities incl ude small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprof it 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 thatCMS-1358-P 141 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 ar e not included in the de finition of a small entity. The Secretary has determined that this propos ed rule would not have a si gnificant economic impact on a substantial number of small entities. We defi ne small HHAs as either non-proprietary or proprietary with total revenue s of $13.5 million or less in any 1 year. We estimate that approximately 18 percent of HHAs are classifi ed as non-proprietary. Analysis of Medicare claims data reveals a 0.11 per cent decrease in estimated paym ents 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. Specifical ly, 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 toward s more accurate payment for the delivery of home health services. Our anal ysis 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 th e Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the ope rations of a substantial number of small rural hospitals. This analysis must conform to the prov isions 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 ofCMS-1358-P 142 a metropolitan statistical area and has fewer than 100 beds. This proposed rule applies to HHAs. Therefore, the Secretary has determined that th is 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 do llars, 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 trib al 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 pr oposed rule presents the estimated expenditure effects of policy changes proposed in this rule. We use the la test data and best analysis available, but we do not make adjustments for fu ture changes in such variables as number of visits or case-mix. This analysis incorporates the latest estimat es of growth in service use and payments under the Medicare home health benefit, based onMedicare claims from 2010. We note that certain events may combine to limit the scope or accuracy of our impact analysis, because such an analysis is future-oriented and, thus, susceptibl e to errors resulting fr om 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 Me dicare program may continue to be made as a result of the Affordable Care Act, or new stat utory provisions. Although these changes may notCMS-1358-P 143 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 likel y 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, geogra phic region, and urban and rural locations. The second column shows the payment effects of the wage index onl y. 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 ge neral, facility-based, proprietary agencies in rural areas wouldbe impacted positively as a result of the proposed the provisions of this rule. In addition, freestanding, other volunteer/non-profit agencies and facility-based volunteer/non-profit agencies in urban areas would be impacted positively.CMS-1358-P 144
TABLE 25: Proposed Home Health Agency Policy Impacts for CY 2013, by Facility Type and Area of the Country Comparisons Group Percent change due to the effects of the updated wage index Impact of all

CY 2013 Policies 1 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 Propr ietary -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 Propr ietary -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 CountryCMS-1358-P 145
Comparisons Group Percent change due to the effects of the updated wage index Impact of all

CY 2013 Policies 1 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% 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 ba sed on the site of service of the beneficiary.
REGION KEY: New England= Connecticut, Maine, Massachusetts, Ne w 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, Hawa ii, Oregon, Washington; Outlying= Guam, Puerto Rico, Virgin Islands 1 Percent change due to the eff ects 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 forCMS-1358-P 146 CY 2013 along with the home health payment upda te and the updated wage index, the aggregate impact would be a net decr ease 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 m illion 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 serv ices to Medicare beneficiaries. Section 1895(b)(3)(B)(iv) of the Act gives CMS the authority to implement payment reductions for nominal case-mix growth, changes in case-mix that are unrela ted 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, whic h is an increase in case-mix that is not due to patient acuity. As disc ussed 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 1.3 2 percent payment reduc tion to the national standardized 60-day episode ra tes 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 incr ease in case-mix that is not real would be detrimental to the integrity of the PPS. As di scussed in section III.A. of this rule, becauseCMS-1358-P 147 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, there by paying more accurately for the delivery of home health services under the Medicare home h ealth benefit. The ot her reduction to HH PPS payments, a 1.0 percentage point reduction to th e proposed CY 2013 home health market basket update, is discussed in this rule and is not di scretionary as it is a requirement in section 1895(b)(3)(B)(vi) of the Act (as ame nded 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 sm all businesses, nonprofit or ganizations, and small governmental jurisdictions. Mo st hospitals and most other pr oviders and suppliers are small entities, either by nonprofit status or by havi ng 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 Secr etary 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 sancti oned based on noncompliance 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 a nd SAs. This minor rule determination was made by examining the following survey data fo r calendar year (CY) 2010 in the CMS ProvidingCMS-1358-P 148 Data Quickly (PDQ) System: Survey Activity Report, the Citation Frequency Report, the Condition-Level Deficiencies Report and th e 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 nur sing home data reports, we have found less than 0.3 percent of nursing homes have been subj ect to the Temporary Ma nagement 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 overhau l with changes to current tracking mechanisms and a nationwide training effort to train survey ors, their supervisors and related CMS personnel, we propose an effective date of one year following a final regulation. In addition, section 1102(b) of th e Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the ope rations of a substantial number of small ruralCMS-1358-P 149 hospitals. This analysis must also conform to the provi sions 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 an alysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, th at this proposed regulation would not have a significant impact on the operati ons 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 benef its before issuing any rule w hose 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 governm ents or on the private sector. Executive Order 13132 establishes certain requirem ents that an agency must meet when it promulgates a proposed rule (and subsequent fi nal rule) that imposes substantial direct requirement costs on State and local governme nts, preempts State law, or otherwise has Federalism implications. We would incur cert ain 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 info rmation system (ASPEN) and ongoing expenses for maintenance and associated modifications of th e 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 instructi on 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 developm ent and design. We also estimate 104 hoursCMS-1358-P 150 per year in trouble-shooting and responding to qu estions. 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 inco rporated 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 pe rcent. At this rate the net St ate Medicaid costs incurred in FYs 2013 and 2014 would be approximately $3.7 million a nd $4.2 respectively, spread out across all States and territories. G. Accounting Statement and Table As required by OMB Circul ar A-4 (available at http://www.whitehouse.gov/om b/circulars_a004_a-4 ), in Table 27, we have prepared an accounting statement showing the cla ssification of the transfers associ ated 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.CMS-1358-P 151
TABLE 27: Accounting Statement Classification of Estimated Transfers, from the CY 2012 HH PPS to the CY 2013 HH PPS Category Transfers Annualized Monetized Transfers -$20 million From Whom to Whom? Federal Government to HH providers

H. Conclusion In conclusion, we estimate that the net im pact 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 ($3 00 million increase), and a 1.32 percent case-mix adjustment applicable to the national standardi zed 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 woul d be calculated at 63 pe rcent for the Medicare Classification of Estimated Transfers Re lating to the Medicare and Medicaid Home Health Survey and Certification Costs, FYs 2013 to 2014 Federal Medicaid HH Survey and Certification Costs FYs 2013 to FY 2014 Category Transfers Units Discount Rate 7% 3% Annualized Monetized Transf ers $11.9 Million $11.9 Million From Whom to Whom? Federal Governme nt 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 Government s 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 Transfer s -$15.8 Million -$15.8 Million From Whom to Whom? Federal Government to Medicare HH Survey AgenciesCMS-1358-P 152 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 cer tain requirements that an agency must meet when it promulgates a proposed rule (and subseq uent 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, Federali sm, and have determined that it would not have substantial direct e ffects on the rights, roles, and responsi bilities of States , local or tribal governments.CMS-1358-P 153
List of Subjects
42 CFR Part 409 Health facilities, Medicare.
42 CFR Part 424 Emergency medical services, Health facilities, Health pr ofessions, Medicare, Reporting and recordkeeping requirements.
42 CFR Part 431 Grant programs-health, Health facilities, Medicaid, Privacy, Reporti ng and recordkeeping requirements
42 CFR Part 484 Health facilities, Health professions , Medicare, Reporting and recordkeeping requirements
42 CFR Part 488 Administrative practice and pr ocedure, Health facilities, Medicare, Record and reporting requirements.
42 CFR Part 489 Health facilities, Medicare, Reporti ng and recordkeeping requirements
42 CFR Part 498 Administrative practice and pr ocedure, Health facilities, H ealth professions, Medicare reporting and recordkeeping requirements.CMS-1358-P 154

For the reasons set forth in the preamble, the Centers for Medicar e & Medicaid Services proposes to amend 42 CFR chapter IV as set forth below:
PART 409—HOSPITAL INSURANCE BENEFITS 1. The authority citation for part 40 9 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 re vising 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, th e qualified therapist from each discipline must provide all of the ther apy 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 th e 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, th e qualified therapist from each discipline must provide all of the ther apy services and functiona lly 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.CMS-1358-P 155 (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 th e reassessment and objective measurement of the effectiveness of the thera py 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, ther apy coverage resumes with the completed reassessment therapy visit.
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PART 424—CONDITIONS FOR MEDICARE PAYMENT 3. The authority citation for part 42 4 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Se curity 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 paragr aphs (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 rela ted to the primary reason the patient requiresCMS-1358-P 156
home health services, has occurr ed 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 in termittent 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 th e patient in an acute or post-acute care facility from which the patient was directly admitted to home health. (3 ) A nurse practitioner or a clin ical nurse specialist (as those terms are defined in section 1861(aa)(5) of the Act) who is wo rking 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 se ction 1861(gg)of the Act) as authorized by State law, under the supervision of the certifying physician or unde r 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 wa s directly admitted to home health. (5 ) A physician assistant (as defined in s ection 1861(aa)(5) of the Act) under the supervision of the certifying phys ician 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-to-face 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.CMS-1358-P 157 (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 facili ty 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 comm unicating to the certifying physic ian the clinical findings (i.e., the patient’s homebound status and need for inte rmittent 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 f ace-to-face encounter to th e certifying physician. In all other cases where a non-physician practitio ner performs the face-to-face encounter, the nonphysician practitioner must communicate the clinic al findings of that face-to-face patient encounter to the certifying physician.
* * * * * (F) The physician responsible for certifying th e patient for home care must document the face-to-face encounter on the cer tification itself, or as an ad dendum to the certification (as described in paragraph (a)(1)(v) of this secti on), that the condition for which the patient was being treated in the face-to-face patient encounte r is related to the primary reason the patient requires home health services, a nd why the clinical find ings of such encount er support that the patient is homebound and in need of either in termittent 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 documentati on must be signed by the certifying physician.
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PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION 5. The authority citation for part 43 1 continues to read as follows: Authority: Sec. 1102 of the Social Secu rity Act, (42 U.S.C. 1302) 6. Section 431.610 is amended by revising para graph (g) introductory text to read as follows:CMS-1358-P 158
§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 designate d under paragraph (e) of this section will -
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PART 484—HOME HEALTH SERVICES 7. The authority citation for part 48 4 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 pa ragraph (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 48 8 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 Pr otection and Affordable Care Act (Pub. L. 111–148)

10. Section 488.2 is amended by adding the follo wing statutory basis in numerical order as follows: §488.2 Statutory basis. * * * * *CMS-1358-P 159 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 para graph (a)(1) to read as follows: §488.3 Conditions of participation; conditi ons for coverage; and long-term care requirements. (a) * * * (1) Meet the applicable statutory defi nition 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 paragr aphs (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 a nd agencies. Specifically, surveyors will directly observe the actual provision of care and services to residents and/or patient s, and the effects of that care, to assess whether the care provided m eets 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 a nd patients and the effects of th at care on such residents and patients are assessed in a systematic manner.CMS-1358-P 160 13. The section heading for §488.28 is revised to read as follows: §488.28 Providers or suppliers, other than SN Fs, NFs, and HHAs with deficiencies. * * * * * 14. A new subpart I is added to read as follows: Subpart I—Survey and Certificatio n 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 Certificatio n of Home Health Agencies §488.700 Basis and scope. Section 1891 of the Act establishes requi rements 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 co mplaints received, a change of ownership orCMS-1358-P 161 management, or other indicators of specific concer n 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 regulatio ns contained in part 484, subparts A through C of this chapter, is determined as partof a survey, and can be either standard or condition-level. Extended survey means a survey that re views all conditions of pa rticipation. 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 c ondition-level or standard-level. Partial extended survey means a survey conducted to determine if deficiencies and/or deficient practice(s) exist that were not fully ex amined during the standard survey. The surveyors may review any additional requirements whic h 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 wh ich the surveyor reviews the HHA’s compliance with a select number of standards an d/or conditions of participation in order to determine the quality of care and services fu rnished by an HHA as measured by indicators related to medical, nursing, and rehabilitative care. Substandard care means noncompliance with one or mo re conditions of participation, including deficiencies which coul d 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.CMS-1358-P 162
§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 previ ous 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 ite ms or services by the HHA. (2) Visits to the homes of patients, ( the purpose of the home visit is to evaluate the extent to which the quality and scope of services fu rnished 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 c onsent, and, if determined necessary by CMS or the survey team, other forms of communicati on with patients including telephone calls. (3) Review of indicators that include the out comes of quality care and services furnished by the agency as indicated by medica l, nursing, and rehabilitative care. (4) Review of compliance with a select number of regulations most related to highquality patient care. (b) The survey agency’s failure to follow the procedures set forth in this section will not invalidate otherwise legitimate determinati ons 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 fu lly examined during the standard survey and there are indications that a more comp rehensive review of cond itions 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.CMS-1358-P 163 (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 survey s 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 procedur es 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 su rvey 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 late r than 36 months after the last day of the previous standard survey. Additionall y, 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 condi tions of participation; and (2) Confirm that the HHA has corrected defi ciencies 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;CMS-1358-P 164 (2) Administration; or, (3) Management of the HHA. (c) Complaints

. A standard survey, or a bbreviated 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 comp liance 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 Basi c HHA Surveyor Traini ng Course and any associated course prerequisites. All surveyors must follow th e principles set forth in §488.24 through §488.28 according to CMS policies and proce dures for determining compliance with the conditions of participation. (b) Disqualifications

. Any of the following circumstan ces disqualifies a surveyor from surveying a particular agency: (1) The surveyor currently works for, or, with in 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; orCMS-1358-P 165 (iii) An officer, consultant, or agent for the agency to be surveyed concerning compliance with conditions of participation specified in or pursuant to se ctions 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 w ho has a relationship with the HHA to be surveyed. (4) The surveyor has an immediate family me mber who is a patient of the HHA to be surveyed. §488.740 Certification of compliance or noncompliance. Rules to be followed for certification, docum entation of findings, periodic review of compliance and approval, certific ation of noncomplianc e, 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 r eceipt of an official statement of deficiencies, HHAs are afforded th e 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 Defi ciencies as a result of IDR

. If any findings are revised or removed by CMS or the State based on IDR, the o fficial statement of de ficiencies is revised accordingly and any enforcement actions imposed sole ly 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 forCMS-1358-P 166 participating in an IDR process at the time the offi cial 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 accep table plan of correction. 15. A new subpart J is added to read as follows: Subpart J--Alternative Sanctions for Home Health Agencies with Deficiencies 488.800 Statutory basis. 488.805 Definitions. 488.810 General provisions. 488.815 Factors to be consider ed in selecting sanctions. 488.820 Available sanctions. 488.825 Action when deficiencies pose immediate jeopardy. 488.830 Action when deficiencies are at the cond ition-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 Secr etary to take actions to remove and correct deficiencies in an HHA through an alternative sanc tion or termination or both. Furthermore, this section specifies that these sa nctions are in addition to any others availableCMS-1358-P 167 under State or Federal law, and, except for ci vil 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 achie ve specific outcomes within specific timeframes. Immediate jeopardy means a situation in which the pr ovider’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 pa tient 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 noncomplia nce identified and corrected through a survey, for which the statute aut horizes 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 detaili ng corrective actions to cited deficiencies and specifies the date by which those deficiencies will be corrected. Repeat deficiency means a standard or condition-leve l 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.CMS-1358-P 168
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 gov erning body who has authority to hire, terminate or reassign staff, obligate funds, al ter 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 pr otect 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 survey s 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 defi ciencies constituting noncompliance. (d) Extent of sanctions imposed

. When CMS imposes a sanc tion, 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 noncompliant HHA must submit a plan of correction for approval by CMS. (f) Notification requirements -- (1) Notice . CMS provides writte n 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.CMS-1358-P 169 (g) Appeals

. (1) The provisions of part 498 of this chapter apply when the HHA requests a hearing on a determination of noncompliance l eading 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 pos e 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 ei ther the parent or branch location. (d) The extent to which the deficiencies are di rectly related to a failure to provide quality patient care. (e) The extent to which the HHA is part of a larger organizatio n with performance problems. (f) An indication of any system-wid e failure to provide quality care. §488.820 Available sanctions. In addition to termination of the provider ag reement, the following alternative sanctions are available: (a) Civil money penalties. (b) Suspension of payment for all new admissions and new payment episodes.CMS-1358-P 170 (c) Temporary management of the HHA. (d) Directed plan of corre ction, as set out at §488.850. (e) Directed in-service tr aining, 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 pr ovider 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 jeop ardy has not been removed by the HHA. (3) In addition to a termination, CMS may im pose 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 jeopar dy, 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 agreemen t terminated, is responsible for providing information, assistance, and arrangements necessary for the proper and safe transfer of patients to another local HHA with in 30 days of termination. Th e 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 co ndition-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 s ubstantially 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 wouldCMS-1358-P 171 lead to noncompliance based on the HHA’s failu re 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 sanc tions 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 jeopa rdy, notice must be given at least 15 calendar days before the effective date of the en forcement 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 agreemen t terminated, is responsible for providing information, assistance, and arrangements necessary for the proper and safe transfer of patients to another local HHA with in 30 days of termination. Th e 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 temporar y management of an HHA if it determines that an HHA has a condition-level deficiency(ies) and CM S determines that management limitations or the deficiencies are likely to impair the HHA’s ability to correctCMS-1358-P 172 deficiencies and return the HHA to full complianc e with the conditions of participation within the timeframe required. (2) [Reserved] (b) Procedures

. (1) CMS notifies the HHA that a tem porary 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 achie ved substantial comp liance and has the management capability to ensure continued complia nce with all the conditi ons of participation; (2) CMS terminates the provider agreement; or (3) The HHA reassumes management control wi thout CMS approval. In such case, it would be a failure to relinqui sh 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 mont hs 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 te mporary 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 (preva iling 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 incurre d by the HHA if such person had been in an employment relationship; andCMS-1358-P 173 (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 patien t admissions and new payment episodes. (a) Application

. (1) CMS may suspend payment fo r all new admissions and new payment episodes if an HHA is found to have cond ition-level deficiencies, regardless of whether those deficiencies pos e immediate jeopardy. (2) CMS will consider this sanction for a ny deficiency related to poor patient care outcomes, regardless of whether the de ficiency 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-complia nce; the effective date of the sanction; and the right to appeal the determin ation leading to the sanction. (ii) The HHA may not charge a newly ad mitted 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 repr esentative oral and written notice of the suspension of Medicare payment in a language and ma nner that the beneficiary or representative can understand. (2) Restriction

. (i) Suspension of payment for all new admissions and new payment episodes sanction maybe imposed anytime an HHA is found to be out of s ubstantial compliance.CMS-1358-P 174 (ii) Suspension of payment for patients w ith new admissions or patients with new payment episodes will remain in place until CMS determines that the HHA has achieved substantial compliance or is invo luntarily 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 w ith the conditions of participation. (c) Duration and effect of sanction

. This sanction ends when – (1) CMS determines that the HHA is in substa ntial 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 maximu m of 6 months from the date noncompliance was determined. §488.845 Civil money penalties. (a) Application . (1) CMS may impose a civil mone y penalty against an HHA for either the number of days the HHA is not in compliance w ith 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 th e amount of the penalty: (i) The factors set out at §488.815.CMS-1358-P 175 (ii) The size of an agency and its resources. (iii) The availab ility of other HHAs within a region. (iv) Accurate and credible resources, such as PECOS, Medicare cost reports and Medicare/Medicaid claims inform ation that provide information on the operation and resources of the HHA. (v) Evidence that the HHA has a built -in, self-regulating quality assessment and performance improvement system to provide prop er care, prevent poor outcomes, control patient injury, enhance quality, promote safety, and avoi d risks to patients on a sustainable basis that indicates the ability to meet th e 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 be en implemented even though the HHA is not yet in full compliance with the conditions of participation. (iii) No penalty assessment shall exce ed $10,000 for each day of noncompliance. (3) Upper range of penalty . Penalties in the upper ra nge of $8,500 to $10,000 per day of noncompliance are imposed for a condition-level de ficiency that is immediate jeopardy. The penalty in this range will continue until complian ce can be determined based on a revisit survey.CMS-1358-P 176 (4) Middle range of penalty . Penalties in the rang e of $3,500 - $8,500 per day of noncompliance are imposed for a repeat and/or condition-level defici ency that does not constitute immediate jeopardy, but is directly related to poor qua lity patient care outcomes. (i) $8,500 per day for a repeat de ficiency 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 are related predominately to structure or process-orie nted conditions (such as OASIS submission requirements) rather than directly related to patient care outcomes. (i) $4,000 per day for a repeat de ficiency or deficiencies. (ii) $500 to $3,000 per day fo r other deficiencies. (6) Per instance penalty

. Penalty imposed per inst ance of noncompliance may be assessed for one or more singular events of condi tion-level noncompliance that are identified and where the noncompliance was corrected during th e 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 in stance, 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 w ill 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 sustai n improvement must be evident. (8) Increased penalty amounts

. (i) In accordance with para graph (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 lowe r-level penalty amount, become sufficiently serious to pose potential harm or immediate jeopardy.CMS-1358-P 177 (ii) CMS increases the per day penalty amount for deficiencies that are not corrected and found again at the time of revi sit survey(s) for which a lo wer-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 unc orrected 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 am ount 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 ba sis 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 ci vil money penalty. If an HHA timely waives its right to a hearing, CMS reduces the penalty amo unt by 35 percent, and the amount is due within 15 days of the HHAs agreeing in writing to wa ive 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 reduc ed 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 th e 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, w ith a maximum of $10,000 per day per HHA. A penalty that is imposed per day and per in stance of noncompliance may not be imposed simultaneously.CMS-1358-P 178 (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 noncom pliance will stop accruing on the day the provider agreement is terminated or the HHA achie ves substantial complian ce, whichever occurs first. (4) Duration of penalty when there is no immediate jeopardy. (i) In the case of noncompliance that does not pose immediate jeopar dy, the daily accrual of per day civil money penalties is imposed for the days of noncomplia nce prior to the notice specified in paragraph (c)(1) of this section a nd an additional period of no longer th an 6 months following the last day of the survey. (ii) If the HHA has not achieved compliance with the conditions of participation, CMS terminates the provider agreement. The accrua l of civil money penalty stops on the day the HHA agreement is terminated or the HHA achieves s ubstantial 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 achie ves compliance with the conditions of participation as determined by a revisit survey, CMS sends a fi nal 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 balan ce beginning on the due date, as provided in paragraph (f )(4) of this section.CMS-1358-P 179 (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 pe nalty 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 administra tive decision is made. (ii) The HHA has waived its right to a hear ing in accordance with pa ragraph (c)(2)(ii) of this section. (iii) Time for requesting a hearing has e xpired and CMS has not received a hearing request from the HHA. (f) Due date for payment of penalty . A penalty is due and paya ble 15 days from notice of the final administrative decision. (1) Payments are due for all civi l money penalties within 15 days: (i) After a final administrative decision when the HHA achieves substantial compliance before the final decision or the effective da te of termination before final decision, (ii) After the time to appeal has expired a nd the HHA does not appeal or fails to timely appeal the initial determination, (iii) After CMS receives a written request fr om the HHA requesting to waive its right to appeal the determinations that le d to the imposition of a sanction, (iv) After substantial co mpliance is achieved, orCMS-1358-P 180 (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 co nditions 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 exte nd beyond 6 months from the last day of the survey. (5) The amount of the penalty, when determin ed, 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 th e unpaid balance of a penalty, beginning on the due date. Interest is com puted 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 fr om Medicare and Medicaid participating HHAs are disbursed in proportion to av erage dollars spent by Medicare and Medicaid at the national level based on MSIS and HHA PPS data fo r 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, CM S 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.CMS-1358-P 181 (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 a nd Certification operations nor as the State’s Medicaid non-Federal medical as sistance 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 warra nt directing the HHA to take specific actions;

or (2) Fails to submit an accep table 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 CM S approval) may direct the HHA to take corrective action to achieve specific out comes 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 th e 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 th at indicate noncompliance; (2) Education is likely to co rrect the deficiencies; andCMS-1358-P 182 (3) The programs are conducted by established ce nters of health education and training or consultants with background in ed ucation and training with Medica re 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 inservice training, if the HHA has not achieved co mpliance, 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 paragr aph (a)(1) of this section are met. (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 inCMS-1358-P 183 paragraph (a)(1) of this sec tion are not met, the HHA will re ceive no Medicare payments, as applicable, for new admissions follo wing 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 part icipation by the end of the period specified in paragraph (a) of this secti on, CMS will terminate the provid er 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 pl an of correction w ithin the timeframe specified by CMS. (3) The HHA fails to relinquish control to th e temporary manager, if that sanction is imposed by CMS. (4) The HHA fails to meet the eligibility crite ria 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 terminati on of its provider agreement by CMS in accordance with part 498 of this chapter.CMS-1358-P 184

PART 489--PROVIDER AGREEMEN TS 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 corr ect any deficiencies w ithin 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, CM S gives notice to the HHA at least 2 days before the effective date of terminat ion of the provider agreement.
* * * * *
PART 498-APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR D ETERMINATIONS
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 Secur ity Act (42 U.S.C. 1302 and 1395hh).CMS-1358-P 185 19. Section 498.3 is amended by revising paragr aphs (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 wh ich sanction was imposed. The scope of review on the imposition of a ci vil 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 th at CMS could collect (for SNFs or NFs, the scope of review during a h earing on imposition of a civil m oney 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 provi der’s deficiencies pose immedi ate 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.
* * * * *CMS-1358-P
Authority: (Catalog of Federal Domestic Assi stance Program No. 93.773, Medicare-- Hospital Insurance; and Program No. 93.774, Me dicare--Supplementary Medical Insurance Program) Dated: June 27, 2012.

______________________ Marilyn Tavenner, Acting Administrator, Centers for Medicare & Medicaid Services

Approved: June 28, 2012.

_____________________ Kathleen Sebelius, Secretary.

BILLING CODE 4120-01-P

[FR Doc. 2012-16836 Filed 07/06/2012 at 4:15 pm; Publication Date: 07/13/2012]