70372 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 409, 418, 424, 484, and 

489 

[CMS–1510–F] 

RIN 0938–AP88 

Medicare Program; Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2011; 

Changes in Certification Requirements 

for Home Health Agencies and 

Hospices 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule sets forth an 

update to the Home Health Prospective 

Payment System (HH PPS) rates, 

including: the national standardized 60- 

day episode rates, the national per-visit 

rates, the nonroutine medical supply 

(NRS) conversion factors, and the low 

utilization payment amount (LUPA) 

add-on payment amounts, under the 

Medicare prospective payment system 

for HHAs effective January 1, 2011. This 

rule also updates the wage index used 

under the HH PPS and, in accordance 

with the Patient Protection and 

Affordable Care Act of 2010 (Affordable 

Care Act), updates the HH PPS outlier 

policy. In addition, this rule revises the 

home health agency (HHA) 

capitalization requirements. This rule 

further adds clarifying language to the 

‘‘skilled services’’ section. The rule 

finalizes a 3.79 percent reduction to 

rates for CY 2011 to account for changes 

in case-mix, which are unrelated to real 

changes in patient acuity. Finally, this 

rule incorporates new legislative 

requirements regarding face-to-face 

encounters with providers related to 

home health and hospice care. 

DATES: Effective Date: These regulations 

are effective on January 1, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Frank Whelan, (410) 786–1302, for 

information related to payment 

safeguards. 

Elizabeth Goldstein, (410) 786–6665, for 

CAHPS issues. 

Mary Pratt, (410) 786–6867, for quality 

issues. 

Randy Throndset, (410) 786–0131, for 

overall HH PPS issues. 

Kathleen Walch, (410) 786–7970, for 

skilled services requirements and 

clinical issues. 

Table of Contents 

I. Background 

A. Statutory Background 

B. System for Payment of Home Health 

Services 

C. Updates to the HH PPS 

D. Comments Received 

II. Provisions of the Proposed Rule and 

Response to Comments 

A. Case-Mix Measurement 

B. Therapy Clarifications 

C. Outlier Policy 

1. Background 

2. Regulatory Update 

3. Statutory Update 

4. Outlier Cap 

5. Loss Sharing Ratio and Fixed Dollar 

Ratio (FDL) 

6. Imputed Costs 

D. CY 2011 Rate Update 

1. Home Health Market Basket Update 

2. Home Health Care Quality Improvement 

a. OASIS 

b. Home Health Care CAHPS Survey 

(HHCAHPS) 

3. Home Health Wage Index 

4. CY 2011 Annual Payment Update 

a. National Standardized 60-Day Episode 

Rate 

b. Updated CY 2011 National Standardized 

60-Day Episode Payment Rate 

c. National Per-Visit Rates Used to Pay 

LUPAs and Compute Imputed Costs 

Used in Outlier Calculations 

d. LUPA Add-on Payment Amount Update 

e. Nonroutine Medical Supply Conversion 

Factor Update 

5. Rural Add-on 

E. Enrollment Provisions for HHAs 

1. HHA Capitalization 

2. HHA Changes of Ownership 

F. Home Health Face-to-Face Encounter 

G. Future Plans to Group HH PPS Claims 

Centrally During Claims Processing 

H. New Requirements Affecting Hospice 

Certifications and Recertifications 

III. Collection of Information Requirements 

IV. Regulatory Impact Analysis 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Statutory Background 

The Balanced Budget Act of 1997 

(BBA) (Pub. L. 105–33, enacted on 

August 5, 1997) significantly changed 

the way Medicare pays for Medicare 

home health (HH) services. Section 4603 

of the BBA mandated the development 

of the home health prospective payment 

system (HH PPS). Until the 

implementation of an HH PPS on 

October 1, 2000, home health agencies 

(HHAs) received payment under a 

retrospective reimbursement system. 

Section 4603(a) of the BBA mandated 

the development of an HH PPS for all 

Medicare-covered HH services provided 

under a plan of care (POC) that were 

paid on a reasonable cost basis by 

adding section 1895 of the Social 

Security Act (the Act), entitled 

‘‘Prospective Payment For Home Health 

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

requires the Secretary to establish an 

HH PPS for all costs of HH services paid 

under Medicare. 

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

requires the following: (1) The 

computation of a standard prospective 

payment amount includes all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary; and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage level 

differences among HHAs. 

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

addresses the annual update to the 

standard prospective payment amounts 

by the HH applicable percentage 

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

governs the payment computation. 

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

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of an appropriate 

case-mix change adjustment factor for 

significant variation in costs among 

different units of services. 

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

Act requires the establishment of wage 

adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. Under section 

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

may be the factors used under section 

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

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

amended by section 3131 of the Patient 

Protection and Affordable Care Act of 

2010 (The Affordable Care Act) (Pub. L. 

111–148, enacted on March 23, 2010) 

gives the Secretary the option to make 

additions or adjustments to the payment 

amount otherwise paid in the case of 

outliers because of unusual variations in 

the type or amount of medically 

necessary care. Section 3131(b) of the 

Affordable Care Act revised section 

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

standard payment amount is reduced by 

5 percent and the total outlier payments 

in a given fiscal year (FY) or year may 

not exceed 2.5 percent of total payments 

projected or estimated. The provision 

also makes permanent a 10 percent 

agency level outlier payment cap. 

In accordance with 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 


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1997 HH PPS legislation. The July 2000 

final rule established requirements for 

the new HH PPS for HH services as 

required by section 4603 of the BBA, as 

subsequently amended by section 5101 

of the Omnibus Consolidated and 

Emergency Supplemental 

Appropriations Act (OCESAA) for Fiscal 

Year 1999, (Pub. L. 105–277, enacted on 

October 21, 1998); and by sections 302, 

305, and 306 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 

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

enacted on November 29, 1999). The 

requirements include the 

implementation of an HH PPS for HH 

services, consolidated billing 

requirements, and a number of other 

related changes. The HH PPS described 

in that rule replaced the retrospective 

reasonable cost-based system that was 

used by Medicare for the payment of HH 

services under Part A and Part B. For a 

complete and full description of the HH 

PPS as required by the BBA, see the July 

2000 HH PPS final rule (65 FR 41128 

through 41214). 

Section 5201(c) of the Deficit 

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

109–171, enacted February 8, 2006) 

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

the Act, requiring HHAs to submit data 

for purposes of measuring health care 

quality, and links the quality data 

submission to the annual applicable 

percentage increase. This data 

submission requirement is applicable 

for CY 2007 and each subsequent year. 

If an HHA does not submit quality data, 

the HH market basket percentage 

increase is reduced 2 percentage points. 

In the November 9, 2006 Federal 

Register (71 FR 65884, 65935), we 

published a final rule to implement the 

pay-for-reporting requirement of the 

DRA, which was codified at 

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

the statute. 

The Affordable Care Act made 

additional changes to the HH PPS. One 

of the changes in section 3131 of the 

Affordable Care Act is the amendment 

to section 421(a) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173, enacted on December 8, 

2003) as amended by section 5201(b) of 

the DRA. The amended section 421(a) of 

the MMA now requires, for HH services 

furnished in a rural area (as defined in 

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

respect to episodes and visits ending on 

or after April 1, 2010, and before 

January 1, 2016, that the Secretary 

increase by 3 percent the payment 

amount otherwise made under section 

1895 of the Act. 

B. System for Payment of Home Health 

Services 

Generally, Medicare makes payment 

under the HH PPS based on a national 

standardized 60-day episode payment 

rate that is adjusted for the applicable 

case-mix and wage index. The national 

standardized 60-day episode rate 

includes the six HH disciplines (skilled 

nursing, HH aide, physical therapy, 

speech-language pathology, 

occupational therapy, and medical 

social services). Payment for nonroutine 

medical supplies (NRS) is no longer part 

of the national standardized 60-day 

episode rate and is computed by 

multiplying the relative weight for a 

particular NRS severity level by the NRS 

conversion factor (See section III.C.4.e. 

of this final rule). Payment for durable 

medical equipment covered under the 

HH benefit is made outside the HH PPS 

payment. To adjust for case-mix, the HH 

PPS uses a 153-category case-mix 

classification to assign patients to a 

home health resource group (HHRG). 

Clinical needs, functional status, and 

service utilization are computed from 

responses to selected data elements in 

the OASIS assessment instrument. 

For episodes with four or fewer visits, 

Medicare pays based on a national pervisit rate by discipline; an episode 

consisting of four or fewer visits within 

a 60-day period receives what is referred 

to as a low utilization payment 

adjustment (LUPA). Medicare also 

adjusts the national standardized 60-day 

episode payment rate for certain 

intervening events that are subject to a 

partial episode payment adjustment 

(PEP adjustment). For certain cases that 

exceed a specific cost threshold, an 

outlier adjustment may also be 

available. 

C. Updates to the HH PPS 

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

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. The August 29, 2007 

final rule with comment period set forth 

an update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HHAs for CY 2008. 

That rule included an analysis 

performed on CY 2005 HH claims data, 

which indicated a 12.78 percent 

increase in the observed case-mix since 

2000. The case-mix represented the 

variations in conditions of the patient 

population served by the HHAs. 

Subsequently, a more detailed analysis 

was performed on the 12.78 percent 

increase in case-mix to evaluate if any 

portion of the increase was associated 

with a change in the actual clinical 

condition of HH patients. We examined 

data on demographics, family severity, 

and non-HH Part A Medicare 

expenditure data to predict the average 

case-mix weight for 2005. As a result of 

the subsequent detailed analysis, we 

recognized that an 11.75 percent 

increase in case-mix was due to changes 

in coding practices and documentation, 

and not to treatment of more resourceintensive patients. 

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

underlying change in patient health 

status, CMS implemented a reduction 

over 4 years in the national 

standardized 60-day episode payment 

rates and the NRS conversion factor. 

That reduction was to be 2.75 percent 

per year for 3 years beginning in CY 

2008 and 2.71 percent for the fourth 

year in CY 2011. We indicated that we 

would continue to monitor for any 

further increase in case-mix that was not 

related to a change in patient status, and 

would adjust the percentage reductions 

and/or implement further case-mix 

change adjustments in the future. 

For CY 2010, we published a final 

rule in the November 10, 2009 Federal 

Register (74 FR 58077) (hereinafter 

referred to as the CY 2010 HH PPS final 

rule) that sets forth the update to the 60- 

day national episode rates and the 

national per-visit rates under the 

Medicare prospective payment system 

for HH services. 

D. Comments Received 

In response to the publication of the 

CY 2011 HH PPS proposed rule, we 

received approximately 500 items of 

correspondence from the public. We 

received numerous comments from 

various trade associations and major 

health-related organizations. Comments 

also originated from HHAs, hospitals, 

other providers, suppliers, practitioners, 

advocacy groups, consulting firms, and 

private citizens. The following 

discussion, arranged by subject area, 

includes our responses to the 

comments, and where appropriate, a 

brief summary as to whether or not we 

are implementing the proposed 

provision or some variation thereof. 

General (Miscellaneous) 

Comment: A commenter stated that 

multiple policy changes and payment 

reductions have led to the industry’s 

inability to apply ‘‘cause-and-effect’’ 

analysis when HH care access becomes 

critical. The commenter recommends 

applying changes one at a time and 

phasing them in to allow time to 

determine the impact of those 

individual changes. Another commenter 

stated that as an HHA owner, she is 


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willing to accept cuts to the Medicare 

HH benefit but that the cuts need to be 

incremental so agencies have the time 

and the resources to implement 

adjustments in response to payment 

changes. In addition, there is the 

growing concern of the ‘‘unknown’’ costs 

associated with implementation of the 

Affordable Care Act. Another 

commenter stated that the health 

insurance costs for their employees have 

skyrocketed over the past 3 years, and 

that in conjunction with these cuts, it 

hinders their ability to hire staff. 

Response: We have, in fact, been 

phasing in the reductions to the HH PPS 

rates for the increase in nominal casemix. As a result of the CY 2008 final 

rule, we have reduced HH PPS rates by 

2.75 percent for 2008, 2009, and 2010 to 

account for the increase in nominal 

case-mix, that is an increase in case-mix 

not due to actual changes in patient 

characteristics. However, there still 

exists significant nominal case-mix 

increase in the payment system that has 

not yet been addressed. Consequently, 

we believe that the case-mix 

adjustments continue to be necessary in 

order to address the residual increase in 

the nominal change in case-mix that has 

not yet been accounted for in the 

payment system. As such, we are 

moving forward with phasing in our 

case-mix reductions and will be 

applying a 3.79 percent reduction to the 

HH PPS rates in CY 2011 (as discussed 

in the July 23, 2010 proposed rule). In 

response to comments that we received 

on our case-mix model and its 

measurement of real case-mix, we will 

further study the concerns raised and 

are not finalizing the proposed 3.79 

percent reduction to the HH PPS rates 

for CY 2012 at this time. Therefore, in 

addition to our continuous monitoring 

of nominal case-mix increase, we plan 

to perform a review of our case-mix and 

NRS models, and address any 

reductions to the CY 2012 HH PPS 

payments in next year’s rulemaking. 

The other policy changes and 

reductions addressed in this rule (that 

is, outlier provisions and reductions to 

the market basket update) were 

mandated by the Affordable Care Act. 

We are uncertain of the meaning of 

‘‘unknown’’ costs as referenced by the 

commenter and therefore are unable to 

address the particular concern. 

Comment: A commenter stated that he 

receives calls from providers who are 

confused with the language that is used 

by CMS in determining billing 

requirements. He believes the proposed 

changes are a step in the right direction. 

Response: We appreciate the 

comment and will continue to work 

towards providing the industry/public 

with clear policies, instructions, and 

guidance as they relate to our payment 

policies. 

Comment: With the increased use of 

technology and telehealth, funds should 

be made available to HHAs to include 

such monitoring to allow patients and 

their families to be more proactive in 

the management of their illnesses and to 

reduce ER visits, primary care physician 

appointments and hospital stays. Home 

Health is the area to fund, not to cut, 

and that medical spending in other 

areas should be reduced. 

Response: We are not opposed to 

improvements in technology, or the use 

of telehealth in the HH setting and 

certainly do not discourage the use of 

these advances in medicine. However, 

under section 1895(e) of the Act, 

telehealth services cannot substitute for 

in-person HH services ordered as part of 

a plan of care. However, telehealth can 

be used to supplement traditional HH 

services. 

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

dictates how HH PPS rates are to be 

updated annually, and section 3131(a) 

of the Affordable Care Act, amending 

this provision, requires the Secretary to 

rebase HH payments beginning in 2014. 

At that time, more up-to-date costs will 

be used to rebase payments to HHAs. 

Comment: A commenter stated that 

the impact analysis in the proposed rule 

is useless in that the analysis simply 

quantifies the percentage cut in rates on 

a geographic basis. Further, the impact 

analysis offers little substantive 

understanding of the individual cost 

impact of such proposed provisions as 

the physician face-to-face encounter 

requirement, the revisions to therapy 

assessment, coverage and 

documentation standards, coding 

change proposals, and CAHPS 

compliance. The estimated costs are 

vastly understated because they do not 

include the sizeable administrative 

expenses that HHAs will incur to 

implement any of the changes beyond 

the cost of some of the form revisions. 

A valid and useful impact analysis 

starts with an understanding of the 

results of the combination of rate cuts 

and cost increases that the proposed 

policies will bring to HHAs. The 

commenter further asserts that once 

these results are fairly and accurately 

determined, the impact analysis must 

begin with the highest of priority 

concerns—impact on access to care—as 

that is the central purpose of Medicare. 

Second, the commenter believes that the 

impact analysis should continue with 

an evaluation of the effect of the 

proposed policies on total spending for 

the Medicare program, not just the effect 

on HH services spending. 

The commenter provided the example 

that if the analysis of the proposed 

policies’ impact on access to care shows 

that thousands of Medicare beneficiaries 

would no longer have HH care available 

or that provision of HH services would 

be significantly delayed, Medicare 

spending would rise as a result of a shift 

to higher cost care such as skilled 

nursing facility services or extended 

inpatient stays. 

The commenter also proposed that the 

impact analysis should evaluate the 

impact of the proposed policies on 

another stakeholder—HHAs as 

businesses. Such evaluation should start 

with the ongoing viability of the 

individual businesses and the industry 

as a whole. Among the many elements 

that should be reviewed is whether the 

business will be paid less than the cost 

of the delivery of care. Another element 

is the workforce impact—will health 

care workers take their talents to other 

care sectors because of reductions in 

compensation and benefits. Access to 

capital is also an important factor to 

evaluate. If the proposed rule changes 

restrict access to capital, there may be 

reduced use of efficiency-related 

technologies or business expansions to 

achieve economies of scale. Lack of 

access to capital could also mean an 

inability to meet ongoing payroll 

obligations because of cash flow 

problems. 

The commenter also claimed there is 

another flaw in the CMS impact 

analysis, which is its limited review to 

a single year. This is particularly 

concerning to the commenter because 

the proposed rule extends rate cuts into 

a second year. An impact analysis that 

does not evaluate the impact of cuts in 

payment rates for both of the years as 

proposed is invalid and in violation of 

CMS obligations under the Regulatory 

Flexibility Act. 

The commenter strongly recommends 

that CMS conduct a thorough and valid 

impact analysis, consistent with the 

concerns referenced above. Another 

commenter states that in the proposed 

rule CMS concluded that the proposed 

rule would not have a significant impact 

on a substantial number of small 

entities. Section 605 of the Regulatory 

Flexibility Act (RFA) requires that if the 

regulatory agency certifies that the rule 

will not have a significant impact on a 

substantial number of small businesses, 

it must include a statement providing 

the factual basis supporting the 

certification. The commenter suggests 

that CMS failed to provide an adequate 

factual basis for its certification that 

there would be no significant impact. In 

fact, there is no language in the RFA 

section of the proposed rule that 


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discloses the reasons why CMS 

concluded that there would be no 

substantial impact on small HHAs. CMS 

should at a minimum have provided the 

public with information on the number 

of HHAs and other health care entities 

likely to be affected by the rule. Further, 

CMS has guidelines (usually based on 

small business revenues) in place that 

the agency uses to determine whether a 

rule will have a significant impact on a 

substantial number of small entities. 

CMS failed to discuss how the impacts 

of this rule fall within those guidelines. 

Such a discussion is vital for the 

purposes of transparency, as affected 

small entities can use this information 

to provide CMS with economic impact 

information on the rule’s projected 

impact on their business. Based on the 

public input, the commenter asserts that 

CMS could determine the validity of 

their decision to certify the rule in the 

publication of the final regulation. 

The commenter is concerned that 

while CMS has certified that the rule 

will not have a significant impact, the 

affected HHAs still believe that the 

regulation will result in a significant 

burden on their businesses. The 

commenter believes that there is merit 

in bringing these small business 

concerns to the attention of CMS in the 

hope that they will add to the 

transparency of the RFA contained in 

the final rule. 

Response: The RFA requires agencies 

to analyze options for regulatory relief 

of small entities, if a rule has a 

significant impact on a substantial 

number of small entities for that year. 

As such, there is no requirement under 

the RFA to provide impacts for any 

year(s) beyond that which the rule is 

updating the rates. For purposes of the 

RFA, small entities include small 

businesses, nonprofit organizations, and 

small governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $7 million to $34.5 million in any 1 

year. For purposes of the RFA, 

approximately 95 percent of HHAs are 

considered small businesses according 

to the Small Business Administration’s 

size standards, with total revenues of 

$13.5 million or less in any one year. 

Individuals and States are not included 

in the definition of a small entity. As 

such, this rule is estimated to have an 

overall negative effect upon small 

entities (see section IV.B. of this final 

rule, ‘‘Anticipated Effects’’, for 

supporting analysis). 

The last section of Table 19 shows the 

percentage change in payments by 

agency size, as determined by the 

number of first episodes. The agency 

size categories, for this rule, are based 

on the number of first episodes in a 

random 20 percent beneficiary sample 

of CY 2008 claims data. Initial episodes, 

under the HH PPS, are defined as the 

first episode in a series of adjacent 

episodes (contiguous episodes that are 

separated by no more than a 60-day 

period between episodes) for a given 

beneficiary. Initial, or first, episodes are 

a good estimate of agency size, because 

this method approximates the number 

of admissions experienced by the 

agency based on approximately one-fifth 

of the total annual data. The size 

categories were set to have roughly 

equal numbers of agencies, except that 

the highest category has somewhat more 

agencies because added detail amongst 

the large size category was not needed. 

Because our model does not have the 

data to account for the ‘‘total’’ revenue of 

an HHA, in the proposed rule, and again 

in this final rule, we have used the 

number of first episodes as a proxy for 

agency size. As such, using the facility 

size categories (based on the number of 

first episodes), the impact table shows 

that the difference in impact between 

smaller and larger HHAs is small and 

within a 0.05 percentage point range. In 

fact, smaller agencies have a smaller 

reduction and fare slightly better than 

larger agencies represented by the ‘‘200 

or more first episodes’’ category. 

In an effort to better demonstrate the 

impact on small HHAs, as it relates to 

total revenue, we supplemented our 

impact analysis by linking to Medicare 

cost report data, which has total 

revenues for HHAs. Using total revenues 

and the $13.5 million threshold of the 

RFA, we categorized an HHA as being 

either small or large. To perform this 

analysis, we were able to match 

approximately 72 percent of the cost 

report data to our model. For the 

remainder of the agencies in the model, 

we proxy for large agencies as those 

agencies with at least 750 first episodes. 

This results in approximately 95 percent 

of agencies being classified as small and 

5 percent of agencies being large, which 

is reflective of what our cost report files 

show us. This analysis provides similar 

results to the one using first episodes as 

a measure of an agency’s size in that 

small HHAs fare slightly better, ¥4.84 

percent impact, than do large HHAs, 

which are estimated to experience a 

¥5.01 percent (see section IV.B. of this 

final rule, ‘‘Anticipated Effects’’, for 

supporting analysis). 

In a separate, supplemental analysis, 

as merely an indicator of possible access 

to care issues, we looked at estimated 

margins of HHAs, by county, and the 

estimated effect that the provisions of 

this rule might have on HHAs. In 

particular, we look to identify counties 

that might not be served by at least one 

HHA with a positive margin as a result 

of the finalized policies of this rule. The 

analysis demonstrate that occurrence of 

such counties is very infrequent; thus, 

we do not believe that access to care is 

an issue (see section IV.B. of this final 

rule, ‘‘Anticipated Effects’’, for 

supporting analysis). Given the profit 

margins of HHAs that we and MedPAC 

are seeing in our analyses, we believe 

that the reductions of this final rule can 

be absorbed by the majority of HHAs, 

and that access to care will not be 

compromised. However, we will 

continue to monitor the situation to 

identify any unintended consequences 

of our policies in this final rule. 

Comments Regarding Access to Care 

Comment: A commenter stated that 

additional regulatory responsibilities of 

oversight, documentation, education, 

choosing survey vendors, etc., would 

result in increased costs to HHAs. There 

is an inherent risk for decreased quality 

of care and volume of services provided 

by HHAs. It is possible that HHAs may 

become more selective in their 

acceptance of medically difficult 

patients who are likely to utilize more 

services. 

Response: We assume that the 

commenter is referring to the therapy 

provisions of this rule. We believe that 

our clarifications to our therapy 

coverage requirements do not constitute 

additional responsibilities, but rather 

clarify the existing responsibilities of 

the qualified therapist and the HHA. 

Similarly, we are clarifying the existing 

supervision/oversight requirements of 

qualified therapists in the HH setting. 

We are also clarifying our coverage 

requirements for education of the 

patient and/or family members, and our 

documentation requirements. We do not 

consider any of these clarifications to be 

beyond the current responsibilities of an 

HHA. 

We are, as part of this final rule, 

requiring qualified therapists to perform 

the needed therapy service, assess 

patients and measure and document 

therapy effectiveness at what we 

consider key points of the episode. We 

believe that all HH patients who need 

therapy services would benefit from 

those services being delivered by a 

qualified therapist, instead of an 

assistant, at key points in the course of 

treatment. We will continue to monitor 

for unintended consequences of the 

provisions of this final rule. 

Comment: Several commenters stated 

that the payment reductions would 

result in decreased access to care and 

force HHAs out of business. The 


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commenters assert that patients who are 

moved from acute care facilities to their 

homes and have major medical 

problems would not be able to get HH 

services for their illnesses. These 

proposed changes would not only 

endanger access to care but also impede 

efforts to transition patients to the home 

and cripple essential community HHAs. 

Several commenters stated that HH 

patients would be forced into costly 

institutional care and increase Medicare 

spending. Another commenter stated 

that if these proposed cuts were 

implemented, many senior citizens who 

have paid taxes in to the Medicare 

system for years would be forced to go 

into assisted living facilities and nursing 

homes or simply not receive the 

healthcare they deserve. In addition, 

their quality of life would be 

compromised. 

Response: As discussed in a previous 

response to a comment, in a separate 

analysis in the regulatory impact section 

of this rule, we looked at margins of 

HHAs, by county, and the estimated 

effect that the provisions of this rule 

would have on HHAs. In particular, we 

studied the number of counties that 

would not be served by at least one 

HHA with a positive margin. Our 

analysis concluded that there were few 

counties in which no HHAs had 

positive margins; therefore, we do not 

believe that access to care will be 

adversely affected by these case-mix 

adjustments. Given the data on profit 

margins that we and MedPAC saw in 

our analyses, we believe that the 

reimbursement rate reductions set forth 

in this final rule can be absorbed by the 

majority of HHAs, and that access to 

care will not be compromised. 

II. Provisions of the Proposed Rule and 

Response to Comments 

A. Case-Mix Measurement 

As stated in the proposed rule 

published on July 23, 2010, analysis of 

HH PPS claims shows total average 

case-mix grew at a rate of about 1 

percent each year from 2000 to 2007, 

with 4 percent growth in 2008. Based on 

our analysis of the proportion of total 

case-mix change due to changes in real 

case-mix severity of the HH user 

population, the total amount of case-mix 

growth unrelated to real changes in 

patient severity (nominal case-mix) is 

17.45 percent between 2000 and 2008. 

In each of the years 2008, 2009, and 

2010, we reduced payment rates by 2.75 

percent as recoupment for nominal casemix change. A payment-rate reduction 

of 7.43 percent would be needed to 

account for the outstanding amount of 

nominal case-mix change we intend to 

recoup based on the real case-mix 

change analysis updated through 2008. 

In the proposed rule, we proposed to 

increase the planned 2.71 percent 

reduction in CY 2011 to 3.79 percent, 

and to make another 3.79 percent 

reduction in CY 2012. Doing so would 

enable us to account for the 7.43 percent 

nominal case-mix residual, while 

minimizing access to care risks. 

Iteratively implementing the case-mix 

reduction over two years gives HH 

providers more time to adjust to the 

intended reduction of 7.43 percent than 

would be the case were we to account 

for the residual in a single year. 

For a complete description of the 

proposed case-mix refinements model 

and the underlying research, we refer 

readers to the CY 2011 HH PPS 

proposed rule (75 FR 43238 through 

43244) published in the July 23, 2010, 

Federal Register. 

Comment: Commenters stated that we 

should suspend or drop case-mix 

reductions because the proposal is 

based on the assumption that agencies 

intentionally gamed the system. 

Response: As we have stated in 

previous regulations, changes and 

improvements in coding are important 

in bringing about nominal coding 

change. We believe nominal coding 

change results mostly from changed 

coding practices, including improved 

understanding of the ICD–9 coding 

system, more comprehensive coding, 

changes in the interpretation of various 

items on the OASIS and in formal 

OASIS definitions, and other evolving 

measurement issues. Our view of the 

causes of nominal coding change does 

not emphasize the idea that HHAs in 

general gamed the system. However, 

since our goal is to pay increased costs 

associated with changes in patient 

severity, and nominal coding change 

does not necessarily demonstrate that 

underlying changes in patient severity 

occurred, we believe it is necessary to 

recoup overpayments due to nominal 

coding change. 

Comment: Commenters stated that all 

of the HHAs are being penalized for the 

corrupt actions of a few HHAs. Many 

commenters indicated that their agency 

had case-mix weights below the 

national average. Commenters stated 

that nominal case-mix change 

reductions should be limited to certain 

types of agencies (for example, those 

with high average case-mix index (CMI) 

or large weight increases or for-profit 

providers) or that CMS should 

implement different payment reductions 

by state or by geographical region, 

suggesting that their region has a lower 

nominal case-mix change than the 

national average. Other commenters 

recommended that reductions be 

proportional to an individual agency’s 

CMI. For example, some commenters 

suggested that payment reductions be 

applied to those HHAs with an average 

case-mix above 1.20. Commenters stated 

that we should not implement payment 

reductions to all HHAs merely because 

that policy is easier to implement. 

Response: For a variety of reasons, as 

we have noted in previous regulations, 

we have not proposed targeted 

reductions for nominal case-mix change. 

We have not conducted analysis of how 

and whether individual agencies’ 

coding practices have changed over time 

because this is not feasible. One reason 

is that many agencies have small patient 

populations, which would make it 

practically impossible to measure 

nominal case-mix change reliably. 

Another reason is that we believe 

changes and improvements in coding 

have been widespread, so that such 

targeting would likely not separate 

agencies clearly into high and low 

coding-change groups. 

Table 1A shows average case-mix by 

type of agency in 2000 and 2008. All 

types of agencies, regardless of region or 

profit status or size or affiliation, have 

substantial increases in their average 

case-mix. While for-profit agencies’ 

case-mix grew approximately 19 

percent, the case-mix average for nonprofit agencies also grew considerably 

(16.6 percent). Case-mix grew just over 

19.5 percent for freestanding agencies 

while case-mix for facility-based 

agencies grew just short of 15 percent. 

For rural agencies, case-mix grew almost 

16 percent, while case-mix for urban 

agencies grew just under 19 percent. 

Rural agencies will receive an 

additional 3 percent rural add-on to 

their payments, which will help offset 

the case-mix reductions. It should be 

noted that the agency groups start from 

different base year values, but in general 

the percentage change in case-mix is 

roughly similar across these groups, 

with the possible exception of the 

Midwest, for which the percentage 

change is somewhat higher than the 

other changes—about 23 percent. No 

group could be said to have trivial casemix change. Therefore, we believe our 

proposal to make across the board 

payment reductions is consistent with 

the data, and making distinctions by 

type of agency would be inappropriate. 


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TABLE 1A—ESTIMATES OF CASE-MIX CHANGE BY PROVIDER TYPE

[2000–2008] 

Actual case-mix Case-mix change 

2000 

(IPS period) 2008 Total Percentage 

Overall 

All Agencies ..................................................................................................... 1.0959 1.3085 0.2126 19.4 

Ownership Type 

Non-profit ......................................................................................................... 1.0840 1.2641 0.1801 16.6 

Government ..................................................................................................... 1.0672 1.2291 0.1619 15.2 

For-profit .......................................................................................................... 1.1202 1.3332 0.2130 19.0 

Agency Type 

Facility-based ................................................................................................... 1.0834 1.2433 0.1599 14.8 

Freestanding .................................................................................................... 1.1035 1.3200 0.2165 19.6 

Region 

North ................................................................................................................ 1.0422 1.2459 0.2037 19.6 

South ................................................................................................................ 1.1251 1.337 0.2118 18.8 

Midwest ............................................................................................................ 1.0865 1.3431 0.2566 23.6 

West ................................................................................................................. 1.0956 1.2648 0.1692 15.5 

Facility Size (Number of 1st Episodes) 

< 99 episodes ................................................................................................... 1.0898 1.2499 0.1602 14.7 

100 or more ..................................................................................................... 1.1057 1.3266 0.2209 20.0 

Urban/Rural 

Urban ............................................................................................................... 1.1097 1.3184 0.2087 18.8 

Rural ................................................................................................................ 1.0478 1.2136 0.1657 15.8 

Although we have stated in past 

regulations that a targeted system would 

be administratively burdensome, the 

reasons we have just presented go 

beyond administrative complexity. 

Certain comments seem to assume that 

the level of case-mix can precisely 

identify those agencies practicing 

abusive coding. We do not agree with 

the comments, which seem to assume 

that agency-specific case-mix levels can 

precisely differentiate agencies 

practicing abusive coding from others. 

System wide, case-mix levels have risen 

over time while patient characteristics 

data indicate little change in patient 

severity over time. That is, the main 

problem is the amount of change in the 

billed case-mix weights not attributable 

to underlying changes in actual patient 

severity. Moreover, we believe that a 

policy of varying payment levels 

according to regional differences in 

nominal case-mix change would be 

perceived as inequitable by 

beneficiaries. That is, beneficiaries who 

might have access only to agencies 

subject to larger payment reductions 

might believe Medicare’s policies 

disadvantage them unfairly. 

Comment: Commenters stated that we 

should suspend or drop case-mix 

adjustments because they will cause 

financial distress/bankruptcy among 

agencies, particularly ‘‘safety-net’’ 

agencies that take patients other 

agencies reject. Commenters further 

stated that the proposed payment 

reductions will cause ‘‘safety net’’ 

providers to have a ‘‘negative operating 

margin’’ and/or cause not-for-profit 

agencies to go out of business. 

Response: Our analysis of the 

potential effect of the 2011 payment rate 

reductions suggests that while negativemargin agencies may increase in 

number, almost all such agencies are 

located in counties with other agencies 

predicted to have positive margins. We 

also note that predicting the size of the 

increase in negative-margin agencies is 

difficult to do because many agencies 

may find ways to cut costs or increase 

revenues so that margins do not 

deteriorate. Identifying the agencies that 

commenters call ‘‘safety-net’’ agencies is 

not feasible with our administrative 

data, so we cannot provide any evidence 

either to support or refute assertions 

that safety-net agencies are at greatest 

risk. Our analysis of margins of not-forprofit agencies shows that they tend to 

have lower margins than for-profit 

agencies. However, we do not agree that 

not-for-profit agencies will necessarily 

be more likely to exit the HH business 

than a for-profit agency. We believe the 

business decision is a complex one with 

many considerations, such as the 

organization’s mission, the availability 

of alternate sources of funding, and 

whether or not the organization is 

embedded in a larger one. These 

influential factors are not necessarily 

associated with the non-profit or forprofit status of an agency, and therefore, 

we cannot accurately predict the 

business decision of an agency based 

solely on their status. 

Comment: Commenters stated that we 

should suspend or drop case-mix 

adjustments because access would be 

reduced, particularly among hard-toplace patients. Commenters predicted 

that the payment reductions would have 

a ‘‘destabilizing effect’’ on HHAs and 

negatively impact patient access to HH 

care. 

Response: MedPac has previously 

recommended to the Congress that HH 

rates be reduced by 5 percent. (MedPac, 

Report to Congress: Medicare Payment 


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Policy, March 2009). We believe HH 

industry margins are sufficient to 

support a rate reduction of that size. For 

example, MedPac projected 2011 

margins would remain high, at 13.7 

percent (assuming the previously 

planned rate reduction of ¥2.71 percent 

in 2011). MedPac also reported that the 

number of agencies continues to grow, 

reaching in excess of 10,400 in 2009. 

This is a 50 percent increase since 2002, 

although growth in new agencies has 

been highly uneven geographically. 

Notably, access to care was sufficient in 

2001, when the number of agencies 

nationally was much lower than it is 

today (Office of the Inspector General, 

Access to Home Health Care after 

Hospital Discharge, July 2001, and 

Office of the Inspector General, 

Medicare Home Health Care Community 

Beneficiaries, October 2001). Our 

analysis of cost reports submitted by the 

end of 2008 indicates that 99 percent of 

beneficiaries are in counties served by at 

least two agencies, with more than half 

of beneficiaries in counties served by at 

least 11 agencies. Predictions about the 

number of bankruptcies and effects on 

access are highly uncertain. 

Furthermore, we have no indications 

that payment reductions implemented 

since 2008 have led to access problems 

among beneficiaries. During the 

succeeding period, the total number of 

agencies has continued to grow, which 

is indirect evidence that access levels 

have not deteriorated. We intend to 

request that the Office of the Inspector 

General resume investigations of the 

access impacts of payment reductions. 

We will continue to monitor access to 

care in order to identify any unintended 

consequences of our policies in this 

final rule. We emphasize that the 

justification for the nominal case-mix 

payment reductions is not HHA margins 

but rather is the increase in billed casemix weights, which our analysis 

indicates, is unrelated to changes in 

underlying patient health 

characteristics. 

Comment: Commenters suggested that 

we provide funding to HHAs that admit 

patients that other agencies avoid. 

Response: We have received 

comments of this nature over the years. 

We are unable to definitively 

characterize such a categorization of 

HHAs using administrative data. While 

we welcome information as to the 

characteristics and identity of such 

agencies, so that we can study their 

performance, we would also need to 

study carefully the implications of 

making such distinctions on a 

permanent basis in our payment system. 

We expect many issues would arise. In 

future rulemaking we will solicit 

comment on the various challenges that 

might arise in administering payments 

differently to what some commenters 

called ‘‘full access organizations’’ and 

potentially other categories of agencies 

that might be capable of mitigating 

access problems, should they arise. 

Comment: Some commenters 

suggested that CMS focus its efforts on 

the study, which will assess possible 

changes to the HH PPS in order to 

ensure access to care. 

Response: Section 3131(d) of the 

Affordable Care Act mandates that the 

Secretary conduct a study to evaluate 

costs related to providing care to lowincome beneficiaries, beneficiaries in 

medically underserved areas, and 

beneficiaries with varying levels of 

severity of illness. The section directs 

the study to be focused on ensuring 

access to care for patients with 

characteristics associated with 

especially high costs. We are preparing 

to launch the mandated study in FY 

2011. 

Comment: Commenters stated that 

CMS should suspend or drop nominal 

case-mix change reductions because 

those payment reductions are contrary 

to congressional intent in the Affordable 

Care Act, which implemented payment 

reductions on a separate basis. 

Furthermore, commenters stated that 

the 3.79 percent case-mix payment 

reduction should count as the ‘‘5 percent 

cut mandated by the [Affordable Care 

Act]’’ and the proposed payment 

decreases should not be implemented in 

addition to the Affordable Care Actmandated payment reductions. 

Response: Section 3401(e) of the 

Affordable Care Act mandated a market 

basket reduction and future productivity 

adjustments. In the Affordable Care Act, 

Congress did not make any changes to 

the pre-existing provision authorizing 

CMS to reduce payment rates in 

response to nominal case-mix change. 

Nor did the Congress authorize a 

substitution of the case-mix payment 

reduction for the Affordable Care Act’s 

five percent payment reduction related 

to outlier payments (Section 3131(b) of 

the Affordable Care Act). Therefore, the 

reductions for nominal case-mix 

changes comply with current law. 

Comment: Commenters stated that 

CMS should suspend or drop case-mix 

reductions because CMS should give 

specific proposals such as therapy 

documentation and comorbidity casemix weight changes time to work. 

Response: Our proposals are intended 

to recoup excess outlays that have 

already been made through 2008, 

outlays that were not justified by 

changes in patient severity. Going 

forward, beginning with 2011, we 

would expect to see a moderation of 

nominal case-mix growth because of the 

proposals mentioned by the 

commenters. Such moderation would 

decrease recoupment, if any, proposed 

in the future. 

Comment: A commenter stated that 

the need for payment reductions in HH 

care is ‘‘consistent with the experience 

of coding changes in other payment 

systems.’’ However, the methodology 

‘‘used to establish the reduction 

percentage’’ in the inpatient system was 

flawed and, therefore, the methodology 

used to establish the payment reduction 

for HH is probably flawed as well. 

Response: The payment systems, 

institutional conditions, data resources, 

case-mix assignment procedures, and 

many other aspects differ across care 

settings. Therefore, methodologies must 

each be judged on their own individual 

merits. We have explained and justified 

the methodology in this and in previous 

regulations cited elsewhere in this 

preamble. 

Comment: We received a comment 

recommending that we focus the 

application of the case-mix change 

adjustment only to visits beyond the 

13th day by changing the OASIS scoring 

and rate calculation for the extended 

cases rather than reducing the base rate 

and affecting all visits as a result. 

Response: We are unsure of the 

specific change recommended in this 

comment, but we would be concerned 

that any approach to rate reduction 

based on the length of time in treatment 

within the 60-day episode would affect 

fundamental assumptions of the HH 

PPS system. Most notably, the system 

assumes that the amount of resources 

within the 60-day period, rather than 

the timing of their expenditure within 

that period, is the appropriate variable 

use to determine payments in the casemix-adjusted payment system. 

Comment: One commenter stated that 

a recent study that used data from a 

nationally representative survey (the 

Medical Expenditures Panel Survey— 

MEPS) found a change in real case-mix 

between 2000 and 2007. 

Response: We thank the commenter 

for the comments. However, we note 

that the MEPs analysis appears to be 

based on all Medicare beneficiaries, not 

just the subset of HH patients. Home 

health users are less than 10 percent of 

the fee for service enrolled Medicare 

population, so it is not certain that the 

MEPS study of the entire Medicare 

population is relevant to the question of 

worsening health status of HH users. 

Comment: Commenters stated that 

CMS should suspend or drop case-mix 

reductions because the data used to 

determine the reductions do not 


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recognize real increases in severity due 

to earlier and sicker hospital discharges. 

Response: While we recognize that 

average lengths of stay in acute care are 

in decline, our analysis shows that 

agencies are, in fact, caring for fewer, 

not more, post-acute patients. Since 

2001, the average length of stay in acute 

care preceding HH has declined by 

about one day, from 7 days to 6 days. 

However, agencies are caring for fewer 

highly acute patients in their caseloads. 

The proportion of non-LUPA episodes 

in which the patient went from acute 

care directly to HH within 14 days of 

acute hospital discharge declined 

substantially between 2001 and 2008, 

from 32 percent to 23 percent. In 

addition, the median acute hospital 

length of stay for these non-LUPA 

episodes with a 14-day lookback period 

has remained unchanged at 5 days since 

2002 (see Table 1B, 50th percentile). 

Since 2005, the distribution has been 

stable, except for a 1-day shortening of 

lengths of stay at the 5th, 80th, and 99th 

percentiles. We believe the declining 

prevalence of recent acute discharges is 

due in part to more patients incurring 

recertifications after admission to HH 

care, and due to more patients entering 

care from the community. The 

shortening lengths of stay at the right 

tail (high percentiles) of the distribution 

may reflect changing utilization of longterm-care hospitals during recent years. 

The conclusion we draw from these data 

is that while patients on average have 

shorter hospital stays, agencies are also 

facing a smaller proportion of HH 

episodes in which the patient has been 

acutely ill in the very recent past. Also, 

the detailed data on the distribution of 

stay lengths suggest that for the most 

part lengths of stay for such patients 

remained stable through 2008, 

particularly since around 2005. 

TABLE 1B—PERCENTILES OF ACUTE HOSPITAL LENGTH OF STAY (DAYS) 

[2001–2008] 

Year 5th 10th 20th 30th 40th 50th 60th 70th 80th 90th 99th 

2001 ................................................. 2 2 3 4 5 6 7 8 10 14 32 

2002 ................................................. 2 2 3 4 5 5 6 8 10 14 31 

2003 ................................................. 2 2 3 4 4 5 6 8 10 13 30 

2004 ................................................. 2 2 3 4 4 5 6 7 9 13 29 

2005 ................................................. 2 2 3 3 4 5 6 7 9 12 28 

2006 ................................................. 1 2 3 3 4 5 6 7 9 12 28 

2007 ................................................. 1 2 3 3 4 5 6 7 9 12 27 

2008 ................................................. 1 2 3 3 4 5 6 7 8 12 25 

Note: Based on a 10 percent random beneficiary sample of FFS HH users; excludes LUPA episodes and includes only episodes where acute 

hospital discharge occurred within 14 days of the from-date of the 60-day episode claim and the patient’s first destination post-discharge under 

Part A was HH care. 

Furthermore, we think that acuity of 

patients has been increasingly mitigated 

by lengthening post-acute stays for the 

substantial number of HH patients who 

use residential post-acute care (PAC) 

prior to an episode. Our data show that 

patients who enter residential PAC 

before HH admission have experienced 

increasing lengths of stay in PAC since 

2001. Using a 10 percent random 

beneficiary sample, we computed the 

total days of stay (including both acute 

and PAC days) for HH episodes with 

common patterns of pre-admission 

utilization during the 60 days preceding 

the beginning of the episode. We 

included patients whose last stay was 

acute, or whose next-to-last stay was 

acute with a follow-on residential PAC 

stay, or whose third from last stay was 

acute followed by two PAC stays. These 

common patterns accounted for 55 

percent of the initial episodes in 2001 

and 42 percent in 2008. We found that 

total days of stay during the 60 days 

leading up to the episode averaged 12.6 

days in 2001, and rose to 12.8 days in 

2008. This small change in total days of 

stay during a period when acute LOS 

was declining was due to increasing 

lengths of stay in residential PAC for 

these patients. For example, within the 

30 days before admission, average 

length of stay in the PAC setting for 

episodes preceded by an acute stay that 

was the next-to-last stay, and where the 

PAC stay was the very last stay before 

the claim-from date, increased from 12.7 

to 14.3 days. Our interpretation of these 

statistics is that patient acuity has been 

increasingly mitigated by longer postacute stays for the substantial number of 

HH patients that use residential PAC 

prior to the start of a HH episode. 

Patient acuity also was mitigated by 

growing numbers of HH recertifications. 

Comment: A commenter stated the 

data and analysis we used to measure 

real case-mix change do not recognize 

that technology improvements in recent 

years enable patients with more 

complex conditions to be cared for at 

home. 

Response: We appreciate this 

comment but possess limited 

information to evaluate it. The data we 

do have, from OASIS, suggest that 

episodes for patients using 

technological treatments at home are not 

increasing. OASIS data show that the 

proportion of episodes involving enteral 

nutrition has declined from 2.9 percent 

to 1.6 percent between 2001 and 2008; 

the proportion of episodes involving 

intravenous therapy or infusion therapy 

has stayed stable at around 2.2 percent; 

and the proportion of episodes 

involving parenteral nutrition remains 

at 0.2 percent or less during that period. 

The proportion of episodes with none of 

those treatments has increased from 

94.8 percent to 96.2 percent. These data 

are inconsistent with the commenter’s 

assertion, but we solicit commenters to 

provide us in the future with other types 

of reliable data on this aspect of patient 

case-mix. 

Comment: Many commenters cited 

improvements in the accuracy of OASIS 

coding which could more precisely 

measure patient severity as a reason 

why we should drop its proposal to 

address nominal case-mix growth by 

reducing payments. 

Response: Comments referencing 

coding improvements, such as 

increasing accuracy, do not recognize 

that such improvements are an 

inappropriate basis for payment. 

Measurable changes in patient severity 

and patient need are an appropriate 

basis for changes in payment. Our 

analysis continues to find only small 

changes in patient severity and need. 

Comment: Commenters stated that the 

increase in case-mix is due to the HHA’s 

diligence in ensuring proper coding; 

CMS’s implementation of payment 

reductions would therefore penalize 

HHAs for proper coding, while the 

agencies who were not ethical or 

diligent in their coding would not be 

affected as much. Furthermore, a 

commenter suggested that part of the 


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‘‘nominal’’ case-mix changes were due to 

HHAs’ past failures to code properly. 

The commenter stated that when the HH 

PPS system was first implemented in 

2000, HHAs undercoded in a manner 

that generated insufficient resources to 

adequately care for the patient. After 

modifications were made to the HH PPS 

system in 2008, coding was still not 

adequate for the patient. The commenter 

stated that, for these reasons, the 

baseline average case-mix is much lower 

than the actual value. 

Response: We agree with the 

commenter’s explanation of previous 

undercoding as a cause of nominal casemix growth. Over the years, we have 

issued and revised instructions for 

OASIS to reinforce the importance of 

complete and accurate coding. As we 

have stated in previous regulations, 

however, Medicare should not 

inappropriately make greater 

reimbursements for a patient population 

whose level of severity has changed 

relatively little over the years, 

notwithstanding more-comprehensive 

documentation of the health status of 

these patients. 

Comment: A commenter stated that 

much of the increase in case-mix 

weights is due to HHAs complying with 

Medicare instructions regarding patient 

coding consistent with the 2008 version 

of the HH PPS. 

Response: This comment is difficult 

to address because the commenter does 

not cite specifically which documents 

constitute CMS-issued Medicare 

instructions ‘‘consistent with the 2008 

version of the HH PPS.’’ Nor does the 

comment explain how the increase in 

case-mix weights was driven by such 

CMS instructions. However, we believe 

our release in late 2008 of a revision of 

Attachment D of the OASIS Instruction 

Manual would not have had the effect 

suggested by the comment. (Attachment 

D was intended to provide guidance on 

diagnosis reporting and coding in the 

context of the HH PPS.) First, 

Attachment D reiterated traditional CMS 

guidance about how to select diagnoses 

in home health. Attachment D did not 

deviate from the fundamental and 

longstanding instruction that reported 

diagnoses must be relevant to the 

treatment plan and the progress or 

outcome of care. Second, Attachment 

D’s release late in the year suggests it 

would not have had much impact on the 

2008 data. 

Comment: We received a number of 

comments stating that HH patients now 

have more complex conditions than 

previous populations of HH patients 

and that such patients previously would 

have been referred to health care 

facilities, but are now being cared for at 

home. Moreover, the commenters stated 

that other healthcare settings have 

developed stricter admission 

requirements, thereby increasing the 

number of HHA patients with high 

severity levels. One commenter cited as 

evidence diversion of patients to home 

care from inpatient rehabilitation 

facilities due to the CMS 60 percent rule 

and skilled nursing facilities’ (SNFs’) 

technology increases. The commenters 

point to such changes as evidence that 

policy incentives favor the home setting 

over institutional care, and therefore, 

case-mix increases are warranted. 

Response: We appreciate the 

comment, but we have little information 

with which to evaluate the claim 

regarding diversion to the home care 

setting. Possibly relevant is that the 

proportion of initial non-LUPA episodes 

preceded by acute care within the 

previous 60 days has declined between 

2001 and 2008, from 70.0 percent to 

62.7 percent. This indicates more 

patients are being admitted from noninstitutional settings, for example, the 

community. However, our data do not 

indicate whether the patients coming 

into home care without recent care in a 

Part A setting were diverted from 

entering such settings in favor of homebased care. Post-acute institutional 

utilization data perhaps consistent with 

the comment suggest a decline in 

inpatient rehabilitation facilities (IRFs) 

as a source of HH patients, but this 

decline may have been partly offset by 

an increase in SNF utilization as a 

source. For example, the proportion of 

initial episodes preceded by an IRF stay 

that ended sometime during the 30 days 

before HH admission suddenly declined 

by more than a percentage point in 2005 

and declined another 1.5 percentage 

points by 2008, while the percentage 

preceded by a SNF stay increased half 

a percentage point in 2005 and 

increased another 0.4 percentage points 

by 2008 (data based on a 10 percent 

beneficiary sample of initial, non-LUPA 

episodes). Furthermore, the fact that 

acute stays, which normally precede 

stays in institutional PAC settings, are 

decreasing in the stay histories of HH 

patients is inconsistent with the idea 

that the reduction in IRF stay histories 

is a sign that more patients are coming 

to HH as a result of diversion from IRF 

care. 

Comment: Commenters stated that the 

implementation of the payment 

reductions should be delayed until the 

validity of data and methods used to 

calculate the payment reduction can be 

verified. 

Response: The real case-mix 

prediction model and its application 

account for changes in the HH patient 

population by quantifying the 

relationship between patient 

demographic and clinical characteristics 

and case-mix. The relationships in 

conjunction with updated measures of 

patient characteristics are used to 

quantify real case-mix change. The 

characteristics in the model include 

proxy measures for severity, including a 

variety of measures, namely, 

demographic variables, hospital 

expenditures, expenditures on other 

Part A services, Part A utilization 

measures, living situation, type of 

hospital stay, severity of illness during 

the stay, and risk of mortality during the 

stay. Measurable changes in patient 

severity and patient need, factors 

mentioned by commenters, are an 

appropriate basis for changes in 

payment. Our model of real case-mix 

change has attempted to capture such 

increases. 

We recognize that models are 

potentially limited in their ability to 

pick up more subtle changes in a patient 

population such as those alluded to by 

various commenters. Yet in previous 

regulations, we presented additional 

types of data suggestive of only minor 

change in the population admitted to 

HH, and very large changes in case-mix 

indices over a short period. We 

included among these pieces of 

evidence information about the 

declining proportion of HH episodes 

associated with a recent acute stay for 

hip fracture, congestive heart failure, 

stroke, and hip replacement, which are 

four situations often associated with 

high severity and high resource 

intensity. We found declining shares for 

these types of episodes as of 2005 (72 

FR 49762, 49833 [August 2007]). We 

presented information showing that 

resource use did not increase along with 

billed case-mix (72 FR 49833); stable 

resource use data suggest that patients 

were not more in need of services over 

time, notwithstanding the rising billed 

case-mix weights that suggested they 

would be. We also analyzed changes in 

OASIS item guidance that clarified 

definitions and could have led to 

progress in coding practice (72 FR 

25356, 25359 [May 2007]). We reported 

rates of OASIS conditions for the year 

before the beginning of the HH PPS and 

2003, and found some scattered small 

changes indicative of worsening severity 

but no dramatic changes commensurate 

with the increase in case-mix weights 

(72 FR 25359). In our discussion, we 

cited specific instances where agencies’ 

changing understanding of coding could 

have contributed to the adverse changes. 

However, as previously stated, Medicare 

payments should be based on patient 


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level of severity, and not on coding 

practices. 

In the July 2010 proposed rule, we 

identified a very large, sudden 1 year 

change (+0.0533) in the average casemix weight by comparing a 2007 sample 

that we assigned to case-mix groups 

using the new 153-group system and a 

2008 sample grouped under the same 

system. It is unlikely that the patient 

population suddenly worsened in 

severity to cause an increase of 0.0533 

in the average case-mix weight in a 

single year. Furthermore, we concluded 

that the large change was not due to our 

use of the new, 153-group case-mix 

algorithm in 2008, because when we 

applied the previous case-mix system 

and the new system to a sample of 2007 

claims, the average weight differed very 

little (the difference was 0.0054). That 

is, the algorithms in the previous and 

new case-mix systems provided highly 

similar case-mix weights on the sample 

of 2007 claims. We further examined the 

diagnosis coding on OASIS assessments 

linked to the 20 percent claims sample 

and found a large increase between 2007 

and 2008 in the reporting of secondary 

diagnosis codes (see 75 FR 43242 [July 

23, 2010]). The use of secondary 

diagnosis codes in the case-mix 

algorithm was introduced in 2008 as 

part of the new case-mix system. 

We are not delaying the CY 2011 

payment reduction because we consider 

these various analyses to be strong 

evidence that agencies changed coding 

practice markedly when faced with the 

new case-mix system in October 2000 

and when faced with the refined one in 

January 2008. The conclusions we 

reached from the available evidence 

were that a small amount of real casemix change has occurred; our model 

measures this amount to be 10.07 

percent of the total change in the 

average weight since the 12-month 

period ending September 30, 2000. The 

remainder of the total change resulted 

from sources of nominal case-mix 

change as discussed elsewhere in this 

preamble. These sources include 

improvements in coding, changes in 

therapy prescriptions in response to 

payment incentives, and changes in 

such elements of the system as OASIS 

item definitions and coding guidelines. 

However, as stated elsewhere in this 

preamble, we are not finalizing the 

proposed reduction for CY 2012 

pending further study relating to the 

measurement of real and nominal casemix change. 

Comment: Commenters stated that we 

should change our methodology so that 

coding and documentation, and not 

therapy utilization, are the only factors 

used in calculating ‘‘nominal’’ case-mix 

changes. 

Response: We thank the commenters 

for their suggestion. However, the model 

we use is intended to analyze changes 

in real case-mix over time and does not 

distinguish whether these changes are 

due to increases in therapy use or other 

factors mentioned by the commenter. 

We do not believe that it would be 

appropriate to include utilizationrelated variables such as the number of 

therapy visits as variables in the model 

predicting real case-mix change. In 

addition, the goal of this analysis was to 

examine changes in measures of patient 

acuity that are not affected by any 

changes in provider coding practices. 

Comment: Commenters stated that we 

should eliminate the proposed payment 

reductions and rather ‘‘conduct targeted 

claims review and deny payment for 

claims where the case-mix weight is not 

supported by the plan of care.’’ 

Response: While we appreciate the 

commenters’ suggestion, we cannot act 

on it, because our resources are not 

sufficient to conduct claims review on 

a scale that would be required to 

counteract the broad-based uptrend in 

case-mix weights. 

Comment: Other commenters stated 

that CMS decrease the magnitude of the 

proposed payment reductions. 

Response: We have amended the 

proposal that would have implemented 

two successive years of payment 

reductions, with each year’s reduction 

at 3.79 percent. Instead we are finalizing 

in this rule only the first year’s 

reduction (for CY 2011) while we study 

additional case-mix data, and methods 

to incorporate such data, into our 

methodology for measuring real vs. 

nominal case-mix change. In the CY 

2012 proposed rule, we will make 

proposals concerning any payment 

reduction for CY 2012 based on results 

of those studies and based on claims 

samples updated through CY 2009. In 

previous rules, we have stated our 

intention to incorporate additional types 

of data, such as Part B data, into our 

methodology. Efforts so far have been 

inhibited by problems of data adequacy. 

In the coming year, we intend to draw 

on more resources and expertise than 

we have in the past in order to move 

forward in completing the examination 

of additional kinds of data for 

measuring real vs. nominal case-mix 

change. As we have stated elsewhere in 

this regulation, the various types of 

information and data pointing to the 

conclusion that nominal case-mix 

change has been responsible for most of 

the case-mix growth go beyond the 

model predicting real case-mix. Much of 

that extra information cannot be 

converted into a quantifiable measure, 

but it is nevertheless very significant in 

explaining nominal case-mix growth. 

Comment: Commenters stated that we 

should eliminate the case-mix 

reductions altogether and find other 

methods to prevent upcoding and 

‘‘manipulation of therapy and co-morbid 

condition factors.’’ 

Response: We appreciate the 

commenter’s suggestion. As stated 

elsewhere in this preamble, the payment 

reductions we proposed were to 

compensate for past nominal change in 

case-mix weights that resulted from 

changed coding practices and/or 

instructions and behavioral changes 

among agencies, such as changes in 

therapy visits prescribed. One approach 

addressing therapy factors would be to 

conduct medical necessity evaluations 

during episodes. An approach to 

limiting a change in comorbid-condition 

coding exacerbated by a change in 

disease definition would be to eliminate 

hypertension from the case-mix system. 

We believe these are two proposals that 

capture the spirit of the commenters’ 

suggestion, but in both instances, we 

received many comments in opposition. 

However, we welcome suggestions of 

other policies that can prevent upcoding 

and manipulation of case-mix measures. 

Comment: Commenters stated that we 

should suspend or drop case-mix 

adjustments because adjustment should 

instead focus on case-mix groups with 

high weights due to therapy. 

Response: The 2008 case-mix model’s 

four-equation structure incorporated a 

procedure that decelerated payments as 

therapy visits per episode increase. We 

plan to recalibrate the case-mix weights 

in the coming year, and in so doing we 

will examine our policy of imposing 

within the case-mix model this 

deceleration in payment increases. Such 

examination could lead to an approach 

suggested by the commenter, were we to 

more aggressively impose the 

deceleration. For 2011, we are 

proposing to maintain the set of casemix weights we issued in 2008. 

Comment: Similarly, commenters 

stated that we should ‘‘target agencies 

with excessive therapy usage’’ instead of 

implementing the proposed payment 

reductions. 

Response: We have not conducted an 

analysis to identify agencies with 

excessive therapy usage. We believe that 

what constitutes excessive therapy must 

be judged in view of the patient’s need 

during the episode. It is impossible to 

conduct an analysis that takes the 

amount of individual need into account 

based on the information we have; in 

fact, that is the reason we implemented 

therapy thresholds in the first place: A 


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shortage of information on the OASIS 

sufficient to predict the amount of 

therapy needed by the patient. What we 

do have is strong evidence that in 

general therapy prescriptions changed 

dramatically under the HH PPS, in 

response to payment incentives. These 

prescriptions changed again with the 

implementation of the revisions to the 

HH PPS case-mix system in 2008; 

notably, between 2007 and 2008, we 

observed a 3-percentage point increase 

in the percent of episodes with 14 or 

more therapy visits. Such behavioral 

change was part of the nominal change 

causing expenditures that we are now 

recovering with the case-mix reductions 

to the rates. 

Furthermore, even if agencies with 

excessive therapy usage were 

identifiable in an administratively 

feasible manner, a separate set of 

concerns relates to the effect on 

beneficiaries from targeting agencies in 

the way suggested by the commenters. 

We are concerned that a policy of 

targeting agencies with excessive 

therapy usage might unfairly penalize 

certain patients. For instance, even in an 

agency that pads the therapy 

prescription to reach a certain 

threshold, there will likely be some 

patients who need all the therapy visits 

prescribed. A payment reduction 

limited to certain agencies is likely to 

unfairly penalize some of the agency’s 

patients. In addition, as previously 

stated, we believe that nominal case-mix 

change has been widespread and that 

therefore overpayments were 

widespread as well. 

Comment: Commenters stated that we 

should suspend or drop case-mix 

reductions in favor of the approach in 

S.2181/H.R. 3865 (110th Congress), 

which involved working with the HH 

industry to develop criteria and 

evaluating a medical records sample to 

determine reductions, rather than 

relying on hypothetical extrapolations. 

Another commenter mentioned that the 

Home Health Care Access Protection 

Act (S. 3315/H.R. 5803) was introduced 

to ‘‘establish a more reliable and 

transparent process for CMS to follow in 

evaluating Medicare payments for home 

health services.’’ The commenter asked 

if CMS would be willing to cosponsor 

this legislation. 

Response: We intend to work with 

representatives of the HH industry as we 

pursue a review over the coming year of 

the data and methods for measuring real 

case-mix change. Theoretically, a 

medical records sample might work, but 

as a practical matter, we strongly 

suspect it might not work. It is unlikely 

that we could finance the collection of 

samples large enough to produce 

reliable results. It is expensive to 

abstract medical records, and we would 

need a sizable sample of records from 

the IPS period and from a follow-up 

year (for example, 2009). Based on our 

experience in a context involving the 

retrieval of years-old records, it is not 

likely that we could find enough records 

to constitute a valid broad-based 

sample. The procedure would have 

nurses group them into a case-mix 

group, and compare the results with 

those from a similar procedure 

performed on recent records. Additional 

potential problems with using medical 

records include the strong possibility 

that records would have insufficient 

information to allow assignments for the 

Activities of Daily Living (ADL) items of 

the case-mix system, have insufficient 

information to enable independent 

staging of pressure ulcers, and other 

kinds of underreporting. It is possible 

that this procedure might not return the 

findings that the proponents suggest it 

would, because the nominal case-mix 

change problem partly results from 

reporting practices that have changed 

through time from a state of 

underreporting to a state of more 

complete reporting. Therefore, one 

would expect that the source records 

would likely reflect underreporting in 

the early years, just as the OASIS 

reflected underreporting in the early 

years. 

Comment: One commenter stated that 

detailed information about the method 

to calculate the baseline values was not 

released to the public. Commenters 

questioned the validity of the 2000 data 

used to calculate the baseline. 

Commenters stated that in 2000, there 

was a limited amount of OASIS data 

and the data submitted might not have 

been completely correct. One 

commenter expanded upon this concept 

by stating that ‘‘a consistent, largely 

reliable database of information from 

submissions of the OASIS form was 

most likely not achieved until sometime 

during 2003’’. Commenters stated that 

initially extensive education and 

training was needed in order to ensure 

reliable OASIS data. In addition, 

commenters stated that since Abt 

Associates was only able to use 313,447 

episodes to calculate the base, there 

were not enough data to ensure that the 

base was correct, and therefore, ‘‘the 

final period of IPS should not have been 

used as a ‘‘base’’ to measure anything.’’ 

Response: In our May 2007 proposed 

rule and our August 2007 final rule, we 

described the IPS samples and PPS 

samples that were used to calculate 

case-mix change. We remind the 

commenter that 313,447 observations is 

an extremely large sample by statistical 

standards, and that agencies began 

collecting OASIS data in 1999, 

following issuance of a series of 

regulations beginning on January 25, 

1999 (64 FR 3764). Most of the data we 

used for the baseline period come from 

the first 3 quarters of the year 2000— 

months after collection was mandated to 

begin in August 1999. By 2000, the vast 

majority of agencies were complying 

with the reporting requirements. We 

question the idea that agencies took 

three more years to come up to speed 

with OASIS. We believe the commenter 

overstates the amount of training 

needed to complete OASIS reliably. The 

licensed personnel responsible for 

assessing patients do not and should not 

need all the extensive training implied 

by the comment, because assessment is 

part of the foundation of their training 

and professional skill. Indirect evidence 

that the data from the early years of the 

HH PPS were sufficiently reliable comes 

from model validation analysis we 

conducted during that period. 

Validation of the 80-group model on a 

large 19-month claims sample ending 

June 2002 (N = 469,010 claims linked to 

OASIS) showed that the goodness-of-fit 

of the model was comparable to the fit 

statistic from the original Abt Associates 

case-mix sample (0.33 vs. 0.34), 

notwithstanding that average total 

resources per episode declined by 20 

percent. That analysis also showed that 

all but three variables in the scoring 

system remained statistically 

significant. 

Comment: Commenters noted that 

OASIS data from Outcome Concepts 

Systems demonstrated increased patient 

acuity from 2006–2008 as measured by 

ADL and Instrumental Activities of 

Daily Living (IADL) assessments of 

decreasing functional capabilities of HH 

patients. OASIS data demonstrated a 

‘‘large increase’’ in acuity as measured 

by changes in clinical conditions, the 

number of patients requiring IV therapy, 

parenteral nutrition, those that have 

urinary tract infections at the start of 

care and those with increased inability 

to manage oral and injectable 

medications; these commenters noted 

that OASIS measures were not likely to 

be ‘‘upcoded’’ to secure higher 

reimbursement as none had a direct or 

indirect impact on the level of payment 

under HH PPS. Further, the decrease in 

functional capabilities could have been 

easily correlated with increase in the 

use of therapy services as both physical 

and occupational therapists directly 

address the ADL incapacities that are 

the focus of these OASIS findings. The 

commenter referred to reports on the 

July 23, 2010, Proposed Rule 


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commissioned by the Home Health 

Advocacy Coalition and the National 

Association for Home Health and 

Hospice, saying both documents 

indicate ‘‘non-case-mix related OASIS 

items, such as grooming and light meal 

preparation have shown increasing 

functional limitations among home 

health patients.’’ 

Response: We believe the commenter 

is in error in stating that intravenous 

therapy and parenteral nutrition are not 

used in the case-mix system. Another 

inaccuracy in this comment pertains to 

the cited changes in the frequency of 

these technological treatments at home, 

which in fact are not increasing. A large, 

random sample of OASIS data linked to 

claims shows that the proportion of 

episodes involving intravenous therapy 

or infusion therapy has remained stable 

at around 2.2 percent and the 

proportion of episodes involving 

parenteral nutrition remains at 0.2 

percent or less during that period. We 

are reluctant to use OASIS data to 

analyze changes in real case-mix 

because OASIS measures reflect changes 

in coding practices and payment 

incentives including quality 

measurement incentives, all of which 

are not related to real changes in 

patients’ acuity. We are also concerned 

that incentives could lead to reports of 

patient function—whether or not 

particular function-related items are 

used in the case-mix assignment—that 

are consistent with the therapy visits 

planned. Unfortunately, this problem 

potentially limits the usefulness of noncase-mix items. We believe that 

independent measures are the best way 

to ensure the reliability of our real casemix methodology. We plan to try to 

identify independent measures, beyond 

the independent measures we are 

currently using in our methodology, as 

we go forward. 

Comment: A commenter stated the 

case-mix change analysis is flawed in 

that it relies on hospital DRG data, 

whereas more than half of Medicare HH 

patients are admitted to care from a 

setting other than a hospital, and if they 

were in a hospital, the HH admission 

followed much later. 

Response: We disagree that the utility 

of the hospital information in the casemix change analysis is so limited. 

Regardless of whether the patient came 

directly from a non-hospital-setting (for 

example, home or a post-acute 

institutional stay), information from a 

hospital stay preceding HH is typically 

relevant to the type of patient being seen 

by the HHA, and thus can provide 

information about the PPS case-mix 

measure for the HH episode. A recent 

hospitalization, whether or not there is 

an intervening period spent in some 

other setting before HH admission, is 

common before admission to home 

health. Data from a 10 percent random 

beneficiary sample of HH users indicate 

that a hospitalization history for new 

admissions is far more common than the 

comment may suggest. In 2008, 45.3 

percent of patients admitted to home 

care for a non-LUPA episode had an 

acute stay within the previous 14 days; 

56.1 percent had an acute stay within 

the previous 30 days; 60.3 percent had 

an acute stay within the previous 45 

days; and 62.7 percent had an acute stay 

within the previous 60 days. We could 

have restricted the real case-mix change 

analysis to new admissions to home 

health, but because we received many 

questions about the completeness of the 

information to be obtained from such an 

approach, we decided to use all 60-day 

episodes in the analysis. We believe 

using all 60-day episodes in the analysis 

is reasonable, since a majority of new 

admissions to HH complete their stay in 

HH within a 60-day episode. 

Furthermore, non-initial episodes, 

though they are less than half of 

episodes in our analysis, are not devoid 

of recent hospital information. When we 

look at all new HH admissions, we find 

that about 15 percent are hospitalized 

within 30 days of admission (that is, 

within the first 30 days of the first 

episode), with the risk of hospitalization 

rising beyond the 30th day. Many of 

these hospitalized patients return to HH 

after discharge, making data for 

returnees available for our analysis of 

the acute stay history. While we do not 

have information specifically about the 

hospitalization risk of the new 

admissions who go on to recertification 

episodes, it seems reasonable to infer 

that they have risks similar to the 

overall average 30 day hospitalization 

rate of 15 percent. The Abt Associates 

case-mix change report (‘‘Analysis of 

2000–2008 Case-mix Change,’’ July 

2010, link at http://www.cms.gov/ 

center/hha.asp) indicates that about 90 

percent of the episodes have a 

hospitalization history in the data (p. 6), 

looking back a maximum of 4 years. 

However, from the information we show 

here about the likelihood of a hospital 

stay before and after home health, 

relatively few of the hospital stays 

contributing information are as old as 4 

years. We also note that the remaining 

10 percent of episodes are not dropped 

from the analysis; these episodes 

contribute information for the model, 

specifically, demographic information 

and various proxy measures derived 

from Part A utilization and expenditure 

data. 

Comment: Commenters suggested that 

CMS should also recognize that HH 

patients are often treated for conditions 

other than the primary reason for their 

hospitalization. Furthermore, 

commenters stated that the primary 

reason for HH care may be different 

from the primary reason why a person 

was admitted into the hospital. 

Therefore, commenters stated that the 

DRGs used in the real case-mix 

prediction model may not be relevant to 

the patient’s condition in the HH 

setting. 

Response: We thank the commenters 

for their input. However, we would like 

to remind commenters that the real 

case-mix prediction model is not 

limited to diagnoses from inpatient 

claims. The model also takes into 

account demographic factors, as well as 

utilization indicators of health status. 

Moreover, the model measures the 

relationship between these factors and 

case-mix. 

Comment: Some commenters stated 

that payment rate reductions due to 

case-mix weight changes are not 

warranted because Medicare 

expenditures on HH are well within 

budgeted levels, thereby demonstrating 

that aggregate spending has not 

increased enough to permit CMS to 

exercise its authority to adjust payment 

rates. Commenters cited budget 

projections of the Congressional Budget 

Office (CBO). Another commenter stated 

while therapy services for HH patients 

have increased in volume since the start 

of the HH PPS in 2000, patient 

outcomes have improved and Medicare 

spending per patient and in the 

aggregate overall has stayed well below 

projections by the CBO. Some 

commenters stated that payment 

reductions in HH will lead to more 

institutional care, for example, by 

leading to increases in hospital 

readmissions of post-acute patients. 

Response: A CBO projection table 

shown in one of these comments 

indicated that, based on projections of 

March 2004, spending has exceeded 

projections in 3 of the 5 succeeding 

years. We have no statutory authority to 

consider the relationship of CBO 

projections to HH outlays when setting 

the HH PPS payment rates. The 

Secretary’s authority to respond to 

nominal coding change is set out at 

section 1895(b)(3)(B)(iv) of the Act. 

There is no evidence that improvement 

in HH patient outcomes is related to the 

level of payments achieved through 

nominal case-mix change. Effects of 

payment reductions on access and 

patient outcomes are worthy of study, 

using carefully designed research. We 

are aware of the challenges of 


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conducting conclusive research in this 

area, in part because other policy 

changes affecting the study question 

may co-occur. We have noted elsewhere 

in this preamble that we intend to 

request that the Office of the Inspector 

General resume investigations of the 

access impacts of payment reductions. 

Comment: A commenter stated that a 

typical case-mix weight change 

adjustment in other sectors may bring a 

reduction in profit margins only, 

whereas in home health the adjustment 

occurs where the higher payments from 

increased case-mix weights are offset by 

increased costs. 

Response: Analysis of profit margins 

indicates that they remain high among 

HHAs. For example, Medicare margins 

were 17.4 percent in 2008. This 

situation suggests that higher payments 

are not necessarily being offset by 

increased costs. In March 2010, MedPac 

estimated that Medicare margins will be 

13.7 percent in 2011, taking into 

account the then-expected payment 

reduction of 2.71 percent to account for 

nominal case-mix change (MedPac, 

Report to the Congress: Medicare 

Payment Policy, March 2010). Our 

estimates suggest aggregate Medicare 

profit margins in HH will remain in 

double digits in 2011 under the 

payment policies proposed in the July 

23, 2010, proposed rule. 

Comment: Commenters stated that 

therapy utilization is a coding 

adjustment that accompanies not only 

an increase in reimbursement but also 

an increase in provider costs, implying 

that a rate reduction related to increased 

costs is inappropriate. 

Response: We believe that the goal of 

the Medicare program is to ensure that 

beneficiaries receive the right care at the 

right time. The evolution of patterns of 

therapy utilization since the PPS began 

leaves doubt that appropriate care has 

been provided. In the CY 2008 proposed 

regulation (72 FR 25356) we described 

a shift in the distribution of therapy 

visits per episode under the HH PPS 

that caused two peaks: One below the 

therapy threshold of 10 therapy visits 

and the other in the 10 to 13-visit range. 

Before the HH PPS, the distribution had 

one peak, at 5 to 7 therapy visits, well 

below the 10-visit therapy threshold in 

use prior to the 2008 refinements to the 

HH PPS. Table 2 shows the distribution 

of episodes (LUPA and non-LUPA) 

changed again with the implementation 

of the 153-group case-mix system and 

its revised set of thresholds and therapy 

steps. At the new 7-visit step (7 to 9 

visits) there was a sudden 50 percent 

increase in the proportion of episodes, 

and at the new 14-visit therapy 

threshold, there was a 25 percent 

increase in the proportion of episodes. 

One commenter, in writing about the 

questionable prescription of therapy 

treatment, stated that certain agencies 

have habitually provided therapy to 

patients whose natural course of 

recuperation would have been the same 

regardless of receipt of therapy. We also 

note that we implemented a declining 

payment with each added therapy visit 

with the 2008 refined case-mix system, 

with the intent to deter inappropriate 

padding of therapy prescriptions to 

higher and higher numbers of visits, as 

we added new thresholds above 10 

visits. However, the pliability of therapy 

prescriptions, the continued growth in 

the proportion of episodes utilizing 

therapy, and the 25 percent increase in 

the proportion of episodes with high 

numbers of therapy visits (14 or more) 

may be evidence that increased costs are 

more than offset by the increased 

payment associated with therapy. 

Therefore, it is not certain that a rate 

reduction related to increased costs is 

inappropriate. 

TABLE 2—DISTRIBUTION OF HOME HEALTH EPISODES ACCORDING TO NUMBER OF THERAPY VISITS

[2002–2008] 

Number of therapy visits 2001 

(%) 

2002 

(%) 

2003 

(%) 

2004 

(%) 

2005 

(%) 

2006 

(%) 

2007 

(%) 

2008 

(%) 

None ................................................................................................. 54 52 51 50 50 50 50 49 

1 to 5 ................................................................................................ 14 15 15 15 15 15 14 14 

6 ....................................................................................................... 3 3 3 3 3 3 3 3 

7 to 9 ................................................................................................ 6 6 6 6 6 6 6 9 

10 to 13 ............................................................................................ 10 11 13 14 14 15 15 10 

14+ ................................................................................................... 12 12 12 12 12 12 12 15 

Comment: A commenter stated that 

the increase in case-mix due to 

increased therapy services should count 

towards the ‘‘real’’ case-mix changes, not 

towards the ‘‘nominal’’ case-mix 

changes. The commenter thought that as 

long as the agency provides therapy, the 

changes in case-mix due to increased 

therapy services should be considered 

‘‘real.’’ 

Response: We based our nominal 

change estimate on beneficiary 

characteristics information, which when 

applied to the prediction model for real 

case-mix, to account for whatever 

changes in patient severity that have 

occurred since the IPS baseline. The 

remainder of the change in the national 

average case-mix weight is classified as 

nominal. We have not netted out from 

our estimate of nominal case-mix 

change any increases in the weights due 

to additional therapy utilization, 

because utilization is an aspect of the 

case-mix system that is under the 

control of providers, and therefore, is 

not necessarily a reflection of changes in 

patient severity, especially in view of 

the fact that our use of the real case-mix 

change model accounts for changes in 

patient severity. Furthermore, the 

evolution of therapy utilization under 

the HH PPS suggests that some of the 

therapy provision under the HH PPS has 

been subject to financially driven 

decision-making and as such, it is akin 

to nominal case-mix change, so we have 

classified it with nominal change. 

Comment: A commenter stated the 

real case-mix change analysis omits 

consideration of increased therapy 

needs in the population. Other 

commenters stated that therapy use 

changes were not explained in the 

model and that CMS admitted that it 

could not explain the correct amount of 

therapy expected for patients. The 

commenter stated CMS should use 

alternative variables that would be more 

indicative of the changes in therapy use. 

Response: The models were intended 

to analyze changes in case-mix over 

time and do not distinguish whether 

these changes are due to increases in 

therapy use or other factors. We do not 

believe that it would be appropriate to 

include utilization-related variables, 

such as the number of therapy visits, as 

predictors in the model, as such, 

variables are provider-determined. In 

addition, the goal of these analyses was 

not to develop refinements to the 

payment system but rather to examine 

changes in measures of patient acuity 

that are not affected by any changes in 

provider coding practices. CMS has 


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access to the claims histories and other 

administrative data for patients in our 

samples, and we welcome suggestions 

about how to better use these resources 

in finding alternative variables more 

indicative of the need for therapy. Such 

proposals must recognize that the 

desirability of any proposed alternative 

data depends on whether the data 

generation process involves HH 

providers. 

Comment: A commenter stated that 

fewer therapy services are being 

provided in other care settings and 

therefore, the increases in therapy usage 

are due to patients’ increased need for 

therapy services in the HH setting. 

Response: We have no information 

suggesting that fewer therapy services 

are being provided in other care 

settings. In the SNF setting, more 

therapy is being provided to SNF 

patients than used to be the case. This 

is indicated by the increased share of 

SNF days for therapy RUG–III groups; 

the share grew from 75 percent to 85 

percent between 2000 and 2006. 

MedPac has documented increases in 

rehabilitation intensity in SNFs since 

2002 (MedPac, Report to the Congress, 

Medicare Payment Policy, March 2010). 

For patients who go on to HH from Part 

A institutional settings, we have no 

evidence of less therapy utilization in 

prior settings. We have evidence to the 

contrary. For example, total billed 

charges for therapy from all previous 

Part A settings within the 14 days before 

HH admission nearly tripled, from an 

average of $1,154 (2001) per person with 

any Part A discharge to $2,952 (2008). 

Total billed charges for therapy 

increased from $2,068 in 2001 to $3,680 

in 2008 per person with any prior Part 

A stay involving therapy. 

Comment: A commenter suggested 

that CMS ‘‘analyze case-mix weight 

changes based on data beginning in 

2005’’ and ‘‘analyze case-mix weight 

changes for 2008 to current to see how 

much increase occurred in more recent 

years.’’ Furthermore, the commenter 

recommended that CMS ‘‘use national 

benchmarking companies for data if 

CMS does not have data yet available.’’ 

Response: We will be turning to 

analysis of 2009 data later this year. 

Unfortunately, the time it takes for a 

complete year of data to arrive and the 

added time of cleaning, processing, 

summarizing, and linking the data 

currently preclude using the data for the 

analysis in this final rule. We have 

concerns that data from benchmarking 

services would not be nationally 

representative. Therefore, we intend to 

use random samples drawn from our 

own administrative data. 

Comment: A commenter believes that 

the model fails to account for any 

changes in HHA behavior related to 

patient populations served. These 

changes would include a marketing 

effort targeted to increase the proportion 

of patients who are high users of 

therapy. The commenter also stated that 

the post-acute care industry has 

changed dramatically since the Abt 

regressions were first designed. The 

current use of administrative claims 

data by Abt and CMS is inadequate, and 

perhaps even counterproductive. This 

practice sends the wrong signals as to 

how HH and facility-based care should 

be related as the Medicare program 

moves toward an era of ‘‘bundled 

payments’’ and other initiatives to 

coordinate care across settings. 

Response: We disagree with this 

comment. The predictive model for real 

case-mix was designed in 2007 and 

includes a comprehensive set of 

variables. The model looks at case-mix 

change across a large sample of 

providers, rather than considering 

individual provider behavior. If the 

characteristics of patients have changed 

due to marketing efforts, this should 

show up as changes in the mean values 

of patient characteristics over time. For 

example, the increase in knee 

replacement patients since the baseline 

year causes an increase in the predicted 

case-mix weight. We will continue to 

research ways to modify our models and 

data for analyzing real case-mix change 

over time. A challenge with using 

OASIS items is that, for the most part, 

OASIS items associated with case-mix 

are already used in the grouper and thus 

are not appropriate to use in the casemix change analyses (since changes in 

case-mix over time may be due to 

coding changes rather than changes in 

severity). 

Comment: Commenters stated that the 

model is based on administrative data 

rather than clinical data. 

Response: The model only includes a 

few variables that are derived from 

OASIS assessments (measures of patient 

living arrangement) because the OASIS 

items can be affected by changes in 

coding practices. It is not practical to 

consider other types of HH clinical data 

(for example, from medical charts) in 

the model. 

Comment: A commenter wrote that 

the model relies too heavily on 

assumptions and beliefs rather than 

empirical evidence. 

Response: We disagree with the 

commenter. The prediction model for 

real case-mix is an empirical model, the 

findings of which are based entirely on 

empirical evidence. 

Comment: A commenter stated CMS 

should suspend nominal case-mixrelated payment reductions until it 

develops an accurate and reliable model 

to evaluate changes in case-mix weights 

consistent with the whole nature of 

patients served in HH care, not just 

those discharged directly from 

hospitals. 

Response: The commenter does not 

recognize that many variables in our 

model are applicable to patients who 

have not used hospitals recently. 

Variables relating to demographic status 

and PAC utilization are among the 

model’s variables. Another set of the 

model’s variables, used to describe the 

nature of any previous hospital stay, 

applies to many patients nonetheless, 

because we searched the claims history 

to find the last hospital stay that 

occurred before the episode. We believe 

that the model includes a rich set of 

patient measures. Efforts will continue 

to deploy more information in 

evaluating changes in HH patients’ 

health characteristics. It is important to 

note that the omission of any particular 

variable is not enough to change 

estimates of unpredicted case-mix 

change. Variables must have different 

prevalence rates in the initial and later 

periods. If prevalence rates for such 

variables were the same in both periods, 

the effects would net out; in other 

words, there would be no systematic 

difference in the predicted case-mix 

over time. 

Comment: One commenter stated that 

the ‘‘2008 additional case-mix ICD–9 

codes and therapy four-equation model 

logically results in increased case-mix 

and contributes to the faulty foundation 

of comparison with IPS and early PPS 

data.’’ 

Response: We disagree with the 

commenter. We performed our research 

leading to the four-equation model 

using an extremely large sample of 

claims linked to OASIS assessments. 

Using visit times by discipline reported 

on the sample of claims, we studied the 

relationship of the total of wageweighted visit times per 60-day claim to 

patient characteristics as reported by 

agencies on the assessments. The wageweighted minutes are the best measure 

available of the cost burden of caring for 

the patient, given his or her clinical 

characteristics. This method essentially 

replicated the original method we used 

to develop the 80-group case-mix 

system during the period before OASIS 

was implemented and before per visit 

line billing was required. A prototype of 

OASIS was used at that time. The 2005 

coding and reporting practices, as well 

as the resource use patterns, were the 

foundation of the 2008 refinements, 


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along with our replication of the basic 

analytic approach. We know of few 

other methods comparable in their 

ability to yield a fair and representative 

case-mix model for national application. 

Given the essential continuity in 

approach, we fail to see how the 2008 

refined model specifically is a reason 

not to make comparisons with pre-PPS 

and early PPS data. Our comparisons of 

population and utilization 

characteristics, which are the basis for 

our prediction model of real case-mix, 

do not involve use of the HH PPS casemix payment variables or the ICD–9 

codes reported by agencies. 

Comment: Commenters stated that the 

Abt report on the real case-mix change 

analysis (‘‘Analysis of 2000–2008 Casemix Change’’, July 2010, link at http:// 

www.cms.gov/center/hha.asp) does not 

discuss what signs are consistent with 

known relationships and, hence, is not 

in a position to judge the signs of the 

coefficients. In addition, commenters 

stated that while Abt included variables 

related to inpatient stays, the estimated 

coefficients are not consistent with 

expectations that ‘‘the coefficient for any 

stay would be positive and the 

coefficient for the number of days 

would be negative.’’ The coefficient has 

an opposite sign than what is expected. 

Response: We thank the commenters 

for their comments. However, our 

purpose is to predict case-mix weights 

using all available and relevant 

administrative data, rather than to 

isolate the impact of individual 

variables. We have noted elsewhere that 

many coefficients have signs as we 

expect (Abt Associates 2008; CMS 

1541–FC, FR August 29, 2007). Contrary 

to what the commenter states, it is not 

clear that a hospitalization would be 

associated with higher case-mix; it may 

be that community patients are more 

clinically complex and have a higher 

case-mix than those who are discharged 

from a hospital to home health. This 

result is consistent with the impact of 

pre-admission location variables (from 

OASIS item M0175) in the 80-group 

case-mix model. 

Comment: Abt does not perform any 

multicollinearity diagnostic statistics or 

consider the remedy of combining some 

of the variables. The model uses a large 

number of variables that do not have 

much variation. The close interaction 

among the variables ‘‘is likely to pose 

problems with the prediction of the 

dependent variables.’’ 

Response: Given the objectives of the 

analysis, we are not particularly 

concerned about redundancy among 

variables. It is also important to note 

that such redundancy, often called 

multicollinearity, does not actually bias 

results and may only cause large 

standard errors of the coefficients for 

variables that are related to one another. 

Standard errors are not used in our casemix change calculations. The Abt 

Associates report described 

improvement in the predictive power of 

the model as each set of variables (for 

example, APR–DRG variables) was 

added beyond demographic variables 

alone. The addition of Part A 

expenditure variables, the last variable 

set added to the model, led to little 

improvement in predictive power, and 

for that reason might be considered 

redundant; however, their addition did 

not change the essential results of the 

analysis (Abt Associates, 2008), which 

were that only a small proportion of the 

case-mix growth could be attributed to 

changes in patients’ characteristics. 

Comment: Commenters stated that the 

Abt models are unreliable because 40 

percent of the top variables differ from 

one model year to the next (original IPS 

model and the model rebased to 2008 

data), and 20 percent of the variables 

change signs. Commenters also stated 

that the model CMS uses to assess casemix weight changes should be at least 

as accurate and reliable as the case-mix 

adjustment model that it is assessing. 

The current PPS case-mix model 

reportedly originally had an R-squared 

explanatory power of over 40 percent 

while the case-mix weight change 

assessment model falls far short of that 

benchmark. Commenters stated that the 

explanatory power of the models falls 

46 percent from the original model to 

the rebased model. The regression 

model R-square dropped from 19 

percent to 10 percent in the 2008 

analysis. The R-square of the 80-group 

HHRG model was at 0.21—much lower 

than the R-square for the 153-group 

HHRG model at 0.44. The commenter 

stated this high R-square of the current 

PPS case-mix model suggests that the 

case-mix weight change regression 

model analysis for 2008 should have 

had a higher R-square. The decrease in 

the R-square is ‘‘unclear and 

unexplored.’’ 

Response: We thank commenters for 

their comments. However, we disagree 

that the difference in R-squares for the 

two models indicates that the prediction 

model for real case-mix is unreliable. 

The nine top drivers of case-mix are the 

same in both models, as are 15 of the 

top 20. Most of the predicted case-mix 

change results from the major ‘‘drivers’’ 

in the model, and, of the top 50 drivers 

of case-mix change (which account for 

more than 60 percent of the total 

predicted change in the model), 37 have 

the same sign in both models and the 

correlation between the coefficients 

from the two regression models is 0.56. 

Of the variables that changed signs, 

most were not statistically significant. 

We would expect some change over 

time in the variables that are among the 

top drivers of case-mix change, given 

the large number of variables in the 

model and the differing dependent 

variables (the 80 case-mix weights for 

the first model and the 153 case-mix 

weights for the second model). With 

regards to the 40 percent R-squared 

explanatory power benchmark, given 

that the goal of the case-mix change 

analyses is to determine the extent to 

which case-mix changes observed over 

time are due to changes in patient acuity 

or other factors (such as coding changes) 

that are not observed in the model, we 

do not believe that this is an appropriate 

statistical performance benchmark for 

the model. 

The explanatory power of the current 

HH PPS case-mix model is as high as it 

is in large part because of the therapyrelated variables in the model (where a 

direct measure of resource use is 

included on the right-hand side of the 

regression model). We do not believe 

that it is appropriate to include these 

types of variables in the case-mix 

change model because they are provider 

determined. 

Comparing the statistical performance 

of the two prediction models for real 

case-mix is not really appropriate to 

compare strictly the statistical 

performance of the two models, given 

that we had to drop the living 

arrangement variable from the second 

model and that the dependent variable 

for each model is a different set of casemix weights. We also note that a 

possible contributor to the lower Rsquare for the second model is the large 

amount of nominal case-mix change that 

occurred between 2000 and 2008. 

Changes in coding practice and 

resulting assignment of case-mix 

weights could have led to a situation 

where the predictor variables in the 

prediction model for real case-mix 

collectively have less ability to predict 

the weights than when the variables 

were first used with the data from the 

last year of IPS (2000) to predict the 

original PPS case-mix weights. 

Comment: A commenter stated that 

no explanation was provided on 

segmented choice of periods of 

evaluation. This commenter wrote that 

it is unclear why Abt subdivided the 

2000–08 period into 2000–2007 and 

2007–2008. To minimize the possibility 

for shifts in the relationship between 

resource requirements and explanatory 

variables, Abt could have subdivided 

the 8-year period in half or at least 


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performed some sensitivity analysis to 

choose the time periods. 

Response: The procedure of 

identifying nominal case-mix change 

relies on subtracting an average of 

predicted weights from the average of 

actual, billed weights. The case-mix 

group system changed from one of 80 

groups to 153 groups in 2008, causing 

a change in the set of weights that could 

be billed to Medicare. Up until 2008, 

this was not an issue as the same set of 

weights was used throughout the entire 

history of the PPS up until that year. To 

be able to bridge the periods before and 

after the 153-group model, we rebased 

the prediction model to the 2008 data, 

the first year that the 153-group model 

was used for paying HH providers. We 

combined the results from the original 

IPS-period equation with the results 

from the rebased 2008 equation for this 

year’s analyses. Our application this 

year of the IPS-period equation was 

unchanged (except for certain technical 

changes in the APR–DRG grouper) from 

our application of it for last year’s rule. 

Comment: A commenter stated 

hospital discharge data demonstrate that 

HH patients are admitted from hospital 

stays with a higher degree of acuity than 

in the past. ‘‘The acute care (inpatient 

prospective payment system (IPPS)) 

CMI for cases discharged to HHAs 

reflects the patient severity of the 

patients discharged to home health 

agencies. As one of the measures for 

patient severity is prior hospitalization, 

it is believed to be unaffected by the HH 

CMI. The CMI for the prior 

hospitalization can be assumed to be a 

proxy measure of the ‘‘real’’ case-mix 

index. Based on our analyses of the 

2007 and 2008 MedPAR data (Medicare 

discharges from short term acute care 

hospitals), we found that the CMI (MS 

DRG-based CMI) of cases discharged to 

HHAs increased by 2.5 percent from 

1.588 in 2007 to 1.63 in 2008. 

Furthermore, we also found that among 

the acute care cases discharged to 

HHAs, the proportion of cases 

categorized as Medicare Severity 

Adjusted Diagnosis Related Groups (MS 

DRGs) with complications and 

comorbidities increased by 3 percentage 

points from 25 percent in 2007 to 28 

percent in 2008. This implies that the 

real case-mix index due to 

comorbidities most likely increased for 

the cases discharged to home health 

agencies.’’ 

Response: The MedPAR data analyzed 

in this comment cover the period when 

the MS–DRG system was implemented. 

We analyzed MS–DRG coding and 

found evidence of changes in coding 

and documentation practices that led to 

increases in billed acute care case-mix 

weights. CMS actuaries estimated that a 

2.5 percent increase in case-mix in the 

hospital IP PPS was due to coding and 

documentation changes occurring in FY 

2008 (75 FR 50355). The results cited by 

the commenter may have reflected the 

weight-increasing hospital coding 

behaviors addressed by the CMS 

regulatory analysis. Therefore, we have 

reason to believe that this measure alone 

is not good evidence for assessing real 

case-mix change. We must also point 

out that our analyses employing the 

APR–DRG system indicated that the 

proportion of episodes with a Mortality 

Risk Level 3 (Major) diagnosis increased 

over time while the proportion with 

Mortality Risk Level 2 (Moderate) 

decreased. However, our regression 

coefficients (for both the IPS and 2008 

model) showed a negative relationship 

between being in the moderate or major 

risk of severity groups and case-mix. 

Thus, the increase in the proportion of 

patients in the highest mortality risk 

category led to an estimate of lower 

predicted case-mix. Given these types of 

findings, it is not clear the extent to 

which the CMI changes that the 

commenter notes, even if they 

represented an accurate measure, would 

lead to a prediction of higher case-mix. 

Comment: Several commenters 

suggested we conduct an impact 

analysis of the proposed rule relative to 

case-mix, include an evaluation of 

access in each year of any adjustment, 

and consider all factors related to 

access. These commenters felt that the 

impacts in the proposed rule were 

factually and legally inadequate, and 

therefore, violated the Regulatory 

Flexibility Act (RFA). A commenter 

stated we should include an evaluation 

of the effect of the proposed rule on 

Medicare spending ‘‘in a whole sense,’’ 

not just the effect on HH services 

spending. 

Response: We have provided a 

complete and comprehensive analysis 

for the upcoming calendar year. As in 

past years, we will address options for 

regulatory relief for the succeeding 

calendar year in the year before the rate 

update becomes effective. There is no 

language in the RFA that requires an 

analysis of ‘‘out-year’’ expenditures. The 

state of the art is not adequate for 

forecasting effects on all Medicare 

spending. 

Comment: Commenters suggested that 

CMS remove the case-mix adjustment 

for medical supplies unless CMS can 

develop a method to accurately 

determine what percentage of the casemix change is ‘‘real’’ and what 

percentage is ‘‘nominal.’’ 

Response: We believe that coding 

practice changes have affected the casemix assignment for the nonroutine 

medical supplies (NRS) payment level. 

The OASIS items used in making the 

case-mix assignment are potentially 

vulnerable to the same types of forces 

that affect coding for the episode casemix group, that is, improvements in 

coding and more complete coding, more 

specific definitions, increased reporting 

of secondary diagnoses, and other 

causes of coding practice change. 

However, since the nominal case-mix 

change measure was designed to apply 

to the episode case-mix system, the 

nominal case-mix change measure may 

not directly apply to the NRS case-mix 

model. Therefore, we will defer the 

application of the payment reduction to 

the NRS conversion factor for CY 2011 

until a review of the nominal case-mix 

change measure can be performed. 

Comment: Commenters stated that it 

appears that the CMS case-mix weight 

change analysis never specifically 

evaluated any evidentiary basis for its 

determination that the hypertension 

diagnostic coding was a nominal change 

in case-mix. Instead, we assume that the 

increased coding of hypertension is 

upcoding. 

Response: We proposed to delete 

ICD–9–CM code 401.9, Unspecified 

Essential Hypertension, and ICD–9–CM 

code 401.1, Benign Essential 

Hypertension, from the HH PPS casemix model’s hypertension group, in 

order to correlate with the goals of our 

HH PPS case-mix system. 

We continue to be concerned that the 

increase in reporting of unspecified 

hypertension and benign hypertension 

signals that continued inclusion of these 

codes in our case-mix system threatens 

to move the HH PPS case-mix model 

away from a foundation of reliable and 

meaningful diagnosis codes. As we 

described in our proposed rule, the data 

indicate a jump of approximately 12 

percentage points in the reporting of 

unspecified hypertension when the 

refined HH PPS added hypertension as 

a case-mix code in 2008. The proposed 

rule also described that the data 

suggested no HH added resource 

requirements are associated with 

hypertension, unspecified, which is by 

far the most commonly reported 

hypertension code. 

In our proposed rule, we also 

described that the classification of blood 

pressure (BP) was revised in 2003 by the 

National Heart, Lung and Blood 

Institute (NHLBI) in their ‘‘Seventh 

Report of the Joint National Committee 

on Prevention, Detection, Evaluation, 

and Treatment of High Blood Pressure’’ 

(the JNC 7 report) and published in the 

May 21, 2003, Journal of the American 

Medical Association. These revisions 


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provided specific clinical guidelines for 

prevention, detection, and treatment of 

high blood pressure. A key aspect of the 

guidelines includes the introduction of 

a ‘‘pre-hypertension’’ level for 

individuals with a systolic blood 

pressure of 120–139 mm Hg or a 

diastolic blood pressure of 80–89 mm 

Hg. This recognition represented a 

change from traditional medical views 

on the implications of blood pressures 

slightly above 120/80. If an individual is 

designated as pre-hypertensive, the 

guidelines stipulate that this individual 

will generally require health promoting 

lifestyle modifications to prevent 

cardiovascular disease. We described 

our concerns surrounding the new 

guidelines for hypertension which we 

suspected might have led to an 

increased prevalence of codes 401.1 and 

401.9 in 2008 HH claims, along with 

some evidence that HH patients with 

either unspecified or benign 

hypertension no longer require extra 

resources. We described that these 

results appear possibly consistent with 

a phenomenon in which agencies 

increased their reporting of 

hypertension in situations that did not 

meet the HH diagnosis reporting 

criteria; the results are suggestive of 

changed coding practice in which lesssevere episodes are being reported with 

hypertension in 2008 than used to be 

the case. As such, we described that we 

believe including codes 401.1 and 409.9 

in the HH PPS case-mix model reduces 

the model’s accuracy, and that we do 

not believe we should be including 

these diagnoses in our case-mix system. 

We received many comments opposed 

to the removal of these codes. 

Comment: Commenters stated that 

currently CMS is penalizing HHAs 

twice for the nominal case-mix changes 

due to hypertension coding by 

proposing to remove the hypertension 

codes and by including the case-mix 

changes due to hypertension coding in 

the calculations for payment reductions. 

Response: We disagree with the 

commenters who believe that, by 

removing these codes while also 

reducing HH base episode payment 

rates due to coding change, we are in 

effect double-counting for growth in 

case-mix unrelated to real changes in 

patient health status twice. We 

proposed to remove these codes from 

the case-mix system beginning in CY 

2011. Our updated analysis, which 

measures changes in case-mix, both 

nominal and real, used data from the 

inception of HH PPS through 2008. As 

such, by removing these hypertension 

codes we would expect a slower growth 

of hypertension-related nominal casemix beginning in CY 2011. However, as 

explained in response to a different 

comment (below), we are not finalizing 

our proposal to remove hypertension 

codes 401.1 and 401.9. We assure 

commenters that if we were to remove 

these codes from our case-mix system 

we would do so in such as way that we 

would recalibrate our case-mix weights 

to ensure that the removal of the codes 

would result in the same projected 

aggregate expenditures. 

Comment: A commenter stated that 

the 2008 HH PPS methodology is based 

upon a determination that a 

hypertension diagnosis indicates a 

higher degree of resource need and 

utilization by patients with that 

diagnosis. Nothing in the CMS analysis 

indicates that anything other than this 

original finding is supportable. As such, 

concluding that an increase in patients 

with a hypertension diagnosis is 

anything other than a change in patient 

characteristics is illogical and in error. 

Response: If the underlying 

proportion of patients with 

hypertension has not changed, then the 

increase in the observed prevalence of 

hypertension is an indication of a 

change in coding practices, even if it 

reflects more accurate coding. As such, 

the increased prevalence is not real 

case-mix change, as it does not 

represent cost increases related to the 

health status of patients. 

Comment: Commenters stated that 

CMS opines that the 2003 changes in 

diagnostic coding guidance led to the 

increase in incidence of hypertension 

coding rather than changes in patient 

characteristics. However, the 2003 

changes were fully operational at the 

time in 2007 when CMS proposed and 

finalized the 2008 HH PPS version that 

includes hypertension as a factor in the 

patient classification system. 

Response: We believe that the 2003 

NHLBI guidance (‘‘Seventh Report of the 

Joint National Committee on Prevention, 

Detection, Evaluation, and Treatment of 

High Blood Pressure’’, Journal of the 

American Medical Association, May 21, 

2003) may have led to changes in coding 

hypertension, but that diffusion of the 

new information probably occurred over 

several years. The case-mix model of the 

Final Rule referenced by the commenter 

was based on 2005 data. 

Comment: One commenter stated that 

diagnosis codes 401.1 and 401.9 should 

be retained in the case-mix system, 

because very often clinically complex 

patients such as hypertensive heart 

disease patients will be diagnosed with 

the code 401.9 while waiting for proper 

documentation that is required by ICD– 

9–CM in order to report a more specific 

diagnosis code. Another commenter 

urged CMS to perform additional 

analysis to assess the severity of 

individuals with hypertension codes 

401.1 and 401.9 in order to determine 

whether these codes should be 

eliminated. The commenter suggested 

that CMS look at the resource use and 

the change in the number of visits for 

patients with codes 401.1 and 401.9 

from 2005 to 2008 and compare them to 

data on individuals with other 

hypertensive diagnosis codes, while 

controlling for differences in patient 

characteristics. 

Response: We find these comments 

compelling. HHAs are expected to 

adhere to ICD–9–CM coding guidance. 

The commenter states that ICD–9–CM 

coding guidance requires specific 

documentation be obtained prior to 

coding certain complex hypertensive 

diseases such as hypertensive heart 

disease, and such documentation may 

take time to obtain. The commenter 

states that agencies may have no choice 

other than to code such patients using 

code 401.9 pending receipt of such 

documentation. Therefore, for such 

patients, deletion of these codes may 

delay access to needed home care. We 

agree with the commenter who urged 

CMS to expand our resource use 

analysis for hypertension codes 401.1 

and 401.9 to control for patient 

characteristic differences, and also 

compare the resource usage of patients 

with these codes to the resource usage 

of patients with other hypertension 

diagnosis codes. We agree that this 

suggested comprehensive analysis will 

enable us to identify whether there are 

sub-categories of patients currently 

assigned codes 401.9 or 401.1 who are 

more resource intensive, such as the 

hypertensive heart disease patient, 

enabling us to revise our case-mix 

system to account only for those 

resource intensive patients. As such, we 

are deferring removal of the 

hypertension codes from our case-mix 

model pending completion of the 

suggested analysis. 

In the interim, we are committed to 

slowing the growth of nominal case-mix 

by addressing the inappropriate 

reporting of these codes. We plan to 

target providers for review who have 

substantive growth in the reporting of 

these codes, or higher than expected 

instances of reporting them. We also 

reiterate the need for providers to follow 

the OASIS Attachment D coding 

guidance, found at http://www.cms.gov/ 

HomeHealthQualityInits/ 

14_HHQIOASISUserManual.asp, where 

we explain that providers must only 

code a diagnosis if it is addressed in the 

HH plan of care and affects the patient’s 

responsiveness to treatment and 

rehabilitative prognosis. 


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Finally, we would like to clarify that 

page 12 of the 2003 statement by the 

National Heart, Lung and Blood 

Institute (NHLBI) ‘‘Seventh Report of the 

Joint National Committee on Prevention, 

Detection, Evaluation, and Treatment of 

High Blood Pressure’’ (the JNC 7 report), 

published in the May 21, 2003, Journal 

of the American Medical Association 

explicitly states that prehypertension is 

not a disease category, which indicates 

that the coding of 401.1 or 401.9 for prehypertensive patients would not be 

appropriate. This is consistent with preexisting ICD–9–CM guidance, which 

describes essential hypertension as SBP 

of 140 and above. 

Comment: A commenter stated that 

the proposed 3.79 percent adjustment 

for nominal case-mix change appears to 

be based primarily on the inclusion of 

hypertension as a patient diagnosis and 

modified provision of therapy services 

consistent with the HH PPS model 

revision in 2008. 

Response: As previously stated, the 

proposed adjustments for CY 2011 and 

CY 2012 took into account all of the 

nominal case-mix growth we measured 

between the IPS baseline and CY 2008, 

and netted out nominal case-mix growth 

that was already accounted for in 

previous rate reductions. As of last 

year’s rate update regulation, we 

anticipated a need to compensate for a 

total nominal growth of 13.56 percent. 

This year’s analysis showed that 

reductions previously planned to be 

implemented were not adequate to 

compensate for the full total of nominal 

growth (17.45 percent) that has occurred 

through 2008. Our method for deriving 

the real and nominal case-mix change 

percentages did not isolate any specific 

sources of nominal growth (such as 

hypertension coding) upon which to 

base the reduction. However, the 

proposed rule for CY 2011 described 

statistics showing a large 1-year increase 

in hypertension reporting between 2007 

and 2008, and it noted that the observed 

growth in the numbers of episodes with 

high numbers of therapy visits was 

unexpected. The proposed rule also 

discussed evidence beyond 

hypertension and therapy, such as 

increased reporting of secondary 

diagnoses in general. 

In summary, in this final rule, we are 

implementing the proposed 3.79 percent 

reduction to the national standardized 

episode rate for CY 2011. We will defer 

finalizing a payment reduction for CY 

2012 until further study of the case-mix 

change data and/or methodology is 

completed. In addition, in this rule, we 

are withdrawing the proposal to apply 

the case-mix change reduction to the 

NRS conversion factor. As part of our 

review of the nominal case-mix change 

methodology, we will study its 

applicability to the NRS model. The 

NRS conversion factor will be updated 

in CY 2011 by the market basket update 

of 1.1 percent and will also be adjusted 

for outlier payments in accordance with 

section 3131(b) of the Affordable Care 

Act. We are also withdrawing our 

proposal to eliminate ICD9–CM 

diagnosis codes 401.1, Benign Essential 

Hypertension, and 401.9, Unspecified 

Essential Hypertension, from the HH 

PPS case-mix model’s hypertension 

group, pending the results of a more 

comprehensive analysis of the resource 

use of patients with these conditions. 

B. Therapy Clarifications 

In the CY 2011 HH PPS proposed 

rule, we discussed analyses that 

suggested that therapy under the 

Medicare HH benefit, in many cases, 

was being over-utilized. Analysis of HH 

utilization under the original single 

10-visit therapy threshold suggests that 

the threshold offered a strong financial 

incentive to provide therapy visits when 

a lower amount of therapy was more 

clinically appropriate. Essentially, the 

data suggested that financial incentives 

to provide 10 therapy visits 

overpowered clinical considerations in 

therapy prescriptions. For the CY 2008 

final rule, we established a system of 

three thresholds (6, 14, and 20 therapy 

visits) with graduated steps in between 

to meet our objectives of retaining the 

prospective nature of the payment 

system, reducing the strong incentive 

resulting from the single 10 therapy 

threshold, restoring clinical 

considerations in therapy provision, and 

paying more accurately for therapy 

utilization below the 10-visit therapy 

threshold. 

In the proposed rule, we described 

that analysis of CY 2008 data continues 

to suggest that some HHAs may be 

providing unnecessary therapy. 

MedPAC states in its March 2010 report 

that 2008 data also reveal a 26 percent 

increase of episodes with 14 or more 

therapy visits (MedPAC, Report to 

Congress: Medicare Payment Policy, 

Section B, Chapter 3, March 2010, p. 

203). While this analysis suggested that 

therapy payment policies are vulnerable 

to fraud and abuse, the swift, across-theboard therapy utilization changes also 

suggest another more fundamental 

concern. MedPAC wrote in the March 

2010 report (MedPAC, 2010, p. 206) that 

payment incentives continue to 

influence treatment patterns, and that 

payment policy is such a significant 

factor in treatment patterns because the 

criteria for receipt of the HH benefit are 

ill-defined. MedPAC also reported that 

better guidelines would facilitate more 

appropriate use of the benefit. 

As such, in the CY 2011 HH PPS 

proposed rule, we proposed to clarify 

our policies regarding coverage of 

therapy services at § 409.44(c) in order 

to assist HHAs and to curb misuse of the 

benefit. Specifically, we proposed the 

following: 

• Require that measurable treatment 

goals be described in the plan of care 

and that the patient’s clinical record 

would demonstrate that the method 

used to assess a patient’s function 

would include objective measurement 

and successive comparison of 

measurements, thus enabling objective 

measurement of progress toward goals 

and/or therapy effectiveness. 

• Require that a qualified therapist 

(instead of an assistant) perform the 

needed therapy service, assess the 

patient, measure progress, and 

document progress toward goals at least 

once least every 30 days during a 

therapy patient’s course of treatment. 

For those patients needing 13 or 19 

therapy visits, we proposed to require 

that a qualified therapist (instead of an 

assistant) perform the therapy service 

required at the 13th or 19th visit, assess 

the patient, and measure and document 

effectiveness of the therapy. We would 

cease coverage of therapy services if 

progress towards plan of care goals 

cannot be measured, unless the 

documentation supports the expectation 

that progress can be expected in a 

reasonable and predictable timeframe. 

An exception to this would be when the 

criteria for needing maintenance 

therapy are met. 

• Clarify when the establishment and 

performance of a maintenance program 

is covered therapy. 

Comment: A number of commenters 

were in strong support of our efforts to 

rein in abuse and overuse of therapy 

through sound documentation, objective 

measurement, and appropriate 

involvement of qualified therapists. 

Commenters expressed support for 

proposed additional requirements of 

documentation of the patient’s clinical 

record, including therapy treatment 

goals to be described in the plan of care 

and objective measurement obtained 

during the functional assessment. One 

commenter stated that the elements of 

documentation added in our proposed 

regulations are reflective of professional 

standards for the practice of speechlanguage pathology. Another commenter 

expressed general support of our 

therapy coverage and documentation 

requirements, including those for 

patient assessment, physician 

collaboration, plan of care, goal 

establishment, evaluation of progress 


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toward goals through objective 

measures, and documentation, 

indicating they are all reflective of 

professional standards of practice for 

therapy services, such as those 

established by named major therapy 

associations. Another commenter 

expressed support for the proposed 

therapy coverage requirements 

regarding functional assessments, 

treatment plan revisions, and accurate 

documentation, indicating that these 

requirements align with professional 

standards of clinical practice. 

Response: We thank the commenters 

for their support. 

Comment: Numerous commenters 

expressed concern regarding the 

provision of the proposed rule requiring 

that a qualified therapist, instead of an 

assistant, perform the needed therapy 

service at the 13th and 19th therapy 

visits. These commenters stated that 

therapy visits by a qualified therapist 

beyond those already conducted on the 

1st, 30th, and 60th days would be 

prohibitively expensive to HHAs and an 

unnecessary intrusion for patients. A 

number of commenters suggested that 

requiring a qualified therapist, instead 

of an assistant, to perform the needed 

therapy service every 30 days should be 

sufficient, stating that requiring a 

qualified therapist to perform the 

therapy service on the 13th and 19th 

visits was excessive. A commenter 

suggested that because only 15 percent 

of episodes contained more than 13 

therapy visits and only 5 percent of 

episodes contained more than 19 

therapy visits, CMS should consider the 

increased costs of its proposed required 

therapy changes versus the actual need 

for the new requirement. Commenters 

quoted recent findings of a health care 

consulting company’s survey of HH 

providers regarding the proposed 

therapy clarifications, stating that most 

providers believe the proposed therapy 

changes would lead to scheduling 

difficulties for therapy visits and would 

cause difficulties in employing/ 

contracting qualified therapists. A few 

commenters asked CMS to delay the 

implementation date of this provision 

by one quarter to allow more transition 

time for providers. Several commenters 

suggested, as an alternative to the 

requirement that a qualified therapist 

perform the needed therapy service at 

the 13th and 19th visit, that adopting 

ranges would be more acceptable—for 

example, allowing the qualified 

therapist visit to occur between the 11th 

and 13th visits and again between the 

17th and 19th visits. Another 

commenter proposed that CMS should 

instead defer to State law requirements, 

asserting that most States require more 

frequent qualified therapist supervision 

of assistants than those in the proposed 

rule, and the proposal’s timeframes 

would be redundant to State laws. The 

commenter further stated that the 

proposed defined timeframes are in 

conflict with § 409.44(a) as they fail to 

reflect attention to the patient’s 

individual needs. Further, the 

commenter suggested that CMS abandon 

the 13th and 19th qualified therapist 

visit requirement and instead base the 

reassessment timeframe on individual 

care needs and changes in patient 

status. That same commenter added that 

assistants utilize their clinical reasoning 

skills every time they treat a patient and 

advise the supervising therapist 

regarding the patient’s need for 

continued skill intervention and grading 

of treatment and, therefore, the 

requirement for qualified therapist visits 

at defined timeframes is not reasonable. 

A commenter classified all our proposed 

therapy visit rules as arbitrary at best, as 

well as calling these latest rules 

regarding the 13th and 19th assessments 

capricious. One commenter stated that a 

requirement to re-evaluate patients at 

the 13th and 19th visits may not be 

effective in curbing agencies from 

inappropriately using the benefit in the 

long-run, suggesting that some agencies 

will soon learn how to work the revised 

system to their benefit. A commenter 

stated that, while overall therapy 

utilization has increased, it has led to 

better outcomes for Medicare 

beneficiaries and overall spending per 

Medicare patient has remained well 

below Congressional Budget Office 

(CBO) projections. Referring to the 

aforementioned survey results, the 

commenter described the surveyed 

HHAs’ concern that the proposed 

clarifications would result in limited 

improvements in patient care. Several 

commenters believed that the proposed 

changes would have an adverse effect 

on access to care and timeliness of 

services provided and that these 

requirements would result in less direct 

patient care time. Many commenters 

stated that the documentation 

requirements were burdensome and 

costly. Several commenters feared that 

these requirements would impede 

access to care in rural areas where there 

are shortages of qualified therapists. 

Response: We thank the commenters 

for their suggestions. We continue to 

believe that to ensure Medicare HH 

patients receive effective, high-quality 

therapy services, the frequency that a 

qualified therapist must assess the 

effectiveness of services performed by 

assistants must be more clearly defined 

in Medicare home health coverage 

regulations. Longstanding Medicare 

Conditions of Participation (CoPs) 

regulations at § 484.32(a) require that 

HH therapy services be administered by 

a qualified therapist or a qualified 

assistant under the therapist’s 

supervision, thus requiring a qualified 

therapist to supervise therapy services 

to ensure their effectiveness. We believe 

that in order to adhere to these 

regulations, a qualified therapist must 

periodically perform the patient’s 

needed therapy service during the 

course of treatment to ensure that the 

therapy being provided by assistants is 

effective and/or that the patient is 

progressing toward treatment goals. 

These visits ensure that the qualified 

therapist has first-hand knowledge of 

the patient in order to identify needed 

changes to the care plan. Additionally, 

these visits enable a qualified therapist 

to determine if treatment goals have 

been achieved or if therapy has ceased 

to be effective. We note that some States 

preclude assistants by scope of practice 

from making determinations such as 

whether goals are met. As such, we 

believe that by requiring a qualified 

therapist, instead of an assistant, to 

perform the needed therapy service, 

assess the patient, and measure and 

document progress toward goals and/or 

effectiveness of therapy at defined 

points in the course of treatment, we 

would lessen the risk that patients 

continue to receive therapy after the 

treatment goals have been reached and/ 

or after therapy is no longer effective. 

In response to the commenter who 

stated that while overall therapy 

utilization has increased, such increased 

utilization has led to better outcomes for 

Medicare beneficiaries, we disagree 

with the conclusion. In their March 

2010 report, MedPAC described that 

functional measure scores for HH 

patients continue to improve, but also 

expressed concerns that the measures 

may not appropriately depict the quality 

of therapy provided by HHAs. MedPAC 

reports that there are no measures, 

which reflect functional improvement 

for only those patients that receive 

therapy services. Instead, the measures 

reflect functional improvement for all 

patients. Therefore, we believe that the 

data do not support the commenter’s 

conclusion that higher volumes of 

therapy have led to better outcomes. 

The same commenter, pointing to 

results of the survey described above, 

stated that the HHAs believe these 

proposed therapy coverage clarifications 

would result in limited improvements 

in patient care. Again, we disagree with 

these opinions. We refer the commenter 

to research studies conducted by Linda 


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Resnick (of Brown University) et al., 

entitled ‘‘Predictors of Physical Therapy 

Clinic Performance in the Treatment of 

Patients with Low Back Pain 

Syndromes’’ (2008, funded by a grant 

from the National Institute of Child 

Health) and ‘‘State Regulation and the 

Delivery of Physical Therapy Services’’ 

(2006, funded in part through a grant 

from the Agency for Healthcare 

Research and Quality). Both studies 

concluded that more therapy time spent 

with a qualified physical therapist, and 

less time with a physical therapist 

assistant, is more efficient and leads to 

better patient outcomes. In these 

studies, the lower percentage of time 

seen by a qualified therapist and the 

greater percentage of time seen by an 

assistant or aide, the more likely a 

patient would have more visits per 

treatment per episode. The studies also 

concluded that, although delegation of 

care to therapy support personnel such 

as assistants may extend the 

productivity of the qualified physical 

therapist, it appears to result in less 

efficient and effective services. We 

believe that by requiring regular visits 

by a qualified therapist during a course 

of treatment we will achieve more 

appropriate and efficient provision of 

therapy services while also achieving 

better therapy outcomes. Regarding the 

comment that HH expenditures are 

below CBO projections, we are unclear 

on the commenter’s suggestion. We 

believe that the commenter may have 

been suggesting that the growth in HH 

expenditures does not warrant our 

attempts to facilitate more appropriate 

and effective therapy utilization. If so, 

we disagree with the commenter. We 

continue to believe that these improved 

guidelines, as suggested by MedPAC, 

are an important step in addressing 

program vulnerabilities while also 

improving the quality of services 

provided. We also disagree with the 

commenters who believe that a qualified 

therapist visit every 30 days is 

sufficient, and that the required 13th 

and 19th visits are excessive and 

redundant to many state practice 

supervision requirements, and that the 

13th and 19th visit requirement 

timeframes fail to reflect the patient’s 

individual needs. As we have noted in 

this and previous rules, at the inception 

of the HH PPS we analyzed the amount 

of therapy a HH rehabilitation patient 

would typically require during a course 

of treatment. We used clinical judgment 

to determine that the typical 

rehabilitation patient in a HH setting 

would require about 8 hours of therapy, 

or 10 therapy visits during a course of 

treatment. We believe that when the 

unique condition of an individual 

patient requires more therapy than a 

typical Medicare HH rehabilitation 

patient, such a patient should be more 

closely monitored by a qualified 

therapist to ensure that high-quality, 

effective services are being provided 

and/or acceptable progress toward goals 

is being achieved. We also continue to 

believe that to ensure that this 

monitoring occurs for all high-therapy 

needs Medicare patients, we cannot 

depend on individual state supervision 

requirements. Instead, Medicare 

coverage clarifications will ensure that 

all Medicare HH patients benefit from 

this oversight. We also disagree with 

commenters that these policies will lead 

to an intrusion for patients. To the 

contrary, research suggests that more 

qualified therapist involvement would 

further enhance patient care for those 

patients needing these levels of therapy. 

We also note that these policies will not 

result in additional visits or therapy 

services provided to the patient. The 

visit by a qualified therapist would not 

be in addition to the visit that would 

otherwise occur, as described in the 

patient’s treatment plan. Instead, the 

qualified therapist, perhaps instead of 

an assistant, would perform the therapy 

service at defined points in the course 

of treatment. In response to the 

commenter who questioned whether a 

comprehensive assessment of the 

patient would need to occur during 

these qualified therapist visits, we refer 

the commenter to the regulation text 

changes at § 409.44(c)(1)(iv) which 

describes that the qualified therapist 

must assess a patient’s function using 

objective measurement of function. In 

other words, the assessment of function 

would not be a comprehensive 

assessment of the patient’s clinical 

condition. 

In response to the commenters who 

expressed cost and access to care 

concerns associated with these policies 

we note that current CoPs at § 484.12 

already require that the HHA and its 

staff comply with accepted professional 

standards and principles that apply to 

professionals furnishing services by a 

HHA. Those accepted professional 

standards include complete and 

effective documentation, such as that 

which we described in our proposal. 

(Section 484.55 of the CoPs already 

requires that HHAs provide a 

comprehensive assessment that 

‘‘accurately reflects the patient’s current 

health status and includes information 

that may be used to demonstrate 

progress toward achievement of desired 

outcomes.’’) In addition, § 484.2 requires 

that a clinical note be a notation of 

contact with a patient that is written 

and dated by a member of the health 

team, and that describes signs and 

symptoms, treatment and drugs 

administered and the patient’s reaction, 

and any changes in physical or 

emotional condition, which becomes 

part of the medical record. Further, 

§ 484.48, our longstanding regulation for 

CoPs and clinical records, requires that 

a clinical record containing pertinent 

past and current findings in accordance 

with accepted professional standards be 

maintained for every patient receiving 

HH services. In addition to the plan of 

care, the record must include treatment 

plans and activity orders, signed, and 

dated clinical and progress notes, and 

copies of summary reports sent to the 

attending physician. Because these 

proposed clarifications to our therapy 

coverage requirements are consistent 

with long-standing CoP requirements 

and accepted professional standards of 

clinical practice, we would expect that 

many providers have already adopted 

these practices. 

Also, because CoPs at § 484.32 allow 

therapy services offered by the HHA to 

be provided by a qualified therapist or 

a qualified assistant under the 

supervision of qualified therapist and in 

accordance with the plan of care, it is 

our expectation that HHAs are already 

utilizing qualified therapists regularly to 

perform the needed therapy services in 

order to perform the required 

supervision of assistants. 

We agree with the commenter that 

most HH therapy patients do not receive 

13 and/or 19 visits in their course of 

treatment. In response to the comments 

which stated the relatively small 

numbers do not warrant the 13 and 19 

qualified therapist visit and 

documentation requirements, suggesting 

instead that we target providers with 

suspect therapy practices for review, we 

reiterate that we believe these 

requirements benefit all patients. We 

believe that these requirements may also 

deter inappropriate provision of high 

levels of therapy, and therefore lessen 

the risk of the associated inappropriate 

higher HH PPS payments. In summary, 

by requiring qualified therapist visits 

when the amount of therapy reaches 

those high levels, which also 

correspond to high payment levels, we 

believe we can simultaneously achieve 

better patient outcomes, more efficient 

provision of therapy, and more accurate 

reimbursement. 

We find compelling the commenters’ 

concerns regarding scheduling 

difficulties. We believe the commenters’ 

concerns regarding scheduling warrant 

more flexibility in the timing of the 13th 

and 19th visit requirements. Therefore, 


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we have decided to allow for some 

flexibility associated with the 13th and 

19th therapy visit rule for patients. 

Specifically, for beneficiaries in rural 

areas, the qualified therapist may 

perform the needed therapy service, 

reassessment and measurement at any 

time after the 10th therapy visit but no 

later than the 13th therapy visit, and 

after the 16th therapy visit but no later 

than the 19th therapy visit. And, if 

extenuating circumstances outside the 

control of the therapist preclude the 

therapy service visit, reassessment and 

measurement at the 13th and 19th 

timeframes, the qualified therapist may 

perform the therapy service visit, 

reassessment and measurement at any 

time after the 10th therapy visit but no 

later than the 13th therapy visit, and 

after the 16th therapy visit but no later 

than the 19th therapy visit. 

Regarding the access to care concerns, 

we believe that these requirements will 

ultimately result in more access to 

effective therapy services. MedPAC 

reports broad access to HH care for 

Medicare beneficiaries. As such, we do 

not expect that these coverage 

clarifications will result in access to 

care issues, but we will monitor for 

unanticipated effects. 

We note, however, because of the 

volume of comments we received on 

this issue, we believe that many 

agencies have not been in compliance 

with the documentation practices and 

qualified therapist oversight we would 

expect. Therefore, we have decided to 

delay the effective date of these 

requirements until April 1, 2011, to 

allow agencies that do not currently 

have such practices in place additional 

time to transition. 

Comment: A number of commenters 

expressed support for our efforts to 

require reassessments, but had 

questions as to how assessment visit 

requirements at the 13th and 19th visit 

would work when multiple therapy 

disciplines are providing care. 

Specifically, commenters stated that 

because HH therapy can consist of any 

combination of three therapy 

disciplines, it would be difficult for 

therapists to track the 13th and 19th 

visits if more than one therapy 

discipline was serving the patient. 

Commenters asked how it would be 

determined which therapist would do 

the 13th and 19th assessments. 

Additionally, commenters were 

concerned that CMS might be expecting 

a therapist of one discipline to do the 

assessment for the therapist of another 

discipline. Commenters stated that it 

would be unrealistic and cumbersome 

to track the 13th and 19th visits, 

especially when there are multiple 

therapy disciplines involved. In a 

related comment, a commenter 

recommended further clarification of 

the proposed regulations by requesting 

that CMS further specify that 

professional standards should be those 

pertaining to the individual professions. 

The commenter also stated that, because 

existing Medicare regulations require 

compliance with Federal, State, and 

local laws, requiring the proposed 

qualified therapist visits at defined 

points in the course of treatment could 

contradict State licensure and scope of 

practice laws. 

Response: We concur with the 

commenters that we need to clarify our 

expectation when more than one 

therapy discipline is providing services 

to the patient. We will clarify the 

regulation text to state that the policy 

applies to each discipline separately. 

The patient’s function must be initially 

assessed and periodically reassessed by 

a qualified therapist of the 

corresponding discipline for the type of 

therapy being provided (that is, PT, OT, 

and/or SLP). When more than one 

therapy discipline is being provided, the 

corresponding qualified therapist would 

perform the reassessment during the 

regularly scheduled visit associated 

with that discipline which was 

scheduled to occur as near as possible 

to the 13th and 19th visit, but no later 

than the 13th and 19th visit. 

We also note that a small percentage 

of patients which receive 13 and 19 

therapy visits receive more than 1 

therapy discipline. In addition, HHAs 

must coordinate their patients’ care per 

longstanding conditions of participation 

at § 484.14(g). As such, we would expect 

such coordination to already be 

occurring. Given the low volume of 

such patients and the added flexibility 

as described above, we do not believe 

that the coordination associated with 

multi-therapy discipline patients will be 

overly burdensome. However, we will 

monitor the effects of this provision to 

identify unintended consequences. 

Comment: Several commenters 

suggested that instead of putting 

additional requirements on all HHAs in 

response to a smaller number of HHAs 

who are abusing the system, CMS 

should target those agencies that are 

providing unnecessary therapy. A few 

commenters urged CMS to consider how 

the therapy provisions of this rule 

would affect HHAs, especially in rural 

areas, where there is a shortage of 

therapists. A commenter also stated that 

the notion that HH expenditures were 

high due to unnecessary therapy visits 

is inaccurate and provided statistics that 

he believes prove therapy 

overutilization is not a problem. 

Response: As we have described in 

previous comment responses, we 

believe that these proposed 

requirements will strengthen the 

integrity of the benefit while also 

resulting in better patient outcomes. We 

believe all HHAs, not just suspect 

agencies, should adhere to these best 

practices in order to provide highquality and effective therapy services, 

consistent with existing CoPs. 

Comment: A few commenters 

expressed concern regarding therapy 

services possibly not being covered after 

a hospitalization, as a result of these 

assessment visit requirements. 

Specifically, the commenters were 

concerned that we were imposing new 

limits on maintenance therapy. 

Commenters expressed fear that the 

result of not covering such therapy 

services might be that many high fall 

risk patients would be sent home 

without therapy care, which would lead 

to increased falls/hospitalizations/ 

fractures that would increase Medicare 

spending in the end. Another 

commenter stated that physical therapy 

and occupational therapy were utilized 

more for safety evaluations and fall 

prevention measures, especially for 

patients on medication, which places 

them at a higher risk for falls. This 

commenter added that fall prevention 

best practice interventions provided in 

patients’ homes save Medicare money. 

Similarly, a commenter asked CMS to 

clarify therapy coverage for pain. 

Response: We agree with the 

commenter that fall prevention practices 

and/or pain management are essential 

for many HH patients in order to 

provide the patient with quality care. 

We remind the commenter that a 

longstanding coverage requirement for 

HH therapy services under Medicare is 

that the services which the patient 

needs must require the performance by 

or supervision of a qualified therapist. 

Whether or not fall prevention services 

and pain management services are 

covered therapy depends on the unique 

clinical condition of the patient and the 

complexity of the needed therapy 

services. Many fall prevention services 

would not require the skills of a 

therapist. Longstanding regulations 

allow therapy coverage when, for safety 

and effectiveness reasons, the unique 

medical complexities of the patient 

require a qualified therapist’s skills in 

the establishment or performance of a 

therapy maintenance program. As such, 

should the unique clinical condition of 

a patient require that the specialized 

skills, knowledge, and judgment of a 

qualified therapist are needed to design 

and establish a safe and effective 

maintenance program in connection 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 70393 

with a specific illness or injury, then 

such services would be covered as 

therapy services. 

Comment: Commenters were opposed 

to the requirement that a skilled nursing 

service must be needed in order to have 

maintenance therapy covered, and that 

a maintenance program cannot be 

established after restorative therapy has 

ended. 

Response: The intent of language in 

the proposed rule was to clarify that, in 

order for the establishment of a 

maintenance therapy program to be 

considered covered therapy, the 

specialized skills, knowledge, and 

judgment of a therapist would be 

required in developing a maintenance 

program. Services would be covered to 

design or establish the plan, to ensure 

patient safety, to train the patient, 

family members and/or unskilled 

personnel in carrying out the 

maintenance plan, and to make periodic 

reevaluations of the plan. In the 

proposed rule, we further noted 

scenarios in which maintenance therapy 

may be provided in the home setting. 

The language in the proposed rule 

was not meant to indicate that 

maintenance therapy could not be 

provided as the sole skilled service and 

would be covered only if ancillary to 

another skilled qualifying service. The 

proposed clarifications were not 

intended to expand or limit existing 

coverage criteria. We regret the 

confusion these scenarios may have 

caused. We note that therapy coverage 

criteria have always been based on the 

inherent complexity of the service 

which the patient needs. As such, 

maintenance therapy has and will 

continue to be covered in the HH setting 

when the unique clinical condition of 

the patient requires the complex 

services which can only be provided 

effectively and safely by a qualified 

therapist. We will revise the proposed 

regulation text to address the 

commenters’ confusion. 

Comment: A number of commenters 

expressed concern regarding proposed 

regulation text changes that state 

therapy visits would not be covered for 

transient or easily reversible loss or 

reduction in function. Some 

commenters who opposed the proposed 

regulation text changes stated that these 

changes would disallow coverage of 

maintenance therapy, citing 

longstanding Medicare HH coverage 

policies previously set out in the 

‘‘Health Insurance For the Aged, Home 

Health Agency Manual,’’ Pub. 11 (HIM– 

11) that allowed for the coverage of such 

maintenance therapy. One commenter 

recommended striking the language, 

‘‘transient and reversible loss.’’ A 

commenter also stated that these 

proposed regulation changes are in 

direct conflict with section 1814(a)(2)(C) 

of the Act. Commenters questioned 

what criteria define a transient and 

reversible reduction in function, or 

when a patient’s condition could be 

expected to improve spontaneously. 

One commenter stated that it is difficult 

to determine when conditions are or are 

not transient and reversible, noting that 

some patients who present a very 

serious condition on admission may 

recover quickly, while others with 

seemingly less-serious conditions can 

end up being far more complex as 

treatments progress. Another 

commenter stated we must take into 

account the patient’s unique condition. 

Response: We disagree with the 

commenter that the proposed regulation 

text changes conflict with section 

1814(a)(2)(C) of the Act. We believe that 

the commenter is inferring that by not 

allowing therapy coverage for an easily 

reversible reduction in function, we 

would be denying coverage to a patient 

who needs therapy, an eligibility 

criterion listed in section 1814(a)(2)(C) 

of the Act. We disagree with such 

interpretation. Consistent with statute, 

longstanding regulation, and 

longstanding manual guidance, therapy 

coverage under the HH benefit is based 

on a patient’s need for skilled services. 

The therapy services must be of such a 

level of complexity and sophistication 

or the condition of the beneficiary must 

be such that the services required can 

safely and effectively be performed only 

by a qualified therapist or a qualified 

therapy assistant under the supervision 

of a qualified therapist. Services which 

do not require the performance or 

supervision of a qualified therapist are 

not reasonable and necessary services, 

even if they are performed by a qualified 

therapist. 

When a patient suffers a transient and 

easily reversible loss or reduction of 

function which could reasonably be 

expected to improve spontaneously as 

the patient gradually resumes normal 

activities, the services do not require the 

performance or supervision of a 

qualified therapist, and those services 

are not considered reasonable and 

necessary covered therapy services. We 

acknowledge that making a 

determination that a patient suffers a 

transient and easily reversible loss or 

reduction of function which could 

reasonably be expected to improve 

spontaneously as the patient gradually 

resumes normal activities requires 

clinical judgment and a consideration of 

the patient’s unique condition. We 

believe that rehabilitation professionals, 

by virtue of their education and 

experience, are typically able to 

determine when a functional 

impairment could reasonably be 

expected to improve spontaneously as 

the patient gradually resumes normal 

activities. Likewise, we expect 

rehabilitation professionals to be able to 

recognize when their skills are 

appropriate to promote recovery. A 

prescriptive definition of these sorts of 

conditions, such as a listing of specific 

disease states that provide subtext for 

these descriptions is impractical, as 

each patient’s recovery from illness is 

based on unique characteristics. In 

response to the commenter who believes 

that the therapy clarifications would 

disallow coverage of maintenance 

therapy, we assure the commenter that 

these clarifications do not impose new 

limits on the criteria for maintenance 

therapy coverage. We again note that 

therapy coverage criteria have always 

been based on the inherent complexity 

of the service which the patient needs. 

As such, maintenance therapy has and 

will continue to be covered in the HH 

setting when the unique clinical 

condition of the patient requires the 

complex services, which can only be 

provided effectively and safely by a 

qualified therapist. In addition, we note 

that these clarifications are consistent 

with longstanding manual guidance. 

Comment: A commenter urged CMS 

to address therapy coverage for 

conditions that may not directly impact 

functional status, such as the role of 

therapists in wound care. 

Response: We reiterate that if the 

services do not require the performance 

or supervision of a qualified therapist, 

those services are not considered to be 

reasonable and necessary covered 

therapy services. As such, if a therapist 

(who is qualified to do so per her or his 

State Practice Act) would perform 

services such as wound-care, those 

services would be covered therapy only 

if they required the skills of the 

qualified therapist or qualified assistant 

under the supervision of a qualified 

therapist. Should a qualified therapist 

(who is qualified to do so per her or his 

State Practice Act) perform wound care 

that does not require the specialized 

skills of a therapist and could be 

routinely performed by agency nursing 

staff, these services would not be 

covered therapy services. 

Comment: A commenter expressed 

concern over the proposed therapy 

coverage clarifications, stating that the 

proposed regulatory text changes are 

major changes to current policy and that 

they are in conflict with Medicare 

statute and current law. The commenter 

stated that Medicare coverage will be 

more difficult to obtain for beneficiaries 


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with chronic and debilitating conditions 

if the proposals are finalized. The 

commenter urged CMS to withdraw the 

maintenance therapy regulation text 

changes, stating that maintenance 

therapy is a covered benefit in home 

health and that Medicare statute does 

not require improvement for services to 

qualify for coverage. The commenter 

stated that the restoration potential of a 

patient is not the deciding factor in 

determining whether skilled services are 

needed, further stating that even if full 

recovery or medical improvement is not 

possible, a patient may need skilled 

services to prevent further deterioration 

or preserve current capabilities. The 

commenter stated that a prescribed 

therapy service which requires the skills 

of a therapist to help maintain function 

or prevent slow deterioration is 

medically necessary and should be 

covered under the statute. The 

commenter stated that current 

regulations recognize this, but the 

proposed changes minimize this point, 

and the commenter urged CMS to not 

restrict benefits in order to fight fraud. 

The commenter expressed concern 

with the proposal’s use of the words 

‘‘improvement’’ and ‘‘progress,’’ fearing 

an increased emphasis on these terms in 

the rules for therapy coverage will limit 

access to care for patients who require 

maintenance therapy. Further, the 

commenter alleged that the proposed 

rule would require improvement for 

therapy to be covered. The commenter 

suggested the word ‘‘effective’’ is more 

appropriate than ‘‘improvement’’ or 

‘‘progress.’’ 

The commenter believed that the 

proposed regulation text will require the 

therapist to use complex and 

sophisticated therapy techniques in 

order for maintenance therapy to be 

covered and will thus be a new coverage 

limitation preventing needed access to 

therapy, and that the proposed 

regulation text which states that 

maintenance therapy must be required 

in connection with a specific disease 

would also newly limit maintenance 

therapy coverage. Further, the 

commenter alleged that the revised 

regulation text does not consider the 

unique condition of the patient as it 

must and as does the current regulation 

text. The commenter stated that the 

proposal newly categorizes maintenance 

therapy as not rehabilitative, while the 

current regulations include both 

restorative and maintenance therapy as 

rehabilitative. The commenter stated 

that, should CMS require improvement 

as a therapy coverage criterion, CMS 

would be applying an arbitrary ‘‘rule of 

thumb’’ which does not consider the 

patient’s individual condition, and such 

a requirement for improvement conflicts 

with the current regulation at § 409.42. 

Further, the commenter stated that the 

proposed regulation text changes will 

result in denials of Medicare coverage 

for beneficiaries with long-term, 

progressive, or incurable conditions. 

The commenter also took issue with the 

proposed regulation text change to 

require the documentation of progress 

toward goals. 

The commenter further stated that the 

definition of maintenance therapy is too 

vague and restrictive. The commenter 

also took issue with the proposed 

regulation text, which requires that, in 

order for maintenance therapy to be 

covered, the skills of a therapist must be 

needed to ensure the patient’s safety 

‘‘and’’ the skills of a therapist are needed 

to provide a safe and effective 

maintenance program. The commenter 

believed that we should replace the 

‘‘and’’ with an ‘‘or’’. The commenter also 

stated that the regulation does not 

define ‘‘reasonable and necessary’’ in a 

way that clearly provides for coverage of 

maintenance therapy. As was also 

mentioned by other commenters, this 

commenter was concerned that the 

proposed regulation text describes 

coverage of the development of a 

maintenance program during the last 

visit(s) for rehabilitative therapy, stating 

that, often, standard practice is to 

establish and instruct the patient in an 

appropriate maintenance program at the 

outset of a course of therapy. The 

commenter also spoke to the proposed 

regulation text change, which appears to 

indicate that we would not cover the 

establishment of a maintenance program 

after a restorative therapy program has 

ended, or if a beneficiary had never met 

the criteria for restorative therapy. The 

commenter stated that the proposed 

regulation text would result in 

maintenance therapy becoming a 

dependent service. 

Response: The proposed regulatory 

text clarifications are intended to 

neither limit nor expand the coverage of 

therapy in the HH setting, but instead 

are intended to provide clear therapy 

guidelines, as suggested by MedPAC, to 

deter inappropriate provisions of 

therapy services. As we have described 

in earlier responses to comments, we 

also believe that these guidelines will 

improve patient outcomes, improve 

therapy effectiveness, and promote more 

consistent compliance with the 

Medicare CoPs. However, as we 

described in an earlier comment 

response, we agree with the commenter 

that the proposed regulation text 

changes may have been unclear in the 

descriptive scenarios surrounding 

coverage of the development of a 

maintenance program, and we will 

revise the final regulation text changes 

at § 409.44(c)(2)(iii)(B) to remove the 

scenarios described in the proposed 

rule’s § 409.44(c)(2)(iii)(B)(1) through 

(B)(3). 

We also agree with the commenter 

that there are some additional changes 

to the proposed regulation text that we 

should finalize for better clarity. We 

believe that these changes may alleviate 

some of the commenter’s concerns that 

the proposed rule limits coverage 

associated with maintenance therapy, 

and reassure the commenter that the 

coverage criteria clarifications are 

consistent with statute, current 

regulations, and longstanding manual 

guidance. Specifically, in response to 

the commenter’s concern that we would 

have newly categorized maintenance 

therapy as non-rehabilitation, we will 

delete the proposed regulation text at 

§ 409.44(c)(2)(iii)(A)(2) and (A)(3) for 

the final rule. We believe our attempts 

to clarify these definitions are not 

needed, as those definitions are well 

defined in § 409.44(c)(2)(iii)(A) through 

(iii)(C). We will also finalize some 

technical changes to the proposed 

regulation text, including replacing 

several of the proposed regulatory text 

references to improvements in function 

with references to the effectiveness of 

the care plan goals, as suggested by the 

commenter. 

We agree with the commenter that 

that current regulations and 

longstanding manual guidance are 

consistent in that therapy services are 

covered in the HH setting based on the 

inherent complexity of the service 

which the patient needs. As such, 

maintenance therapy has and will 

continue to be covered in the HH setting 

when the unique clinical condition of 

the patient requires the complex 

services, which can only be provided 

effectively and safely by a qualified 

therapist. 

Regarding the commenter’s concern 

that the proposed rule stated that skilled 

therapy is not reasonable and necessary 

unless improvement is documented, we 

disagree with the commenter’s 

interpretation of the proposed rule. 

However, we agree that we could have 

been more clear in the regulation text 

which describes the documentation 

requirements at § 409.44(c)(2)(i). In the 

final rule, we will clearly state that 

maintenance therapy as defined in 

§ 409.44(c)(2)(iii)(B) and 

§ 409.44(c)(2)(iii)(C) would not be 

subject to the criteria listed in 

§ 409.44(c)(2)(i)(B)(4). 

Concerning the comment that the 

proposed regulation text, which requires 

the therapist to use complex and 


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sophisticated therapy techniques in 

order for maintenance therapy to be 

covered, imposes a new coverage 

limitation associated with maintenance 

therapy and will prevent needed access 

to therapy, we refer the commenter to 

longstanding manual guidance at 40.2.2 

E. in chapter 7 of the Medicare Benefit 

Policy Manual, CMS Pub. 100–2. This 

section contains longstanding guidance 

which uses the term ‘‘complex and 

sophisticated procedures’’ when 

describing reasonable and necessary 

maintenance therapy. This same chapter 

instructs a reviewer to consider the 

inherent complexity of the service when 

determining if the skills of a therapist 

are required. The complexity and 

sophistication of the service are 

longstanding criteria used to assess 

whether the skills of a therapist are 

required. As such, we disagree with the 

commenter that this is a new limiting 

criterion. We also disagree that the 

proposed regulation text changes do not 

adequately consider the unique 

condition of the patient when clarifying 

coverage requirements. In fact, we 

believe the proposed regulation text 

changes at § 409.44(c)(2)(iii) refer more 

comprehensively than the current 

regulation text to the patient’s unique 

clinical condition as a criterion for 

determining whether the complex 

services which must be provided by a 

therapist are needed. Regarding the 

commenter’s concern that the proposed 

regulation text changes newly require 

that maintenance therapy must be 

needed in connection with a specific 

disease, we also disagree. Current 

regulations at § 409.44(c)(2)(iii) describe 

that establishing a maintenance program 

would be covered if the skills of a 

therapist are needed to provide a safe 

and effective maintenance program in 

connection with a specific disease. 

However, we agree that the words ‘‘in 

connection with the patient’s illness or 

injury’’ instead of ‘‘in connection with a 

specific disease’’ would be an 

improvement to the regulation text and 

we are making this change in this final 

rule. We disagree with the commenter 

that current policy allows maintenance 

therapy to be covered when the skills of 

a therapist are needed to ensure the 

patient’s safety OR the skills of a 

therapist are needed in order to provide 

a safe and effective maintenance 

program. We have required in regulation 

and longstanding manual guidance that 

the skills of a therapist would be 

required to ensure both patient safety 

and effectiveness of a maintenance 

program for the performance of 

maintenance therapy to be covered. 

We refer the commenter to current 

regulations at § 409.44(c)(2)(iii) and 

longstanding manual guidance at 40.2.2 

E. in chapter 7 of the Medicare Benefit 

Policy Manual, CMS Pub. 100–2. 

Regarding the commenter’s concern that 

current § 409.32(c) mandates the 

restoration potential of a patient is not 

the deciding factor in determining 

whether skilled services are needed, and 

even if full recovery or medical 

improvement is not possible, a patient 

may need skilled services to prevent 

further deterioration or preserve current 

capabilities, we reply that we believe 

the commenter may be 

misunderstanding the current regulation 

text at § 409.32(c) or interpreting this 

out of its proper context. We believe it 

is important to again note that the 

emphasis for our therapy coverage 

criteria is not on the issue of restoration 

potential per se, but rather on the 

beneficiary’s need for complex services 

which require the skills of a qualified 

therapist. Current regulations at 

§ 409.32(c) specify that it is the 

beneficiary’s need for skilled services 

rather than his or her restoration 

potential that is the deciding factor in 

evaluating the need for skilled nursing 

services in the HH setting. A 

beneficiary’s restoration potential has 

never been a factor at all in identifying 

those services that constitute skilled 

nursing care. Thus, nursing care can be 

considered skilled without regard to 

whether it serves to improve a 

beneficiary’s condition or to maintain 

the beneficiary’s current level of 

functioning. In fact, as the original 

version of this regulation’s text [as 

initially codified at 20 CFR 

§ 405.127(b)(2) (40 FR 43897, September 

24, 1975)] makes clear, this provision’s 

example of a terminal cancer patient 

was intended to refer specifically to 

nursing services that can be considered 

skilled ‘‘even though no potential for 

rehabilitation exists’’ (emphasis added). 

Longstanding current regulatory 

language at § 409.44(c) sets out the 

criteria for skilled therapy (as opposed 

to the skilled nursing criteria described 

above) to be a covered service under 

Medicare’s HH benefit. Current 

regulations specify that HH therapy 

services are covered based on the 

inherent complexity of the service 

which the patient needs, and whether 

the needed services require the skills of 

a qualified therapist. Further, current 

regulations state that HH therapy 

services are covered if there is an 

expectation that the patient’s condition 

will improve in a reasonable and 

predictable timeframe based on the 

physician’s assessment of the 

beneficiary’s restoration potential and 

unique medical condition of the patient. 

Current regulations also allow for 

therapy coverage when, for safety and 

effectiveness, the unique medical 

complexities of the patient require a 

qualified therapist’s skills in the 

establishment or performance of a 

therapy maintenance program. 

Regarding the commenter’s concerns 

that, should we require improvement as 

a therapy coverage criteria, we would be 

applying an arbitrary ‘‘rule of thumb’’ 

which does not consider the patient’s 

individual condition, and as such, the 

requirement conflicts with the current 

regulation at § 409.44, we again assure 

the commenter that we are not 

expanding or limiting the coverage of 

HH therapy. To address the 

commenter’s concerns regarding the 

potential for claims denials based on 

‘‘rules of thumb,’’ we assure the 

commenter that such denials are 

prohibited. 

‘‘Rules of thumb’’ in the Medicare 

medical review process are prohibited. 

Intermediaries must not make denial 

decisions solely on the reviewer’s 

general inferences about beneficiaries 

with similar diagnoses or on general 

data related to utilization. Any ‘‘rules of 

thumb’’ that would declare a claim not 

covered solely on the basis of elements, 

such as, lack of restoration potential, 

ability to walk a certain number of feet, 

or degree of stability, is unacceptable 

without individual review of all 

pertinent facts to determine if coverage 

may be justified. Medical denial 

decisions must be based on a detailed 

and thorough analysis of the 

beneficiary’s total condition and 

individual need for care. 

Similar instructions have appeared as 

far back as 1992 in the previous, paperbased manuals (available online at 

http://www.cms.gov/Manuals/PBM/ 

list.asp), in section 3900.A of the 

Medicare Intermediary Manual, Part 3 

(CMS Pub. 13–3), and in section 214.7 

of the Medicare SNF Manual (CMS Pub. 

12). 

Regarding the comment that the 

proposed regulation does not define 

‘‘reasonable and necessary’’ in a way that 

clearly provides for coverage of 

maintenance therapy, we believe the 

commenter took issue with proposed 

clarifications surrounding regulations at 

§ 409.44(c)(2)(iv) which state that the 

amount, frequency, and duration of 

services must be reasonable. In these 

revisions we describe that therapy can 

be considered reasonable and necessary 

when the criteria for maintenance 

therapy are met. We believe the 

commenter suggests we more 

definitively state that therapy would be 


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covered in such a case. We concur, and 

we will make this change. 

Comment: One commenter noted that 

under a state’s approved Medicaid State 

Plan Amendment, therapies may be 

authorized as appropriate to maintain 

function or to slow the rate of decline 

in function. This commenter therefore 

requested that we consider whether the 

proposed rule language should be 

revised to clarify a potential difference 

in benefits [under Medicaid versus 

Medicare] or if revised instructions 

regarding Conditions of Participation 

(CoPs) applicability is sufficient. For 

whatever option we choose, this 

commenter indicated that we should 

contemplate using the Medicare rules as 

the foundation for Medicaid HH 

program rules as this commenter 

believes that changes are needed to 

accommodate the permitted differences 

in benefits. 

Response: We thank the commenter 

but note such a suggestion is outside the 

scope of this rule, and the issue for 

which we solicited comments. We will 

consider this suggestion in the future as 

we analyze improvements to the HH 

PPS. 

Comment: Commenters stated that, 

while they applaud our efforts to better 

define medical necessity and document 

therapy services, they were also 

concerned that the new documentation 

requirements will be a difficult 

transition for HHAs, stating that the 

proposed requirement would require 

significant time and resources for HHAs 

to ensure that their therapists and other 

medical staff are educated and prepared 

to implement the new requirements into 

their everyday practices. Consequently, 

this commenter recommended we 

provide extensive educational outreach 

and the commenter asked that we delay 

implementation of these requirements to 

provide agencies time to retrain staff. 

This commenter also recommended 

that we elaborate further on provisions 

of the proposed § 409.44(c)(1), including 

citing references to resources we used 

for the phrase ‘‘with accepted standards 

of clinical practice,’’ asking us to 

indicate that these included resources 

from professional associations. In 

addition, this commenter asked that we 

indicate that the ‘‘therapy goals’’ be 

established by the qualified therapist in 

conjunction with the physician. This 

commenter also requested that we 

further clarify what we mean by 

objective measurement of therapy 

progress by including activities of daily 

living such as walking, eating, bathing, 

etc. With respect to § 409.44(c)(2)(i), this 

commenter asked that we clarify what 

are considered to be ‘‘accepted practice’’ 

and ‘‘effective treatment.’’ Similar to 

other commenters, this commenter 

requested that we further acknowledge 

multi-therapy cases and insert language 

that allows for some type of window for 

completing the reassessment prior to or 

after the 13th or 19th therapy visits, 

stating that the adjustment should be 

made to account for extenuating 

circumstances that are outside the 

control of the qualified therapist. 

Regarding assistants making clinical 

notes, this commenter suggested that we 

change the phrase ‘‘job title’’ to 

‘‘professional designation’’ and clarify 

that written and electronic signatures 

are acceptable. Some commenters asked 

that we eliminate § 409.44(c)(2)(i) 

altogether. Regarding § 409.44(c)(2)(iii), 

this commenter requested that because 

‘‘rehabilitative’’ and ‘‘restorative’’ are not 

interchangeable, we change our 

regulations to be consistent throughout, 

using only the word ‘‘rehabilitative.’’ 

This commenter also asked that we add 

a sentence to clearly state that the 

maintenance program must be 

established by the qualified therapist. 

With respect to § 409.44(c)(2)(iv), this 

commenter asked that we elaborate on 

the phrase ‘‘with accepted standards of 

clinical practice’’ and highlight the 

importance of educating caregivers to 

ensure patients receive the appropriate 

level of care. The commenter also 

requested that we delay implementation 

of these requirements until April 2011 

to allow time for providers to transition. 

Response: We thank the commenter 

for the suggested clarifications and we 

have adopted the suggested 

clarifications with some exceptions. We 

have retained the language in our 

current regulatory text at 

§ 409.44(c)(2)(iii) which presently 

mandates that for therapy to be covered, 

there must be an expectation that the 

beneficiary’s condition will improve 

materially in a reasonable (and generally 

predictable) period of time based on the 

physician’s assessment of the 

beneficiary’s restoration potential and 

medical condition. Typically, we use 

the term ‘‘rehabilitative’’ to describe 

services provided by therapists. In the 

regulation text, we describe the 

physician’s assessment and therefore we 

believe the ‘‘restorative’’ terminology is 

appropriate. However, we will finalize 

additional changes to the proposed 

regulation text to achieve more 

consistency in the usage of these terms. 

As described in an earlier comment, we 

have adopted the commenter’s request 

for flexibility associated with the 13th 

and 19th visit. We believe that 

clarifications regarding electronic 

signatures are better addressed in 

manual guidance. Finally, we will 

implement this provision beginning 

April 2011. 

Comment: Some commenters urged 

CMS to transform the HH PPS therapy 

reimbursement model to one based on 

clinical outcomes and skill 

improvement. A commenter urged CMS 

to adopt tests for clinicians, which 

assess the clinician’s abilities. 

Response: We thank the commenter 

for these suggestions. As we described 

in earlier comment responses, section 

3131(d) of the Affordable Care Act 

requires CMS to conduct a study on 

costs involved with providing HH 

services for patients with high severity 

of illness, including analysis of 

potential revisions to outlier payments 

to better reflect costs of treating 

Medicare beneficiaries and analyze 

other HH PPS issues determined by the 

Secretary. We intend to use this 

opportunity to assess a variety of HH 

PPS issues, including our current HH 

PPS therapy threshold reimbursement. 

Comment: A commenter suggested 

that CMS consider making access to 

physician-ordered medically necessary 

music therapy as a covered service. 

Response: We thank the commenter 

but note that Congress would need to 

enact legislation in order to cover music 

therapy services under Medicare’s HH 

benefit, as they are not currently 

covered HH services as defined in 

section 1861(m) of the Act. 

Comment: Commenters provided 

feedback regarding our plans to revise 

G-codes to reflect greater detail in the 

reporting of skilled nursing and therapy 

services. Many commenters requested 

more time (6 months to a year or more) 

be allowed before these new and revised 

codes become effective, so as to give 

more time for CMS to provide direction 

to HHAs and thus provide time for 

agencies to train staff and modify data 

collection systems to accommodate 

these coding changes. Another 

commenter questioned the lead-time to 

establish new G-codes, stating that it 

would be impossible for all necessary 

program changes to be made to all 

vendor software within three months. 

This commenter requested that CMS 

postpone the new and revised G-codes 

until 2012 to give agencies and vendors 

time to reprogram the requirements. The 

commenter also suggested that the types 

of descriptions of the codes identified 

suggest that CMS wants to use the codes 

to determine medically reasonable and 

necessary care rather than doing actual 

medical review of patient clinical 

records. The commenter noted that 60 to 

75 percent of claims in which the 

appeals are taken to the administrative 

law judge level are reversed and 

suggested that we already have an issue 


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with our medical review and program 

integrity units that would be further 

exacerbated by the proposed G-codes. 

Response: It is important to note that 

we provided the information on the new 

G-codes to the industry as a prenotification of our intention to collect 

additional information on the claim. 

The implementation of this provision 

will be issued in an administrative 

change notice. We note that in 

describing our plans in the proposed 

rule published on July 23, 2010, we 

intended to provided the industry with 

early information so that they could 

begin planning for this change at that 

time. We currently plan to implement 

this reporting requirement in January 

2011. However, we thank the 

commenter, and we will consider this 

suggestion. 

Comment: Commenters expressed 

concern regarding G-code 6, stating that 

it has combined two dissimilar activities 

and should be split to avoid confusion, 

resulting in possible erroneous data. 

Specifically, commenters indicated that 

a G-code for services for the 

management and evaluation of the plan 

of care should be separate from a G-code 

for the services for the observation and 

assessment of a patient’s condition 

while a patient’s treatment is stabilized. 

Response: We concur with this 

suggestion and will adopt the separate 

G-codes. 

Comment: Some commenters asked 

that in revising and adding G-codes for 

the reporting of HH services, CMS 

should also consider creating codes to 

differentiate between the services 

provided by a registered nurse (RN) and 

a licensed practical nurse (LPN). 

Response: We thank the commenters 

for this suggestion and will consider 

their recommendation in future 

rulemaking. 

In summary, we thank the many 

commenters for their thoughtful and 

comprehensive suggestions. After 

considering these comments, we will 

finalize the proposed therapy coverage 

clarifications with several changes. We 

will delay the implementation of the 

therapy provisions until April 1, 2011, 

to allow agencies more transition time. 

We will finalize exceptions to the 13th 

and 19th qualified therapy visit 

requirement to provide some flexibility 

associated with patients in rural areas, 

patients receiving more than 1 therapy 

discipline, and documented exceptional 

circumstances which would preclude 

the therapist from performing the 

needed 13th or 19th visit. We have 

made regulatory text changes to remove 

confusing scenarios associated with 

maintenance therapy, which led 

commenters to believe that maintenance 

therapy was a dependent service. We 

will finalize numerous other regulation 

text changes to clarify that these 

changes do not impose new limitations 

on the coverage of maintenance therapy. 

The changes include clarifications that 

when the criteria for maintenance 

therapy is met, a qualified therapist 

would be assessing the effectiveness of 

the therapy provided, rather than the 

patient’s progress. Other changes 

include the removal of definitions of 

rehabilitative therapy which was 

confusing to commenters, and other 

miscellaneous regulation text 

clarifications which were suggested and 

we believe improve the clarity of the 

regulation text. 

C. Outlier Policy 

1. Background 

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

for the provision of an addition or 

adjustment to the national standardized 

60-day case-mix and wage-adjusted 

episode payment amounts in the case of 

episodes that incur unusually high costs 

due to patient HH care needs. Prior to 

the enactment of the Affordable Care 

Act in March 2010, this section 

stipulated that total outlier payments 

could not exceed 5 percent of total 

projected or estimated HH payments in 

a given year. Under the HH PPS, outlier 

payments are made for episodes for 

which the estimated costs exceed a 

threshold amount. The wage adjusted 

fixed dollar loss (FDL) amount 

represents the amount of loss that an 

agency must absorb before an episode 

becomes eligible for outlier payments. 

As outlined in our FY 2000 HH PPS 

final rule (65 FR 41188 through 41190), 

Medicare provided for outlier payments 

not to exceed 5 percent of total 

payments and adjusted the payment 

rates accordingly. 

2. Regulatory Update 

In our November 10, 2009 HH PPS 

final rule for CY 2010 (74 FR 58080 

through 58087), we explained that our 

analysis revealed excessive growth in 

outlier payments in discrete areas of the 

country. Despite program integrity 

efforts associated with excessive outlier 

payments in targeted areas of the 

country, we discovered that outlier 

expenditures exceeded the 5 percent 

statutory limit. Consequently, we 

assessed the appropriateness of taking 

action to curb outlier abuse. 

In order to mitigate possible billing 

vulnerabilities associated with excessive 

outlier payments, and to adhere to our 

statutory limit on outlier payments, we 

adopted an outlier policy of an agencylevel cap on outlier payments at 10 

percent of the agency’s total payments, 

in concert with a reduced FDL ratio of 

0.67. This policy resulted in a projected 

target outlier pool of approximately 2.5 

percent (the previous outlier pool target 

was 5 percent of total HH expenditures). 

For CY 2010, we first returned 5 percent 

back into the national standardized 60- 

day episode rates, the national per-visit 

rates, the LUPA add-on payment 

amount, and the NRS conversion factor. 

Then, we reduced the CY 2010 rates by 

2.5 percent to account for the new 

outlier pool targeted to 2.5 percent. This 

revised outlier policy was adopted for 

CY 2010 only. 

3. Statutory Update 

Section 3131(b)(1) of the Affordable 

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

of the Act, ‘‘Adjustment for outliers,’’ to 

state, ‘‘The Secretary shall reduce the 

standard prospective payment amount 

(or amounts) under this paragraph 

applicable to HH services furnished 

during a period by such proportion as 

will result in an aggregate reduction in 

payments for the period equal to 5 

percent of the total payments estimated 

to be made based on the prospective 

payment system under this subsection 

for the period.’’ In addition, section 

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

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

by redesignating the existing language 

as section 1895(b)(5)(A) of the Act, and 

revising it to state that the Secretary, 

‘‘may provide for an addition or 

adjustment to the payment amount 

otherwise made in the case of outliers 

because of unusual variations in the 

type or amount of medically necessary 

care. The total amount of the additional 

payments or payment adjustments made 

under this paragraph with respect to a 

fiscal year or year may not exceed 2.5 

percent of the total payments projected 

or estimated to be made based on the 

prospective payment system under this 

subsection in that year.’’ As such, our 

HH PPS outlier policy must reduce 

payment rates by 5 percent, and target 

up to 2.5 percent of total estimated HH 

PPS payments to be paid as outlier 

payments. We will first return the 2.5 

percent held for the target CY 2010 

outlier pool to the national standardized 

60-day episode rates, the national pervisit rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

for CY 2010. We will then reduce these 

rates by 5 percent as required by section 

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

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

Act. For CY 2011 and subsequent 

calendar years, the total amount of the 

additional payments or payment 

adjustments made may not exceed 2.5 

percent of the total payments projected 


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or estimated to be made based on the 

PPS in that year as required by section 

1895(b)(5)(A) of the Act as amended by 

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

Care Act. 

4. Outlier Cap 

As stated earlier, for CY 2010, we 

implemented an agency-level cap by 

limiting HH outlier payments to be a 

maximum of 10 percent of an agency’s 

total payments (74 FR 58080 through 

58087). Section 3131(b)(2)(C) of the 

Affordable Care Act makes this 10 

percent agency-level cap a permanent 

statutory requirement, by adding a 

paragraph, (B) ‘‘Program Specific Outlier 

Cap’’, to section 1895(b)(5) of the Act. 

The new paragraph states, ‘‘The 

estimated total amount of additional 

payments or payment adjustments made 

* * * with respect to a HHA for a year 

(beginning with 2011) may not exceed 

an amount equal to 10 percent of the 

estimated total amount of payments 

made under this section (without regard 

to this paragraph) with respect to the 

HH agency for the year’’. Therefore, the 

10 percent agency-level outlier cap 

would continue in CY 2011 and 

subsequent calendar years as required 

by section 1895(b)(5)(B) of the Act, as 

added by section 3131(b)(2)(C) of the 

Affordable Care Act. In summary, 

section 3131(b) of the Affordable Care 

Act requires the following outlier 

policy: (1) Reduce the estimated total 

payments by 5 percent; (2) target to pay 

no more than 2.5 percent of estimated 

total payments for outliers; and (3) 

apply a 10 percent agency-level outlier 

cap. 

5. Loss-Sharing Ratio and Fixed Dollar 

Loss (FDL) Ratio 

The July 2000 final rule (65 FR 41189) 

described a methodology for 

determining outlier payments. Under 

this system, outlier payments are made 

for episodes whose estimated cost 

exceeds a threshold amount. The 

payment rate for a 60-day episode is the 

sum of the wage-adjusted national pervisit rate amounts for all visits delivered 

during the episode. The outlier 

threshold is defined as the sum of the 

episode payment rate for that case-mix 

group and a FDL amount. Both 

components of the outlier threshold are 

wage-adjusted. The wage-adjusted FDL 

amount represents the amount of loss 

that an agency must experience before 

an episode becomes eligible for outlier 

payments. The wage-adjusted FDL 

amount is computed by multiplying the 

national standardized 60-day episode 

payment amount by the FDL ratio, and 

wage-adjusting that resulting amount. 

The wage-adjusted FDL amount is then 

added to the wage-adjusted 60-day 

episode payment rate to arrive at the 

wage-adjusted outlier threshold amount. 

The outlier payment is defined as a 

proportion of the wage-adjusted 

estimated costs beyond the wageadjusted outlier threshold amount. The 

proportion of additional costs paid as 

outlier payments is referred to as the 

loss-sharing ratio. Prior to the passage of 

the Affordable Care Act, the FDL ratio 

and the loss-sharing ratio were selected 

so that the estimated total outlier 

payments would not exceed the 5 

percent aggregate level. We chose a 

value of 0.80 for the loss-sharing ratio, 

which is relatively high, but preserves 

incentives for agencies to attempt to 

provide care efficiently for outlier cases. 

With a loss-sharing ratio of 0.80, 

Medicare pays 80 percent of the 

additional costs above the wageadjusted outlier threshold amount. A 

loss-sharing ratio of 0.80 is also 

consistent with the loss-sharing ratios 

used in other Medicare PPS outlier 

policies, such as inpatient hospital, 

inpatient rehabilitation, long-term 

hospital, and inpatient psychiatric 

payment systems. 

As discussed in the October 1999 

proposed rule (64 FR 58169) and the 

July 2000 final rule (65 FR 41189), the 

percentage constraint on total outlier 

payments creates a tradeoff between the 

values selected for the FDL ratio and the 

loss-sharing ratio. For a given level of 

outlier payments, a higher FDL ratio sets 

higher FDL amounts and thus reduces 

the number of cases that receive outlier 

payments, but allows for setting a higher 

loss-sharing ratio and higher outlier 

payments per episode. Alternatively, a 

lower FDL ratio means lower FDL 

amounts and therefore allows more 

episodes to qualify for outlier payments 

but setting a lower loss-sharing ratio and 

lower outlier payments per episode. 

Therefore, setting these two 

parameters (that is, FDL ratio and losssharing ratio) involves policy choices 

about the number of outlier cases and 

their payments. In the CY 2010 HH PPS 

final rule (74 FR 58086), in targeting 

total outlier payments as 2.5 percent of 

total HH PPS payments, we 

implemented a FDL ratio of 0.67. 

For this rule, we have updated our 

analysis from the CY 2010 HH PPS final 

rule and we estimate that maintaining a 

FDL ratio of 0.67, in conjunction with 

a 10 percent cap on outlier payments at 

the agency level, would target paid 

outlier payments to be no more than the 

2.5 percent of total HH PPS payments as 

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

Act, as amended by section 

3131(b)(2)(B) of the Affordable Care Act. 

The following is a summary of the 

comments we received regarding the 

outlier payment policy. 

Comment: A commenter supported 

CMS in its efforts to curb fraud and 

abuse in the Medicare program. The 

commenter is not opposed to the 

proposed implementation of these 

changes to the outlier policy. However, 

the commenter cautioned CMS to 

carefully analyze the effect this outlier 

policy might have on HHAs in rural and 

underserved areas. Often times, patients 

who are sicker and more clinically 

complex may be treated in the HH 

setting due to lack of access to other 

post-acute care settings. HHAs treating 

such patients would have higher outlier 

costs than HHAs that are located in 

urban and higher socioeconomic areas. 

The commenter strongly urged CMS to 

ensure that these HHAs were not 

unfairly audited or penalized for the 

treatment furnished to these patients. 

Another commenter stated that some 

remote rural areas have only one agency 

per county and many counties have no 

HHAs. In such rural areas, there would 

be no other agency to share intake of 

clients who have costly outlier episodes. 

State regulations for Medicaid or 

assisted living programs could force 

clients to be admitted to a nursing home 

because agencies in these remote rural 

markets might not be able to afford to 

provide care for them. The commenter 

further urges that small HHAs (that is, 

those with fewer than 300 patients) in 

remote rural areas should be exempt 

from the agency-level outlier cap or 

have a higher cap. Another commenter 

recommended exempting agencies with 

fewer than 60 Medicare patients per 

year from the outlier policy since even 

one or two outlier episodes could easily 

reach the cap. This policy could force 

some small HHAs to refuse care to 

patients who are most in need of care. 

Response: We will take these 

comments into consideration when we 

conduct our study on costs involved 

with providing ongoing access to HH 

services for patients with high severity 

of illness, as required by the Affordable 

Care Act. 

Comment: Several commenters stated 

that the proposed outlier policy is unfair 

because all agencies are held 

accountable for the unscrupulous 

behavior of a few agencies. The 

commenters believed that CMS is taking 

a broad stroke approach to 

implementing changes that could be 

detrimental to the many agencies that 

are operating appropriately and in 

compliance with the regulations. A 

commenter stated that the outlier policy 

would further reduce patient access and 

would fail to target the abusers. Several 


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commenters stated that the legislative 

limit placed on the outlier pool would 

punish all agencies for the outlier policy 

abuse of a very limited number of 

agencies. Several commenters 

recommended restoring the 2.5 percent 

reduction to the payment rates. Another 

commenter stated that the proposed cut 

of 2.5 percent to the base payment for 

all HHAs in order to ‘‘pay’’ for this 

policy was unfair and excessive, 

especially considering other proposed 

cuts. The commenter recommended that 

CMS limit any single year rate 

reductions including statutory 

reductions and case-mix change 

adjustments to no greater than an 

aggregate 2.5 percent. Another 

commenter noted that the Affordable 

Care Act mandated that the reduction in 

payments for outliers be 5 percent and 

that the outlier target be 2.5 percent of 

total payments. As the difference of 2.5 

percent remains unallocated in the 

proposed rule, the commenter suggested 

that CMS redesignate that difference to 

the proposed 3.79 percent decrease for 

case-mix change, resulting in a case-mix 

adjustment of 1.29 percent decrease. 

Otherwise, the CY 2011 HHA rate will 

be hit twice—by the 3.79 percent casemix decrease and the 2.5 percent outlier 

pool decrease. Another commenter 

stated that HHAs have already sustained 

a significant cut in outlier payments, 

leaving insulin dependent and wound 

care patients without a nurse to provide 

injections and necessary wound care 

treatment. At any given time, an agency 

cannot assess whether it has the 

resources to accept these types of 

patients. A commenter requested that 

CMS exempt ‘‘special needs’’ HHAs that 

serve high-cost patients with multiple 

clinical issues from the 10 percent 

agency-level outlier cap. The 

commenter believed a revision to a 

higher outlier cap is critical for 

continued provision of care by agencies 

serving high-need and high-cost 

beneficiaries without losing critical 

outlier funding. 

Response: Section 3131(b) of the 

Affordable Care Act does not allow for 

exceptions to the mandate of the outlier 

policy which reduces estimated 

aggregate HH payments by 5 percent, 

allows no more than an estimated 2.5 

percent of aggregate HH payments to be 

outlier payments, and requires the 10 

percent agency-level outlier cap. We do 

not have regulatory authority to restore 

the 2.5 percent to the estimated 

aggregate HH payments. Nonetheless, 

we will continue to monitor outlier 

payments in order to advise the 

legislators of any unintended 

consequences of this legislation, such as 

lack of access to care. 

Comment: A commenter stated that he 

interpreted Table 4 in the July 23, 2010 

proposed rule (75 FR 43257) to indicate 

that each year HHAs can expect an 

additional 2.5 percent reduction to the 

base episode rate starting from the prior 

year’s base rate before the market basket 

update. This additional rolling 

reduction does not seem contemplated 

in the Affordable Care Act. A 

commenter stated that the 2.5 percent 

rate reduction combined with the 

standard 3 percent inflation/cost of 

living increases demanded by their 

employees will result in their agency 

being unable to hire staff to serve their 

patients. CMS does not identify actual 

outlier payment history when 

addressing these changes in the rule. 

Response: The 2.5 percent reduction 

is not a rolling reduction. The 2.5 

percent reduction is a one-time, but 

permanent, reduction to the HH rates, 

which is to be applied in CY 2011. 

Table 3 shows outlier payment history 

as a percentage of total HH PPS 

payments between CY 2004 and CY 

2008. 

TABLE 3—OUTLIER PAYMENT HISTORY AS A PERCENTAGE OF TOTAL HH PPS PAYMENTS

[Between CY 2004 and CY 2008] 

Year Outlier 

payment 

Total HH PPS 

payment 

Percentage 

change 

2004 ......................................................................................................................................... $309,198,604 $11,500,462,624 2.69 

2005 ......................................................................................................................................... 527,096,653 12,885,434,951 4.09 

2006 ......................................................................................................................................... 701,945,386 14,041,853,560 5.00 

2007 ......................................................................................................................................... 996,316,407 15,677,329,001 6.36 

2008 ......................................................................................................................................... 1,127,162,152 17,114,906,875 6.59 

Comment: A commenter stated that 

the outlier policy will significantly 

decrease fraudulent behavior within the 

Miami-Dade, Florida area. The 

commenter further supports more open 

dialogue between the HH community 

and government officials to improve 

program integrity within the Medicare 

program. 

Response: We appreciate the 

comment and the commenter’s support. 

6. Imputed Costs 

Section 3131(d) of the Affordable Care 

Act requires CMS to conduct a study on 

costs involved with providing HH 

services for patients with high severity 

of illness, including analysis of 

potential revisions to outlier payments 

to better reflect costs of treating 

Medicare beneficiaries. CMS will 

produce a Report to the Congress 

containing this study’s 

recommendations no later than March 1, 

2014. 

To consider outlier policy 

improvements in the nearer term, we 

solicited comments regarding alternate 

policy options and methodologies to 

better account for high cost patients. In 

particular, we solicited the industry’s 

input on alternatives in imputing costs 

in the calculation of the outlier 

payments. 

We have discussed and are exploring 

the possible use of visit intensity data in 

the imputing of costs as part of the 

outlier payment calculation and would 

be interested in the industry’s views on 

such an alternative. In addition, we 

solicited feedback concerning the use of 

diagnoses codes (for example, diabetes) 

as a factor in the calculation of imputed 

costs associated with outlier payments. 

We believe that modifying the fixed 

dollar loss ratio or the loss-sharing ratio 

now would not improve the current 

policy. However, we welcome industry 

comments on such potential 

modifications. 

The following is a summary of the 

comments we received regarding 

imputed costs. 

Comment: Several commenters stated 

that visit intensity data or diagnoses are 

not the only issues impacting outliers. 

CMS should consider a comprehensive 

look at resource utilization which might 

include these factors. Another 

commenter stated that the proposed rule 

does not specify how ‘‘visit intensity’’ is 

to be measured, such as whether the 

length of the visit or the frequency of 

visits would be measured. Several 

commenters stated that in addition to 

intensity data and diagnoses, resource 


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utilization, and other factors affect costs 

for an outlier episode and should be 

taken into consideration. 

Another commenter suggested using 

actual, inflation-adjusted, agencyspecific costs for each discipline rather 

than the imputed LUPA rates currently 

used to calculate the outlier payment. 

Calculations using such costs would 

reduce abuse by agencies that game the 

system by providing excessive numbers 

of visits at visit costs below the LUPA 

rate. Using actual costs versus imputed 

costs would better estimate the needs of 

patients who are severely impaired. 

Continued use of imputed costs to 

administer the outlier leaves the 

program vulnerable to abuse while 

simultaneously compromising the 

usefulness of the outlier costs concept 

for seriously ill patients of reputable 

agencies. 

Response: We appreciate these 

comments and will take them into 

consideration when we conduct a study 

of outlier payments required by the 

Affordable Care Act. We will produce a 

Report to the Congress containing this 

study’s recommendations no later than 

March 1, 2014. 

D. CY 2011 Rate Update 

1. Home Health Market Basket Update 

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

requires that the standard prospective 

payment amounts for CY 2011 be 

increased by a factor equal to the 

applicable HH market basket update for 

those HHAs that submit quality data as 

required by the Secretary. Section 

3401(e) of the Affordable Care Act 

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

Act by adding a new clause (vi) which 

states, ‘‘After determining the HH 

market basket percentage increase * * * 

the Secretary shall reduce such 

percentage * * * for each of 2011, 2012, 

and 2013, by 1 percentage point. The 

application of this clause may result in 

the HH market basket percentage 

increase under clause (iii) being less 

than 0.0 for a year, and may result in 

payment rates under the system under 

this subsection for a year being less than 

such payment rates for the preceding 

year.’’ 

The following is a summary of the 

comments we received regarding the HH 

market basket update. 

Comment: A commenter believes that 

the market basket index fails to include 

consideration of the direct cost 

increases that CMS rules may have on 

the delivery of care. Instead, the index 

evaluates general cost changes such as 

the cost of caregivers, transportation, 

insurance, and office space. This 

approach does not provide CMS with 

sufficient information to adjust payment 

rates in relation to regulatory cost 

increases. 

When the HH services ‘‘product’’ 

changes because of new regulatory 

requirements, CMS should include in 

the market basket index an element to 

address the resulting cost changes. 

Alternatively, CMS should adjust base 

payment rates to account for such cost 

changes as done previously for costs 

associated with OASIS. 

Response: The HH market basket is 

not designed to account for changes in 

total costs (such as those associated 

with the implementation of OASIS–C or 

other initiatives), but is rather intended 

to measure the input price pressures 

that the average HH provider is 

expected to face in the coming year. 

The composition of the market basket 

itself is made up of a set of mutually 

exclusive and exhaustive cost categories 

that reflect the cost structure of the 

industry (in a given base year). The HH 

index’s cost shares (or weights) are 

based on data reported on the Medicare 

cost report forms and are specific to 

HHAs. Each cost category is assigned an 

appropriate price proxy whose projected 

movements are weighted by their 

respective cost shares and aggregated to 

arrive at the actual market basket 

update. 

Any cost increases that a provider 

bears based on regulatory requirements 

must be reflected in the increasing costs 

of the inputs on provision of the service. 

When the market basket is rebased, cost 

changes will be accounted for in the 

data, up to and including the base year. 

We evaluate the cost weight 

distributions on a periodic basis. If the 

cost structure of the HH industry 

changes, such as a greater share of 

expenses being devoted to wages and 

salaries, we will propose to rebase and 

revise the market basket, as appropriate. 

Comment: A commenter states that 

the continued reductions to the home 

health market basket update each year 

for 2011, 2012, and 2013 are drastic. 

These cuts come at a time when labor 

costs—particularly nurses and 

therapist—continue to rise. 

Response: Since publication of the CY 

2011 HH PPS proposed rule, we have 

updated the HH market basket increase 

for CY 2011. The updated HH market 

basket increase is 2.1 percent, which is 

based on IHS Global Insight Inc.’s third 

quarter 2010 forecast, utilizing historical 

data through the second quarter of 2010. 

A detailed description of the 

methodology used to derive the HH 

market basket is available in the CY 

2008 HH PPS proposed rule (72 FR 

25356, 25435). Due to the new 

requirement at section 1895(b)(3)(B)(vi) 

of the Act, the CY 2011 market basket 

update of 2.1 percent must be reduced 

by 1 percentage point to 1.1 percent. In 

effect, the CY 2011 market basket 

update is 1.1 percent. The statute does 

not permit us to exercise any discretion 

with respect to the application of this 

percentage point reduction. 

2. Home Health Care Quality 

Improvement 

a. OASIS 

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

requires that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ In addition, 

section 1895(b)(3)(B)(v)(I) of the Act 

dictates that ‘‘for 2007 and each 

subsequent year, in the case of a HHA 

that does not submit data to the 

Secretary in accordance with sub clause 

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

market basket percentage increase 

applicable under such clause for such 

year shall be reduced by 2 percentage 

points.’’ This requirement has been 

codified in regulations at § 484.225(i). 

Accordingly, for CY 2011, we will 

continue to use a HHA’s submission of 

OASIS data to meet the requirement that 

the HHA submit data appropriate for the 

measurement of health care quality. For 

CY 2011, we proposed to consider 

OASIS assessments submitted by HHAs 

to CMS in compliance with HHA 

Conditions of Participation for episodes 

beginning on or after July 1, 2009 and 

before July 1, 2010 as fulfilling the 

quality reporting requirement for CY 

2011. This time period allows for 12 full 

months of data collection and would 

provide us the time necessary to analyze 

and make any necessary payment 

adjustments to the payment rates in CY 

2011. We will reconcile the OASIS 

submissions with claims data in order to 

verify full compliance with the quality 

reporting requirements in CY 2011 and 

each year thereafter on an annual cycle 

July 1 through June 30 as described 

above. 

As set forth in the CY 2008 final rule, 

agencies do not need to submit quality 

data for those patients who are excluded 

from the OASIS submission 

requirements under the Home Health 

Conditions of Participation (CoP) 

(§ 484.200 through 484.265), as well as 

those excluded, as described in the 

Final Rule Medicare and Medicaid 

Programs: Reporting Outcome and 

Assessment Information Set Data as Part 

of the Conditions of Participation for 


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Home Health Agencies December 23, 

2005 (70 FR 76202) as follows: 

• Those patients receiving only nonskilled services; 

• Neither Medicare nor Medicaid is 

paying for HH care (patients receiving 

care under a Medicare or Medicaid 

Managed Care Plan are not excluded 

from the OASIS reporting requirement); 

• Those patients receiving pre- or 

post-partum services; or 

• Those patients under the age of 18 

years. 

As set forth in the CY 2008 final rule 

(72 FR 49863), agencies that become 

Medicare-certified on or after May 1 of 

the preceding year (2010 for payments 

in 2011) are excluded from any payment 

penalty for quality reporting purposes 

for the following CY. Therefore, HHAs 

that are certified on or after May 1, 2010 

are excluded from the quality reporting 

requirement for CY 2011 payments. 

These exclusions only affect quality 

reporting requirements and do not affect 

the HHA’s reporting responsibilities 

under the CoP. HHAs that meet the 

quality data reporting requirements 

would be eligible for the full HH market 

basket percentage increase. HHAs that 

do not meet the reporting requirements 

would be subject to a 2 percent 

reduction to the HH market basket 

increase in conjunction with applicable 

provisions of the Affordable Care Act, as 

discussed in the section II.X. of this 

final rule ‘‘CY 2011 Payment Update.’’ 

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

further requires 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 HHA has the 

opportunity to review the data that is to 

be made public with respect to the 

agency prior to such data being made 

public.’’ We will continue to use the 

subset of OASIS data that is utilized for 

quality measure development and 

publicly reported on Home Health 

Compare as the appropriate measure of 

HH quality. 

To meet the requirement for making 

such data public, we will continue to 

use the Home Health Compare Web site, 

which lists HHAs geographically. 

Currently, the Home Health Compare 

Web site lists 12 quality measures from 

the OASIS data set as described later. 

The Home Health Compare Web site, 

which is scheduled to be redesigned 

this Fall is located at http:// 

www.medicare.gov/HHCompare/ 

Home.asp. Each HHA currently has prepublication access, through the CMS 

contractor, to its own quality data, as 

the contractor updates this periodically. 

We will continue this process, to enable 

each agency to view its quality measures 

before public posting of data on Home 

Health Compare Web site. 

The following 12 outcome measures 

are currently publicly reported: 

• Improvement in ambulation/ 

locomotion; 

• Improvement in bathing; 

• Improvement in transferring; 

• Improvement in management of 

oral medications; 

• Improvement in pain interfering 

with activity; 

• Acute care hospitalization; 

• Emergent care; 

• Discharge to community; 

• Improvement in dyspnea; 

• Improvement in urinary 

incontinence; 

• Improvement in status of surgical 

wounds; and 

• Emergent care for wound infections, 

deteriorating wound status. 

We will continue to use specified 

measures derived from the OASIS data 

for purposes of measuring HH care 

quality. This would also ensure that 

providers would not have an additional 

burden of reporting quality of care 

measures through a separate 

mechanism, and that the costs 

associated with the development and 

testing of a new reporting mechanism 

would be avoided. 

We have changed the set of OASIS 

outcome measures that will be publicly 

reported beginning in July 2011 to 

include the following outcome measure: 

• Increase in number of pressure 

ulcers. 

This outcome measure is the 

percentage of patient episodes in which 

there was an increase in the number of 

unhealed pressure ulcers. This measure 

is important because pressure ulcers are 

key indicators of the effectiveness of 

care and are among the most common 

causes of harm to patients. Though 

consensus endorsement is not a 

requirement for public reporting of HH 

quality measures, this measure is 

endorsed by the National Quality Forum 

(NQF). 

As previously stated, although NQF 

endorsement is not required for public 

reporting, we will discontinue public 

reporting of certain outcome measures, 

which were previously reported on 

Home Health Compare and are no 

longer endorsed by NQF. Those 

measures are the following: 

• Discharge to community; 

• Improvement in Urinary 

Incontinence; and 

• Emergent Care for Wound 

Infections, Deteriorating Wound Status. 

We solicited comments on these 

measures in the CY 2011 HH PPS 

proposed rule. 

Additionally, the change to OASIS–C 

results in modifications to two of the 

outcome measures as follows: 

• Improvement in bed transferring: 

This measure replaces the previously 

reported measure improvement in 

transferring. It provides a more focused 

measurement of the ability to turn and 

position oneself in bed and transfer to 

and from the bed. 

• Emergency Department Use without 

Hospitalization: This measure replaces 

the previously reported measure: 

Emergent care. It excludes emergency 

department visits that result in a 

hospital admission because those visits 

are already captured in the acute care 

hospitalization measure. 

To summarize, the following outcome 

measures, which comprise measurement 

of HH care quality, will be publicly 

reported beginning in July 2011: 

• Improvement in ambulation/ 

locomotion; 

• Improvement in bathing; 

• Improvement in bed transferring; 

• Improvement in management of 

oral medications; 

• Improvement in pain interfering 

with activity; 

• Acute care hospitalization; 

• Emergency Department Use without 

Hospitalization; 

• Improvement in dyspnea; 

• Improvement in status of surgical 

wounds; and 

• Increase in number of pressure 

ulcers. 

We implemented use of the OASIS–C 

(Form Number CMS–R–245 (OMB# 

0938–0760)) on January 1, 2010. This 

revision to OASIS was tested and has 

been distributed for public comment 

and other technical expert 

recommendations over the past few 

years. The OASIS–C is on the CMS Web 

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

HomeHealthQualityInits/12_

HHQIOASISDataSet.asp#TopOfPage. 

As a result of changes to the OASIS 

data set, process of care measures are 

available as additional measures of HH 

quality. We published information 

about new process measures in the 

August 13, 2009 proposed rule (74 FR 

40960) and in the November 10, 2009 

final rule with comment period (74 FR 

58096). We proposed and made final the 

decision to update the Home Health 

Compare Web site in October 2010 to 

reflect the addition of the following 13 

new process measures: 

• Timely initiation of care; 

• Influenza immunization received 

for current flu season; 

• Pneumococcal polysaccharide 

vaccine ever received; 

• Heart failure symptoms addressed 

during short-term episodes; 


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70402 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 

• Diabetic foot care and patient 

education implemented during shortterm episodes of care; 

• Pain assessment conducted; 

• Pain interventions implemented 

during short-term episodes; 

• Depression assessment conducted; 

• Drug education on all medications 

provided to patient/caregiver during 

short-term episodes; 

• Falls risk assessment for patients 65 

and older; 

• Pressure ulcer prevention plans 

implemented; 

• Pressure ulcer risk assessment 

conducted; and 

• Pressure ulcer prevention included 

in the plan of care. 

The implementation of OASIS–C 

impacts the schedule of quality measure 

reporting for CY 2010 and CY 2011. 

While sufficient OASIS–C data are 

collected and risk models are 

developed, the outcome reports (found 

on the Home Health Compare Web site 

and the contractor outcome reports used 

for HHA’s performance improvement 

activities) will remain static with 

OASIS–B1 data. The last available 

OASIS–B1 reports will remain in the 

system and on the HHC site until they 

are replaced with OASIS–C reports. 

Sufficient numbers of patient episodes 

are needed in order to report measures 

based on new OASIS–C data. This is 

important because measures based on 

patient sample sizes taken over short 

periods can be inaccurate and 

misleading due to issues like seasonal 

variation and under-representation of 

long-stay HH patients. Once sufficient 

OASIS–C data have been collected and 

submitted to the national repository, we 

will begin producing new reports based 

on OASIS–C. 

December 2009 was the last month for 

which OBQI/M data was calculated for 

OASIS–B1 data and OASIS–B1 OBQI/M 

reports continue to be available after 

March 2010. OASIS–C process measures 

are available to preview as of September 

2010 and will be publicly reported in 

October 2010. OASIS–C outcome 

measures will be available to preview in 

May 2011 and will be publicly reported 

in July 2011. 

The following is a summary of the 

comments we received regarding the 

Home Health Care Quality 

Improvement: OASIS proposal. 

Comment: One commenter expressed 

support for the proposed changes in 

OASIS reporting. Another commenter 

stated support for quality reporting. 

Commenters also stated they support 

the changes in OASIS publicly reported 

indicators and expressed support for the 

continued submission of OASIS data 

and expressed their commitment to 

continue working with CMS to develop 

appropriate measures. Commenters also 

support the adoption of OASIS–C 

process measures and applaud CMS for 

creating this patient-focused system. 

Response: We appreciate the positive 

feedback regarding changes in the 

measures which will be publicly 

reported and the quality reporting 

efforts in general. We appreciate the 

industry’s encouragement and 

willingness to adopt the new methods 

that reflect the quality of care provided 

to Medicare beneficiaries. 

Comment: One commenter expressed 

concern with the addition of the 

Increase in Number of Pressure Ulcers 

measure to publicly reported outcomes. 

The commenter stated that it is not an 

appropriate measure of the homecare 

agencies’ effectiveness of care but rather 

of the family’s effectiveness and that 

HHAs are not responsible for the care 

provided 24 hours a day. 

Response: Though HH services are 

provided on an intermittent, part-time 

basis, and HHA staff are not present in 

the home 24 hours per day, the HHA is 

responsible for determining that the 

level of care provided by the agency is 

safe and adequate to manage the needs 

of the patient. Monitoring and 

addressing adherence to the Plan of Care 

established by the physician, HHA, 

patient, and family is the responsibility 

of the HHA. In many cases, though we 

agree not all, the provision of skilled 

nursing services, which includes 

family/caregiver instruction, in 

conjunction with the provision of 

personal care services, can accomplish a 

great deal in the prevention of new 

pressure ulcers. We believe this is an 

important indicator of HHA 

performance related to best practices, 

patient safety, and comfort. This 

measure is also harmonized with similar 

measures in other settings. We will 

move forward with reporting Increase in 

Number of Pressure Ulcers on Home 

Health Compare in July 2011. 

Comment: One commenter urged 

CMS to maintain ‘‘Improvement in 

Urinary Incontinence’’ among the 

publicly reported outcome measures, 

stating that this measure is of utmost 

importance to Medicare beneficiaries’ 

quality of life and Medicare costs. 

Another commenter expressed 

disappointment in the removal of the 

outcome measure ‘‘Discharge to 

Community’’ from public reporting, 

stating their belief that this measure is 

one of the best measures of the 

effectiveness of HHA intervention. 

Response: The Improvement in 

Urinary Incontinence outcome measure 

did not receive endorsement from NQF 

when reviewed in March 2009. NQF’s 

rationale primarily involved concerns 

about reliability of the data, that is, that 

this information is difficult to capture 

reliably due to issues with patient 

reporting. We have also received 

feedback from providers and consumers, 

which leads us to believe that the 

measure lacks salience and meaningful 

use, particularly among consumers. It 

appears that consumers are unable to 

link this outcome to the HHA’s 

performance and cannot attribute 

improvement to HHA care. 

The Discharge to Community measure 

also did not receive endorsement from 

NQF when reviewed in March 2009. 

NQF determined that this measure did 

not reflect whether patients met their 

treatment goals, but only that they were 

discharged from services, which may 

have been for other reasons unrelated to 

the care provided. NQF also noted that 

the acute care hospitalization measure 

captures many of these patients. 

However, the comments offered do 

present meaningful information that we 

will find useful when considering 

resubmitting these measures for NQF 

endorsement. Please note that these 

measures will continue to be provided 

to agencies for use in quality/ 

performance improvement efforts. 

Comment: One commenter 

recommended CMS consider ending the 

requirement that OASIS data be 

submitted for Medicare Advantage (MA) 

plans, noting that that they have not 

found an MA plan that has used the data 

in the past decade. 

Response: Under section 1891(b) of 

the Act, the Secretary is responsible for 

assuring that the Conditions of 

Participation (CoPs) and their 

enforcement are adequate to protect the 

health and safety of individuals under 

the care of an HHA and to promote the 

effective and efficient use of Medicare 

funds. Medicare funds are used to pay 

for care provided to patients covered by 

MA plans. 

Under sections 1861(o), 1871, and 

1891 of the Act, the Secretary has 

established in regulations the 

requirements that an HHA must meet to 

participate in the Medicare program. 

These requirements are set forth at 42 

CFR Part 484, Conditions of 

Participation: Home Health Agencies. 

The current HH CoPs require that all 

HHAs participating in Medicare and 

Medicaid (including managed care 

organizations providing HH services to 

Medicare and Medicaid beneficiaries) 

collect and report OASIS data on adult, 

non-maternity patients receiving skilled 

care. 

One of the major purposes of 

collecting and reporting OASIS data is 

to track the quality of patient outcomes. 


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It is important that the content of 

reports depicting the status of patient 

outcomes and the HHA use of best 

practices include measures related to all 

Medicare beneficiaries, including those 

covered by MA Plans. It is also 

important to include MA beneficiary 

data in the calculation of agency, state, 

and national averages in both agency 

level and public quality measure 

reports. This quality information is 

available for use and is actually used 

not only by payers, but also by 

researchers, providers, and consumers 

of HH services. We are not currently 

considering a change in the OASIS 

reporting requirements. 

Comment: Two commenters urge that 

CMS remove New York State’s LTHHCP 

agencies from the Pay for Reporting 

(P4R) initiative in order to ensure that 

these programs will not be adversely/ 

unfairly affected or penalized once CMS 

implements a Pay for Performance 

system. The commenter also requests 

that any special needs CHHAs be 

removed from the P4R initiative for the 

same reasons. 

Response: The Pay for Reporting 

initiative requires that all Medicare 

certified HHAs submit OASIS 

assessments. The HH P4R requirements 

are based in section 5201(c)(2) of the 

DRA, which provides for an adjustment 

to the HH market basket percentage 

update depending on their submission 

of quality data. HHAs that submit the 

required quality data using OASIS will 

receive payments based on the full HH 

market basket update each calendar 

year. If a HHA does not submit quality 

data, the HH market basket will be 

reduced by 2 percentage points based on 

annual payment rule and the Congress. 

The submission of OASIS assessments 

is also required by the CoPs and as a 

Condition of Payment. The only 

exceptions to the reporting requirements 

are: 

• Prepartum and postpartum patients; 

• Patients under the age of 18; 

• Patients not receiving skilled health 

care services; and 

• Non-Medicare/non-Medicaid 

patients (patients receiving care under a 

Medicare or Medicaid Managed Care 

Plan are not excluded from the OASIS 

reporting requirement). 

Since New York’s LTHHCP agencies 

or any special needs CHHAs do not fall 

within these exclusions, we are not 

waiving their reporting requirements. 

The Affordable Care Act requires that 

we submit a Report to Congress 

outlining a Value Based Purchasing Plan 

for HHAs by October, 1, 2011. We are 

in the process of developing the Home 

Health Value Based Purchasing report 

and decisions have not yet been made 

about this issue. Therefore, it would be 

premature to link a Pay for Performance 

system to OASIS submission at this 

time. 

Comment: One commenter expressed 

concern that it is too soon to publicly 

report the new OASIS–C process 

measures and request an additional year 

of study and refinement before these 

measures are released to the public. The 

commenter also states that most 

agencies have no way to identify where 

they stand with regard to the process 

items and that many of these items 

remain problematic and confusing to 

providers. 

Response: The process measure 

reports, which detail the 47 new process 

measures based on OASIS–C, were 

made available to HHAs via the 

CASPER reporting system as of 

September 1, 2010. The availability of 

these reports meets the statutory 

requirement that HHAs have 

opportunity to view their measures 

prior to public reporting. Thirteen of the 

process measures were posted on Home 

Health Compare in October 2010. 

We recognize that agencies have 

experienced many changes with the 

transition to OASIS–C on January 1, 

2010 and will need to continue to make 

adjustments to move their newly 

measured performance forward. These 

changes and adjustments are all 

intended to improve the care provided 

to beneficiaries and to provide best 

practices that HHAs may choose to 

implement for their HH patients. 

Process measures are mechanisms for 

assessing the degree to which a provider 

competently and safely delivers clinical 

services that are appropriate for the 

patient in the optimal time period. 

Through efforts over time, HHAs should 

see improvements in their process 

measure reports, including those that 

are publicly reported. Recognizing that 

the first set of reports will provide the 

baseline of performance on which HHAs 

can build, we will continue with the 

proposed reporting plan and timeline. 

There are several resources available 

to assist with any remaining confusion 

within the HH industry related to the 

process items that include the 

following: 

• In 2009, CMS provided three Train 

the Trainer calls via the Medicare 

Learning Network one of which focused 

on process items and measures. All 

three transcripts are still available at 

http://www.cms.gov/

HomeHealthQualityInits/03_

EducationalResources.asp#TopOfPage. 

• A new training video specific to 

Process-Based Quality Improvement 

(PBQI) is now available on YouTube at 

http://www.youtube.com/

watch?v=hNno1GIVAPA. 

• Four new and/or revised manuals 

are also available as downloads from the 

Home Health Quality Initiatives site at 

http://www.cms.gov/

HomeHealthQualityInits/. 

• For questions regarding the OASIS 

items, the OASIS Answers mailbox can 

be accessed at 

cmsoasisquestions@oasisanswers.com. 

Comment: One commenter expressed 

concern with the increased demands 

placed upon HHAs to provide 

information regarding the quality of 

their services, and that possibly these 

newer requirements are unfair to HHAs 

that are honestly trying to provide good 

services and that agencies would stop 

admitting patients that are in dire need 

of HH services because outcomes would 

not be good. The commenter was 

concerned at the presence of 

unscrupulous HHAs that are taking 

advantage of seniors who are deserving 

of quality HH care, and advised CMS to 

be more cautious as to whom they let 

into the program. Another commenter 

stated that OASIS is very time 

consuming and the addition of 

HHCAHPs is ‘‘enough.’’ Some 

commenters suggested that OASIS–C, 

HHCAHPS, and general Quality 

Management requirements are unfunded 

mandates; that are very costly to 

implement. One commenter expressed 

concern that there is no mention of risk 

adjustments on publicly reported data. 

Another commenter noted that neither 

quality measures nor HHCAHPS address 

communication or swallowing 

capabilities. 

Response: We appreciate these 

commenters’ concerns about fraudulent 

HH providers. We are also aware that 

newer requirements, such as OASIS–C 

and HHCAHPS, may be perceived as an 

additional and burdensome 

responsibility that HHAs now have. 

However, we believe that both the 

OASIS–C process measures and 

HHCAHPS will be very useful to both 

HH beneficiaries and HHAs. Recipients 

of HH services will have access to more 

information about the quality of HH 

care. HHAs can utilize the data gleaned 

from these new requirements for their 

internal quality improvement purposes, 

which will assist them as businesses 

and providers. The HH quality 

requirements are intended to provide 

improved support for agency quality 

improvement efforts and enhanced 

quality information for both providers 

and beneficiaries. Process of care items 

that measure agencies’ use of evidencebased practices that have been shown to 

prevent exacerbation of serious 

conditions can improve care received by 


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individual patients and can provide 

guidance to agencies on how to improve 

care and avoid adverse events. 

Regarding the addition of process 

measures and best practices, it is also 

important to note that HHAs are 

encouraged to use these best care 

practices but they are not mandated 

under the current CoPs. 

With the exception of requiring that 

the item be included on the assessment 

form and answered, we are not 

prescribing the content of agency 

clinical assessments or mandating 

specific processes of care. There is no 

requirement for agencies to change their 

care processes to match the evidencebased practices measured in the OASIS 

C. It is up to each agency to determine 

which practices it will implement based 

on its own patients and operations. 

Regarding risk adjustment, all outcome 

measures will be risk adjusted for HHA 

reports and for public reporting. 

Regarding the absence of measures 

related to communication and 

swallowing, the development of both 

quality measures and patient 

satisfaction questions are dynamic 

processes and we will consider these 

categories in our future efforts. 

After considering the comments 

submitted, we have decided to finalize 

what was originally proposed. 

b. Home Health Care CAHPS Survey 

(HHCAHPS) 

In the HH PPS Rate Update for CY 

2010 final rule (74 FR 58078), we 

expanded the HH quality measures 

reporting requirements for Medicarecertified agencies to include the 

CAHPS® Home Health Care (HHCAHPS) 

Survey for the CY 2012 annual payment 

update (APU). We are maintaining our 

existing policy as promulgated in the 

HH PPS Rate Update for CY 2010, and 

are moving forward with its plans for 

HHCAHPS linkage to the P4R 

requirements affecting the HH PPS rate 

update for CY 2012. 

As part of the U.S. Department of 

Health and Human Services’ (DHHS) 

Transparency Initiative, we have 

implemented a process to measure and 

publicly report patient experiences with 

HH care using a survey developed by 

the Agency for Healthcare Research and 

Quality’s (AHRQ’s) Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS®) program. The 

HHCAHPS survey is part of a family of 

CAHPS® surveys that asks patients to 

report on and rate their experiences 

with health care. The HHCAHPS survey 

presents HH patients with a set of 

standardized questions about their HH 

care providers and about the quality of 

their HH care. Prior to this survey, there 

was no national standard for collecting 

information about patient experiences 

that would enable valid comparisons 

across all HHAs. 

(i) Background and Description of the 

HHCAHPS 

AHRQ, in collaboration with its 

CAHPS grantees, developed the 

CAHPS® Home Health Care Survey 

with the assistance of many entities (for 

example, government agencies, 

professional stakeholders, consumer 

groups and other key individuals and 

organizations involved in HH care). The 

HHCAHPS survey was designed to 

measure and assess the experiences of 

those persons receiving HH care with 

the following three goals in mind: 

• To produce comparable data on 

patients’ perspectives of care that allow 

objective and meaningful comparisons 

between HHAs on domains that are 

important to consumers; 

• To create incentives for agencies to 

improve their quality of care through 

public reporting of survey results; and 

• To hold health care providers 

accountable by informing the public 

about the providers’ quality of care. 

The development process for the 

survey began in 2006 and included a 

public call for measures, review of the 

existing literature, consumer input, 

stakeholder input, public response to 

Federal Register notices, and a field test 

conducted by AHRQ. AHRQ conducted 

this field test to validate the length and 

content of the CAHPS® Home Health 

Care Survey. We submitted the survey 

to the NQF for consideration and 

endorsement via their consensus 

process. NQF endorsement represents 

the consensus opinion of many 

healthcare providers, consumer groups, 

professional organizations, health care 

purchasers, Federal agencies, and 

research and quality organizations. The 

survey received NQF endorsement on 

March 31, 2009. The HHCAHPS survey 

received clearance from OMB on July 

18, 2009, and the OMB number is 0938– 

1066. 

The HHCAHPS survey includes 34 

questions covering topics such as 

specific types of care provided by HH 

providers, communication with 

providers, interactions with the HHA, 

and global ratings of the agency. For 

public reporting purposes, we will 

utilize composite measures and global 

ratings of care. Each composite measure 

consists of four or more questions 

regarding one of the following related 

topics: 

• Patient care 

• Communications between providers 

and patients 

• Specific care issues (medications, 

home safety, and pain) 

There are also two global ratings; the 

first rating asks the patient to assess the 

care given by the HHA’s care providers; 

and the second asks the patient about 

his or her willingness to recommend the 

HHA to family and friends. 

The survey is currently available in 

five languages. At the time of the CY 

2010 HH PPS final rule published on 

November 10, 2009, HHCAHPS was 

only available in English and Spanish 

translations. In the proposed rule for CY 

2010, we stated that CMS would 

provide additional translations of the 

survey over time in response to 

suggestions for any additional language 

translations. We now offer HHCAHPS in 

English, Spanish, Chinese, Russian, and 

Vietnamese languages. We will continue 

to consider additional translations of the 

HHCAHPS in response to the needs of 

the HH patient population. 

The following types of HH care 

patients are eligible to participate in the 

HHCAHPS survey: 

• Current or discharged Medicare 

and/or Medicaid patients who had at 

least one skilled HH visit at any time 

during the sample month; 

• Patients who were at least 18 years 

of age at any time during the sample 

period, and are believed to be alive; 

• Patients who received at least two 

skilled care visits from HHA personnel 

during a 2-month look-back period. 

(Note that the 2-month look-back period 

is defined as the 2-month period prior 

to and including the last day in the 

sample month); 

• Patients who have not been selected 

for the monthly sample during any 

month in the current quarter or during 

the 5 months immediately prior to the 

sample month; 

• Patients who are not currently 

receiving hospice care; 

• Patients who do not have 

‘‘maternity’’ as the primary reason for 

receiving HH care; and 

• Patients who have not requested 

‘‘no publicity status.’’ 

We are maintaining for the CY 2012 

APU the existing requirements for 

Medicare-certified agencies to contract 

with an approved HHCAHPS survey 

vendor. Beginning in summer 2009, 

interested vendors applied to become 

approved HHCAHPS survey vendors. 

The application process is online at 

https://www.homehealthcahps.org. 

Vendors are required to attend 

introductory and all update trainings 

conducted by CMS and the HHCAHPS 

Survey Coordination Team, as well as to 

pass a post-training certification test. 

We now have 40 approved HHCAHPS 

survey vendors. In this rule, we also 


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codify the requirements for being an 

approved HHCAHPS survey vendor for 

the CY 2013 APU. 

HHAs started to participate in 

HHCAHPS on a voluntary basis 

beginning in October 2009. We define 

‘‘voluntary participation’’ as meaning 

that HHCAHPS participation is not 

attached to the quality reporting 

requirement for the APU. These 

agencies selected a vendor from the list 

of HHCAHPS approved survey vendors, 

which is available at https:// 

www.homehealthcahps.org. 

(ii) Public Display of the Home Health 

Care CAHPS Survey Data 

The Home Health Care CAHPS data 

will be incorporated into the Home 

Health Compare Web site to 

complement the clinical measures. The 

HHCAHPS data displays will be very 

similar to those of the Hospital CAHPS 

(HCAHPS) data displays and 

presentations on the Hospital Compare 

Web site, where the patients’ 

perspectives of care data from HCAHPS 

are displayed along with the hospital 

clinical measures of quality. We believe 

that the HHCAHPS will enhance the 

information included in Home Health 

Compare by providing Medicare 

beneficiaries a greater ability to compare 

the quality of HHAs. We anticipate that 

the first reporting of HHCAHPS data 

will be in spring/summer 2011. The first 

reporting of HHCAHPS data will 

include data that were collected in the 

voluntary period of HHCAHPS data 

collection (October 2009 through 

September 2010), prior to the period 

when HHCAHPS data collection will 

count toward the 2012 APU 

requirements. HHAs will be able to 

suppress the public reporting of data 

collected in the voluntary period of data 

collection. 

(iii) Participation Requirements for CY 

2012: The Consumer Assessment of 

Healthcare Providers and Systems 

(CAHPS®) Home Health Care Survey 

In the CY 2010 HH PPS final rule (74 

FR 58078, et seq.), we stated that 

HHCAHPS would not be required for 

the APU for CY 2011. However, we 

stated that data collection should take 

place beginning in CY 2010 in order to 

meet the HHCAHPS reporting 

requirements for the CY 2012 APU 

Medicare-certified agencies were asked 

to participate in a dry run for at least 1 

month in third quarter of 2010, and 

begin continuous monthly data 

collection in October 2010 in 

accordance with the Protocols and 

Guidelines Manual located on the 

HHCAHPS Web site at https:// 

www.homehealthcahps.org. 

The dry run data should be submitted 

to the Home Health CAHPS® Data 

Center by 11:59 p.m., Eastern Standard 

Time on January 21, 2011. The dry run 

data will not be publicly reported on the 

CMS Home Health Compare Web site. 

The purpose of the dry run is to provide 

an opportunity for vendors and HHAs to 

acquire first-hand experience with data 

collection, including sampling and data 

submission to the Home Health 

CAHPS® Data Center. 

The mandatory period of data 

collection for the CY 2012 APU includes 

the dry run data in the third quarter 

2010, data from the fourth quarter 2010 

(October, November and December 

2010), and data from the first quarter 

2011 (January, February and March 

2011). We previously stated that all 

Medicare-certified HHAs should 

continuously collect HHCAHPS survey 

data for every month in every quarter 

beginning with the fourth quarter 

(October, November, and December) of 

2010, and submit these data for the 

fourth quarter of 2010 to the Home 

Health CAHPS® Data Center by 11:59 

p.m., Eastern Daylight Time on April 21, 

2011. The data from the 3 months of the 

first quarter 2011 should be submitted 

to the Home Health CAHPS® Data 

Center by 11:59 p.m., Eastern Daylight 

Time on July 21, 2011. These data 

submission deadlines are firm (that is, 

no late submissions will be accepted). 

These periods (a dry run in third 

quarter 2010, and 6 months of data from 

October 2010 through March 2011) have 

been deliberately chosen to comprise 

the HHCAHPS reporting requirements 

for the CY 2012 APU because they 

coincide with the OASIS–C reporting 

requirements that are due by June 30, 

2011 for the CY 2012 APU. In the 

previous rule, we stated that the 

HHCAHPS survey data would be 

submitted and analyzed quarterly, and 

that the sample selection and data 

collection would occur on a monthly 

basis. HHAs should target 300 

completed HHCAHPS survey annually. 

Smaller agencies that are unable to 

reach 300 survey completes by sampling 

would survey all HHCAHPS eligible 

patients. 

We stated that survey vendors initiate 

the survey for each monthly sample 

within 3 weeks after the end of the 

sample month. We wrote that all data 

collection for each monthly sample 

would have to be completed within 6 

weeks (42 calendar days) after data 

collection began. Three survey 

administration modes could be used: 

mail only; telephone only; and mail 

with telephone follow-up (the ‘‘mixed 

mode’’). We also conveyed that for mailonly and mixed-mode surveys, data 

collection for a monthly sample would 

have to end 6 weeks after the first 

questionnaire was mailed. We stated 

that for telephone-only surveys, data 

collection would have to end 6 weeks 

following the first telephone attempt. 

These criteria would remain the same 

for HHCAHPS data collection to meet 

the CY 2012 APU requirements. 

As stated in the CY 2010 HH PPS final 

rule (74 FR 58078), we would exempt 

Medicare-certified HHAs certified on or 

after April 1, 2011 from the HHCAHPS 

reporting requirements for CY 2012 as 

data submission and analysis will not be 

possible for an agency this late in the 

reporting period for the CY 2012 APU 

requirements. 

We would also exempt Medicarecertified agencies from the HHCAHPS 

reporting requirements if they have 

fewer than 60 HHCAHPS eligible 

unique patients from April 1, 2009 

through March 31, 2010. In the CY 2010 

HH PPS final rule, we stated that by 

June 16, 2010, HHAs would need to 

provide CMS with patient counts for the 

period of April 1, 2009 through March 

31, 2010. We have posted a form that 

the HHAs need to use to submit their 

patient counts on the Web site at 

https://www.homehealthcahps.org. This 

patient counts reporting requirement 

pertains only to Medicare-certified 

HHAs with fewer than 60 HHCAHPS 

eligible, unduplicated or unique 

patients for that time period. The 

aforementioned agencies would be 

exempt from conducting the HHCAHPS 

survey for the APU in CY 2012. In this 

rule, we codify the requirement that if 

an HHA has fewer than 60 eligible 

unique HHCAHPS patients annually, 

then they must submit to CMS their 

total patient counts in order to be 

exempt from the HHCAHPS reporting 

requirement. 

For CY 2012, we maintain our policy 

that all HHAs, unless covered by 

specific exclusions, meet the quality 

reporting requirements or be subject to 

a 2 percentage point reduction in the 

HH market basket percentage increase in 

accordance with section 

1895(b)(3)(B)(v)(I) of the Act. 

A reconsiderations and appeals 

process is being developed for HHAs 

that fail to meet the HHCAHPS data 

collection requirements. We proposed 

that these procedures will be detailed in 

the CY 2012 HH payment rule, the 

period for which HHCAHPS data 

collection would be required for the HH 

market basket percentage increase. 

During September through October 

2011, we will compile a list of HHAs 

that are not compliant with OASIS–C 

and/or HHCAHPS for the 2012 APU 

requirements. These HHAs would 


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receive explicit instructions about how 

to prepare a request for reconsideration 

of the CMS decision, and these HHAs 

would have 30 days to file their requests 

for reconsiderations to CMS. By 

December 31, 2011, we would provide 

our final determination for the quality 

data requirements for CY 2012 payment 

rates. HHAs have a right to appeal to the 

Prospective Reimbursement Review 

Board (PRRB) if they are not satisfied 

with the CMS determination. 

(iv) Oversight Activities for the 

Consumer Assessment of Healthcare 

Providers and Systems (CAHPS®) Home 

Health Care Survey 

We stated that vendors and HHAs 

would be required to participate in 

HHCAHPS oversight activities to ensure 

compliance with HHCAHPS protocols, 

guidelines, and survey requirements. 

The purpose of the oversight activities 

is to ensure that HHAs and approved 

survey vendors follow the Protocols and 

Guidelines Manual. As stated, all 

approved survey vendors must develop 

a Quality Assurance Plan (QAP) for 

survey administration in accordance 

with the Protocols and Guidelines 

Manual. The QAP should include the 

following: 

• An organizational chart; 

• A work plan for survey 

implementation; 

• A description of survey procedures 

and quality controls; 

• Quality assurance oversight of onsite work and of all subcontractors 

work; and 

• Confidentiality/Privacy and 

Security procedures in accordance with 

the Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

(Pub. L. 104–191, enacted on August 21, 

1996). 

As part of the oversight activities, the 

HHCAHPS Survey Coordination Team 

would conduct on-site visits and/or 

conference calls. The HHCAHPS Survey 

Coordination Team would review the 

survey vendor’s survey systems, and 

would assess administration protocols 

based on the Protocols and Guidelines 

Manual posted at https:// 

www.homehealthcahps.org. We stated 

that all materials relevant to survey 

administration would be subject to 

review. The systems and program 

review would include, but not be 

limited to the following 

• Survey management and data 

systems; 

• Printing and mailing materials and 

facilities; 

• Data receipt, entry and storage 

facilities; and 

• Written documentation of survey 

processes. Organizations would be given 

a defined time period in which to 

correct any problems and provide 

follow-up documentation of corrections 

for review. Survey vendors would be 

subject to follow-up site visits as 

needed. 

(v) HHCAHPS Requirements for CY 

2013 

For the CY 2013 APU, we will begin 

to require that four quarters of data for 

HHCAHPS be collected and reported. 

The data collection period would 

include second quarter 2011 through 

first quarter 2012. HHAs will be 

required to submit to the Home Health 

CAHPS Data Center data for the second 

quarter 2011 by 11:59 p.m., Eastern 

Daylight Time on October 21, 2011; for 

the third quarter 2011 by 11:59 p.m., 

Eastern Standard Time on January 21, 

2012; for the fourth quarter 2011 by 

11:59 p.m., Eastern Daylight Time on 

April 21, 2012; and for the first quarter 

2012 by 11:59 p.m., Eastern Daylight 

Time on July 21, 2012. 

As noted, we exempt HHAs receiving 

Medicare certification on or after April 

1, 2012 from the full HHCAHPS 

reporting requirement for the CY 2013 

APU, as data submission and analysis 

will not be possible for an agency that 

late in the reporting period for the CY 

2013 APU requirements. However, we 

require that new HHAs that receive 

Medicare certification during CY 2012 

begin HHCAHPS data collection and 

submission the quarter following receipt 

of the CMS Certification Number (CCN) 

in order to receive the CY 2013 APU. 

As noted, we require that all HHAs 

that have fewer than 60 HHCAHPSeligible unduplicated or unique patients 

in the period of April 1, 2010 through 

March 31, 2011 will be exempt from the 

HHCAHPS data collection and 

submission requirements for the CY 

2013 APU. For the CY 2013 APU, 

agencies with fewer than 60 HHCAHPSeligible, unduplicated or unique 

patients would be required to submit 

their counts on the form posted on 

https://www.homehealthcahps.org, the 

Web site of Home Health Care CAHPS 

by 11:59 p.m., e.s.t. on January 21, 2012. 

This deadline is firm, as are all of the 

quarterly data submission deadlines. 

We proposed to codify the HHCAHPS 

survey vendor requirements to be 

effective with the CY 2013 APU. In our 

regulation, we are stating in 

§ 484.250(c)(2) that applicants to 

become approved HHCAHPS survey 

vendors must have been in business for 

a minimum of 3 years and have 

conducted ‘‘surveys of individuals’’ for 

at least 2 years immediately preceding 

the application to become a survey 

vendor for HHCAHPS. For purposes of 

the approval process for HHCAHPS 

survey vendors, a ‘‘survey of 

individuals’’ is defined as the collection 

of data from individuals selected by 

statistical sampling methods and the 

data collected are used for statistical 

purposes. An applicant organization 

must: 

• Have conducted surveys of 

individuals responding about their own 

experiences, not of individuals 

responding on behalf of a business or 

organizations (establishment or 

institution surveys); 

• Be able to demonstrate that a 

statistical sampling process (that is, 

simple random sampling [SRS], 

proportionate stratified random 

sampling [PSRS], or disproportionate 

stratified random sampling [DSRS]) was 

used in the conduct of previously or 

currently conducted survey(s); 

• Be able to demonstrate that it, as an 

organization, has conducted surveys for 

at least two years, in which statistical 

samples of individuals were selected. If 

staff within the applicant organization 

has relevant experience obtained while 

in the employment of a different 

organization, that experience may not be 

counted toward the 2-year minimum of 

survey experience; and 

• Currently possess all required 

facilities and systems to implement the 

HHCAHPS Survey. 

We also proposed that the following 

examples of data collection activities 

would not satisfy the requirement of 

valid survey experience for approved 

vendors as defined for the HHCAHPS, 

and these would not be considered as 

part of the experience required of an 

approved vendor for HHCAHPS: 

• Polling questions administered to 

trainees or participants of training 

sessions or educational courses, 

seminars, or workshops; 

• Focus groups, cognitive interviews, 

or any other qualitative data collection 

activities; 

• Surveys of fewer than 600 

individuals; 

• Surveys conducted that did not 

involve using statistical sampling 

methods; 

• Internet or Web-based surveys; and 

• Interactive Voice Recognition 

Surveys. 

We also proposed to codify the 

criteria that would make organizations 

ineligible to become HHCAHPS 

approved survey vendors. We proposed 

to require that any organization that 

owns, operates, or provides staffing for 

a HHA not be permitted to administer 

its own HHCAHPS Survey or administer 

the survey on behalf of any other HHA. 

We began the HHCAHPS with the belief, 

based on input from many stakeholders 


emcdonald on DSK2BSOYB1PROD with RULES2
Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 70407 

and the public, that an independent 

third party (such as a survey vendor) 

will be best able to solicit unbiased 

responses to the HHCAHPS Survey. 

Since HH patients receive care in their 

homes, this survey population is 

particularly vulnerable and dependent 

upon their HHA caregivers. Therefore, 

in § 484.250(c), we proposed to require 

that HHAs contract only with an 

independent, approved HHCAHPS 

vendor to administer the HHCAHPS 

survey on their behalf. Furthermore, in 

§ 484.250(c)(2), we stated that ‘‘No 

organization, firm, of business that 

owns, operates, or provides staffing for 

an HHA is permitted to administer its 

own Home Health Care CAHPS 

(HHCAHPS) Survey or administer the 

survey on behalf of any other HHA in 

the capacity as an HHCAHPS survey 

vendor. Such organizations will not be 

approved by CMS as HHCAHPS survey 

vendors.’’ 

Specifically, we proposed that the 

following types of organizations would 

not be eligible to administer the 

HHCAHPS Survey as an approved 

HHCAHPS vendor: 

• Organizations or divisions within 

organizations that own or operate a 

HHA or provide HH services, even if the 

division is run as a separate entity to the 

HHA; 

• Organizations that provide 

telehealth, telemonitoring of HH 

patients, or teleprompting services for 

HHAs; and 

• Organizations that provide staffing, 

whether personal care aides or skilled 

services staff, to HHAs for providing 

care to HH patients. 

(vi) For Further Information on the 

HHCAHPS Survey 

We encourage HHAs interested in 

learning about the survey to view the 

HHCAHPS Survey Web site at https:// 

www.homehealthcahps.org. Agencies 

can also call toll-free (1–866–354–0985), 

or send an email to the HHCAHPS 

Survey Coordination Team at 

HHCAHPS@rti.org for more information. 

The following is summary of the 

comments we received regarding the 

HHCAHPS proposal. 

Comment: We received comments 

that the response rate on HHCAHPS 

(about 30 percent) will be low and thus 

difficult to meet the minimum survey 

requirement. 

Response: We conducted a Survey 

Mode Experiment for the HHCAHPS 

with 75 HHAs nationwide with data 

collection conducted between 

September 21, 2009, and January 5, 

2010. The overall response rate (for all 

three modes of mail only, telephone 

only and mixed mode of mail with 

telephone follow-up) was 45.7 percent. 

As long as the HHCAHPS survey 

protocols are followed and that the 

random sampling is completed 

correctly, the response rate of the 

HHCAHPS is not of great concern. We 

have not designated a minimum survey 

response rate requirement for the HHAs. 

Comment: Some commenters believe 

that the costs to HHAs to implement the 

HHCAHPS, including administrative 

and vendor costs, will be very high 

(estimates range from $3,500 for 300 to 

500 surveys, up to $85,000). 

Response: The commenters supplied a 

figure of $3,500 for 300 to 500 surveys, 

but did not provide the number of 

surveys conducted for the $85,000 

figure. Our Web site research shows that 

most of the vendors are charging 

between approximately $2,500 and 

$5,000 for about 300 survey completes. 

We recognize that vendors will charge 

different amounts for the survey, and 

highly recommend that HHAs ‘‘shop 

around’’ for the best value for their 

agency. The HHCAHPS target for the 

number of survey completes is 300 

regardless of agency size, thus the 

$85,000 is not a realistic figure for the 

cost of conducting HHCAHPS. The 

approved HHCAHPS survey vendor list 

is available on https:// 

www.homehealthcahps.org. Currently, 

40 vendors are approved to conduct the 

HHCAHPS survey and additional 

vendors will be approved in the coming 

months. 

Comment: Some commenters stated 

that the requirement for HHCAHPS 

should begin in CY 2013 and not in CY 

2012. 

Response: We are not delaying the 

HHCAHPS requirement for the APU to 

CY 2013, as our data suggest that HHAs 

began preparation for the HHCAHPS 

requirement since its pendency has 

been announced and discussed in prior 

regulations. HHAs anticipated the 

HHCAHPS requirement and this has 

allowed the HHAs to prepare for the 

HHCAHPS requirement. Our data, as of 

mid-October 2010 show that nearly 

8,000 Medicare-certified HHAs have 

either applied for an exemption from 

participation in HHCAHPS or registered 

for credentialing to begin HHCAHPS. 

However, we will not have a certain 

estimate of the HHA participation rate 

in the HHCAHPS dry run until after the 

deadline for that data, which is 11:59 

p.m., e.s.t. on January 21, 2011. 

In the CY 2010 HH PPS final rule (78 

FR 58078), we delayed the HHCAHPS 

requirement for the APU, from CY 2011 

to CY 2012. We announced in that final 

rule (78 FR 58078) that HHAs would 

need to conduct a dry run in third 

quarter 2010 and continuously collect 

survey data beginning in the fourth 

quarter 2010 and moving forward. 

Although we carefully considered the 

comments that we received requesting 

that HHCAHPS linkage to the APU be 

delayed until 2013, we believe that 

HHAs have had sufficient notice of the 

HHCAHPS requirements and that we do 

not need to delay the linkage of 

HHCAHPS to the CY 2013 APU. We 

initially discussed the HHCAHPS 

Survey in the May 4, 2007 proposed 

rule (72 FR 25356) and in the November 

3, 2008 Notice (73 FR 65357). In the CY 

2010 HH PPS proposed rule (74 FR 

40948), we proposed to expand the HH 

quality measures reporting requirements 

to include the CAHPS Home Health 

Care (HHCAHPS) Survey for the CY 

2011 APU. In the CY 2010 HH PPS final 

rule (74 FR 58078), we stated that the 

HHCAHPS would be effective with the 

CY 2012 APU, instead of with the CY 

2011 APU. 

Comment: Some commenters 

questioned the threshold of 300 surveys 

which would be too difficult for small 

HHAs to achieve, and too little for big 

HHAs. The commenters stated that they 

would not be able to make statistically 

valid comparisons between small and 

large HHAs with the same sample size 

of 300 completed surveys per HHA. 

Response: We understand concerns 

about the sample size. However, an 

established principle in statistics is that 

a sample size in absolute numbers is 

more important than a proportion of the 

population surveyed. Surveying a 

sample of 300 will produce the same 

level of precision whether the sample is 

10 percent, 1 percent, or even 0.01 

percent of the total population. The 

larger the sample (even if under 300), 

the less variability there will be in an 

agency’s ratings over time. Therefore, in 

the final rule we are moving forward 

with the target sample size of 300 for 

HHCAHPS as proposed. 

We appreciate this question clarifying 

whether agencies must submit 300 

completed surveys on an annual basis. 

In the proposed rule and in this final 

rule, we emphasized that HHAs should 

target 300 completes annually which 

averages about 25 completes a month. 

We understand that 300 may be difficult 

for some small agencies to achieve. 

Therefore, smaller agencies that are 

unable to reach 300 survey completes by 

sampling should survey all HHCAHPS 

eligible patients. We will accept less 

than 300 surveys completed annually if 

an agency is unable to achieve that 

number. Compliance is based on 

whether the agency did the survey, 

following the instructed protocols and 

not based on the number of patients that 

responded to the survey. 


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70408 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 

Comment: We received comments 

that the HHCAHPS survey is too long. 

Response: The version of the 

HHCAHPS survey that was used in the 

Agency for Healthcare Research and 

Quality (AHRQ) field test in 2008 had 

58 items, and the length of that survey 

did not appear to influence the 

completion of the survey. However, as 

a result of intensive data analysis and 

input from the stakeholders and the 

Technical Expert Panel, over 20 

questionnaire items were eliminated 

from the field test survey. The current 

34-item questionnaire (which received 

National Quality Forum endorsement) 

was the outcome of this development 

process. We believe that the length of 

the survey represents an effective 

compromise and achieves the goal of 

providing key quality measures of the 

patient perspectives of care while at the 

same time keeping the survey as short 

as possible. We are not shortening the 

survey in this final rule. 

Comment: Some commenters believe 

that the HHCAHPS survey questions are 

too confusing. Other commenters stated 

that the HHCAHPS survey is poorly 

crafted. 

Response: The developmental work 

on the Home Health Care CAHPS began 

in mid-2006, and the first survey was 

field-tested (to validate the length and 

content of the survey) in 2008 by the 

AHRQ and the CAHPS grantees, and the 

final survey was used in a national, 

randomized mode experiment in 2009– 

2010. A rigorous, scientific process was 

used in the development of the survey, 

including: A public call for measures; 

literature reviews; focus groups with HH 

patients; cognitive interviews (several 

rounds in 2007) with HH patients; 

extensive stakeholder input; technical 

expert panel reviews, comprehensive 

assessment review and subsequent 

endorsement in March 2009 by the 

National Quality Forum (which 

represents the consensus of many health 

care providers, consumer groups, 

professional associations, purchasers, 

federal agencies and research and 

quality organizations); and public 

responses to Federal Register notices. 

We appreciate the commenters’ 

sensitivity to the HH patients in asking 

about the usability of the HHCAHPS 

survey. The Flesch-Kincaid reading test 

showed that the HHCAHPS survey is at 

less than a seventh grade level. More 

importantly though, if patients are 

unable to answer the survey due to 

decreased capacities, a family or friend 

who is not associated with the HH 

services given to the patient, may assist 

the patient and answer the questions on 

behalf of the selected HH patient in the 

HHCAHPS HHA sample. 

Comment: We received comments 

that the HHAs need more education and 

information about HHCAHPS before it is 

a requirement. 

Response: We initially discussed the 

HHCAHPS Survey in the May 4, 2007 

proposed rule (72 FR 25356, 25423) and 

in the November 3, 2008 Notice (73 FR 

65357, 65358). In the CY 2010 HH PPS 

proposed rule (August 13, 2009), we 

proposed to expand the HH quality 

measures reporting requirements to 

include the CAHPS Home Health Care 

(HHCAHPS) Survey. In the CY 2010 HH 

PPS final rule, we stated that the 

HHCAHPS would be effective with the 

CY 2012 APU. The HHCAHPS 

requirements for CY 2012 have been 

discussed on the CMS Home Health and 

Hospice Open Door Forums from late 

2009 to the present. We have posted 

information regarding the HHCAHPS 

requirements for CY 2012 on all CMS 

sponsored Web sites for Medicare and 

State Medicaid issues. We have spoken 

on this topic of HHCAHPS requirements 

for CY 2012 at conferences with the 

National Association for Home Care and 

on conference calls with the Visiting 

Nurse Associations of America. We have 

spoken about the HHCAHPS 

requirements for CY 2012 on the CMS 

State Medicaid sponsored calls. We 

have maintained a very thorough and 

up-to-date Web site at https:// 

www.homehealthcahps.org that 

emphasized the importance of starting 

HHCAHPS in order to meet the 

requirements for CY 2012. 

Comment: We received comments 

that HHCAHPS does not address 

communication and swallowing issues 

for HH care patients. 

Response: We appreciate this input 

from the commenter and note that none 

of the HHCAHPS questions concern 

such specific issues since the number of 

issues that could be addressed in a 

survey of this length is limited. The 

main goal of the HHCAHPS is to obtain 

the patients’ perspectives of care 

regardless of the specific needs of the 

patients. 

Comment: Some commenters question 

how they will know that the approved 

survey vendors are truly independent of 

HHAs and telehealth companies and ask 

what would happen if they 

inadvertently utilized an approved 

HHCAHPS vendor carrying on a 

prohibited financial relationship with 

another HHA. 

Response: In this final rule, beginning 

with the CY 2013 APU, we will be 

requiring that all HHCAHPS approved 

survey vendors affirm at their oversight 

review, that they do not provide direct 

HH care services to the patients of the 

HHAs to which they are or will be 

contracting to conduct HHCAHPS on 

behalf of these HHAs. If an approved 

HHCAHPS survey vendor has been 

discovered to have falsified its 

affirmation, then that vendor will be 

immediately removed from the 

approved HHCAHPS survey vendor list. 

For those HHAs contracting with a 

vendor that is removed from the 

approved HHCAHPS vendor list, CMS 

will allow affected HHAs to transfer 

their submitted HHCAHPS data to 

another approved HHCAHPS vendor of 

their choice, and arrangements will be 

made should this occur in the middle of 

a quarterly period when vendor changes 

are not usually allowed for HHAs. 

Moreover, the HHCAHPS data from 

these affected HHAs will be reported on 

Home Health Compare; however, they 

will be designated with a footnote that 

explains the circumstance. 

Comment: Some commenters stated 

that CMS should pay the HHAS for the 

(administrative) costs associated with 

HHCAHPS. We received a comment that 

it will cost $1.70 more per patient to 

obtain patient satisfaction input. 

Response: The collection of the 

patient’s perspectives of care quality 

data for similar CAHPS surveys, such as 

the Hospital CAHPS survey, follow the 

same model wherein the health care 

providers pay the approved survey 

vendors for the data collection costs and 

we pay for the training, technical 

assistance, oversight of vendors and 

data analysis costs. HHAs are strongly 

encouraged to report their respective 

HHCAHPS costs on their cost reports 

but should note that these costs are not 

reimbursable under the HH PPS. It is 

advised that HHAs ‘‘shop around’’ for 

the best cost value for them before 

contracting with an approved vendor to 

conduct HHCAHPS on their behalf. 

Comment: Some commenters believe 

that the HHCAHPS is not consistent 

with Hospital CAHPS (HCAHPS). 

Response: We believe that the two 

surveys do not have to be consistent as 

the populations are different for 

Hospital and Home Health CAHPS. The 

differences in the types of questions 

reflect the differences in the nature of 

the services provided. However, both 

CAHPS surveys followed the same 

processes for the development of the 

survey and data collection protocols. 

Comment: We received comments 

that about 70 percent of HHAs have not 

responded to the requirement for 

HHCAHPS thus far, since about July 

2010, only 2,109 of the 10,500 HHAs 

have signed up, and another 1,114 have 

applied for exemptions from HHCAHPS. 

These figures show a poor rate of 

participation for HHCAHPS thus far. 


emcdonald on DSK2BSOYB1PROD with RULES2
Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 70409 

Response: The HHAs’ response to 

participating in HHCAHPS has changed 

since July 2010. Recent data show us 

that very nearly 8,000 of Medicarecertified HHAs have begun to engage in 

HHCAHPS, by either beginning the 

vendor approval process for the survey 

on https://www.homehealthcahps.org, 

or by applying for an exemption from 

the survey on https:// 

www.homehealthcahps.org. We 

anticipate that this participation rate 

will increase, especially in the next few 

months. We are carefully watching the 

participation rate for HHCAHPS, and we 

will continue to inform the public about 

HHCAHPS through the Home Health 

and Hospice Open Door Forums, Web 

sites, and other means of 

communication. 

Comment: One commenter stated 

concerns that while there are 

unscrupulous HHAS, most of the small 

HHAs have to comply with more 

requirements and face difficulty with 

remaining operational. 

Response: We appreciate the 

commenter’s concerns with the complex 

HHA system, which may allow 

unscrupulous providers to take 

advantage of senior citizens needing 

good HH services. We are aware that 

newer requirements, such as HHCAHPS, 

may be perceived as an additional cost 

and responsibility for HHAs. However, 

at the same time, we believe that 

HHCAHPS will benefit both seniors and 

other users of HH services because the 

survey will provide transparency and 

access to more information about the 

quality of HH care. In addition, HHAs 

will benefit with the information 

gleaned from HHCAHPS to utilize for 

their internal quality improvement 

purposes that benefit their agencies as 

businesses and providers of HH 

services. 

Comment: We received a comment 

asking why interactive voice recognition 

(IVR) technology or internet-based 

technology would be excluded as a 

survey mode. 

Response: We appreciate the 

commenter’s knowledge about IVR 

technology and the possible inclusion of 

this technology as an additional survey 

mode for HHCAHPS. Through the 

period of developing and testing the 

HHCAHPS survey, the mail only, 

telephone only, and mail with 

telephone follow-up modes were found 

to be the most suitable for the patient 

population receiving HH care services. 

However, we are certainly open to 

continue testing additional survey 

modes for HHCAHPS, especially with 

the possibility of internet methodologies 

in the future. 

Comment: We received a comment on 

how an approved survey vendor can 

simultaneously be an ‘‘independent’’ 

HHCAHPS surveyor and provide 

consultative services to the same HHAs 

on improving their operations. Such a 

situation is a classic conflict of interest. 

Response: We appreciate this 

commenter’s concerns about the 

independence that HH CAHPS vendors 

should maintain from the HHAs that are 

their clients. However, we believe that 

one of the goals of the HH care CAHPS 

survey is that HHAs can identify 

opportunities for improvement and 

ways to improve care. As long as the 

vendor does not directly provide care to 

patients, the vendor can independently 

provide guidance regarding methods to 

improve care provided by the HHA. 

Comment: One commenter requested 

that we reevaluate and eliminate 

proposed criteria that would exclude 

potential vendors, as the criteria 

overstep CMS’ authority to restrict 

legitimate business. 

Response: We proposed these vendor 

requirements because we need to ensure 

that fully qualified organizations would 

be capable of undertaking the 

HHCAHPS surveys. Based on the vast 

input from stakeholders and the public, 

we proposed these requirements to 

ensure that an independent party will 

be best able to solicit unbiased, uncoerced responses to HHCAHPS survey. 

Comment: One commenter stated that 

HHCAHPS is a proposed change that 

will be damaging to the HH industry 

and to the care and services provided to 

Medicare beneficiaries. 

Response: We believe that HHCAHPS 

will benefit both seniors and other users 

of HH services because they will have 

access to more information about the 

quality of HH care. In addition, HHAs 

will benefit with the information 

gleaned from HHCAHPS to use for their 

internal quality improvement purposes 

and benefit their agencies as businesses 

and providers of HH services. 

Comment: One commenter requested 

that CMS extend the deadline for 

agencies to apply for the HHCAHPS 

survey exemption beyond the original 

June 16, 2010 deadline. 

Response: We will be extending the 

deadline for agencies to apply for 

HHCAHPS survey exemption for the CY 

2012 APU to 11:59 p.m., e.s.t. on 

January 21, 2011. It is noted that the 

application for exemption from 

participation in HHCAHPS has to be 

submitted every year. 

Comment: One commenter asked if 

CMS will require additional consent/ 

authorizations to allow protected health 

information (PHI) patients to be 

included in HHCAHPS, since these PHI 

patients are now in the excluded 

categories for HHCAHPS. These 

additional consent/authorizations are 

required by New York State law. 

Response: These PHI patients are 

ineligible to be included in HHCAHPS 

by New York State Law. We are 

prohibited by law to include PHI 

patients in the HHCAHPS survey under 

any circumstances. In the HHCAHPS 

Protocols and Guidelines manual which 

can be found at https:// 

homehealthcahps.org, it states that 

patients who have a condition or illness 

for which the state in which the patient 

resides has regulations or laws 

restricting the release of patient 

information for patients with that 

condition (for example, patients with 

HIV/AIDS), that these patients are not 

eligible to be included in the HHCAHPS 

sampling procedures. 

(vii) Provisions of the Final Rule 

As a result of the comments, we will 

be extending the deadline for HHAs to 

apply for HHCAHPS survey exemption 

for the CY 2012 APU to 11:59 p.m., e.s.t. 

on January 21, 2011. Therefore, the 

deadline for the submission of the dry 

run data (collected in the third quarter 

of 2010) for the CY 2012 APU is January 

21, 2011, and the deadline to apply for 

HHCAHPS survey exemption for the CY 

2012 APU is also January 21, 2011. It is 

noted that the application for exemption 

from participation in HHCAHPS has to 

be submitted every year. 

In this final rule, beginning with the 

CY 2013 APU, we will be requiring that 

all HHCAHPS approved survey vendors 

affirm at their oversight review, that 

they do not provide direct HH care 

services to the patients of the HHAs to 

which they are or will be contracting to 

conduct HHCAHPS on behalf of these 

HHAs. If an approved HHCAHPS survey 

vendor is found to have falsified its 

affirmation, then that vendor will be 

immediately removed from the 

approved HHCAHPS survey vendor list. 

For those HHAs contracting with an 

HHCAHPS vendor that is removed from 

the approved HHCAHPS vendor list, we 

will allow affected HHAs to transfer 

their submitted HHCAHPS data to 

another approved HHCAHPS vendor of 

their choice and arrangements will be 

made should this occur in the middle of 

a quarterly period when vendor changes 

are not usually allowed for HHAs. 

Moreover, the HHCAHPS data from 

these affected HHAs will be reported on 

Home Health Compare; however, they 

will be designated with a footnote that 

explains the circumstance. 

There are no other changes noted 

from the CY 2011 HH PPS proposed 

rule. 


emcdonald on DSK2BSOYB1PROD with RULES2
70410 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 

3. Home Health Wage Index 

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

of the Act require the Secretary to 

provide appropriate adjustments to the 

proportion of the payment amount 

under the HH PPS to account for area 

wage differences, using adjustment 

factors that reflect the relative level of 

wages and wage-related costs applicable 

to the furnishing of HH services. We 

apply the appropriate wage index value 

to the labor portion of the HH PPS rates 

based on the site of service for the 

beneficiary (defined by section 1861(m) 

of the Act as the beneficiary’s place of 

residence). Previously, we determined 

each HHA’s labor market area based on 

definitions of Metropolitan Statistical 

Areas (MSAs) issued by the Office of 

Management and Budget (OMB). We 

have consistently used the pre-floor, 

pre-reclassified hospital wage index 

data to adjust the labor portion of the 

HH PPS rates. We believe the use of the 

pre-floor, pre-reclassified hospital wage 

index data results in an appropriate 

adjustment to the labor portion of the 

costs, as required by statute. 

In the November 9, 2005 final rule for 

CY 2006 (70 FR 68132), we adopted 

revised labor market area definitions 

based on Core-Based Statistical Areas 

(CBSAs). At the time, we noted that 

these were the same labor market area 

definitions (based on OMB’s new CBSA 

designations) implemented under the 

Hospital Inpatient Prospective Payment 

System (IPPS). In adopting the CBSA 

designations, we identified some 

geographic areas where there were no 

hospitals and, thus, no hospital wage 

data on which to base the calculation of 

the HH wage index. We continue to use 

the methodology discussed in the 

November 9, 2006 final rule for CY 2007 

(71 FR 65884) to address the geographic 

areas that lack hospital wage data on 

which to base the calculation of their 

HH wage index. For rural areas that do 

not have IPPS hospitals, we use the 

average wage index from all contiguous 

CBSAs as a reasonable proxy. This 

methodology is used to calculate the 

wage index for rural Massachusetts. 

However, we could not apply this 

methodology to rural Puerto Rico due to 

the distinct economic circumstances 

that exist there, but instead continue 

using the most recent wage index 

previously available for that area (from 

CY 2005). For urban areas without IPPS 

hospitals, we use the average wage 

index of all urban areas within the State 

as a reasonable proxy for the wage index 

for that CBSA. The only urban area 

without IPPS hospital wage data is 

Hinesville-Fort Stewart, Georgia (CBSA 

25980). 

On December 1, 2009, OMB issued 

Bulletin No. 10–02 located at http:// 

www.whitehouse.gov/omb/assets/ 

bulletins/b10-02.pdf. 

This bulletin highlights three 

geographic areas whose principal city 

has changed, and therefore led to the 

following CBSA names all and within a 

0.05 percentage point range changes and 

new CBSA numbers. 

• Bradenton-Sarasota-Venice, FL 

(CBSA 14600) is replaced by North PortBradenton-Sarasota, FL (CBSA 35840). 

• Fort Walton Beach-CrestviewDestin, FL (CBSA 23020) is replaced by 

Crestview-Fort Walton Beach-Destin, FL 

(CBSA 18880). 

• Weirton-Steubenville, WV-OH 

Metropolitan Statistical Area (CBSA 

48260) is replaced by SteubenvilleWeirton, OH-WV (CBSA 44600). 

The CBSAs and their associated wage 

index values are shown in Addendum B 

of this final rule. The wage index values 

for rural areas are shown in Addendum 

A of this final rule. 

The following is a summary of the 

comments we received regarding the HH 

wage index proposal. 

Comment: A commenter stated that 

the budget neutral nature of the 

methodology means that increases in 

the wage index in one area of the 

country necessarily result in decreases 

in another. 

Response: By nature, the construct of 

the hospital wage index, in the 

aggregate, is to average at 1.0. Hence, the 

index is constructed to be budget 

neutral in the sense that for areas where 

wage index values increase, those 

increases are offset by decreases in other 

areas. The hospital wage index is based 

on hospital cost data and hospital 

utilization, and thus in the aggregate, 

when applied to HH utilization for the 

purposes of impacts, the average wage 

index value may not result to be exactly 

1.0. For instance, as explained in the 

impact analysis section for this final 

rule, the new wage index will result in 

an estimated increase of $20 million in 

aggregate payments to HHAs in CY 

2011. 

Comment: A commenter stated that 

dropping critical access hospitals 

(CAHs) from the calculation of the wage 

index affects HHAs. As CAHs are 

located in rural areas, the absence of 

CAH wage data further compromises the 

accuracy, and therefore the 

appropriateness, of using a hospital 

wage index to determine the labor costs 

of HHAs located in rural areas. 

Response: While we understand the 

commenter’s concern, we are not able to 

address the comment, because the 

methodology regarding the pre-floor, 

pre-reclassified hospital wage index 

calculation (which we continue to 

believe results in an appropriate 

adjustment to the labor portion of the 

costs as required by statute), is outside 

of the scope of this final rule. 

Comment: A commenter stated that, 

pending development of an industry 

specific wage index, CMS should 

investigate the impact of a population 

density adjustment. A population 

density adjustment would result in a 

more accurate wage adjustment that 

recognizes the productivity lost in time 

spent in traveling to provide services in 

less densely populated areas. CMS 

could simply add a population density 

factor by zip code during calculation of 

the labor portion of the payment to 

account for increased costs of providing 

services in less densely populated areas. 

In addition, this adjustment would 

reduce excess reimbursement for 

services provided in densely populated 

urban and congregate living facilities. 

Response: We appreciate the 

commenter’s comment, but we do not 

have evidence that a population density 

adjustment is an appropriate adjustment 

to a wage index. Section 3131(d) of the 

Affordable Care Act requires the 

Secretary to conduct a study on HHA 

costs involved with providing ongoing 

access to care to low-income Medicare 

beneficiaries or beneficiaries in 

medically underserved areas, and in 

treating beneficiaries with varying levels 

of severity of illness. Because medically 

underserved areas may be associated 

with population density, the purview of 

the above mentioned study may 

possibly include feasibility of such an 

adjustment as part of that research. 

However, we note that in setting up the 

original HH PPS rates in 2000, we were 

not able to find any cost differences 

between rural and urban HHAs. While 

rural agencies cite the added cost of 

long distance travel to treat their 

patients, urban/non-rural agencies also 

cite added costs such as needed security 

measures and the volume of traffic that 

they must absorb. We will consider this 

suggestion in future research activities. 

Comment: A commenter stated that 

the current wage index does not 

measure local wages accurately since 

the wages vary widely in some areas. 

Response: The wages are measured at 

the local level as defined by CBSAs. 

HHAs are reimbursed based on the site 

of service of the beneficiary, using the 

wage index value for that area to adjust 

payment for geographical differences. 

Comment: A commenter stated 

concerns regarding the use of the prefloor, pre-reclassified hospital wage 

index to determine geographically 

relevant wages for HH workers. The 

commenter stated that there is a lack of 


emcdonald on DSK2BSOYB1PROD with RULES2
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parity between different health care 

provider types, each of which is subject 

to some form of a hospital wage index, 

but experiences distinct actual values in 

their specific geographic area. Hospitals 

are given the opportunity to reclassify as 

a means of being considered to be in a 

geographical area with a higher wage 

index. HHAs are not given this option. 

Using the pre-floor, pre-reclassified 

wage index continues to put home care 

at a distinct disadvantage in attracting 

and retaining employees. Existing law 

permits CMS a nearly unlimited degree 

of flexibility to utilize a wage index that 

recognizes the geographic differences in 

labor costs in the provision of HH 

services across the country. Section 

1895(b)(4)(C) of the Act mandates the 

establishment of area wage index 

adjustment factors, provides the 

Secretary discretion to determine which 

factors to consider, and permits the 

Secretary to utilize the same wage index 

adjustment factors that are utilized in 

composing the hospital wage index. The 

inherent inequity of HHAs competing 

for labor in the same service area as a 

reclassified hospital is similarly overdue 

for redress. CMS has the statutory 

authority to select the wage index 

method to be applied to HHAs and 

should move the wage index toward 

some level of comparability with that 

enjoyed by hospitals. 

Response: The regulations that govern 

the HH PPS currently do not provide a 

mechanism for allowing providers to 

seek geographic reclassification. As we 

have explained in the past (most 

recently, in the CY 2010 HH PPS final 

rule (74 FR 58105)), the rural floor and 

geographic reclassification in the IPPS 

are statutorily authorized and are only 

applicable to hospital payments. The 

rural floor provision is provided at 

section 4410 of the Balanced Budget Act 

of 1997 (Pub. L. 105–33) (BBA) and is 

exclusive to hospitals. The 

reclassification provision provided at 

section 1886(d)(10) of the Act is also 

specific to hospitals. 

Comment: In the current environment 

of deep, across-the-board cuts, the 

additional impact of inequitable, 

unpredictable, negative swings in wage 

index cannot be ignored any longer. 

Such swings are exacerbated by the 

current economic climate. The HH wage 

index is too volatile from one year to the 

next. CMS should develop a process 

that would alert HHAs to prospective 

swings in the hospital wage index prior 

to hospital wage data finalization, 

allowing agencies to seek intervention 

to eliminate or correct for missing or 

potentially spurious hospital cost report 

data on labor costs. The extra time 

would also allow agencies an 

opportunity to begin planning for 

changes needed to accommodate an 

otherwise unexpected wage index 

swing. At a minimum, the commenters 

urged CMS to put a ceiling and floor on 

year-to-year changes in the wage index 

to mitigate sudden payment changes. 

Another commenter asked CMS to 

consider applying the hospital wage 

index to all healthcare providers in a 

community. The commenter’s opinion 

is that homecare nurses require more 

skills and certifications than hospital 

nurses and home care organizations 

should be able to reimburse them fairly. 

Response: We have consistently used 

the pre-floor, pre-reclassified hospital 

wage index to adjust the labor portion 

of the HH PPS rates. The commenter is 

referring to rural floor and geographic 

reclassification provisions in the IPPS, 

which are only applicable to hospital 

payments. The rural floor provision is 

provided at section 4410 of the BBA and 

is specific to hospitals. The 

reclassification provision provided at 

section 1886(d)(10) of the Act is also 

specific to hospitals. As such, we 

continue to believe that the use of the 

pre-floor, pre-reclassified hospital wage 

index data results in the appropriate 

adjustment to the labor portion of the 

costs as required by statute. 

Comment: CMS should develop and 

conduct a voluntary pilot test on a HH 

specific wage index based on nonhospital, Bureau of Labor Statistics 

(BLS) data calculated on a county level, 

rather than on the Core Base Statistical 

Area (CBSA) level. Several commenters 

stated that CMS’ decision five years ago 

to switch from the Metropolitan 

Statistical Areas (MSAs) to the CoreBased Statistical Areas (CBSAs) for the 

wage index calculation has had serious 

financial ramifications for HHAs. The 

commenters recommend that CMS 

pursue a total reform of the HH wage 

index. 

Response: As we have stated in 

previous rules, previous proposals to 

develop a HH-specific wage index were 

not well received by commenters or the 

industry. Generally, the volatility of the 

HH wage data and the resources needed 

to audit and verify that data make 

ensuring that such a wage index most 

accurately reflects the wages and wagerelated costs applicable to the 

furnishing of HH services difficult. As 

such, we are not adopting a HH-specific 

wage index at this time. We believe that 

more importantly, a HH-specific wage 

index should be reflective of the wages 

and salaries paid in a specific area, be 

based upon a stable data source, and 

significantly improve our ability to 

determine HH payments without being 

overly burdensome. 

In its June 2007 report titled, ‘‘Report 

to Congress: Promoting Greater 

Efficiency in Medicare’’, MedPAC 

recommended that the Congress ‘‘repeal 

the existing hospital wage index statute, 

including reclassification and 

exceptions, and give the Secretary 

authority to establish new wage index 

systems.’’ As such, we will continue to 

review and consider MedPAC’s 

recommendations on a refined 

alternative wage index methodology for 

the HH PPS in the future. We believe 

that the current payment adjustment 

based on the CBSA areas is the best 

available method of compensating for 

differences in labor markets. 

Comment: A commenter encourages 

CMS to analyze HH care providers both 

by geographic location (urban vs. rural) 

and by business status (for-profit vs. 

not-for-profit) such that Medicare 

payment policy can be modified to 

reward quality and efficiency and 

reduce incentives to ‘‘pad’’ 

documentation and increase revenue. 

Response: We will be looking to 

improve the accuracy of payment to 

HHAs in the future, through a number 

of efforts. Section 3131(a) of the 

Affordable Care Act requires the 

Secretary to rebase HH payments, 

beginning in 2014. Factors that will be 

analyzed and considered include 

changes in the number of visits in an 

episode, the mix of services in an 

episode, the level of intensity of services 

in an episode, the average cost of 

providing care per episode, and other 

factors that the Secretary considers to be 

relevant. In conducting the analysis for 

rebasing, we may consider differences 

between hospital-based and 

freestanding agencies, between for-profit 

and nonprofit agencies, and between the 

resource costs of urban and rural 

agencies. Additionally, section 3131(d) 

of the Affordable Care Act requires the 

Secretary to study and report on the 

development of HH payment revisions 

that would ensure access to care and 

payment for severity of illness. The 

study is to be on HHA costs involved 

with providing ongoing 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. As 

part of this study, we are required to 

consult with appropriate stakeholders, 

such as groups representing HHAs and 

groups representing Medicare 

beneficiaries. At the conclusion of this 

study, we must submit a Report to the 

Congress by March 1, 2014. Based on 

the findings of this study, the Secretary 

may provide for a demonstration project 

to test whether making payment 

adjustments for HH services under the 


emcdonald on DSK2BSOYB1PROD with RULES2
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Medicare program would substantially 

improve access to care for patients with 

high severity levels of illness or for lowincome or underserved Medicare 

beneficiaries. 

4. CY 2011 Annual Payment Update 

a. National Standardized 60-Day 

Episode Rate 

The Medicare HH PPS has been in 

effect since October 1, 2000. As set forth 

in the July 3, 2000 final rule (65 FR 

41128), the base unit of payment under 

the Medicare HH PPS is a national 

standardized 60-day episode rate. As set 

forth in § 484.220, we adjust the 

national standardized 60-day episode 

rate by a case-mix relative weight and a 

wage index value based on the site of 

service for the beneficiary. 

In the CY 2008 HH PPS final rule with 

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

revised the HH market basket. To 

provide appropriate adjustments to the 

proportion of the payment amount 

under the HH PPS to account for area 

wage difference, we apply the 

appropriate wage index value to the 

labor portion of the HH PPS rates. The 

labor-related share of the case-mix 

adjusted 60-day episode rate is 77.082 

percent and the non-labor-related share 

is 22.918 percent. The CY 2011 HH PPS 

rates use the same case-mix 

methodology and application of the 

wage index adjustment to the labor 

portion of the HH PPS rates as set forth 

in the CY 2008 HH PPS final rule with 

comment period. Following are the 

steps we take to compute the case-mix 

and wage adjusted 60-day episode rate: 

(1) Multiply the national 60-day 

episode rate by the patient’s applicable 

case-mix weight. 

(2) Divide the case-mix adjusted 

amount into a labor (77.082 percent) 

and a non-labor portion (22.918 

percent). 

(3) Multiply the labor portion by the 

applicable wage index based on the site 

of service of the beneficiary. 

(4) Add the wage-adjusted portion to 

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

rate, subject to any additional applicable 

adjustments. 

In accordance with section 

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

constitutes the annual update of the HH 

PPS rates. The HH PPS regulations at 

§ 484.225 set forth the specific annual 

percentage update methodology. In 

accordance with § 484.225(i), for a HHA 

that does not submit HH quality data, as 

specified by the Secretary, the 

unadjusted national prospective 60-day 

episode rate is equal to the rate for the 

previous calendar year increased by the 

applicable HH market basket index 

amount minus two percentage points. 

Any reduction of the percentage change 

will apply only to the calendar year 

involved and will not be considered in 

computing the prospective payment 

amount for a subsequent calendar year. 

For CY 2011, we proposed to base the 

wage index adjustment to the labor 

portion of the HH PPS rates on the most 

recent pre-floor and pre-reclassified 

hospital wage index. As discussed in 

the July 3, 2000 HH PPS final rule, for 

episodes with four or fewer visits, 

Medicare pays the national per-visit 

amount by discipline, referred to as a 

LUPA. We update the national per-visit 

rates by discipline annually by the 

applicable HH market basket 

percentage. We adjust the national pervisit rate by the appropriate wage index 

based on the site of service for the 

beneficiary, as set forth in § 484.230. We 

adjust the labor portion of the updated 

national per-visit rates used to calculate 

LUPAs by the most recent pre-floor and 

pre-reclassified hospital wage index. We 

also proposed to update the LUPA addon payment amount and the NRS 

conversion factor by the applicable HH 

market basket update of 1.4 percent for 

CY 2011. 

Medicare pays the 60-day case-mix 

and wage-adjusted episode payment on 

a split percentage payment approach. 

The split percentage payment approach 

includes an initial percentage payment 

and a final percentage payment as set 

forth in § 484.205(b)(1) and 

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

percentage payment on the submission 

of a request for anticipated payment 

(RAP) and the final percentage payment 

on the submission of the claim for the 

episode, as discussed in § 409.43. The 

claim for the episode that the HHA 

submits for the final percentage 

payment determines the total payment 

amount for the episode and whether we 

make an applicable adjustment to the 

60-day case-mix and wage-adjusted 

episode payment. The end date of the 

60-day episode as reported on the claim 

determines which calendar year rates 

Medicare would use to pay the claim. 

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

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A partial episode payment 

adjustment as set forth in § 484.205(d) 

and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

b. Updated CY 2011 National 

Standardized 60-Day Episode Payment 

Rate 

In calculating the annual update for 

the CY 2011 national standardized 60- 

day episode payment rates, we first look 

at the CY 2010 rates as a starting point. 

The CY 2010 national standardized 60- 

day episode payment rate is $2,312.94. 

As previously discussed in section 

II.D. of this final rule (‘‘Outlier Policy’’), 

in our policy of targeting outlier 

payments to be approximately 2.5 

percent of total HH PPS payments in CY 

2011, we proposed to return 2.5 percent 

back into the HH PPS rates, to include 

the national standardized 60-day 

episode payment rate. Therefore, to 

calculate the CY 2011 national 

standardized 60-day episode payment 

rate, we first increase the CY 2010 

national standardized 60-day episode 

payment rate ($2,312.94) to adjust for 

the 2.5 percent set aside in the previous 

year for CY 2010 outlier payments. We 

then reduce that adjusted payment 

amount by 5 percent, for outlier 

payments as a percentage of total HH 

PPS payment as mandated by section 

3131 of the Affordable Care Act. Next, 

we update the payment amount by the 

CY 2011 HH market basket update of 

1.1 percent. 

As previously discussed in section 

II.A. of this final rule (‘‘Case-Mix 

Measurement Analysis’’), our updated 

analysis of the change in case-mix that 

is not due to an underlying change in 

patient health status reveals additional 

increase in nominal change in case-mix. 

Therefore, we reduce rates by 3.79 

percent in CY 2011, resulting in an 

updated CY 2011 national standardized 

60-day episode payment rate of 

$2,192.07. The updated CY 2011 

national standardized 60-day episode 

payment rate for an HHA that submits 

the required quality data is shown in 

Table 4. The updated CY 2011 national 

standardized 60-day episode payment 

rate for an HHA that does not submit the 

required quality data (that is, HH market 

basket update of 1.1 percent is reduced 

by 2 percentage points) is shown in 

Table 5. 


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TABLE 4—NATIONAL 60-DAY EPISODE PAYMENT AMOUNT UPDATED BY THE HOME HEALTH MARKET BASKET UPDATE FOR

CY 2011, BEFORE CASE-MIX ADJUSTMENT AND WAGE ADJUSTMENT BASED ON THE SITE OF SERVICE FOR THE

BENEFICIARY

CY 2010 National 

standardized 60-day 

episode payment rate 

Adjusted to return the 

outlier funds that paid 

for the 2.5 percent 

target for outlier payments in CY 2010 

Reduced by 5 percent 

due to the outlier 

adjustment mandated 

by The Affordable 

Care Act 

Multiply by the home 

health market basket 

update of 1.1 percent 

Reduce by 3.79 

percent for nominal 

change in case-mix 

CY 2011 National 

standardized 60-day 

episode payment rate 

$2,312.94 ÷ 0.975 × 0.95 × 1.011 × 0.9621 $2,192.07 

TABLE 5—FOR HHAS THAT DO NOT SUBMIT THE QUALITY DATA—NATIONAL 60-DAY EPISODE PAYMENT AMOUNT UPDATED BY THE HOME HEALTH MARKET BASKET UPDATE FOR CY 2011, BEFORE CASE-MIX ADJUSTMENT AND WAGE

ADJUSTMENT BASED ON THE SITE OF SERVICE FOR THE BENEFICIARY

CY 2010 National 

standardized 60-day 

episode payment rate 

Adjusted to return the 

outlier funds that paid 

for the 2.5 percent 

target for outlier payments in CY 2010 

Reduced by 5 percent 

due to the outlier 

adjustment mandated 

by the Affordable 

Care Act 

Multiply by the home 

health market basket 

update of 1.1 percent 

minus 2 percentage 

points (¥0.9 percent) 

Reduce by 3.79 

percent for nominal 

change in case-mix 

CY 2011 National 

standardized 60-day 

episode payment rate 

$2,312.94 ÷ 0.975 × 0.95 × 0.991 × 0.9621 $2,148.71 

c. National Per-Visit Rates Used To Pay 

LUPAs and Compute Imputed Costs 

Used in Outlier Calculations 

In calculating the CY 2011 national 

per-visit rates used to calculate 

payments for LUPA episodes and to 

compute the imputed costs in outlier 

calculations, the CY 2010 national pervisit rates for each discipline are 

adjusted for the 2.5 percent set aside 

during CY 2011 for outlier payments. 

Then these national per-visit rates are 

reduced by 5 percent as mandated by 

section 1895(b)(3)(C) of the Act, as 

amended by section 3131 of the 

Affordable Care Act. Next, the national 

per-visit rates are updated by the CY 

2011 HH market basket update of 1.1 

percent. National per-visit rates are not 

subject to the 3.79 percent reduction 

related to the nominal increase in casemix. The CY 2011 national per-visit 

rates per discipline are shown in Table 

6. The six HH disciplines are as follows: 

• Home Health Aide (HH aide); 

• Medical Social Services (MSS); 

• Occupational Therapy (OT); 

• Physical Therapy (PT); 

• Skilled Nursing (SN); and 

• Speech Language Pathology 

Therapy (SLP). 

TABLE 6—NATIONAL PER-VISIT AMOUNTS FOR LUPAS (NOT INCLUDING THE LUPA ADD-ON AMOUNT FOR A BENEFICIARY’S ONLY EPISODE OR THE INITIAL EPISODE IN A SEQUENCE OF ADJACENT EPISODES) AND OUTLIER CALCULATIONS UPDATED BY THE CY 2011 HOME HEALTH MARKET BASKET UPDATE, BEFORE WAGE INDEX ADJUSTMENT

Home health discipline type 

CY 2010 

Per-visit 

amounts per 

60-day 

episode 

Adjusted to 

return the 

outlier funds 

that paid for 

the 2.5 

percent 

target for 

outlier payments in CY 

2010 

Reduced by 

5 percent 

due to the 

outlier adjustment 

mandated 

by The 

Affordable 

Care Act 

For HHAs that DO submit 

the required 

quality data 

For HHAs that DO NOT 

submit the required 

quality data 

Multiply by 

the home 

health 

market 

basket update of 1.1 

percent 

CY 2011 

per-visit 

payment 

amount f 

For HHAs 

that DO 

submit the 

required 

quality data 

Multiply by 

the home 

health market basket 

update of 

1.1 percent 

minus 2 

percentage 

points 

(¥0.9 percent) 

CY 2011 

per-visit 

payment 

amount for 

HHAs that 

DO NOT 

submit the 

required 

quality data 

HH Aide .................................................... $51.18 ÷ 0.975 × 0.95 × 1.011 $50.42 × 0.991 $49.42 

MSS ......................................................... 181.16 ÷ 0.975 × 0.95 × 1.011 178.46 × 0.991 174.93 

OT ............................................................ 124.40 ÷ 0.975 × 0.95 × 1.011 122.54 × 0.991 120.12 

PT ............................................................. 123.57 ÷ 0.975 × 0.95 × 1.011 121.73 × 0.991 119.32 

SN ............................................................ 113.01 ÷ 0.975 × 0.95 × 1.011 111.32 × 0.991 109.12 

SLP .......................................................... 134.27 ÷ 0.975 × 0.95 × 1.011 132.27 × 0.991 129.65 

d. LUPA Add-on Payment Amount 

Update 

Beginning in CY 2008, LUPA episodes 

that occur as the only episode or initial 

episode in a sequence of adjacent 

episodes are adjusted by adding an 

additional amount to the LUPA 

payment before adjusting for area wage 

differences. 

The following is a summary of the 

comments we received regarding the 

LUPA add-on Payment. 

Comment: Several commenters stated 

that at a time when costs are increasing, 

the LUPA ‘‘add-on reduction’’ will make 

it more difficult for agencies to deal 

with the additional mandates that were 

added to the start of care visit. This is 

the first time a reduction is proposed for 

the LUPA add-on. Costs continue to 


emcdonald on DSK2BSOYB1PROD with RULES2
70414 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 

escalate, but CMS continues to expect 

more while decreasing payments. 

Response: We assume that the 

commenter is referring to either the 2.5 

percent reduction to the HH PPS 

payment amounts due to the outlier 

policy legislated by section 3131(b) of 

the Affordable Care Act or the 1 

percentage point reduction for CY 2011, 

2012, and 2013 and the productivity 

adjustment for CY 2015 and subsequent 

years to the HH market basket update 

legislated by section 3401(e) of the 

Affordable Care Act; or both. As both 

reductions are legislated by the 

Affordable Care Act, we have no 

regulatory authority to do otherwise. 

As previously discussed, we are 

returning 2.5 percent back into the 

LUPA add-on payment. We then reduce 

the LUPA add-on payment by 5 percent 

outlier adjustment as mandated by 

section 1895(b)(3)(C) of the Act as 

amended by section 3131 of the 

Affordable Care Act. Next, we update 

the LUPA payment amount by the CY 

2011 HH market basket update 

percentage of 1.1 percent. The LUPA 

add-on payment amount is not subject 

to the 3.79 percent reduction related to 

the nominal increase in case-mix. For 

CY 2011, the add-on to the LUPA 

payment to HHAs that submit the 

required quality data will be updated by 

the HH market basket update of 1.1 

percent. The CY 2011 LUPA add-on 

payment amount is shown in Table 7. 

The add-on to the LUPA payment to 

HHAs that do not submit the required 

quality data will be updated by the HH 

market basket update (1.1 percent) 

minus two percentage points. 

TABLE 7—CY 2011 LUPA ADD-ON AMOUNTS

CY 2010 LUPA 

Add-On Amount 

Adjusted to return 

the outlier funds, 

that paid for the 

original 5 percent 

target for outliers 

Adjusted to return 

the outlier funds 

that paid for the 

2.5 percent target 

for outlier payments in CY 2010 

Reduced by 5 percent due to the 

outlier adjustment 

mandated by the 

Affordable Care 

Act 

For HHAs that DO submit the required 

quality data 

For HHAs that DO NOT submit the 

required quality data 

Multiply by the 

home health market basket update 

of 1.1 percent 

CY 2011 LUPA 

Add-On Amount 

for HHAs that DO 

submit required 

quality data 

Multiply by the 

home health market basket update 

of 1.1 percent 

minus 2 percentage points (¥0.9 

percent) 

CY 2011 LUPA 

Add-On Amount 

for HHAs that DO 

NOT submit required quality data 

$94.72 ÷ 0.975 × 0.95 × 1.011 $93.31 × 0.991 $91.46 

e. Nonroutine Medical Supply 

Conversion Factor Update 

The following is summary of the 

comments we received regarding the 

Nonroutine Medical Supplies (NRS). 

Comment: A commenter stated that 

the calculation for the nonroutine 

medical supply conversion factor 

includes a reduction of 3.79 percent for 

the change in nominal case-mix weight. 

The commenter does not believe this 

reduction should be applied to the 

calculation of the NRS, as the NRS 

payment amount is not directly affected 

by changes in case-mix weight. 

When CMS developed the 

refinements to the PPS payment rates 

effective for calendar year 2008, 

significant changes were made to the 

methodology for reimbursing of 

nonroutine medical supplies. The 

analysis performed by CMS was 

designed to ‘‘better match NRS 

payments with NRS costs.’’ ‘‘The 

proposed and final regression models 

were developed after additional 

variables from OASIS items and 

targeting certain conditions expected to 

be predictors of NRS use based on 

clinical considerations. To account for 

paying of NRS through the 

implementation of a 6-severity group 

methodology, and to maintain budget 

neutrality, we reduce the national 

standardized 60-day episode payment 

rate (72 FR 49851 through 49852). 

The standardized payment amount 

was adjusted to remove the cost 

attributed to NRS or $45.87 (72 FR 

49865). Therefore, due to this change in 

methodology the NRS amount paid to 

HHAs is no longer subject to variation 

based upon the case-mix weight of the 

episode. Indeed, an episode with a casemix of 0.5827 can receive the same NRS 

payment amount as an episode with a 

case-mix of 3.4872. Therefore, the casemix adjustment as proposed should not 

be applied to the NRS payment 

amounts. 

Response: We appreciate the 

commenter’s perspective and input. 

Because our case-mix adjustment 

parameter comes from modeling the 

episode case-mix weights, not the NRS 

case-mix levels, we will defer the 

application of the 3.79 percent case-mix 

reduction to the NRS payment amounts 

for CY 2011, pending the results of an 

independent review of our case-mix and 

NRS models. Therefore, the NRS 

payment calculation will not be 

decreased by 3.79 percent for CY 2011. 

Comment: A commenter stated that 

reimbursement for nonroutine supplies 

is not adequate to cover current costs for 

these supplies. Vendors of nonroutine 

supplies continue to increase costs for 

agencies. 

Response: In our CY 2008 final rule, 

we implemented the now existing 6- 

severity group methodology for payment 

of NRS. As part of that implementation, 

we built intelligence into the HIPPS 

code so that we would know when 

supplies are being provided and when 

they are not, at all NRS severity levels. 

Since the expiration of a 6-month grace 

period, HHAs have been required to 

denote, through the HIPPS code they 

submit on the claim, whether supplies 

were actually provided to the 

beneficiary during that HH episode of 

care. As such, we will soon have the 

improved data on NRS, providing us 

with a much better capability to analyze 

and evaluate payment to HHAs for NRS 

in the future. 

Payments for nonroutine medical 

supplies (NRS) are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. We first adjust the CY 

2010 NRS conversion factor ($53.34) for 

the 2.5 percent set aside for outlier 

payments in CY 2010. We then reduce 

that amount by the 5 percent outlier 

adjustment as mandated by section 

1895(b)(3)(C), as amended by section 

3131(b) of the Affordable Care Act. 

Next, we update by the CY 2011 market 

basket update of 1.1 percent. As 

mentioned above in our summary of 

comments related to the NRS, we will 

not apply the 3.79 percent case-mix 

reduction to the NRS payment amounts 

for CY 2011. The final updated CY 2011 

NRS conversion factor for CY 2011 in 

Table 8A. For CY 2011, the NRS 

conversion factor is $52.54. 


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TABLE 8A—CY 2011 NRS CONVERSION FACTOR FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY DATA

CY 2010 NRS conversion 

factor 

Adjusted to return the 

outlier funds that paid for 

the 2.5 percent target for 

outlier payments in CY 

2010 

Reduced by 5 percent due 

to the outlier adjustment 

mandated by The 

Affordable Care Act 

Multiply by the home 

health market basket 

update of 1.1 percent 

CY 2011 NRS conversion 

factor for HHAs that do 

submit the required quality 

data 

$53.34 ÷ 0.975 × 0.95 × 1.011 $52.54 

Using the NRS conversion factor 

($52.54) for CY 2011, the payment 

amounts for the various severity levels 

are shown in Table 8B. 

TABLE 8B—RELATIVE WEIGHTS FOR THE 6-SEVERITY NRS SYSTEM

Severity level Points 

(scoring) Relative weight NRS payment amount 

1 ............................................................................ 0 ............................................................................ 0.2698 $14.18 

2 ............................................................................ 1 to 14 .................................................................. 0.9742 51.18 

3 ............................................................................ 15 to 27 ................................................................ 2.6712 140.34 

4 ............................................................................ 28 to 48 ................................................................ 3.9686 208.51 

5 ............................................................................ 49 to 98 ................................................................ 6.1198 321.53 

6 ............................................................................ 99+ ........................................................................ 10.5254 553.00 

For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2010 NRS conversion 

factor. We first adjust the CY 2010 NRS 

conversion factor ($53.34) for the 2.5 

percent set aside for outlier payments in 

CY 2010. We then reduce that amount 

by the 5 percent outlier adjustment as 

mandated by section 1895(b)(3)(C) of the 

Act, as amended by section 3131 of the 

Affordable Care Act. Next, we update 

the conversion factor by the CY 2011 

HH market basket update percentage of 

1.1 percent minus 2 percentage points. 

The CY 2011 NRS conversion factor for 

HHAs that do not submit quality data is 

shown in Table 9A. 

TABLE 9A—CY 2011 NRS CONVERSION FACTOR FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY DATA

CY 2010 NRS conversion 

factor 

Adjusted to return the 

outlier funds that paid for 

the 2.5 percent target for 

outlier payments in CY 

2010 

Reduced by 5 percent due 

to the outlier adjustment 

mandated by The 

Affordable Care Act 

Multiply by the proposed 

home health market basket update of 1.1 percent 

minus 2 percentage points 

(¥0.9 percent) 

CY 2011 NRS conversion 

factor for HHAs that do not 

submit the required quality 

data 

$53.34 ÷ 0.975 × 0.95 × 0.991 $51.50 

The payment amounts for the various 

severity levels based on the updated 

conversion factor for HHAs that do not 

submit quality data are calculated in 

Table 9B. 

TABLE 9B—RELATIVE WEIGHTS FOR THE 6-SEVERITY NRS SYSTEM FOR HHAS THAT DO NOT SUBMIT QUALITY DATA

Severity level Points 

(scoring) Relative weight NRS payment amount 

1 .......................................................................... 0 ......................................................................... 0 .2698 $13 .89 

2 .......................................................................... 1 to 14 ................................................................ 0 .9742 50 .17 

3 .......................................................................... 15 to 27 .............................................................. 2 .6712 137 .57 

4 .......................................................................... 28 to 48 .............................................................. 3 .9686 204 .38 

5 .......................................................................... 49 to 98 .............................................................. 6 .1198 315 .17 

6 .......................................................................... 99+ ..................................................................... 10 .5254 542 .06 

5. Rural Add-On 

The following is summary of the 

comments we received regarding the 

rural add-on policy. 

Comment: Several commenters stated 

support for the 3 percent rural add-on 

to the national standardized 60-day 

episode rate, national per-visit rates, 

LUPA add-on amount, and nonroutine 

medical supplies (NRS) conversion 

factor for HH services provided in rural 

areas through December 15, 2015. They 

state that this rural add-on reflects the 

higher costs of rural agencies. 

Response: The rural add-on is 

mandated by section 3131(c) of the 

Affordable Care Act. Section 3131(c) of 

the Affordable Care Act amended 

section 421(a) of the MMA, which was 

amended by section 5201(b) of the DRA. 

Thus the amended section 421(a) of the 

MMA provides an increase of 3 percent 

of the payment amount otherwise made 

under section 1895 of the Act for HH 

services furnished in a rural area (as 

defined in section 1886(d)(2)(D) of the 

Act), with respect to episodes and visits 

ending on or after April 1, 2010 and 

before January 1, 2016. The statute 


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waives budget neutrality related to this 

provision, as the statute specifically 

states that the Secretary shall not reduce 

the standard prospective payment 

amount (or amounts) under section 1895 

of the Act applicable to HH services 

furnished during a period to offset the 

increase in payments resulting in the 

application of this section of the statute. 

The 3 percent rural add-on is applied 

to the national standardized 60-day 

episode rate, national per-visit rates, 

LUPA add-on payment, and NRS 

conversion factor when HH services are 

provided in rural (non-CBSA) areas. We 

implemented this provision for CY 

2010, for episodes and visits ending on 

or after April 1, 2010 and ending before 

January 1, 2011 through Program 

Memorandum ‘‘Temporary 3 Percent 

Rural Add-On for the Home Health 

Prospective payment System (HH PPS)’’ 

(Transmittal #674/Change Request 

#6955, issued April 23, 2010). Refer to 

Tables 10 thru 13b for these payment 

rates. 

TABLE 10—CY 2011 PAYMENT AMOUNTS FOR 60-DAY EPISODES FOR SERVICES PROVIDED IN A RURAL AREA BEFORE

CASE-MIX AND WAGE INDEX ADJUSTMENT

For HHAs that DO submit quality data For HHAs that DO NOT submit quality data 

CY 2011 national 

standardized 60-day 

episode payment rate 

Multiply by the 3 percent rural add-on 

Total CY 2011 

national standardized 

60-day episode 

payment rate 

CY 2011 national 

standardized 60-day 

episode payment rate 

Multiply by the 3 percent rural add-on 

Total CY 2011 national standardized 

60-day episode 

payment rate 

$2,192.07 × 1.03 $2,257.83 $2,148.71 × 1.03 $2,213.17 

TABLE 11—PER-VISIT AMOUNTS FOR SERVICES PROVIDED IN A RURAL AREA, BEFORE WAGE INDEX ADJUSTMENT

Home health discipline type 

For HHAs that DO submit quality data For HHAs that DO NOT submit quality data 

CY 2011 pervisit rate for 

HHAs that 

DO submit 

quality data 

Multiply by 

the 3 percent 

rural add-on 

Total CY 

2011 per-visit 

rate for rural 

areas 

CY 2011 pervisit rate for 

HHAs that 

DO NOT 

submit quality 

data 

Multiply by 

the 3 percent 

rural add-on 

Total CY 

2011 per-visit 

rate for rural 

areas 

HH Aide ................................................................ $50.42 × 1.03 $51.93 $49.42 × 1.03 $50.90 

MSS ..................................................................... 178.46 × 1.03 183.81 174.93 × 1.03 180.18 

OT ........................................................................ 122.54 × 1.03 126.22 120.12 × 1.03 123.72 

PT ......................................................................... 121.73 × 1.03 125.38 119.32 × 1.03 122.90 

SN ........................................................................ 111.32 × 1.03 114.66 109.12 × 1.03 112.39 

SLP ...................................................................... 132.27 × 1.03 136.24 129.65 × 1.03 133.54 

TABLE 12—TOTAL CY 2011 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 

CY 2011 LUPA addon amount for HHAs 

that DO submit quality 

data 

Multiply by the 3 percent rural add-on 

Total CY 2011 LUPA 

add-on amount for 

rural areas 

CY 2011 LUPA addon amount for HHAs 

that DO NOT submit 

quality data 

Multiply by the 3 percent rural add-on 

Total CY 2011 LUPA 

add-on amount for 

rural areas 

$93.31 × 1.03 $96.11 $91.46 × 1.03 $94.20 

TABLE 13A—TOTAL CY 2011 CONVERSION FACTOR FOR SERVICES PROVIDED IN RURAL AREAS

For HHAs that DO submit quality data For HHAs that DO NOT submit quality data 

CY 2011 conversion 

factor for HHAs that 

DO submit quality 

data 

Multiply by the 3 percent rural add-on 

Total CY 2011 

conversion factor for 

rural areas 

CY 2011 conversion 

factor for HHAs that 

DO NOT submit 

quality data 

Multiply by the 3 percent rural add-on 

Total CY 2011 

conversion factor for 

rural areas 

$52.54 × 1.03 $54.12 $51.50 × 1.03 $53.05 


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TABLE 13B—RELATIVE WEIGHTS FOR THE 6-SEVERITY NRS SYSTEM FOR SERVICES PROVIDED IN RURAL AREAS

Severity level Points 

(scoring) 

For HHAs that DO submit quality data For HHAs that DO NOT submit quality 

data 

NRS payment amount 

for HHAs that 

DO submit 

quality data 

Multiply by 

the 3 percent rural 

add-on 

Total NRS 

payment 

amount for 

rural areas 

NRS Payment amount 

for HHAs that 

DO NOT 

submit quality 

data 

Multiply by 

the 3 percent rural 

add-on 

Total NRS 

payment 

amount for 

rural areas 

1 ...................................... 0 ..................................... $14 .18 × 1.03 ...... $14 .61 $13 .89 × 1.03 ...... $14 .31 

2 ...................................... 1 to 14 ............................ 51 .18 × 1.03 ...... 52 .72 50 .17 × 1.03 ...... 51 .68 

3 ...................................... 15 to 27 .......................... 140 .34 × 1.03 ...... 144 .55 137 .57 × 1.03 ...... 141 .70 

4 ...................................... 28 to 48 .......................... 208 .51 × 1.03 ...... 214 .77 204 .38 × 1.03 ...... 210 .51 

5 ...................................... 49 to 98 .......................... 321 .53 × 1.03 ...... 331 .18 315 .17 × 1.03 ...... 324 .63 

6 ...................................... 99+ ................................. 553 .00 × 1.03 ...... 569 .59 542 .06 × 1.03 ...... 558 .32 

E. Enrollment Provisions for HHAs 

In the CY 2011 HH PPS proposed 

rule, we proposed several payment 

safeguard provisions designed to: 

(1) Ensure that enrolling HHAs have 

sufficient capital on hand to operate the 

business; (2) improve our ability to 

verify that HHAs that are changing 

ownership meet and continue to meet 

the Conditions of Participation for 

HHAs as specified in 42 CFR part 484; 

and (3) improve the quality of care that 

Medicare beneficiaries receive from 

HHAs. 

1. HHA Capitalization 

a. Background 

As stated in the CY 2011 HH PPS 

proposed rule, in the January 5, 1998 

Federal Register (63 FR 291) we 

published a final rule that required an 

enrolling HHA to furnish proof that it 

has available sufficient funds—or 

‘‘initial reserve operating funds’’ 

(IROF)—to operate the HHA for the 

3 month period following the effective 

date of its provider agreement. This 

requirement, at § 489.28, was triggered 

by our concern that HHAs were entering 

the Medicare program without sufficient 

funds, which could, as stated in the 

preamble to the January 5, 1998 final 

rule, have deleterious consequences on 

patient care. We stated therein: 

New HHAs generally are small businesses 

and have the same need for adequate 

capitalization as have other small businesses, 

which are just starting. As with other small 

businesses, a lack of funds in reserve to 

operate the business until a stream of 

revenues can be established can seriously 

threaten the viability of the business. In 

addition, for new HHAs, which are in 

business to render patient care services, any 

condition threatening the viability of the new 

business can adversely affect the quality of 

care to their patients and, in turn, the health 

and safety of those patients. That is, if lack 

of funds forces an HHA to close its business, 

to reduce staff, or to skimp on patient care 

services because it lacks sufficient capital to 

pay for the services, the overall well-being of 

the HHA’s patients could be compromised. In 

fact, there could be the risk of serious ill 

effects as a result of patients not receiving 

adequate services. 

In the January 5, 1998 preamble, we 

also cited a 1997 OIG report entitled, 

‘‘Home Health: Problem Providers and 

their Impact on Medicare’’ (OEI–09–96– 

00110), in which the OIG expressed 

similar concerns about undercapitalized 

HHAs. The OIG stated: 

If it were not for Medicare accounts 

receivable, problem agencies would have 

almost nothing to report as assets. Agencies 

tend to lease their office space, equipment, 

and vehicles. They are not required by 

Medicare to own anything, and they are 

almost always undercapitalized. On average, 

cash on hand and fixed assets amount to only 

one-fourth of total assets for HHAs, while 

Medicare accounts receivable frequently 

equal 100 percent of total assets. These 

agencies are almost totally dependent on 

Medicare to pay their salaries and other 

operating expenses. For a home health 

agency, there are virtually no startup or 

capitalization requirements. In many 

instances, the problem agencies lease 

everything without collateral. They do not 

even have enough cash on hand to meet their 

first payroll. 

We noted in the CY 2011 HH PPS 

proposed rule that our Medicare 

contractors have traditionally 

determined the provider’s compliance 

with the capitalization provisions in 

§ 489.28 prior to making their 

recommendation for approval to the 

State Agency and CMS Regional Office 

(RO). This can occur many months 

before the HHA signs its provider 

agreement. To ensure that the HHA 

maintains its required level of 

capitalization during this potentially 

lengthy period—as well as during the 

period between when it signs said 

agreement and the time it is granted 

Medicare billing privileges (a period 

which also can last several months)—we 

proposed at § 489.28(a) to require the 

HHA to ‘‘have available sufficient funds 

* * * at the time of application 

submission and at all times during the 

enrollment process to operate the HHA 

for the 3 month period after Medicare 

billing privileges are conveyed by the 

Medicare contractor.’’ 

We believe that confirming 

capitalization more than once during 

this process would address our concern 

that a provider may have redirected 

these funds—which were originally 

secured exclusively to meet the 

capitalization requirements—for a 

purpose other than to operate the 

business. Indeed, situations have arisen 

in which an HHA no longer has 

sufficient capitalization at the time it is 

enrolled in Medicare. This defeats the 

policy behind § 489.28, which is to 

ensure that HHAs are adequately 

capitalized when they become Medicare 

providers. Accordingly, we believe that 

a prospective HHA must meet and 

maintain adequate capitalization during 

the entire period between when it 

submits its enrollment application to 

the Medicare contractor up to 3 months 

after the contractor conveys Medicare 

billing privileges to the HHA. This will 

ensure that the HHA has sufficient 

operating funds at the time of 

application submission, during the 

period in which a State Agency or 

deemed accrediting organization is 

ensuring that the HHA meets the 

Conditions of Participation, and when 

Medicare billing privileges are 

conveyed. 

b. Proposed Provisions 

We proposed the following provisions 

related to capitalization: 

• In § 424.510, we proposed to add 

the IROF requirement specified in 

§ 489.28(a), so as to make it an 

enrollment requirement for prospective 

HHAs. 

• In § 424.530(a)(8), we proposed to 

deny Medicare billing privileges to a 

prospective HHA if it could not furnish 

supporting documentation (within 30 


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days of a CMS or Medicare contractor’s 

request) verifying that it met the IROF 

requirement specified in § 489.28(a). We 

also proposed to deny Medicare billing 

privileges to a prospective HHA that 

failed to meet the IROF requirement at 

§ 489.28(a). 

• In § 424.535(a)(11), we proposed to 

revoke Medicare billing privileges and 

the corresponding provider agreement if 

the enrolled HHA was not able to 

furnish supporting documentation 

(within 30 days of a CMS or Medicare 

contractor’s request) verifying that it 

met the IROF requirement specified in 

§ 489.28(a). 

• In § 489.28(a), we proposed to 

require that the HHA have available 

sufficient IROF at the time of 

application submission, and at all times 

during the enrollment process to operate 

the HHA for the 3 month period after 

Medicare billing privileges are conveyed 

by the Medicare contractor (exclusive of 

actual or projected accounts receivable 

from Medicare). 

• In § 489.28(c), we proposed to add 

a new paragraph (1) to reemphasize that 

the Medicare contractor, in selecting 

comparative HHAs for the purpose of 

calculating the enrolling HHA’s 

required level of capitalization, could 

only select HHAs that submitted cost 

reports to Medicare. 

• In § 489.28(g)(1), we proposed to 

establish that CMS may deny Medicare 

billing privileges to an HHA unless the 

HHA meets the initial reserve operating 

funds requirements of this section. 

• In § 489.28(g)(2), we proposed to 

establish that CMS may revoke the 

Medicare billing privileges of an HHA 

that fails to meet the initial reserve 

operating funds requirements of this 

section within three months of receiving 

its billing privileges. 

c. Analysis of and Responses to Public 

Comments 

The following is a summary of the 

comments received on our proposed 

capitalization provisions, and our 

responses thereto: 

Comment: Several commenters 

expressed support for our proposal to 

require multiple instances of 

capitalization verification between the 

time an application is submitted up to 

3 months after the contractor conveys 

Medicare billing privileges. One 

commenter stated that the proposed 

capitalization requirement would 

reduce the risk that incoming providers 

will have inadequate funds to operate. 

The commenter added that the provider 

enrollment process can take several 

months or more; thus, expanding 

Medicare’s authority to verify the IROF 

more than once is a reasonable 

safeguard. Another commenter stated 

that the proposed capitalization 

requirements are important to ensure 

that new HHAs have adequate resources 

to provide quality care to patients. 

Response: We appreciate the support 

of these commenters. 

Comment: One commenter stated that 

the signing of a provider agreement 

signifies that the HHA has met the 

requirements to receive payment. The 

commenter also stated that proposed 

§ 489.28(g)(2) allows CMS to enter into 

a provider agreement before verification 

of capitalization is performed at the 

point that billing privileges are 

conveyed. From this, the commenter 

seemed to imply that verification of 

capitalization after the conveyance of a 

provider agreement is inappropriate, 

since the provider has already—via the 

provider agreement—been deemed to 

have met the Medicare requirements for 

participation, including the 

capitalization requirements. The 

commenter recommended that we: 

(1) Verify the IROF at the time of 

enrollment, the time of the initial 

survey, and the time the provider 

agreement is signed; and (2) delete 

proposed § 489.28(g)(2), as it conflicts 

with § 489.28(g)(1), which does not 

allow CMS to convey billing privileges 

until IROF requirements have been met. 

Response: In the August 16, 2010 final 

rule titled, ‘‘Medicare Program; Hospital 

Inpatient Prospective Payment Systems 

for Acute Care Hospitals and the Long 

Term Care Hospital Prospective 

Payment System Changes and FY 2011 

Rates; Provider Agreements and 

Supplier Approvals; and Hospital 

Conditions of Participation for 

Rehabilitation and Respiratory Care 

Services; Medicaid Program: 

Accreditation for Providers of Inpatient 

Psychiatric Services; Final Rule,’’ we 

revised the effective date of provider 

and supplier agreements at § 489.13. 

Specifically, section 489.13 was revised 

to clarify that the date of a Medicare 

provider or supplier approval may not 

be earlier than the latest date on which 

all applicable Federal requirements 

have been met, and that such 

requirements include review and 

verification of an application to enroll 

in the Medicare program by CMS’s 

legacy fiscal intermediary, legacy 

carrier, or Medicare Administrative 

Contractor (MAC). These clarifications 

were necessary because a September 28, 

2009 decision of the Appellate Division 

of the Department of the Appeals Board 

(DAB) that interpreted § 489.13 as not 

including enrollment application 

processing among the Federal 

requirements that must be met. 

Accordingly, the August 16, 2010 

final rule mentioned above revised 

§ 489.13(b) to state,’’ Federal 

requirements include, but are not 

limited to— 

(1) Enrollment requirements 

established in Part 424, Subpart P, of 

this chapter. CMS determines, based 

upon its review and verification of the 

prospective provider’s or supplier’s 

enrollment application, the date on 

which enrollment requirements have 

been met; 

(2) The requirements identified in 

§ 489.10 and § 489.12; and 

(3) The applicable Medicare health 

and safety standards, such as the 

applicable conditions of participation, 

the requirements for participation, the 

conditions for coverage, or the 

conditions for certification.’’ 

Thus, Medicare billing privileges are 

conveyed by the Medicare contractor, 

not through the issuance of a provider 

agreement. That is, even though the 

provider has signed a provider 

agreement, the provider must, after that 

point, still continue to meet all 

enrollment requirements before the 

contractor conveys Medicare billing 

privileges. Moreover, as stated in this 

final rule, one of those requirements is 

the maintenance of adequate 

capitalization. In fact, even after billing 

privileges are conveyed, the provider 

must meet the capitalization 

requirement for another 3 months. This 

is consistent with the Medicare 

enrollment requirement in 42 CFR 

424.500 et seq. that the provider remain 

in compliance with all enrollment 

requirements once it is enrolled in 

Medicare. 

With respect to the commenter’s 

request to delete § 489.28(g)(2) because 

it conflicts with § 489.28(g)(1), we 

believe there is no conflict. Section 

§ 489.28(g)(2) provides that the 

capitalization requirements be 

maintained for 3 months after billing 

privileges are conveyed—much like the 

requirement that the provider continue 

to meet other enrollment requirements 

after it is enrolled in Medicare. Section 

§ 489.28(g)(1), on the other hand, 

provides that capitalization 

requirements must be met before billing 

privileges are conveyed. The provisions, 

in other words, are not mutually 

exclusive. They simply cover two 

different timeframes. 

Nevertheless, to alleviate any 

confusion on this issue, we have revised 

§ 489.28(a) to reemphasize that the HHA 

must maintain capitalization during the 

3 month period following its receipt of 

Medicare billing privileges. 

Comment: Several commenters stated 

that if CMS intends for HHAs to 


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maintain capitalization 3 months after 

they are able to bill Medicare, this does 

not comport with the provisions of 

§ 489.28(g), even after these provisions 

are changed pursuant to this rule. This 

is because § 489.28(g) will still state that 

CMS will only convey Medicare billing 

privileges to an HHA that satisfies its 

IROF requirement. Another commenter 

also requested clarification on how our 

proposed changes are consistent with 

the current verbiage in § 489.28(g). 

Response: As indicated in our 

response to the previous commenter, the 

HHA will still be required to satisfy the 

IROF requirement before receiving 

Medicare billing privileges. However, 

the HHA will also be required to 

maintain the IROF level during the first 

3 months after receiving billing 

privileges. These two requirements, 

again, are not inconsistent, but merely 

address two different timeframes. We 

have revised § 489.28(a) to make this 

point more clear. 

Comment: One commenter stated that 

the new capitalization rules could 

hinder the creation of new HHAs, 

which, in turn, could harm underserved 

areas, and that the closure of a new 

HHA because of the new requirements 

could disrupt patient care. The 

commenter recommended flexibility 

and discretion in applying the 

capitalization requirements when the 

HHA’s failure to meet the required IROF 

levels is superseded by the need for the 

HHA in that community, or when the 

HHA’s financial condition on a 

prospective basis suggests that it will 

likely become financially viable. 

Response: While we understand and 

appreciate the commenter’s concerns, 

we feel, for reasons already stated, that 

it is important for incoming HHAs to 

meet and maintain the capitalization 

amount specified by the Medicare 

contractor at the time of enrollment, 

throughout the enrollment process, and 

during the first 3 months after Medicare 

billing privileges are conveyed. We 

note, moreover, that if a HHA’s 

Medicare billing privileges are denied or 

revoked for failing to meet the 

capitalization requirements, the HHA is 

afforded administrative appeal rights 

pursuant to the procedures set forth in 

42 CFR part 498. 

Comment: One commenter stated that 

it is unclear whether CMS will require 

HHAs to show capitalization more than 

3 months after they are able to bill the 

Medicare program. 

Response: Section 489.28(a) of the 

final rule states that the HHA must 

maintain capitalization up to 3 months 

after Medicare billing privileges have 

been conveyed to the provider. 

Comment: One commenter stated that 

the proposed provisions lack clarity as 

to when an HHA will be required to 

show capitalization. 

Response: We believe that § 489.28(a) 

is clear as to the points at which proof 

of capitalization must be shown. 

Comment: One commenter 

recommended that CMS ensure there is 

transparency throughout the 

capitalization process. Specifically, the 

commenter urged CMS to make certain 

that the applicant: (1) Is able to 

determine how much capitalization is 

needed at the time it submits its 

application through the last stage of the 

review process; (2) is notified if or when 

the capitalization amount changes and 

give the applicant sufficient time to 

secure any capitalization shortfall; and 

(3) is subject to capitalization standards 

that are evidence-based and reviewable 

by an objective and independent person 

or entity. Another commenter 

recommended that CMS require each 

contractor to: (1) Publish the 

methodology used to calculate IROF 

levels for a particular region or State; 

(2) use current cost report data for each 

calendar year; and (3) publish ranges of 

IROF based on current cost report data. 

Response: We will ensure that: 

(1) Sufficient information is available to 

HHAs prior to submitting their 

enrollment applications so they know 

what the appropriate capitalization 

levels are and the justification for and 

basis behind them; (2) incoming HHAs 

are notified when their required 

capitalization amounts change; and (3) 

our Medicare contractors calculate the 

IROF amount consistent with existing 

regulations and the provisions in this 

final rule. Moreover, we expect that our 

contractors will make annual 

adjustments to the IROF to ensure that 

the capitalization amount is based on 

current full cost report data. 

Comment: One commenter indicated 

that the proposed clarification in 

§ 489.28(c)(1) regarding the use of cost 

reports when selecting comparative 

HHAs is superfluous, since § 489.28(c) 

is already clear on this point. 

Response: Though we agree that 

§ 489.28(c) already discusses this topic, 

we have clarified in this final rule that 

Medicare contractors will use full cost 

report data to calculate the IROF 

amount. As such, Medicare contractors 

will exclude from the IROF calculation 

those HHAs that do not submit cost 

report data or that submit low 

utilization cost report data, as defined in 

existing program guidance. 

Comment: A commenter stated that 

§ 489.28(a) holds that the IROF is to be 

used to operate the HHA for the 3 

month period after its Medicare 

provider agreement becomes effective. 

Requiring an HHA to show proof of 

IROF 3 months after billing privileges 

have been conveyed will not allow the 

agency to use these funds as intended 

by the rule. 

Response: We do not agree that the 

HHA would be unable to use these 

funds during the first 3 months of 

operations. Section 489.28(a) simply 

states that the provider must have 

adequate capitalization on hand to 

operate the business for the 3 month 

period after billing privileges are 

conveyed. 

Comment: One commenter stated that 

the need to show capitalization three 

times places a tremendous financial 

burden on prospective HHAs that are 

providing care to patients while 

awaiting reimbursement approval. 

Response: We believe this comment 

underscores our concern about 

undercapitalized HHAs enrolling in 

Medicare. Moreover, since most 

businesses receive monthly banking 

statements or have ready access to 

information about their financial net 

worth, we do not believe that it is 

burdensome to furnish this information 

upon a Medicare contractor’s request. 

2. HHA Changes of Ownership 

a. Background 

In the CY 2010 HH PPS proposed 

rule, we also addressed the issue of 

HHA ‘‘flipping’’ (e.g., rapidly selling the 

HHA), or the HHA ‘‘certificate mill’’ 

process. We explained in detail how 

this process works and our concerns 

about it in the preamble to that August 

13, 2009 rule (74 FR 40948): 

We have recently found instances where 

owners of a HHA, some of which were 

working in concert with brokers or 

organizations operating ‘turn-key’ businesses, 

have enrolled or have attempted to enroll in 

the Medicare program for the specific 

purpose of selling the Medicare billing 

privileges and the Medicare provider 

agreement of their HHA to a third-party. In 

this scenario, the buyer or seller of the HHA 

typically would notify Medicare of the sale 

or change of ownership via the Medicare 

enrollment application (CMS–855A) after the 

billing privileges have been transferred when 

the HHA is sold. 

Current CMS policy recommends surveys 

when there is a change of ownership. 

However, surveys in cases of a change of 

ownership do not occur with the frequency 

that they do when providers initially enroll 

in Medicare. Consequently, there are 

instances in which a change of ownership 

takes place yet the new owner does not 

undergo a survey, in which case Medicare 

cannot conclusively ascertain whether the 

business, under new ownership, meets the 

Conditions of Participation under 42 CFR 

part 484. This serves as an incentive for 

certain prospective providers to enroll in the 


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Medicare program with the sole purpose of 

transferring Medicare billing privileges and 

the associated provider agreement when the 

business is sold. 

This is problematic for two reasons. First, 

the prospective provider has minimal 

incentive for ensuring quality care for its 

patients after it is enrolled because its 

exclusive objective for participating in 

Medicare in the first place is to sell the 

business shortly after receiving Medicare 

billing privileges. In other words, the 

provider, aware that it may be able to sell the 

business without the HHA having to undergo 

a survey, may have little motivation to ensure 

that it is in compliance with the Conditions 

of Participation under 42 CFR part 484, since 

it intends on selling the business in any 

event. Medicare beneficiaries, therefore, may 

receive inadequate services as a result of this 

activity. Second, without the protection that 

a survey provides, the HHA may attempt to 

bill Medicare for these insufficient services. 

These circumstances increase the risk for an 

HHA to submit inappropriate and potentially 

fraudulent claims to Medicare, which places 

the Medicare Trust Funds at risk. 

In short, under this scenario, 

entrepreneurs apply for Medicare HHA 

certification, undergo a survey, and 

become enrolled in Medicare, but then 

immediately sell the agency. These 

brokers, in other words, enroll in 

Medicare exclusively to sell the HHA, 

rather than to provide services to 

beneficiaries. This practice allows a 

purchaser of an HHA to enter the 

Medicare program through the back 

door—via the change of ownership 

process—without having to undergo a 

State survey. Because of this 

circumvention of the State survey 

process, we have no way of knowing 

whether the HHA, under its new 

ownership, is still in compliance with 

the HH conditions of participation. 

Largely to address this concern, we 

proposed in § 424.550(b)(1) of the CY 

2010 HH PPS proposed rule that if an 

owner of an HHA sells (including asset 

sales or stock transfers), transfers or 

relinquishes ownership of the HHA 

within 36 months after the effective date 

of the HHA’s enrollment in Medicare, 

the provider agreement and Medicare 

billing privileges do not convey to the 

new owner. The prospective provider/ 

owner of the HHA must instead: (1) 

Enroll in the Medicare program as a new 

HHA under the provisions of § 424.510; 

and (ii) obtain a State survey or an 

accreditation from an approved 

accreditation organization. 

We received several comments 

supporting the establishment of this ‘‘36 

month rule’’ and did not receive any 

specific recommendations that we 

establish exceptions thereto. We 

therefore left § 424.550(b)(1) largely 

intact in the 2010 HH PPS final rule. 

However, we did reiterate in that rule 

that the 36-month provision was not 

only designed to deal with the specific 

issue of ‘‘flipping,’’ but to also address 

the broader problem of new owners of 

HHAs entering the program without a 

State survey being performed: 

We wish to make clear that the intent of 

42 CFR § 424.550(b)(1) goes beyond the issue 

of ‘‘turn-key’’ operations. If an HHA 

undergoes a change of ownership, CMS—at 

the current time—generally does not perform 

a State survey pursuant thereto. CMS 

therefore has no sure way of knowing 

whether the HHA, under its new ownership 

and management, is in compliance with the 

HHA conditions of participation—regardless 

of whether the ownership change occurred 

12, 24, or 36 months after the HHA’s initial 

enrollment. Unless CMS can make this 

determination, there is a risk that the newlypurchased HHA, without having been 

appropriately vetted via the survey process, 

will bill for services when it is out of 

compliance with the conditions of 

participation. And in light of the frequency 

of inappropriate practices, as outlined in the 

GAO report, of HHAs relative to other 

provider types, we believe it is imperative 

that we ensure that the newly-purchased 

HHA be subject to an appropriate level of 

review. (74 CFR 58118) 

The effective date of § 424.550(b)(1) 

was January 1, 2010. 

b. Proposed Provisions 

After the implementation of 

§ 424.550(b)(1), we received a number of 

comments regarding the impact of this 

provision on bona fide ownership 

transactions. Therefore, in this year’s 

HH PPS proposed rule, we proposed to 

revise § 424.550(b)(1), and to establish 

several exceptions: 

• In § 424.502, we defined the term 

‘‘change in majority ownership’’ to mean 

when an individual or organization 

acquires more than a 50 percent interest 

in an HHA during the 36 months 

following its initial enrollment into the 

Medicare program or a change of 

ownership (including asset sales, stock 

transfers, mergers, or consolidations). 

This would include an individual or 

organization that acquires majority 

ownership in an HHA through the 

cumulative effect of asset sales, stock 

transfers, consolidations, and mergers 

during a 36 month period. 

• In § 424.550(b)(1), we proposed that 

any change in majority ownership 

within 36 months after the effective date 

of the HHA’s enrollment in Medicare 

(including asset sales, stock transfers, 

mergers or consolidations) would 

require the entity to enroll as a new 

HHA and undergo a State survey or 

obtain accreditation. 

• In § 424.550(b)(2)(i), we proposed to 

exempt from § 424.550(b)(1) a publiclytraded company that is acquiring 

another HHA, and both entities 

submitted cost reports to Medicare for 

the previous 5 years. 

• In § 424.550(b)(2)(ii), we proposed 

to exempt from § 424.550(b)(1) an HHA 

parent company that is undergoing an 

internal corporate restructuring, such as 

a merger or consolidation, and the HHA 

submitted a cost report to Medicare for 

the previous 5 years. 

• In § 424.550(b)(2)(iii), we proposed 

to exempt from § 424.550(b)(1) those 

situations where the owners of an 

existing HHA are changing its existing 

business structure (for example, 

partnership to a limited liability 

company; sole proprietorship to 

subchapter S corporation), but the 

individual owners remain the same and 

there is no change in majority 

ownership. 

• In § 424.550(b)(2)(iv), we proposed 

to exempt from § 424.550(b)(1) those 

ownership changes involving the death 

of an owner who owns a 49 percent or 

less interest in an HHA (where several 

individuals or organizations are coowners of an HHA and one of the 

owners dies). 

We proposed these exceptions to 

account for certain legitimate 

transactions that might be unduly 

affected by the 36-month rule. However, 

as we stated in the proposed rule, our 

decision to do so in no way alleviated 

our ongoing concerns about the 

‘‘certificate mill’’ process. We also 

remained concerned about the broader 

ability of new HHA owners to enter 

Medicare through the back door via the 

change of ownership process, as 

opposed to the initial enrollment and 

State survey mechanism. 

c. Analysis of and Responses to Public 

Comments 

The following is a summary of the 

comments received regarding the 36- 

month rule, and our responses thereto: 

(1) General Application of Rule 

Comment: One commenter expressed 

support for the 36-month rule, as well 

as for our proposed changes and 

exceptions. The commenter stated that 

the rule is one means to reduce the 

number of new HHAs that: (1) Are 

entering Medicare ill-equipped to 

provide high-quality care; and (2) easily 

fall into patterns of behavior that hurt 

the integrity of the Medicare program. 

Another commenter stated that the 

additional clarification to the 36-month 

rule was positive. 

Response: We appreciate and agree 

with these comments. 

Comment: One commenter stated that 

the survey of an HHA that has changed 

owners would seem appropriate. New 


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owners/operators may not be welleducated on home care rules and 

regulations, and surveys of such 

agencies would often be in the patients’ 

best interests. Exceptions might be 

considered when another alreadycertified and operating HHA with a 

proven track record purchases another 

HHA. Still, care transitions and 

managerial changes can place patient 

care at risk. Timely and targeted surveys 

may avoid many problems later on, both 

for the purchased HHA and its patients. 

Response: We appreciate this 

comment, and share the commenter’s 

belief that surveying new owners would 

be in the best interests of the HHA’s 

patients. 

Comment: Several commenters 

recommended that we limit the 

applicability of the 36-month rule to 

ownership changes occurring within 36 

months after the effective date of the 

HHA’s initial enrollment in Medicare, 

rather than within 36 months after the 

HHAs most recent ownership change. 

One commenter added that this single 

change would eliminate the most 

significant problems created by the 

proposed rule. 

Response: We believe that applying 

§ 424.550(b)(1) to ownership changes 

that occur within 36 months of: (1) 

Initial enrollment and (2) the HHA’s 

most recent ownership change, is 

needed to ensure that newly-sold HHAs 

are in compliance with the conditions of 

participation. 

Comment: Several commenters 

recommended that we rescind the 

current 36-month rule and establish a 

technical advisory committee with 

experts from home care and the finance 

sector to establish guidelines that will 

ensure that patient care remains the top 

priority for existing and new home care 

agencies. 

Response: We disagree that a 

technical advisory committee is needed 

to address the provisions of the 36- 

month rule. We believe that the 

comments received in response to our 

proposal and our subsequent changes 

will result in improved patient care and 

financially viable HHAs. 

Comment: Several commenters stated 

that the proposed provisions constitute 

an expansion of the 36-month rule that 

would block new investments in the HH 

industry, which, in turn, could inhibit 

necessary industry consolidation and 

prevent providers from expanding. The 

commenters generally believed that the 

costs of the proposed revisions 

outweigh any benefits to the Medicare 

program or its beneficiaries. Another 

commenter stated that revising the rule 

to ensure that capital is available will 

lead to better patient care outcomes, 

fewer issues in the operations of HHAs, 

and increased innovations that will 

lower the overall costs of care. 

Response: We disagree with the 

assertion that the costs of the proposed 

rule outweigh its benefits. Beyond the 

issue of ‘‘certificate mills’’ and HHAs’ 

‘‘flipping’’ ownership to a third-party, 

we remain concerned about: (1) The sale 

or transfer of HHAs that have little or no 

enterprise value except the Medicare 

billing number, and (2) new owners 

entering Medicare without the HHA 

having to undergo a State survey. 

Comment: Several commenters stated 

that for many HHAs that have been 

enrolled in Medicare for more than 36 

months (or even less than 36 months), 

the proposed rule will deprive them of 

access to capital, in that no existing 

HHA can afford to lose its Medicare 

participation until a new survey is 

conducted, a process which can take 

many months. No ongoing business, the 

commenters stated, can continue to 

incur expenses with no revenue during 

that time, and that patient care could 

therefore suffer. Several commenters 

further contended that by expanding the 

rule to apply to changes occurring more 

than 36 months after initial enrollment, 

banks will not loan money to, private 

equity firms will not invest in, and 

quality HHA organizations will not 

purchase, existing HHAs. This is 

because the bank/purchaser realizes it 

will be unable to effectively (a) foreclose 

upon, or (b) sell its majority interest in 

the business, due to the need to enroll 

as a new provider and undergo a survey. 

The commenters stated that some 

financiers have, since the 

implementation of § 424.550(b)(1), 

declined to loan money to HHAs 

because of these concerns, with one 

commenter adding that this closing of 

access to funds does not help address 

the issue of ‘‘flipping.’’ One commenter 

added that CMS should not require 

enhanced capitalization in one section 

of the proposed rule while denying 

access to that capital in another. 

Another commenter stated that many 

entities will avoid the HHA business 

entirely if they cannot exit their 

investment for 36 months or obtain 

capital. Meanwhile, enrolled HHAs, 

another commenter noted, will be 

reluctant to exit Medicare, which could 

prove problematic for Medicare if the 

HHA is poorly-performing or of lowquality. Another commenter stated that 

lenders already perform due diligence 

on the HHA before loaning it money. 

This important safeguard is lost if 

lenders will not loan funds to the HHA 

because of the 36-month rule. 

Response: As already stated, the 36- 

month rule is designed to ensure that 

enrolled HHAs comply with the HHA 

conditions of participation and furnish 

quality services to Medicare 

beneficiaries. Nevertheless, we have 

adopted, as explained below in more 

detail, certain exceptions to the 36- 

month rule. We believe these exceptions 

will help ensure that HHAs are able to 

obtain financing, while at the same time 

protecting the integrity of the Medicare 

program. 

Comment: One commenter suggested 

that rather than require an HHA to 

reenroll in Medicare, the entity should 

instead have to obtain re-accreditation 

from an approved accreditation 

organization within 6 months of the 

ownership change. If reaccreditation is 

obtained within this period, the 

reenrollment process should not be 

required. If reaccreditation is not 

obtained, reenrollment would be 

necessary. The commenter believed that 

the reaccreditation process would be a 

faster and more cost-effective way to 

identify and stop the certificate mill 

process, and would not result in a gap 

in reimbursement for legitimate HHAs 

or a reduction in services for patients. 

Another commenter stated that the HHA 

should still be able to bill Medicare 

while awaiting the survey. This will 

prevent a disruption of services. 

Response: Though we appreciate 

these comments, our concern is that 

during the period in which the HHA is 

waiting for the survey to be performed, 

an entity that is potentially out of 

compliance with the conditions of 

participation because of its ownership 

change may be billing Medicare for 

services it is not qualified to provide. 

Accordingly, we are not adopting these 

recommendations. 

Comment: A commenter stated that 

although the survey requirement of the 

36-month rule is essentially based on 

the old owner’s conduct—that is, the 

owner’s sale of its HHA—it is the new 

owner that must undergo the survey. 

The commenter believed this was 

somewhat unfair. 

Response: We disagree. In the 

commenter’s scenario, the buyer is 

voluntarily agreeing to purchase the 

HHA. If a prospective buyer is 

uncomfortable with undergoing a 

survey, it need not proceed with the 

sale. Moreover, by ensuring that the 

HHA has submitted full cost reports, we 

believe this information will assist the 

buyer in establishing a fair valuation for 

the HHA it is purchasing. 

Comment: One commenter questioned 

the value of § 424.550(b)(1) on two 

grounds. First, if an owner has operated 

a Medicare-enrolled HHA for at least 36 

months, it is clear that it is not a broker 

looking to immediately ‘‘flip’’ the HHA 


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after enrollment. Second, an HHA can 

easily circumvent the 36-month rule by 

simply not disclosing the ownership 

change; the commenter suggested that 

by the time CMS learns of the 

transaction, it may be too late. Several 

commenters contended that the rule is 

only triggered when the HHA selfreports the change in ownership to 

CMS. Legitimate businesses that are 

willing to self-report under these 

circumstances are not the types of 

entities that generally pose a risk to 

Medicare. It therefore follows that the 

36-month rule will prevent only 

legitimate transactions from taking 

place. Another commenter stated that if 

an HHA is enrolled for more than 36 

months, this should be adequate proof 

that the entity is not a certificate mill. 

Hence, the rule should only apply to the 

first 36 months of enrollment. 

Response: With respect to the first 

comment, we have, as previously 

mentioned, elected to apply 

§ 424.550(b)(1) to ownership changes 

that occur within 36 months of: 

(1) Initial enrollment, and (2) the HHA’s 

most recent ownership change. Again, 

our concerns go beyond the issue of 

‘‘flipping,’’ and touch on the larger 

question of whether a newly-sold HHA 

is still in compliance with the 

conditions of participation. 

Regarding the remaining comments, 

we note that—under the Medicare 

enrollment regulations at 42 CFR 

424.500 et seq.—a failure to report an 

ownership change to CMS can result in 

a: (1) Retroactive revocation of the 

provider’s Medicare billing privileges, 

and (2) a bar against reenrolling in 

Medicare for a period of 1 to 3 years. 

Hence, it is to the provider’s advantage 

to self-report the ownership change, for 

failing to do so could keep the provider 

out of Medicare for a much longer 

period if the provider’s billing privileges 

are revoked. Moreover, § 424.550(b)(1) is 

triggered when the change of ownership 

occurs, rather than whether it is 

reported. In other words, it is not the 

submission of a CMS–855A ownership 

change application that implicates 

§ 424.550(b)(1), but the ownership 

change itself. 

Comment: Several commenters stated 

that § 424.550(b)(1) was inconsistent 

with section 1891(c)(2)(B)(i) of the Act. 

They contended that Congress did not 

intend for State surveys to take place 

every time there is a change of 

ownership, and that if a survey was 

nevertheless necessary, it had to occur 

within 2 months of the change. The 

commenters believed that CMS has 

therefore exceeded the authority 

provided to the Secretary under section 

1891(c)(2)(B)(i). 

Response: We disagree. Nothing in the 

statute itself prohibits us from enacting 

§ 424.550(b)(1). Section 1891(c)(2)(B)(i) 

gives CMS the discretion to perform a 

survey within 2 months if a change of 

ownership has occurred. This issue was 

discussed in the legislative history of 

this provision, which read in part: 

The Committee amendment would 

authorize the States and the Secretary to 

conduct a standard survey, or an abbreviated 

version of a standard survey within 2 months 

after any change in ownership, 

administration, or management of a facility, 

as well as after a change in the director of 

nursing. (H.R. Rep. 100–391(I), 1987 

U.S.C.C.A.N. 2313–1) (Emphasis added). 

However, as both the statute and the 

aforementioned language indicate, we 

are not mandated to take this action 

within the 2 month period. In addition, 

while we appreciate the need for 

surveys in such situations to be 

conducted as rapidly as possible, State 

survey workloads generally do not 

permit them to happen within 2 months 

of the change. 

Comment: Several commenters stated 

that instead of requiring a new 

enrollment and survey—a process 

which could take an extended period of 

time—CMS should use its authority 

under section 1891(c)(2)(B)(i) to conduct 

a survey of a sold HHA within 2 months 

of the sale’s effective date. They added 

that the § 424.550(b)(1) survey 

requirement will further burden State 

survey agencies and accreditation 

organizations. In light of this, they 

questioned the need for such surveys if 

both the buyer and seller are legitimate 

businesses, as shown by their 

submission of cost reports for 36 

months. 

Response: While we appreciate this 

suggestion, the commenters seem to 

imply that we do not have the authority 

to conduct a survey outside of that 

referenced in section 1891(c)(2)(B)(i) of 

the Act. As already indicated, we do not 

agree. We further note that a survey 

performed pursuant to § 424.550(b)(1) is 

of a new HHA, not an existing one; this 

is because § 424.550(b)(1) requires the 

HHA to enroll as a new provider. 

Comment: One commenter suggested 

that CMS hold that an HHA provider 

number will not transfer upon an 

ownership change unless either: (1) The 

new owner has successfully been 

through the State survey or 

accreditation process and the parent 

company has filed cost reports on behalf 

of other HHAs it owns for 36 months; 

or (2) the HHA being purchased has 

filed cost reports for at least 36 months. 

This would, the commenter explained, 

significantly curtail, if not eliminate, the 

certificate mill process. 

Response: As already explained, our 

concerns are not limited to the 

‘‘flipping’’ process. We are also 

concerned with ensuring that newlysold HHAs are still in compliance with 

the conditions of participation. 

Nevertheless, we have adopted an 

exception to the 36-month rule that is 

consistent with the commenter’s second 

suggestion. 

Comment: Several commenters stated 

that the primary intent of this provision 

was to stem the practice of turn-key 

ventures that establish HHAs for the 

sole purpose of selling them. The 

commenters argued that the proposed 

rule exceeds this intent. 

Response: We disagree that this rule 

exceeds its intent. Again, aside from the 

issue of ‘‘flipping,’’ we believe it is 

crucial for Medicare to ensure that 

entities undergoing an ownership 

change remain in compliance with the 

conditions of participation. We believe 

the final rule helps fulfill this intent. 

Comment: One commenter stated that 

the proposed changes are confusing and 

discriminatory, that the rule conflicts 

with existing law regarding transfers of 

ownership, and will effectively halt all 

mergers and acquisitions in the HH 

industry unless the HHA is a public 

company. The commenter stated that 

many HHAs are small companies, and 

their investment in our communities 

should be protected. 

Response: We are unable to address 

the commenter’s first and second 

contentions, as the commenter did not 

explain how the proposed rule is 

confusing or discriminatory, or how it is 

inconsistent with current laws regarding 

ownership changes. With respect to the 

third contention, we agree that the 

volume of HHA ownership changes, 

including asset sales and stock transfers, 

could be reduced as a result of the 36- 

month rule. Yet we also believe that the 

exceptions outlined in this final rule 

will allow a number of legitimate HHA 

ownership changes to proceed. 

Comment: Several commenters stated 

that no evidence of the ‘‘certificate mill’’ 

problem has been substantiated by CMS. 

Another commenter stated that CMS has 

not defined or described the program 

integrity or quality of care concerns that 

the proposed rule is designed to 

address, nor has CMS identified the 

harm caused by the ‘‘flipping’’ process. 

This commenter added that if CMS’s 

concerns go beyond the issue of 

‘‘flipping,’’ this needs to be clearly 

disclosed so that comments can be 

furnished. 

Response: We disagree with these 

assertions. In the proposed and final 

rules for CY 2010 and 2011, we clearly 

articulated our concerns about this 


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problem and stated that we have 

uncovered instances where entities have 

enrolled in Medicare for the specific 

purpose of selling their HHAs to other 

entities looking to obtain Medicare 

billing privileges. We further explained 

that this practice allows a new entity to 

enter Medicare without having to 

undergo a State survey, which therefore 

raises questions as to whether the HHA 

is furnishing quality services to 

Medicare beneficiaries. In the 2010 

proposed and final rules, we also 

articulated why this issue is especially 

disconcerting in light of the program 

integrity issues prevalent in the HHA 

community. In addition, we have 

consistently explained our concerns 

about the need to verify that newly-sold 

HHAs—even those not specifically 

engaged in the practice of ‘‘flipping’’— 

are in compliance with the conditions of 

participation. 

Comment: One commenter stated that 

a change in majority ownership does not 

necessarily imply a change in the 

management of the HHA’s day-to-day 

operations. A survey should be 

conducted only if the majority 

ownership change is accompanied by 

other factors that raise questions about 

the entity’s compliance. In other words, 

surveys pursuant to § 424.550(b)(1) 

should be conducted on a case-by-case 

basis. Other commenters, too, expressed 

concern about the ‘‘majority ownership’’ 

standard, and stated that CMS should 

instead apply the definition of ‘‘change 

of ownership’’ in § 489.18 to the 36- 

month rule, or should require a 100 

percent ownership change before 

§ 424.550(b)(1) is triggered. 

Response: While we agree that a 

change in majority ownership of a 

particular HHA may not always result in 

a change in the HHA’s management, it 

has been our experience that a change 

in management routinely occurs when 

there is a change in ownership. 

Comment: Several commenters 

recommended that the proposed 

revisions to the 36-month rule be 

applied prospectively only. Specifically, 

the commenters believed that no 

currently-enrolled HHA should be 

subject to the rule, in that they entered 

Medicare without a restriction on the 

sale of the HHA other than those 

existing at that time. At most, one 

commenter stated, CMS should apply 

the rule to HHAs initially enrolled in 

Medicare on January 1, 2010 (the 

effective date of the rule) or later. 

Otherwise, applying the rule to HHAs 

enrolled prior to that point will affect 

the business’s value and financial 

stability. 

Response: For reasons already stated, 

it is important for us to confirm that an 

entity undergoing an ownership change 

is still in compliance with the HHA 

conditions of participation. 

Consequently, we do not believe that all 

HHAs enrolled prior to January 1, 2010 

should be exempt from the provisions of 

this final rule. As an example, assume 

that an HHA initially enrolled in 

Medicare on July 1, 2009. The HHA is 

subject to § 424.550(b)(1) through July 1, 

2012, or 36 months after its date of 

initial enrollment. If the HHA undergoes 

a change in majority ownership on 

September 1, 2011, it will be subject to 

§ 424.550(b)(1) until September 1, 2014, 

or 36 months after its most recent 

ownership change. 

Comment: Several commenters 

expressed concern that § 424.550(b)(1) 

would lead to beneficiaries that are 

under treatment by an HHA undergoing 

a § 424.550(b)(1) ownership change to 

be denied certain services (or 

discharged and compelled to find care 

elsewhere), since the HHA will have to 

enroll as a new entity. Another 

commenter stated that this could also 

lead to layoffs of the HHA’s staff. 

Response: We disagree. As we have 

stated in a number of forums, there is 

no shortage of available HH services 

throughout the country. A patient who 

may be discharged under the 

commenter’s scenario will retain access 

to care via other HHAs within the 

community. We do not think there is a 

risk of a discharged beneficiary being 

unable to obtain HHA services from 

another provider. 

Comment: A commenter suggested 

that instead of the 36-month rule, CMS 

should use its deactivation authority 

under § 424.540 to deactivate the billing 

privileges of an entity undergoing a 

change of ownership until a State 

survey is completed; additional 

ownership changes could be prohibited 

during that period. The new owner 

would therefore receive payments, but 

they would be delayed. This would be 

consistent with § 424.540(b)(3)(i), which 

mandates a survey prior to the 

reactivation of an HHA’s billing 

privileges. Likewise, another commenter 

suggested that CMS, in the alternative: 

(1) Require an HHA to notify CMS of the 

forthcoming sale 60 days in advance 

(and terminate the HHA if such notice 

is not given); (2) suspend the HHA’s 

billing privileges effective the date of 

the sale; and (3) require the HHA to 

undergo a State survey or obtain 

accreditation within 6 months of the 

ownership change. Failure to meet 

either (1) or (3) would result in the 

termination of the provider’s Medicare 

enrollment. 

Response: We appreciate these 

suggestions. However, we believe that 

§ 424.550(b)(1) more adequately 

furnishes the program safeguards we 

seek because the HHA will be required 

to enroll as a new provider and be 

subject to all of the provider enrollment 

and State survey vetting processes that 

other new HHAs must undergo. 

Comment: Another commenter 

suggested that CMS mandate that a 

provider agreement would not transfer 

upon a change of ownership if both the 

purchasing and selling entities: (1) Have 

not successfully been through the State 

survey process (or deemed accreditation 

process); and (2) have never filed an 

HHA cost report. 

Response: We appreciate this 

suggestion. The commenter’s first 

criterion, however, is superfluous 

because the enrolled HHA that is being 

purchased will have already gone 

through the State survey or 

accreditation process prior to 

enrollment. Moreover, the second 

criterion makes no distinction between 

full cost reports and low or no 

utilization cost reports. Consequently, 

under the commenter’s scenario, an 

HHA could be exempt from the 36- 

month rule so long as it submitted one 

cost report—even if it was a no 

utilization cost report. In light of this, 

we do not believe the commenter’s 

recommendation provides the necessary 

program safeguards. 

Comment: One commenter stated that 

while the 36-month rule was wellfounded in purpose and intent, it will 

negatively impact bona fide HHAs and 

the patients they serve and should be 

redesigned wholesale or significantly 

revised to better balance the interests of 

patients, providers, and Medicare. The 

commenter recommended that CMS 

work with the health care industry to 

achieve the program integrity purposes 

behind the rule. 

Response: We believe the exceptions 

in this final rule strike the necessary 

balance between our program integrity 

concerns and our desire to address some 

of the issues raised by the HHA 

industry. 

Comment: One commenter stated that 

the 36-month rule will create more harm 

than good. The commenter cited an 

example of an HHA that is poorly run. 

The HHA, rather than being able to 

freely sell the business, would now be 

encouraged to hold on to the HHA until 

the 36-month clock expires. Another 

commenter added that even in cases 

where an HHA owner had every 

intention of maintaining its ownership 

for more than 36 months after its initial 

investment, many personal and 

professional circumstances can occur to 

impact that timing. 


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Response: Given the changes we have 

adopted in this final rule, we believe 

that the owner of an HHA as described 

above would need to make the business 

decision to remain in the Medicare 

program or to exit the Medicare program 

voluntarily. 

Comment: Several commenters asked 

for clarification as to whether indirect 

ownership changes are subject to the 36- 

month rule. 

Response: Indirect ownership changes 

are not subject to the 36-month rule. We 

have clarified this in the regulatory text 

of the final rule. However, CMS will 

further analyze and monitor this issue, 

and may consider modifying this policy 

in future rulemaking. 

Comment: One commenter suggested 

that indirect ownership changes without 

significant day-to-day management 

changes be exempt from the 36-month 

rule. 

Response: As previously stated, 

indirect ownership changes are not 

subject to the 36-month rule. 

Comment: A commenter stated that 

with the termination of the provider 

agreement upon the application of 

§ 424.550(b)(1), Medicare loses the 

assumption of Medicare liabilities that 

come with the transfer of the provider 

agreement. 

Response: We appreciate this 

comment, but believe that the 36-month 

rule helps us address the program 

integrity concerns we have outlined. 

Comment: One commenter stated that 

because many states require an HHA to 

maintain a valid Medicare certification 

as a condition of Medicaid enrollment, 

loss of the HHA’s enrollment in 

Medicare could prevent the entity from 

furnishing Medicaid services. 

Response: We understand the 

commenter’s concern. However, we 

believe that owners of an HHA need to 

consider the impact of any changes of 

ownership on all of their payer 

relationships, not just Medicare. 

Comment: One commenter stated that 

CMS needs to apply caution in detailing 

regulations that financially impact 

legitimate HHAs and large numbers of 

patients. This is especially true if, for 

instance, a State is involved in 

purchasing or selling a significant 

number of HHAs and many CMS–855A 

applications must be completed. 

Response: We agree, and have 

incorporated public comments into this 

final rule that protect the Medicare 

program while helping to ensure that 

HHAs continue to have access to capital 

markets. 

Comment: One commenter stated that 

several of CMS’s concerns about 

certificate mills may be somewhat 

misguided. The commenter cited 

verbiage in the CY 2010 and 2011 HH 

PPS rules in which we stated that 

certain HHA brokers sell the business 

without having seen a patient or hired 

an employee. The commenter stated that 

the entity is required to provide services 

to at least 10 patients prior to obtaining 

a provider agreement. 

Response: In this final rule, we have 

incorporated the submission of a full 

cost report for 2 years as an exception 

to the 36-month rule. Accordingly, we 

recognize that some HHAs do not 

submit cost report data or submit low 

utilization cost reports. 

Comment: One commenter stated that 

the 36-month rule will be extremely 

damaging to the home care industry and 

requested that CMS not implement it. 

Response: Though we are unsure as to 

the commenter’s specific concerns about 

the 36-month rule, we believe, for 

reasons already stated, that it is 

necessary. 

Comment: Several commenters asked 

whether § 424.550(b)(1) applies if there 

is a transfer between partners that 

changes one person’s ownership interest 

from 40 percent to greater than 50 

percent. The commenters questioned 

the provision’s applicability, since the 

parties have not changed but have 

simply shifted the assets between them. 

Response: Section 424.550(b)(1) 

applies if there is a change in majority 

ownership. Since, in the example posed 

by the commenters, there is a change in 

majority ownership (that is, a person or 

entity now owns over 50 percent of the 

HHA) § 424.550(b)(1) indeed applies, 

assuming the entity does not qualify for 

an exception under § 424.550(b)(2). 

Comment: One commenter stated that 

there were two typographical errors in 

the definition of ‘‘majority ownership’’ 

in § 424.502. First, the word ‘‘months’’ 

should immediately follow the phrase 

‘‘during the 36.’’ Second, after ‘‘Medicare 

program,’’ the phrase ‘‘or a change of 

ownership’’ should be deleted. 

Response: We have revised § 424.502 

to incorporate the first change, but we 

are not incorporating the second change. 

(2) Exceptions 

Comment: One commenter 

recommended that if additional 

assurance is required that an HHA is 

indeed a viable agency and not being 

‘‘flipped,’’ we could extend the 

applicability of the proposed 36-month 

rule to sales of HHAs that have never 

filed a full cost report or that have filed 

a no or low utilization cost report 

pursuant to the Provider 

Reimbursement Manual. 

Response: We agree in part with this 

commenter, and have adopted the use of 

full cost reports in our exception criteria 

for the 36-month provision and in 

§ 489.28(c)(1). Moreover, we agree that 

an HHA must submit two or more 

consecutive full cost reports before the 

agency can receive an exception under 

§ 424.550(b)(2)(i). It is also important to 

note that we do not believe the 

submission of a low utilization cost 

report or no cost report for a given 

practice location meets the full cost 

report standard. 

Comment: Several commenters 

recommended that we adopt a public 

company exception to the 36-month 

requirement that states, ‘‘A company is 

acquiring another company that is an 

HHA (or is the parent company of one 

or more HHAs) and the majority of the 

HHAs being acquired are bona fide 

operating HHAs that have submitted 

cost reports to Medicare for the previous 

36 months or longer.’’ 

Response: As already stated, an HHA 

must submit two or more consecutive 

full costs reports before it can qualify for 

an exception under § 424.550(b)(2)(i). 

We believe this exception would 

effectively block all unwanted ‘‘license 

flipping’’ transactions, while ensuring 

that bona fide operating businesses can 

obtain financing. 

Comment: Several commenters 

expressed concern over the proposed 

exception in § 424.550(b)(2)(i) for 

publicly-traded companies that 

purchase an HHA. Among the 

arguments they presented were that: 

(1) It gives an unfair advantage to 

publicly-traded firms, (2) it restricts 

competition and is contrary to the 

public interest; (3) private companies in 

many cases have the resources and size 

comparable to publicly-traded 

companies; (4) a transaction by a 

privately-held, bona fide HHA is no less 

legitimate than one involving a 

publicly-held company; (5) since the 

statute does not give publicly-traded 

HHAs any greater rights or privileges, 

neither should the 36-month rule; (6) 

the additional legal and oversight 

requirements applicable to public 

companies do not make a difference 

with respect to compliance with 

Medicare rules to warrant an exclusive 

exception; and (7) because most HHAs 

are small, privately-held companies that 

lack the resources of some larger, 

publicly-held companies, the latter have 

an unfair advantage. Several of these 

commenters also contended that 

§ 424.550(b)(2)(i) should be expanded to 

include private companies, and that 

public and private companies should be 

exempt if the HHA submitted cost 

reports to Medicare for the previous 3 

years. One commenter stated that this 

will balance the need to protect the 

Medicare program without restricting 


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legitimate transactions. Another 

commenter, believing that proposed 

§ 424.550(b)(2)(i) is unfair, suggested 

two additional exceptions. One was for 

an individual or company that 

purchases an HHA with an initial 

investment of $15 million (or some 

other substantial figure). The second 

should be for buyers that already 

operate one or more HHAs with 

aggregate revenues of greater than $25 

million. These prospective buyers, the 

commenter stated, are not of the types 

that intend to commit fraud. 

Response: Section 424.550(b)(2)(i) has 

been revised to apply to both private 

and public companies. 

Comment: One commenter stated that 

the public-company exception should 

be replaced with an exception for a 

company acquiring another company 

that is an HHA (or is the parent 

company of one or more HHAs), and the 

majority of the HHAs being acquired are 

bona fide operating HHAs that have 

submitted cost reports to Medicare for 

the previous 36 months or longer. The 

commenter defined ‘‘bona fide’’ as an 

operating entity that employs caregivers, 

provides services to beneficiaries and 

other patients, and has filed Medicare 

cost reports for the previous 36 months 

or longer. Another commenter 

recommended that CMS exempt from 

the 36-month rule any ‘‘experienced’’ 

acquiring party, whether a public or 

private company. The commenter 

defined ‘‘experienced’’ as an HHA that 

has had at least one survey within the 

last 36 months. 

Response: Section 424.550(b)(2)(i) has 

been expanded to include any HHA that 

has submitted 2 consecutive years of 

cost reports (excluding low or no 

utilization cost reports). 

Comment: Several commenters 

questioned why CMS did not propose 

an exception for non-profit entities. One 

commenter requested that CMS furnish 

a rationale for this decision. Another 

commenter stated that the transfer of 

control of non-profit, tax-exempt HHAs 

to another non-profit, tax-exempt entity 

should be exempt from the 36-month 

rule because of other safeguards that 

prevent ‘‘flipping’’ transactions. 

Response: Section 424.550(b)(2)(i) is 

equally applicable to non-profit and forprofit entities. 

Comment: One commenter believed 

that the exceptions to the 36-month rule 

were reasonable in view of the need to 

accommodate legitimate changes in 

ownership. The commenter added, 

however, that while non-profits are not 

engaged in buying and selling HHAs or 

operating large national chains, nonprofits that must merge for financial or 

other reasons should be offered full 

support by CMS to ensure the 

continuation of service to vulnerable 

patients. 

Response: We appreciate the 

commenter’s support for our proposed 

exceptions to the 36-month rule and, as 

already mentioned, non-profit entities 

are included within the purview of 

§ 424.550(b)(2)(i). 

Comment: One commenter suggested 

that any change in ownership of a 

holding company that owns and 

operates HHAs through subsidiaries be 

exempt from the 36-month rule, so long 

as that holding company has one or 

more consolidated subsidiaries that 

have submitted cost reports to Medicare 

for at least 2 years. 

Response: While we appreciate this 

suggestion, it is moot because, as 

already mentioned, indirect ownership 

changes are not impacted by the 36- 

month rule. 

Comment: Several commenters 

suggested that we establish an exception 

to § 424.550(b)(1) to permit a qualifying 

bank or other legitimate lending 

institution to foreclose on a defaulted 

loan and to permit the lender to, in turn, 

sell the HHA to an accredited buyer. 

Failure to do so will curtail the ability 

of HHAs to secure financing, since 

banks will be reluctant to loan money to 

HHAs if, should the HHA collapse 

financially, the bank will be unable to 

foreclose on the business. Another 

commenter agreed, stating that the 

proposed 36-month rule eliminates the 

option of foreclosure as security for 

lenders. 

Response: Since there is no enterprise 

value to an HHA that is in bankruptcy 

or where the lender forecloses (except 

the Medicare billing number), we do not 

believe that this exception should be 

adopted in formal rulemaking. However, 

we believe that we would be compelled 

to follow a court order approving the 

sale of an HHA. 

Comment: Several commenters 

suggested an exception for ownership 

changes triggered by a bankruptcy with 

court approval. This will allow the HHA 

to obtain needed capital. 

Response: As stated above, we will 

comply with court orders, but we do not 

believe that a bankruptcy exception to 

the 36-month rule is necessary. 

Comment: One commenter suggested 

that we create an exception to 

§ 424.550(b)(1) to allow a buyer that 

already operates an accredited HHA to 

acquire an unrelated HHA if the 

accrediting body extends the buyer’s 

accreditation to include the newlyacquired HHA. Accrediting 

organizations, the commenter stated, 

will only extend accreditation if they 

are satisfied with the buyer’s ability to 

operate the HHA in accordance with its 

standards. 

Response: We appreciate this 

suggestion. However, we believe that 

§ 424.550(b)(1) and its associated 

exceptions more adequately provide the 

program safeguards we desire. 

Comment: Several commenters stated 

that the exception in § 424.550(b)(2)(iv) 

is superfluous because the death of an 

owner of 49 percent or less of the 

business does not result in a change in 

majority ownership anyway. The 

commenters suggested that the 

exception be revised to include the 

death of a majority owner, provided the 

remaining owners or partners retain 

their ownership. One commenter 

expressed concern that 

§ 424.550(b)(2)(iv) applies only when a 

deceased owner has less than a 50 

percent ownership interest and that the 

exception applies to all types of 

business structures. This, the 

commenter states, could cause the entity 

undue hardship. Another commenter 

stated that the transfer of ownership 

from death should be completely 

exempt from the 36-month rule, and 

added that the currently proposed 

exception does not clarify the types of 

ownership interests to which it applies. 

Response: We have revised 

§ 424.550(b)(2)(iv) to state that the death 

of an owner does not trigger the 36- 

month rule. 

Comment: A commenter requested 

clarification of the term ‘‘several 

individuals’’ as used in proposed 

§ 424.550(b)(2)(iv), which reads: ‘‘The 

death of an owner who owns 49 percent 

or less interest in an HHA (where 

several individuals or organizations are 

co-owners of an HHA and one of the 

owners dies.)’’ The commenter asked 

whether a trust qualifies as an 

‘‘individual.’’ 

Response: The term ‘‘several 

individuals’’ refers to more than one 

person, not to trusts. However, the 

verbiage in parentheses was meant to 

include all owners regardless of type. It 

was used only to describe situations in 

which an HHA has multiple owners. Yet 

the issue is largely moot based on our 

aforementioned revisions to 

§ 424.550(b)(2)(iv). 

Comment: One commenter asked 

whether the exception in 

§ 424.550(b)(2)(iv) applies if a 

corporation owned by three people 

establishes an HHA under a 49 percent, 

49 percent, and 1 percent stock 

ownership scenario, and one person 

dies. 

Response: As stated above, we have 

revised § 424.550(b)(2)(iv) to state that 

the death of an owner does not trigger 

the 36-month rule. 


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Comment: Several commenters 

recommended that CMS reduce the cost 

reporting time for the proposed 

exceptions to the 36-month rule from 5 

years to 2 years. The commenters 

believed that 2 years was sufficient. 

Response: We agree, and have revised 

this final rule accordingly. 

Comment: Several commenters stated 

that an ownership change resulting from 

estate planning should be exempt 

because it shows a commitment to the 

delivery of care. 

Response: We believe that the 

expansion of § 424.550(b)(2)(i) will 

allow a number of bona fide estate 

transactions to proceed. 

Comment: Several commenters stated 

that the ‘‘parent company’’ exception in 

§ 424.550(b)(2)(ii) should be revised to 

include the parent’s subsidiaries, 

including the HHA itself. That is, as we 

understood the comment to read, if the 

HHA itself is internally restructuring, 

this should not trigger the 36-month 

rule, regardless of the number of cost 

reports the entity has submitted. 

Response: We have removed the cost 

report submission requirement from 

§ 424.550(b)(2)(ii). We note further that 

§ 424.550(b)(2)(iii) exempts certain 

situations in which the HHA itself is 

changing its business structure. 

Comment: A commenter 

recommended an exception for changes 

of ownership involving entities that 

share a common corporate ownership. 

Response: We are not in a position to 

adopt this suggestion for this particular 

final rule. Nevertheless, we may 

consider it as part of a future 

rulemaking effort. 

Comment: One commenter stated that 

the exception in § 424.550(b)(2)(iii) for a 

change in business structure should 

apply if there is no change in the 

individual owners, regardless of 

whether there is a change in majority 

ownership. The commenter further 

stated that there should be no qualifiers 

on allowing corporate restructurings 

where the chain of ownership remains 

the same. The experience of the HHA— 

which we interpreted to mean, from the 

provider’s comment, as the filing of cost 

reports for the previous 5 years—has no 

bearing on whether the restructuring 

changes the day-to-day operations. 

Response: If the majority ownership is 

not changing, § 424.550(b)(2)(iii) is 

inapplicable. However, we have revised 

§ 424.550(b)(2)(iii) to state that a change 

in business structure—such as a change 

either to or from a corporation, a 

partnership (general or limited), or an 

LLC—does not trigger § 424.550(b)(1) if 

there is no change in the owners of the 

HHA. 

The cost report submission 

requirement specified in proposed 

§ 424.550(b)(2)(i) and (ii) was not part of 

proposed § 424.550(b)(2)(iii), and we 

have not inserted it into the final 

version of the latter provision. 

Comment: One commenter stated that 

further clarification is needed related to 

the internal restructuring that qualifies 

for the exception. 

Response: Though we are uncertain as 

to type of clarification the commenter 

seeks, we believe that the exceptions in 

§ 424.550(b)(2)(ii) and (iii) regarding 

internal restructuring, and the revisions 

made to the latter, are clear. We note 

that several examples of the types of 

restructuring impacted by 

§ 424.550(b)(2)(iii) are included within 

that provision. CMS, however, may in 

the future issue further guidance on this 

subject as needed. 

(3) Miscellaneous Program Safeguard 

Comments 

The following is a summary of 

comments we received on the proposed 

rule that do not specifically address the 

merits of our proposed changes to the 

capitalization provisions and the 36- 

month rule. 

Comment: Several commenters 

recommended that we provide 

education to Medicare contractors 

regarding the implementation of any 

new provisions related to changes in 

ownership. 

Response: We agree with these 

commenters, and will develop manual 

instructions to implement the 

provisions of this final rule. 

Comment: Several commenters stated 

that this portion of the proposed rule is 

confusing, contains certain internal 

language conflicts, and requires 

clarification. Another commenter stated 

that further clarification is needed to 

determine the rule’s full impact on 

HHAs. 

Response: Without further 

information as to the provisions that are 

of concern to these commenters, we are 

unable to address these comments. 

Comment: One commenter stated that 

the proliferation of new for-profit HHAs 

is contributing to the fraud, abuse, and 

misuse of the HH benefit, and 

recommended that CMS impose a 

moratorium on the certification of new 

HHAs effective immediately. If, the 

commenter stated, CMS’s assertion that 

there is already adequate access to HH 

services is true, then adding further 

capacity creates inefficiency in the 

system by adding more fixed costs and, 

in some situations, provider-induced 

demand. 

Response: While we appreciate this 

comment, it is outside the scope of this 

final rule. 

Comment: Another commenter 

expressed great concern about the ease 

of entry into the HH marketplace and 

raised questions as to the qualifications 

of certain HHAs that are granted 

deemed status. The commenter urged 

CMS to use the final rule to suspend all 

deemed status certifications and impose 

a national ‘‘cooling off period’’ for new 

entries to the marketplace. The 

commenter suggested that this occur for 

a minimum of 18 months following 

publication of this final rule. 

Response: While we appreciate this 

comment, it is outside the scope of this 

final rule. 

Comment: One commenter stated that 

CMS should ensure that the Medicare 

contractor completes the processing of 

tie-in notices within 21 days of its 

receipt of said notice. 

Response: This comment is outside 

the scope of this final rule. 

Comment: One commenter stated that 

the proposed changes will limit a health 

system’s ability to engage in good 

business practices. 

Response: Without further 

information as to the specific business 

practices the commenter refers to, we 

are unable to address this comment. 

4. Provisions of Final Rule 

Based on the public comments, we are 

adopting the provisions of the proposed 

rule with the following revisions: 

• In § 424.502, we have inserted the 

word ‘‘months’’ immediately after the 

phrase ‘‘during the 36.’’ We have 

inserted the term ‘‘direct’’ to clarify that 

the definition of majority ownership 

only applies to changes in direct 

ownership of the HHA. We have also 

changed the verbiage ‘‘following the 

initial enrollment into the Medicare 

program or a change of ownership’’ to 

‘‘following the HHA’s initial enrollment 

into the Medicare program or the 36 

months following the HHA’s most 

recent change in majority ownership,’’ 

so as to more clearly articulate the 

definition’s applicability. 

• In § 424.550(b)(2)(i), we have 

replaced the ‘‘publicly-traded exception’’ 

with an exception for an existing HHA 

that has submitted 2 consecutive years 

of Medicare full cost reports. For 

purposes of this exception, low 

utilization or no utilization cost reports 

do not qualify as full cost reports. We 

have also inserted the phrase ‘‘or within 

36 months after the HHA’s most recent 

change in majority ownership,’’ to 

ensure consistency with the verbiage in 

the definition of ‘‘change in majority 

ownership’’ in § 424.502. 


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• In § 424.550(b)(2)(ii), we have 

eliminated the 5-year period for cost 

report submissions. 

• In § 424.550(b)(2)(iii), a change in 

majority ownership of the HHA will be 

exempt from § 424.550(b)(1) if the HHA 

is changing its existing business 

structure—such as from a corporation, a 

partnership (general or limited), or an 

LLC to a corporation, a partnership 

(general or limited) or an LLC—and the 

owners remain the same. 

• In § 424.550(b)(2)(iv), the death of 

an owner will not trigger 

§ 424.550(b)(1). 

• In § 489.28(a), we reemphasized 

that the HHA must also have available 

sufficient initial reserve operating funds 

for the 3 month period following the 

conveyance of Medicare billing 

privileges. 

F. Home Health Face-to-Face Encounter 

As a condition for payment, the 

Affordable Care Act mandates that, prior 

to certifying a patient’s eligibility for the 

HH benefit, the physician must 

document that the physician or a 

permitted nonphysician practitioner 

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

with the patient. The Affordable Care 

Act allows the Secretary to determine a 

reasonable timeframe for the encounter 

to occur. The certifying physician must 

document the face-to-face encounter 

regardless of whether the physician 

himself or herself or one of the 

permitted NPPs perform the face-to-face 

encounter. The Affordable Care Act 

describes NPPs who may perform this 

face-to-face patient encounter as a nurse 

practitioner or clinical nurse specialist, 

as those terms are defined in section 

1861(aa)(5) of the Act, who is working 

in collaboration with the physician in 

accordance with State law, or a certified 

nurse-midwife (as defined in section 

1861(gg) of the Act, as authorized by 

State law), or a physician assistant (as 

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

Act), under the supervision of the 

physician. 

We proposed a change to the 

timeframe of the face-to-face encounter. 

The goal of the Affordable Care Act 

provision is to achieve greater physician 

accountability in certifying a patient’s 

eligibility and establishing a patient’s 

plan of care. We believe these goals can 

be achieved better if the face-to-face 

encounter occurs closer to the HH start 

of care, increasing the likelihood that 

the clinical conditions exhibited by the 

patient during the encounter are related 

to the primary reason the patient comes 

to need HH care. Therefore, we 

proposed that the encounter occur 

within the 30 days preceding the start 

of HH care, if the reason for the 

encounter is related to primary reason 

the patient requires home care. If no 

such encounter occurred prior to the 

start of HH care, we proposed that the 

encounter must occur within 2 weeks 

after the start of care. 

Additionally, as part of the Affordable 

Care Act mandated encounter 

documentation, we proposed that the 

physician document on the certification 

how the clinical findings of the 

encounter support the eligibility 

requirements that a patient be 

homebound and need intermittent 

skilled nursing or therapy. The 

Affordable Care Act allows NPPs to 

perform the face-to-face encounter and 

inform the certifying physician. We also 

proposed that a NPP performing the 

face-to-face encounter with a patient 

cannot be employed by the HHA 

providing care, consistent with current 

policy which precludes a physician who 

certifies a patient’s HH eligibility from 

having a financial relationship with the 

HHA. 

For a complete description of the 

Home Health Face-to-Face Encounter 

proposed implementation approach we 

refer readers to the CY 2011 HH PPS 

proposed rule published on July 23, 

2010. 

Comment: A number of commenters 

stated concern regarding the feasibility 

of implementing a face-to-face 

encounter requirement and they 

suggested that the face-to-face encounter 

requirement be removed altogether. 

Commenters stated opposition to 

implementation of the face-to-face 

encounter requirement, fearing that it 

would cause agencies to go out of 

business and place stress on the 

physician-HHA relationship. Another 

commenter suggested that the face-toface requirements would also place a 

strain on the relationship between 

emergency personnel, such as 

hospitalists and ER physicians, and 

primary care physicians. Additionally, 

some commenters stated that the faceto-face encounters could cause 

decreased access to physician care 

services since the physician would be 

inundated performing face-to-face 

encounters and would not have enough 

time to provide medically-related 

services. Furthermore, a commenter 

suggested that CMS allow the certifying 

physician to decide whether or not a 

face-to-face encounter was even needed. 

Commenters described the challenges 

and health risks associated with 

homebound patients visiting a 

physician’s office for the face-to-face 

encounter, and some patients would 

need to be transported via ambulance to 

see a physician or NPP for the 

encounter. A few commenters stated 

that there should be an audit process 

after HH services are provided as an 

alternative to implementing face-to-face 

encounter requirements. Many 

commenters suggested that the face-toface encounter requirements would 

delay and decrease access to HH 

services, resulting in unnecessary and 

prolonged visits to hospitals or 

emergency care settings, which 

ultimately increase Medicare costs. 

Commenters also described the burden 

and additional costs, which agencies 

will incur as a result of this 

requirement, with many commenters 

stating that the requirement will risk 

access to HH care for Medicare 

beneficiaries. A commenter asked CMS 

to explain the rationale behind the 

requirement for a face-to-face encounter 

and of HH care. Another commenter 

asked CMS to clarify whether the faceto-face encounter would be required 

solely for the first episode or also for 

consecutive episodes. 

Response: We note that section 

6407(a) of the Affordable Care Act (as 

amended by section 10605) amends the 

requirements for physician certification 

of HH services by requiring that, prior 

to making such certification, the 

physician must document that the 

physician himself or herself or specified 

NPP has had a face-to-face encounter 

with the patient. The legislation 

mandates the face-to-face encounter as a 

condition for payment. We are required 

by law to implement this provision and 

we do not have the authority to waive 

the requirement or to adopt alternatives 

to it. The provision does provide us 

with some flexibility in the 

implementation, such as providing us 

with the discretion to set a reasonable 

timeframe for this encounter. 

While we are sensitive to 

commenters’ concern regarding care risk 

associated with this requirement, we 

also note that in enacting this provision, 

the Congress allowed practitioners other 

than the certifying physician to perform 

the encounter. Specifically, the 

Affordable Care Act describes NPPs who 

may perform this face-to-face patient 

encounter as a nurse practitioner or 

clinical nurse specialist, as those terms 

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

Act, who is working in collaboration 

with the physician in accordance with 

State law, or a certified nurse-midwife, 

as defined in section 1861(gg) of the 

Act, as authorized by State law, or a 

physician assistant, as defined in 

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

supervision of the physician. The 

Affordable Care Act also allows the 

encounter to be satisfied through the use 

of telehealth services, subject to the 

requirements in section 1834(m) of the 


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Act. We remind the commenter that a 

criterion to be eligible for Medicare’s 

HH benefit has always been that the 

patient must be under the care of a 

physician. In response to the commenter 

who requested that we provide a 

rationale for the face-to-face encounter, 

we reiterate that this is a mandate of the 

Affordable Care Act and, because this is 

a statutory requirement, we must 

require this encounter as a condition of 

payment. However, we believe that 

more physician and/or practitioner 

involvement with the HH patient will 

improve the quality of care provided to 

the HH patient by providing the 

physician, who is managing the care 

plan, with more direct clinical 

information about the patient which is 

obtained from the encounter. If a NPP 

performed the encounter, the NPP 

would communicate the patient’s 

clinical information obtained during the 

encounter to the certifying physician. 

We also believe increased physician 

involvement will enable the certifying 

physician to more accurately certify the 

‘‘homebound’’ and ‘‘in need of skilled 

services’’ eligibility requirements, thus 

promoting more appropriate use of 

Medicare’s HH benefit. 

In response to the commenter who 

asked CMS to clarify whether the 

encounter is required only for the first 

episode, we believe that the commenter 

is asking whether the provision applies 

to the initial certification or whether it 

also applies to each subsequent 

recertification as well. We note that the 

Congress enacted the requirement to 

apply to the physician’s certification, 

not the recertification. Therefore, we 

have interpreted this provision to apply 

to the initial certification only. In 

response to the commenter’s concern 

about transporting homebound patients 

to see a physician in order to meet the 

requirement, we remind the commenter 

that we are allowing an encounter 

which occurred prior to home health 

admission to satisfy the requirement, 

with certain caveats, as we describe in 

more detail in the following response. 

Also in response to the burden 

concerns, we refer commenters to a 

2001 survey by the OIG which reported 

that of the physicians in the study 

sample, 86 percent who sign home 

health orders see their patients under 

home health care at least monthly. (The 

Physician’s Role in Medicare Home 

Health (OIG publication No. OEI–02– 

00–00620)). 

Comment: Some commenters 

expressed concern about the proposed 

certification timing requirements, 

stating that the proposed requirements 

may prevent patients from receiving 

necessary HH services due to the 

inability to have a face-to-face encounter 

in the required timeframe. The time 

requirement may not be met due to the 

shortage of certifying physicians and 

their limited availability and/or the 

patients’ limited transportation options, 

especially for homebound patients and 

those who live in rural areas. A 

commenter also suggested that patients 

with dementia or behavioral health 

conditions may have a particularly 

difficult time meeting the face-to-face 

requirements. A few commenters 

described a survey of HHAs which 

suggested that the proposed timeframe 

will decrease access to care and cause 

delays. In order to prevent delays or 

decreased access to HH care, 

commenters suggested increasing the 

timeframe in which a face-to-face 

encounter must occur. Several 

commenters believed that if physicians 

have seen the patient within the last 6 

months, then that visit should satisfy 

the encounter requirement. Some 

commenters stated that the Congress 

intended that the face-to-face encounter 

could occur up to 6 months prior to the 

initiation of HH services up to and 

including the date the physician signs 

the certification. Other commenters 

suggested other timeframes, such as 90 

days prior to the start of care and up to 

one month after the start of care. 

A commenter suggested that CMS 

start with a long timeframe for the faceto-face encounter requirement and then 

slowly transition to a shorter timeframe 

to better address any unforeseen issues 

and ease the transition associated with 

this requirement. 

One commenter believed there should 

be stricter requirements for the face-toface encounter. Two commenters 

suggested that CMS remove the 

provision, which allows a face-to-face 

encounter to be performed after the start 

of services. One of the two commenters 

further stated that the reason for the 

face-to-face encounter requirement is to 

ensure that the there is an independent 

evaluation of the need for HH services 

before they are provided. Allowing 

services to be provided before this 

assessment is made may cause 

confusion if the face-to-face 

requirements cannot be met, potentially 

causing a sudden termination of 

services and a lack of payment for the 

services already provided. The 

commenter stated that CMS can prevent 

these scenarios by requiring that a faceto-face encounter occur before the start 

of HH services. The commenter also 

stated that the 30-day timeframe 

proposed in the face-to-face encounter 

requirements was appropriate for 

patients who were discharged from the 

hospital or emergency room. However, 

the commenter thought that the 30-day 

timeframe should be shortened to 15 

days for patients who are admitted to 

the HH setting from the community. The 

commenters suggested that CMS may 

want to consider an extended timeframe 

for the encounter in rural settings. 

Another commenter believed that the 

face-to-face requirements be altered or 

completely removed in rural areas. 

Other commenters urged CMS to 

abandon the proposed requirement 

which states that the encounter must be 

related to the reason the patient needs 

home care, describing concerns with 

enforcement of such a provision. 

Commenters have suggested that when 

a patient’s condition changes, 

communication between the certifying 

physician and the HHA is sufficient and 

can replace the need for a more current 

face-to-face encounter. 

A commenter asked CMS how it 

would ensure that there was, in fact, a 

face-to-face encounter within the 

timeframe. 

Other commenters stated that there 

may be scenarios where patients are 

seen by specialists who do not act as 

their certifying physician. In this case, 

a primary care physician would need to 

perform a face-to-face encounter; 

however, the encounter could be 

redundant since the patient was already 

seen by the specialist. Similarly, another 

commenter stated that often patients 

will be referred to HH services by 

resident physicians or hospitalists and 

they may not be able to see a primary 

care physician for the face-to-face 

encounter. In addition, while the patient 

is in the hospital or emergency care 

setting, the primary care physician may 

not have hospital privileges and may 

not be allowed to see the patient. 

Furthermore, commenters have stated 

that even if hospitalists and emergency 

room physicians are allowed to certify 

the face-to-face encounter, they may be 

hesitant to do so since they would not 

want to or be able to take over the plan 

of care responsibilities. A commenter 

suggested that the primary care 

physicians be allowed to certify HH 

services after reading the hospitalist’s 

discharge summary. Also, a commenter 

stated that there already are problems 

with delays in starting HH services due 

to patients’ lack of follow-up visits or 

infrequent visits with their primary care 

physician. Other commenters have 

stated that some patients do not have a 

primary care physician and may need to 

be treated by a community-based or 

clinic physician, which may take longer 

than 14 days to have the face-to-face 

encounter. Moreover, commenters 

expressed concern with a timeframe of 

2 weeks after the start of care to have the 


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1Wolff, J. L., Meadow, A., Boyd, C. M., Weiss, C. 

O., & Leff, B. (2009). Physician evaluation and 

management of Medicare home health patients. 

Medical Care. 47(11), 1147–1155. 

face-to-face encounter, stating that, 

should a timely encounter not occur, the 

HHA would then lose money for 

services provided during that time and 

the patient would not receive all of the 

necessary services. The HHA would be 

held financially liable when the patients 

or physicians are at fault. A few 

commenters asked whether an agency 

could require patients to sign an 

Advanced Beneficiary Notification 

(ABN), which would allow the agency 

to hold the patient financially 

responsible if a face-to-face encounter 

did not occur as required. Commenters 

expressed concerns where a patient 

might not be able to secure an 

appointment or obtain transportation 

within the 2-week timeframe or who 

may be physically unable to get to the 

doctor’s office. Another commenter 

suggested that there be an exception 

provision to the timeframe requirements 

if there was sufficient documentation 

that showed that there was a reasonable 

attempt to schedule a face-to-face 

encounter with a physician. A 

commenter also asked CMS to clarify 

whether partial payment would apply if 

the encounter occurred, but did not 

occur during the required timeframe. 

Some commenters thought that a 

hospitalist’s or specialist’s face-to-face 

encounter could serve as the certifying 

encounter. Other commenters also 

thought that the hospitalist or specialist 

could sign the plan of care. 

Additionally, commenters suggested 

that the physician who has the best 

understanding of the patient’s condition 

should serve as the certifying physician 

and a primary care physician can then 

formulate and sign the plan of care and 

take over responsibility for further care. 

Alternatively, a commenter proposed 

that the ‘‘HHA medical director’’ be 

allowed to act as the certifying 

physician in the face-to-face encounter 

or the HHAs hire physicians to perform 

the face-to-face encounter. Another 

commenter asked if and how a part-time 

HHA medical director could serve as a 

primary care certifying physician. 

Furthermore, a commenter suggested 

that a HHA employee find out the 

patient’s last face-to-face physician 

encounter and document the date. If the 

date was within 6 months of the HH 

referral, then the patient could receive 

HH services. If the patient had not seen 

a physician in 6 months, the commenter 

proposed that the patient see a 

physician before he or she could be 

enrolled in HH care services. The 

commenter also recommended that the 

date of the face-to-face encounter be 

placed on the plan of care. 

A commenter also thought that the 

same timing standards currently used 

for certification be applied to the faceto-face encounter certification. 

Response: In the proposed rule, we 

proposed that the encounter occur 

within the 30 days preceding the start 

of HH care, if the reason for the 

encounter is related to the primary 

reason the patient requires home care. If 

no such encounter occurred prior to the 

start of HH care, we proposed that the 

encounter must occur within 2 weeks 

after the start of care. We believe that 

this timeframe increases the likelihood 

that the clinical conditions exhibited by 

the patient during the encounter are 

related to the primary reason the patient 

comes to need HH care. We also believe 

that this timeframe best meets the 

program integrity and quality goals 

associated with the provision. The 

timeframe ensures that the certifying 

physician can accurately determine 

whether the patient meets the 

homebound and skilled need eligibility 

criteria while also ensuring that the 

physician understands the current 

clinical needs of the patient to establish 

an effective care plan. Additionally, a 

recent study shows that physician 

involvement with the HH patient within 

30 days prior to HH admission results 

in significantly better patient outcomes. 

Patients receiving a face-to-face 

physician visit within 30 days of HH 

care were 1.45 times more likely to be 

discharged without hospitalization than 

patients who did not receive a face-toface physician visit during their episode 

of care (Wolff et al., 2009, p. 1151 1). We 

incorporated studies such as this one 

and our clinical judgment in the 

creation and formation of the proposed 

timeframe. However, we found some of 

the commenters’ concerns compelling. 

Regarding the feasibility of the proposed 

timeframes and the corresponding 

access to care risks, especially in rural 

areas, we will revise the timeframes 

described in the proposed rule to allow 

the encounter to occur up to 90 days 

prior to the start of care, if the reason 

for the encounter is related to the reason 

the patient comes to need HH care. If no 

such encounter has occurred, we will 

allow the encounter to occur up to 30 

days after the start of care. This 

alternative timeframe was 

recommended in comments submitted 

by a major association of home care 

physicians. The comments described 

that chronic illnesses among the elderly 

are commonly associated with an office 

visit every 3 months, and by adopting a 

timeframe where the encounter could 

occur up to 3 months prior to the start 

of care, we would significantly mitigate 

the access to care risk. For those 

patients who had no encounter during 

the 3 months prior to the start of care 

which was related to the reason the 

patient comes to need HH care, we will 

allow the encounter to occur up to 30 

days after the start of care. We continue 

to believe that it is essential for the 

encounter to be related to the reason the 

patient comes to need home care. 

Otherwise, the encounter does not meet 

what we believe to be the goals of the 

provision—to enable more appropriate 

use of the benefit while also improving 

the physician’s ability to manage the 

patient’s care. However, we understand 

the commenters’ concerns surrounding 

enforcement of this provision. It is not 

our intent that those who enforce the 

provision would take such a literal 

interpretation to look for a cause and 

effect relationship between a diagnosis 

on the physician’s claim and the 

diagnosis on the HH claim. Instead, it is 

our intent that should a patient’s 

clinical condition change significantly 

between the time of the encounter and 

the start of home health care such that 

the physician’s or NPP’s ability to 

accurately assess eligibility and care 

plan would be at risk, a more current 

encounter would be necessary in order 

to meet the goals of the statutory 

requirement. As such, to address the 

commenters’ concerns, we will expand 

on this requirement in manual guidance 

which we believe is the appropriate 

venue for such clarification. 

We disagree with the commenters 

who stated that the Congress intended 

for us to allow the face-to-face 

encounter timeframe to encompass the 6 

months prior to the date on which the 

physician signs the certification. If this 

was the Congress’s intent, the legislative 

provision would not have included 

specific language, ‘‘reasonable timeframe 

as determined by the Secretary,’’ which 

allows the Secretary to determine the 

timeframe. 

We disagree with the commenter who 

suggested that the encounter must occur 

prior to the start of care. We believe that 

it will not be uncommon that a patient 

needs home care but has not seen a 

physician in the 3 months prior to the 

start of care and this should not 

preclude access. As is the practice 

today, the HHA would be responsible 

for ensuring that services are provided 

to eligible patients, and the face-to-face 

encounter, associated documentation, 

and signing of the certification would 

occur after the start of care. 

In response to the commenters who 

believe that we should abandon the 

proposed criterion that the encounter 


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has to be related to the reason the 

patient has come to need HH, we 

continue to believe that in order to 

achieve what we believe to be the goals 

of the provision, the encounter must 

occur close enough to the HH start of 

care to ensure that the clinical 

conditions exhibited by the patient 

during the encounter are related to the 

primary reason for the patient’s need for 

HH care. It ensures that the certifying 

physician can accurately determine 

whether the patient meets the 

homebound and skilled need eligibility 

criteria while also ensuring that the 

physician understands the current 

clinical needs of the patient to establish 

an effective care plan. 

In response to the commenter who 

wanted to know how we would ensure 

that there was, in fact, a face-to-face 

encounter within the timeframe, we will 

issue instructions to the contractors who 

perform medical reviews to ensure 

compliance with this regulation. We 

also expect that other program integrity 

oversight efforts will be effective 

vehicles to monitor compliance with 

this condition of payment. We also 

expect that surveyors will monitor 

compliance with this requirement. In 

response to the commenter who asked 

that we clarify whether partial payment 

would apply if the encounter occurred 

outside the required timeframe, we 

reply that the Affordable Care Act 

established this provision as a condition 

of payment and therefore we would 

have no statutory authority to partially 

pay an agency if they complied with 

some but not all of the provision. 

To address the commenters’ concerns 

surrounding which physician must 

perform the face-to-face encounter and 

document that the face-to-face 

encounter occurred, we remind the 

commenter that the Affordable Care Act 

requires the certifying physician to 

document that the physician himself or 

herself or specified NPP has had a faceto-face encounter (including through the 

use of telehealth, subject to the 

requirements in section 1834(m) of the 

Act) with the patient. The Affordable 

Care Act describes NPPs who may 

perform this face-to-face patient 

encounter as a nurse practitioner or 

clinical nurse specialist (as those terms 

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

Act) who is working in collaboration 

with the physician, in accordance with 

State law, a certified nurse-midwife (as 

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

authorized by State law), or a physician 

assistant (as defined in section 

1861(aa)(5)of the Act), under the 

supervision of the physician. 

Where the patient is admitted to HH 

from the hospital, we believe that 

current practice associated with the HH 

certification would apply to the face-toface encounter as well. In most cases, 

we would expect the same physician to 

refer the patient to HH, order the HH 

services, certify the beneficiary’s 

eligibility to receive Medicare HH 

services, and sign the plan of care. It 

would be this physician who would be 

responsible for documenting on the 

certification that he or she, or a 

specified NPP working in collaboration 

with the certifying physician, had a 

face-to-face encounter with the patient. 

However, we recognize that, in certain 

scenarios, one physician performing all 

of these functions may not always be 

feasible. An example of such a scenario 

would be a patient who is admitted to 

HH upon hospital discharge. While we 

would still expect that in most cases, a 

patient’s primary care physician would 

be the physician who refers and orders 

HH services, documents the face-to-face 

encounter, certifies eligibility, and signs 

the plan of care, there are valid 

circumstances when this is not feasible 

for the post-acute patient. For example, 

as several commenters pointed out, 

some post-acute HH patients have no 

primary care physician. In other cases, 

the hospital physician assumes primary 

responsibility for the patient’s care 

during the acute stay, and may (or may 

not) follow the patient for a period of 

time post-acute. In circumstances such 

as these, it is not uncommon practice for 

the hospital physician to refer a patient 

to HH, initiate orders and a plan of care, 

and certify the patient’s eligibility for 

HH services. In the patient’s hospital 

discharge plan, we would expect the 

hospital physician to describe the 

community physician who would be 

assuming primary care responsibility for 

the patient upon discharge. It would be 

appropriate for the physician who 

assumes responsibility for the patient 

post-acute to sign the plan of care and 

thus be considered ‘‘under the care’’ of 

that community/personal physician 

throughout the time the patient is 

receiving HH services. In a scenario 

such as this, if the hospital physician 

certifies the patient’s HH eligibility and 

initiates the orders for services, the 

hospital physician could document that 

a face-to-face encounter occurred and 

how the findings of that encounter, 

which in this scenario would have 

occurred during the patient’s acute stay, 

support HH eligibility. The community 

physician designated on the discharge 

plan would assume responsibility for 

the patient at some point after acute 

discharge, updating orders, signing the 

plan of care, etc. 

It is important to reiterate that to be 

eligible for Medicare’s HH benefit, the 

patient must be under the care of a 

physician, and it is ultimately the 

responsibility of the HHA that this 

criterion is met. We have always held 

the HHA responsible for ensuring that 

there is a physician-signed plan of care, 

physician-signed orders, and a 

physician-signed certification. 

Therefore, we will also hold the 

agencies responsible for the certifying 

physician’s encounter documentation. 

By statute, this documentation is a 

requirement for payment just as a 

physician-signed certification of 

eligibility is a requirement for payment. 

As such, the requirements for the faceto-face encounter documentation have 

many similarities to the existing 

certification requirements. We have no 

flexibility to adopt exceptions to the 

statutory face-to-face documentation 

requirements. 

In response to the commenters who 

suggested that they deliver an HHABN 

to the HH patient describing the 

patient’s possible financial liability 

should the face-to-face encounter not 

occur as required, this practice is not 

permitted. The HHABN, Form CMS–R– 

296, has been approved by the Office of 

Management and Budget (OMB) to 

provide limitation of liability 

protections to Original Medicare 

beneficiaries receiving HH services 

under section 1862(a)(1)(A)of the Act for 

care that CMS or its contractors 

determines is not reasonable and 

necessary under Medicare; section 

1862(a)(9) for custodial care; (g)(1)(A) 

for care when the beneficiary is not 

homebound; and section 1862(g)(1)(B) 

for care provided to a beneficiary who 

is not in need of skilled nursing care. 

The HHABN must not be used to 

transfer liability to the beneficiary when 

technical requirements for payment, 

such as a face-to-face encounter, are not 

met. The HHABN is not approved for 

this use. 

In response to the commenters who 

requested that HHA medical directors 

act as the certifying physician in the 

face-to-face encounter or that the HHAs 

hire physicians to perform the face-toface encounter, we remind the 

commenters of longstanding regulatory 

prohibitions in § 424.22 which impose 

financial restrictions on the relationship 

between the HHA and the certifying 

physician. We continue to believe that 

these financial restrictions strengthen 

the integrity of the benefit. 

Comment: Commenters have also 

expressed concern about the 

requirement that the face-to-face 

encounter be related to the reason the 

patient needs HH services and concern 


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about the documentation and 

rationalization requirements. 

Commenters also stated that the HHA 

has no control over the quality of the 

physician’s documentation and no 

method to enforce proper physician 

documentation. A commenter suggested 

that the increased documentation 

responsibilities placed on the primary 

care physician would result in fewer 

referrals to HH. The commenter also 

stated that since the HHAs have no 

control over the quality of a physician’s 

documentation, there should be a 

‘‘without fault’’ provision applied when 

there is proper certification but lack of 

proper documentation. Furthermore, 

another commenter stated that it will be 

extremely costly for agencies to change 

their documentation systems to ensure 

the face-to-face encounter 

documentation is sufficient. Moreover, 

the commenter stated that there should 

be payment guarantees so that HHAs are 

not penalized because of improper 

physician documentation. A commenter 

suggested that CMS not finalize the 

proposed requirement that the 

physician’s own medical record 

documentation be consistent with the 

encounter documentation on the 

certification. Another commenter 

suggested that CMS should not 

withhold payment for failing to meet the 

encounter documentation and instead 

impose other sanctions. One commenter 

also suggested that CMS provide 

payment even when a face-to-face 

encounter does not occur if the HHA 

can show that it informed patients and 

physicians of the requirements. In 

addition, a commenter suggested that 

agencies be protected from potential 

patient complaints that may be a byproduct of these requirements. Another 

commenter suggested that CMS should 

not withhold payment for failing to 

meet the encounter documentation and 

instead impose other sanctions. Some 

commenters have suggested a gradual 

implementation of the new face-to-face 

requirements, or delaying the 

implementation of the new face-to-face 

encounter requirements. Commenters 

stated that the face-to-face encounter 

documentation requirements will slow 

the HHAs’ efforts to move to electronic 

health records. Commenters have also 

stated that there are language barriers 

with communicating the new face-toface encounter requirements. Other 

commenters requested that CMS permit 

HHAs to include standardized language 

on the certification form which would 

be signed and dated by the certifying 

physician to suffice as the encounter 

documentation. Commenters asked CMS 

to educate physicians and beneficiaries 

about the new face-to-face requirements, 

the rationale for the requirements, and 

their responsibility in these 

requirements. 

Response: We thank the commenters 

for their suggestions. Regarding the 

comment, which suggested that we 

permit HHAs to include standardized 

face-to-face encounter language on the 

certification form, which would be 

signed and dated by the certifying 

physician, we remind the commenter 

that the statutory language in the 

Affordable Care Act requires that prior 

to certifying, the physician must 

document that the face-to-face 

encounter occurred. The law requires 

this as a condition for HH payment. We 

proposed that the documentation of the 

encounter be a separate and distinct 

section of, or an addendum to, the 

certification, and that the 

documentation include why the clinical 

findings of the encounter support HH 

eligibility. We believe that our proposed 

documentation requirements meet the 

Congress’ intent for more physician 

involvement in determining the 

patient’s eligibility and managing the 

care plan. We believe that were we to 

allow the HHA to craft standard 

language which the physician would 

then simply sign, we would not achieve 

the sort of physician involvement in the 

eligibility determination and care plan 

which was the Congress’ intent. As 

such, we believe that if a HHA were to 

develop standardized encounter 

language to be signed by the physician, 

they would not be adhering to the 

statutory payment requirements that the 

‘‘physician document’’ the encounter. 

Similarly, regarding the comment that 

we should not withhold payment, or 

should consider imposing other nonpayment sanctions, or hold the HHA 

‘‘without fault’’ for failing to meet the 

encounter documentation requirement, 

we reiterate that the law requires the 

physician to document that the face-toface encounter occurred prior to 

certifying HH eligibility, as a condition 

of payment. Under section 6407(b) of 

the Affordable Care Act, we have no 

legal authority to exempt a HHA from 

this requirement, or to impose alternate 

sanctions if a HHA fails to meet a 

statutory payment condition. 

Regarding the commenter who 

requested that we should not require the 

physician’s own medical record 

documentation to be consistent with the 

documentation on the certification, we 

understand the commenter’s concern, 

and we will revise the proposed 

regulation text to make clear that we are 

not holding the HHA responsible for the 

physician’s own medical record 

documentation associated with the 

encounter. We would expect that a 

physician who performs a medically 

necessary physician service, which also 

satisfies the face-to-face encounter 

requirement, would maintain medical 

record documentation concerning the 

encounter, and the clinical findings 

associated with that encounter would be 

consistent with the physician’s 

certification documentation. However, it 

is not our intent to penalize the HHA if 

the physician’s own medical record 

documentation associated with the 

encounter is not in good order. Rather, 

we would look to the physician to fulfill 

his or her responsibility for ensuring 

appropriate medical record 

documentation associated with the 

encounter, and any associated Medicare 

billing. Regarding the commenter who 

asked us to protect agencies from 

complaints, which may be associated 

with this provision, we are unsure what 

the commenter means. We will continue 

to require providers to adhere to quality 

care practices while adhering to 

Medicare’s Conditions of Participation. 

We concur with the commenter who 

suggests that we educate physicians 

regarding this new law, and will do so 

via open door forums, listserv 

announcements, and MedLearn articles. 

Regarding the comments which 

requested that we delay the face-to-face 

requirements, the comment that the 

face-to-face encounter documentation 

requirements will slow the HHAs’ 

efforts to move to electronic health 

records, and the comments that 

suggested there are language barriers 

with communicating the new face-toface encounter requirement, we again 

reiterate that this is a statutory 

requirement, which we must 

implement. We do not understand the 

rationale behind the commenter’s fear 

that this requirement would delay 

adoption of electronic health records. 

We suspect this commenter is 

concerned that agency resources which 

might have been directed toward 

adopting electronic health records 

would be re-directed to implement this 

provision. We again reiterate that this is 

a statutory requirement, which we are 

required to implement. 

We are also confused why the 

commenter believes that language 

barriers would preclude the face-to-face 

encounter, and remind the commenter 

that being under the care of a physician 

is a longstanding eligibility requirement 

for the HH benefit. 

Comment: Commenters stated 

concern regarding the requirements for 

a face-to-face encounter by telehealth, 

stating that the current qualifications for 

telehealth coverage should not apply to 

the face-to-face encounter by telehealth 


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and that CMS has overly strict 

requirements on the parameters for a 

face-to-face encounter by telehealth. The 

current qualifications require the patient 

to go to an ‘‘originating site’’ outside of 

their home; however, by doing so, the 

patient’s homebound status and 

therefore eligibility for HH services may 

be questioned. The commenter 

requested that CMS use section 1834(m) 

of the Act solely to define telehealth and 

expand the definition of telehealth 

services to allow for the use of 

equipment in the patient’s home. Some 

commenters suggested that the face-toface encounter by telehealth can be 

satisfied via telephone calls from the 

physician to the patient. Other 

comments suggested that CMS allow 

face-to-face telehealth visits at the 

patient’s home and that the use of 

technology, such as video chat and 

remote assessment devices, be allowed 

in the telehealth visits. 

Response: There are several codes that 

are currently defined as Medicare 

telehealth services that could be used to 

furnish and bill for medically necessary 

physician services, which would satisfy 

the encounter requirement, if furnished 

by telehealth. However, section 1834(m) 

requires the patient to be located at one 

of several specified types of originating 

sites, and we have no flexibility to 

permit telehealth services to be 

furnished to a patient in the home. 

Regarding the comment that a 

patient’s visit to a physician’s office or 

telehealth originating site would 

threaten the patient’s homebound 

status, we note that longstanding policy 

describes that if a patient leaves the 

home for health care treatment, the 

patient would nevertheless be 

considered homebound. 

Comment: Several commenters stated 

concern regarding the proposed 

restriction that NPPs who are employed 

by the HHA cannot perform the face-toface encounter. Commenters state that 

the proposed regulation imposes stricter 

financial criteria on the relationship 

between the HHA and NPPs who are 

performing the face-to-face encounter 

than has previously been applied to 

physicians who certify HH eligibility. 

Commenters stated that by having the 

same financial relationship criteria for 

certifying physicians and NPPs 

performing a face-to-face encounter, 

CMS will minimize conflict of interest 

while maximizing the number of 

medical personnel who are qualified to 

perform the face-to-face encounter. 

Other commenters believe that HHA 

NPPs should be allowed to perform the 

face-to-face encounter, noting that the 

increase in integrated health systems 

and associated efficiencies in providing 

care would justify allowing the 

practitioner to be an employee of the 

HHA. Several commenters also 

requested that NPPs be allowed to 

certify HH eligibility. 

Response: We believe that given the 

HH program integrity concerns in 

certain pockets of the country 

surrounding the certification of HH 

eligibility, it is imperative that NPPs be 

subject to the same financial limitations 

with the HHA as currently apply to the 

certifying physician. We agree with the 

commenters that the NPPs should not be 

subject to harsher financial limitations 

with the HHA than the certifying 

physician and we have revised the 

proposed § 424.22 accordingly. In 

response to the commenter who 

requested that NPPs be allowed to 

certify HH eligibility, we remind the 

commenter that sections 1814(a)(2)(C) 

and 1835(a)(2)(A) of the Act prohibit 

this. 

Comment: Commenters expressed 

concern about the requirements for a 

physician signature and date on the 

encounter certification, stating that 

often physicians will not date 

documents. Commenters stated 

opposition to the requirement for a date 

from the physician, stating that this 

requirement would cause unnecessary 

burdens as the agency could frequently 

be resending certifications back to 

physicians to obtain the date. 

Commenters stated that since CMS has 

previously allowed the agency to date 

the certification based on the receipt 

date for other documents, CMS should 

apply the same policy to the encounter 

certification date. One commenter 

explicitly stated that the receipt date is 

adequate proof that the agency received 

the required documentation before 

billing for the HH services. 

Response: The requirement that a 

physician date the certification reflects 

longstanding manual guidance. As such, 

this is existing policy. We are taking this 

opportunity to codify this in regulation 

for clarification. 

Comment: Some commenters 

suggested that CMS increase the 

reimbursement associated with the 

current billing code (G0180) which 

physicians use when billing for their 

services associated with Medicare HH 

certification. Other commenters 

questioned whether the face-to-face 

encounter visits would be separately 

reimbursed by Medicare. Commenters 

wanted CMS to clarify whether the 

certification will be billed separately 

from the face-to-face encounter. 

Furthermore, the commenters wondered 

what the pay codes would be for the 

face-to-face encounter and suggested 

that there would be delayed RAP 

payment to agencies since agencies 

would need to wait until the proper 

certification and documentation were 

collected in order to receive payment. 

Another point commenters brought up 

was that residents may have more than 

one residence and therefore they may 

need more than one certifying 

physician, further burdening patients 

who require HH services. Also, 

commenters stated that by requiring the 

face-to-face encounter, the patient must 

pay an additional twenty percent 

copayment for the physician visit, 

which may be costly, particularly for 

those patients who were recently 

discharged from the hospital and were 

required to pay their Medicare hospital 

deductible as well. Commenters brought 

up the example that a patient may not 

want to have a face-to-face encounter 

with a physician when there is no 

medical reason for the visit. Moreover, 

a commenter proposed that CMS 

continue to pay RAPs through its 

current method; however, CMS should 

change the payment of the final claims 

based on the signed certification. 

Response: It is our intention to allow 

RAP payments as we currently do today 

while the HHA is awaiting physician 

completion of the certification. If the 

face-to-face encounter included 

medically-necessary covered physician 

services to the HH patient, the physician 

could bill Medicare for these covered 

services under the physician fee 

schedule. Regarding the physician 

billing practices associated G0180, we 

see no need to change those 

requirements or the associated 

reimbursement. Regarding the post 

acute patient co-pay concern, we refer 

the commenter to the response to the 

comment above which describes the 

role of the hospitalist in the face-to-face 

encounter. Regarding the broader 

copayment comment, we again remind 

the commenter that a HH patient must 

be under the care of a physician as an 

eligibility requirement, and therefore 

would expect that regular physician 

visits to occur during the HH course of 

treatment. As such, we do not believe 

that a face-to-face encounter would 

impose a new copayment financial 

burden on the patient. 

Comment: Some commenters were 

supportive of our proposal to allow 

NPPs to have the face-to-face encounter. 

Commenters also agreed that employees 

of the HHA should not be allowed to do 

the face-to-face encounter. The 

commenters also agreed with the faceto-face encounter requirements and the 

documentation requirements and that 

the encounter requirements should be 

able to be fulfilled through the use of 

telehealth. 


emcdonald on DSK2BSOYB1PROD with RULES2
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2Wolff, J.L., Meadow, A., Boyd, C.M., Weiss, 

C.O., & Leff, B. (2009). Physician evaluation and 

management of Medicare home health patients. 

Medical Care. 47 (11), 1147–1155. 

Response: We thank the commenters 

for their support. 

Comment: Some commenters 

expressed concern that the face-to-face 

encounter requirement would bring into 

question a patient’s right to refuse a 

clinical visit for care that is for 

regulatory compliance only and not 

medically necessary. 

Response: We again remind the 

commenters that this is a mandate of the 

Affordable Care Act and, because this is 

a statutory requirement, we must 

require this encounter as a condition of 

payment. We would expect that 

practitioners would typically be 

conducting a medically necessary 

service to the patient, and this service 

would also meet the face-to-face 

encounter requirement. We disagree 

with the commenters that such 

encounters satisfy a regulatory 

requirement only. We refer again to the 

research,2 which shows that physician 

visits result in better HH patient 

outcomes. Finally, we also remind the 

commenters that, in order to be eligible 

for the Medicare HH benefit, a patient 

must be under the care of a physician. 

Should a patient refuse to have a faceto-face encounter with the physician 

responsible for care, CMS would 

question whether the patient was 

legitimately under the care of the 

physician. 

We thank the commenters for their 

insightful comments. In summary, we 

will finalize the proposed 

implementation approach with the 

following exceptions: 

We will revise the timeframes 

described in the proposed rule to allow 

the encounter to occur up to 90 days 

prior to the start of care, if the reason 

for the encounter is related to the reason 

the patient comes to need home health 

care. If no such encounter has occurred, 

we will allow the encounter to occur up 

to 30 days after the start of care. We will 

also revise the proposed regulation to re 

move the requirements concerning the 

physician’s own medical record 

documentation. We will also revise the 

regulation text to impose the same 

financial restrictions with the HHA to 

nonphysician practitioners who perform 

the face-to-face encounter as currently 

apply to certifying physicians. 

G. Future Plans to Group HH PPS 

Claims Centrally During Claims 

Processing 

Generally speaking, Medicare makes 

payment under the HH PPS on the basis 

of a national standardized 60-day 

episode payment rate that is adjusted for 

case-mix and geographic wage 

variations. The national standardized 

60-day episode payment rate includes 

services from the six HH disciplines 

(skilled nursing, HH aide, physical 

therapy, speech language pathology, 

occupational therapy, and medical 

social services) and nonroutine medical 

supplies. Durable medical equipment 

covered under HH is paid for outside 

the HH PPS payment. To adjust for casemix, the HH PPS uses a 153-category 

case-mix classification to assign patients 

to a home health resource group 

(HHRG). Clinical needs, functional 

status, and service utilization are 

computed from responses to selected 

data elements in the Outcome & 

Assessment Information Set (OASIS) 

instrument. On Medicare claims, the 

HHRGs are represented as Health 

Insurance Prospective Payment System 

(HIPPS) codes. 

At a patient’s start of care, at the start 

of each subsequent 60 day episode, and 

when a patient’s condition changes 

significantly, the HHA is required to 

perform a comprehensive clinical 

assessment of the patient and complete 

the OASIS assessment instrument. The 

OASIS instrument collects data 

concerning 3 dimensions of the patient’s 

condition: (1) Clinical severity 

(orthopedic, neurological or diabetic 

conditions, etc.); (2) Functional status 

(comprised of 6 activities of daily living 

{ADL}); and (3) Service utilization 

(therapy visits provided during 

episode). HHAs enter data collected 

from their patients’ OASIS assessments 

into a data collection software tool. For 

Medicare patients, the data collection 

software invokes HH PPS Grouper 

software to assign a HIPPS code to the 

patient’s OASIS assessment. The HHA 

includes the assigned HIPPS code on 

the Medicare HH PPS bill, ultimately 

enabling our claims processing system 

to reimburse the HHA for services 

provided to patients receiving 

Medicare’s HH benefit. 

Additionally, the HHA is separately 

required to electronically submit OASIS 

assessments for their Medicare and 

Medicaid patients to CMS via their state 

agency. On the HH PPS Web site at 

http://www.cms.gov/homehealthpps/ 

01_overview.asp, we provide a free 

OASIS assessment data collection tool 

(HAVEN) which includes the HH PPS 

grouper software, a separate HH PPS 

grouper program which can be 

incorporated into an HHA’s own data 

collection software, and HH PPS data 

specifications for use by HHAs or 

software vendors desiring to build their 

own HH PPS grouper. Most HHAs do 

not use the HAVEN freeware, instead 

preferring to employ software vendors 

to create and maintain a customized 

assessment data collection tool which 

can be integrated into the HHA’s billing 

software. Likewise, many vendors 

employed by HHAs do not utilize the 

HH PPS grouper freeware, instead 

preferring to build their own HH PPS 

grouper from the data specifications 

which we provide. 

In 2008, we deployed the first 

refinements to the HH PPS since its 

inception in 2000. Prior to the 2008 

refinements, we made infrequent, minor 

changes to the HH PPS grouper 

software. Effective with the refinements, 

the HH PPS grouper became more 

complex and more sensitive to the 

yearly ICD–9–CM code changes. As a 

result, since 2008, HHAs have been 

required to update their HH PPS 

grouper software at least once each year. 

Most HHAs employ software vendors to 

effectuate these updates. HHAs have 

expressed concerns to CMS that the 

frequent grouper updates coupled with 

the additional complexity of the grouper 

has resulted in unexpected costs and an 

increased burden to them. 

In addition, since the 2008 

refinements were implemented, we have 

identified a significant increase in 

OASIS assessments submitted with 

erroneous HIPPS codes. These errors 

occur when HHAs or their software 

vendors inaccurately replicate the HH 

PPS grouper algorithm into the HHA’s 

customized software. The significant 

increase in these errors since 2008 

suggests that many HHA software 

vendors are struggling to accurately 

replicate the complex algorithms in the 

HH PPS grouper. We inform HHAs if the 

submitted HIPPS on the OASIS is 

inaccurate and provides HHAs with the 

correct HIPPS to enable the HHA to 

accurately bill Medicare. However, 

HHAs have expressed concerns that the 

HH PPS grouper complexities increase 

their vulnerability to submit an 

inaccurate HIPPS code on the Medicare 

bill. Further, some HHAs have 

expressed concern that this 

vulnerability will further increase when 

the U.S. health care industry 

permanently transitions from ICD–9 to 

ICD–10 for medical diagnosis and 

procedure coding in October 2013, 

because the ICD–10–CM migration will 

require major changes to an already 

complex HH PPS grouper. 

Because of these concerns, we have 

begun analyzing options to streamline 

the process which assigns HIPPS codes. 

We are analyzing an option, which 

would enable us to assign HIPPS codes 

to the HH PPS bills during claims 

processing. If we are successful in 


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implementing this option, OASIS 

assessment data collection tools would 

no longer invoke HH PPS grouper 

software to assign HIPPS codes to the 

OASIS assessments. Further, HHAs 

would no longer be required to include 

HIPPS codes on HH PPS bills. Such a 

process would relieve the HHA of all 

responsibility associated with the HH 

PPS grouper. If we can centralize the 

assignment of the HIPPS code to the HH 

PPS bill during claims processing, we 

will achieve process efficiencies, 

improve payment accuracy by 

improving the accuracy for HIPPS codes 

on bills, decrease costs, and burden to 

HHAs, and better position HHAs and 

CMS for an easier transition from ICD– 

9 to ICD–10 codes in the future. 

Several changes have occurred 

recently that allow CMS to consider this 

option of assigning HIPPS codes to the 

HH PPS bills during claims processing. 

National claims coding standards have 

expanded the number of positions of 

data available in the treatment 

authorization field on the bill from 18 

to 30. In addition, the National Uniform 

Billing Committee has created 

occurrence code 50 for assessment 

reference dates. This new code 50 will 

allow a separate field for HHAs to report 

the M0090 assessment date currently 

carried in the treatment authorization 

field. These two changes provide 

enough space on the HH PPS bill for 

HHAs to encode all the OASIS payment 

items on the bill, thus potentially 

enabling the HIPPS code to be 

computed during claims processing. 

However, a major challenge exists 

with the feasibility of computing the HH 

PPS group during claims processing is 

the awarding of case-mix points for 

reported primary and secondary 

diagnoses. A centralized HH PPS 

grouper would look to the diagnoses on 

the HH PPS bill for grouping. The 

Health Insurance Portability and 

Accountability Act (HIPAA) authorized 

CMS to require that all diagnoses on the 

bill comply with ICD–9–CM coding 

guidelines as set out at 45 CFR 162.1002 

(65 FR 50370, August 17, 2000). 

Currently, when certain conditions 

apply, to prevent the loss of case-mix 

points, the HH PPS grouper will award 

case-mix points to some diagnoses 

reported as a secondary diagnosis when 

the assignment is performed to comply 

with ICD–9–CM coding requirements. 

We currently instruct HHAs to report 

these diagnoses in M1024 (previously 

M0246) on the OASIS to prevent loss of 

case-mix points. 

We provide detailed guidance on this 

topic in page 5 of Appendix D within 

the OASIS Implementation Manual, 

which can be accessed at http:// 

www.cms.gov/HomeHealthQualityInits/ 

downloads/HHQIAttachmentD.pdf. This 

coding guidance has been provided to 

prevent the loss of case-mix points 

when an underlying case-mix diagnosis 

is associated with the primary V-code 

diagnosis. 

As required by 45 CFR 162.1002, 

those diagnoses currently encoded in 

M1024 (formerly M0246) which should 

not be reported as primary or secondary 

diagnoses cannot be reported on the bill. 

In an attempt to solve this problem, we 

are analyzing options to map diagnoses 

currently reported in M1024 (formerly 

M0246) to diagnoses that are reportable 

as primary and secondary diagnoses in 

the HH setting, per ICD–9–CM coding 

guidelines. We have been encouraged 

with our ability to map some trauma 

codes reported in M1024 to after-care 

codes, which are reportable as primary 

and secondary diagnoses in the HH 

setting. However, additional analysis 

and mapping are needed to fully resolve 

this challenge. 

We solicited public comments on the 

potential enhancement described above 

to assign the HIPPS code to the HH PPS 

bill during claim processing. This 

enhancement would require HHAs to 

report all the OASIS items necessary to 

group the episode on the HH PPS bill. 

As stated above, reporting on OASIS 

items on the bill would address the 

costs and burden HHAs currently 

experience with regards to frequent 

updates of a complex HH PPS grouper, 

address vulnerabilities that HHAs have 

associated with the possible submission 

of inaccurate HIPPS codes on the claim, 

while better positioning HHAs and CMS 

for the ICD–9 to ICD–10 transition. We 

are in the early stages of assessing the 

feasibility of such changes, and wanted 

to seize the opportunity to solicit the 

public for their comments on this topic. 

The following is summary of the 

comments we received regarding the 

proposal to group HH PPS claims 

centrally. 

Comment: Several commenters stated 

their support of our proposal to 

centralize grouping of HH PPS claims as 

long as the HH grouper continued to 

remain available for HHAs and their 

vendors. 

Response: We recognize that HHAs 

and their vendors will continue to have 

a need for the HH grouper software. 

Therefore, we do not have any plans to 

discontinue this process should we 

decide to implement the grouping of HH 

PPS claims during claims processing. 

Comment: One commenter suggested 

that we anticipate and plan to develop 

the appropriate claim response for 

claims that contain data errors that 

prevent the calculation of a HIPPS code. 

Response: We appreciate this 

feedback and will be sure to address this 

concern should we decide to move 

forward with this proposal. We will 

note that currently our claims 

processing system has specifications 

that define valid values for each field. 

The necessary guidance would be 

provided to HHAs and their vendors for 

implementation of this requirement. 

Comment: One commenter stated that 

our proposal does not specify the effect 

of this proposed change on the current 

Resident Assessment Protocol (RAP) 

and final claim processing timelines. 

Response: The proposal to group HH 

PPS claims centrally during claims 

processing has no effect on the RAP or 

final claims processing timelines. In 

fact, the RAP is not utilized in the HH 

setting. In terms of the final claims 

processing timelines, the long standing 

guidelines for our contractors will 

continue to apply. The guidance can be 

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

manuals/downloads/clm104c01.pdf 

through the Internet only manual, IOM 

100–4 Chapter 1 Section 80.2.1. 

Comment: Several commenters stated 

that while we identified a concern 

regarding the increased number of errors 

in HIPPS codes submitted, we did not 

acknowledge errors identified by HHAs 

and their vendors in the HHRG released 

by us. 

Response: Beginning in 2010, we put 

into place a mechanism for our 

contractor that developed the HHRG 

software for CMS to beta test any 

updates to the software with interested 

parties. All issues noted during beta 

testing are to be addressed by our 

contractor prior to final release of an 

updated HHRG. Our aim is to permit 

proper vetting of any grouper such that 

we can avoid errors within our HHRG 

in the future. 

Comment: One commenter stated that 

grouping HH PPS claims centrally 

during claims processing does not 

reduce burden upon HHAs because the 

burden of reporting HIPPS codes is 

replaced with one of reporting OASIS 

items. 

Response: OASIS information 

reported on claims under this proposal 

would be reported in claims fields 

currently used by HHAs; so we do not 

believe that requiring a replacement of 

data in current fields represents an 

additional burden. 

Comment: Several commenters stated 

that our solicitation of comments did 

not provide enough detail surrounding 

the impact upon accounts receivable 

information to provide meaningful 

comments. The commenters suggested a 

separate Federal Register notice be 

issued. 


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Response: We appreciate this 

feedback and believe that based upon 

our plans to continue to provide the 

HHRG software, that the concern about 

potential impact upon HHA operations 

and their accounting needs will be 

addressed. In addition, should we 

decide to implement this provision in a 

future regulation, we will address 

additional details through a notice of 

proposed rulemaking in which 

additional comments can be provided 

by HHAs. 

Comment: One commenter stated 

concern that our future plans to group 

HH PPS claims centrally during claims 

processing will create a burden on 

HHAs and their vendors. 

Response: We appreciate this 

feedback and believe that since the data 

being reported duplicates the 

information necessary for OASIS, we are 

not creating additional burden for HHAs 

and their vendors. In addition, as noted 

above, the proposed reporting of this 

information would replace other data in 

currently used claims fields. 

Comment: Several commenters stated 

that there are no details surrounding 

how the grouper assignment would be 

communicated back to the agencies and 

on claims. 

Response: The HIPPS code that our 

claim processing system assigns will be 

added to the claim record so that the 

provider will be able to view the 

assignment upon online look-up. The 

HIPPS code assigned will also be 

returned on the electronic remittance 

advice. 

Comment: A commenter asked about 

OASIS data corrections identified after 

the claim is submitted and how the 

corrections process will be handled and 

its effect on payment. In addition, the 

commenter would like to know whether 

HIPPS code will be assigned at the RAP 

or on the final claim. 

Response: The HIPPS code would be 

assigned on both the RAP and the final 

claim. If OASIS data corrections caused 

the HIPPS code assigned to the episode 

to change, the HHA would be able to 

cancel and resubmit the RAP for the 

episode. This resubmission process to 

the RAP presently occurs. HHAs that do 

not maintain grouping software for their 

internal purposes would have access to 

the HIPPS code calculated by the State 

OASIS system. 

Comment: A commenter asked how 

Medicare Advantage (PFFS) payors will 

be able to calculate the HHRG in the 

future based upon implementation of 

this proposal. In addition, the 

commenter stated concerns that if the 

HHRG software is not made available 

that the HHAs will be unable to advise 

patients of the copayment amounts. 

Response: We appreciate this 

feedback and again want to reassure 

HHAs and their vendors that we plan to 

continue to make the HHRG software 

updates available for use which will 

permit the Medicare Advantage plans to 

use the HHRG to assist claims 

processing. In addition, the HHAs and 

their vendors will be able to continue to 

advise patients of copayments due. 

H. New Requirements Affecting Hospice 

Certifications and Recertifications 

Section 3132 of the Affordable Care 

Act requires hospices to adopt some of 

MedPAC’s hospice program eligibility 

recertification recommendations, 

including a requirement for a hospice 

physician or nurse practitioner to have 

a face-to-face visit with patients prior to 

the 180th-day recertification, and to 

attest that such a visit took place. The 

Affordable Care Act was enacted too late 

in the calendar year for the 

implementation proposals relating to 

these new requirements to be included 

in a Hospice Wage Index Proposed Rule. 

Therefore, these proposals were 

included in the Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2011; Changes 

in Certification Requirements for Home 

Health Agencies and Hospices Proposed 

Rule. As such, we are responding to 

comments and issuing our 

implementation plan in this final rule. 

In its March 2009 Report to Congress, 

MedPAC wrote that additional controls 

are needed to ensure adequate 

accountability for the hospice benefit. 

MedPAC reported that greater physician 

engagement is needed in the process of 

certifying and recertifying patients’ 

eligibility for the Medicare hospice 

benefit. The Commission reported that 

measures to ensure accountability 

would also help ensure that hospice is 

used to provide the most appropriate 

care for eligible patients. MedPAC 

recommended these measures be 

directed at hospices that tend to enroll 

very long-stay patients. Specifically, 

MedPAC recommended that a hospice 

physician or advanced practice nurse 

visit the patient to determine continued 

eligibility prior to the 180-day 

recertification and each subsequent 

recertification, and attest that such visits 

took place. (MedPAC, Report to the 

Congress: Medicare Payment Policy, 

Chapter 6, March 2009, pp. 365 through 

371.) 

Section 3132(b) of the Affordable Care 

Act requires hospices to adopt 

MedPAC’s hospice program eligibility 

recertification recommendations. 

Specifically, the Affordable Care Act 

amends section 1814(a)(7) of the Act to 

require that on and after January 1, 

2011, a hospice physician or nurse 

practitioner (NP) must have a face-toface encounter with every hospice 

patient to determine the continued 

eligibility of that patient prior to the 

180-day recertification, and prior to 

each subsequent recertification. 

Furthermore, the Affordable Care Act 

requires that the hospice physician or 

NP attest that such a visit took place, in 

accordance with procedures established 

by the Secretary of the HHS. The 

Affordable Care Act provision does not 

amend the statutory requirement that a 

physician must certify and recertify a 

patient’s terminal illness. By statute, 

only a physician (not a NP) may certify 

a patient’s terminal illness, however, 

section 3132 (b)(2) of the Affordable 

Care Act allows a NP to furnish a faceto-face encounter; in the case where the 

NP provides the face-to-face encounter, 

the NP would then need to provide the 

clinical findings from that encounter to 

the physician who is considering 

recertifying the patient. This new 

statutory requirement will better enable 

hospices to comply with hospice 

eligibility criteria and to identify and 

discharge patients who do not meet 

those criteria. 

Hospices which admit a patient who 

previously received hospice services 

(from the admitting hospice or from 

another hospice) must consider the 

patient’s entire Medicare hospice stay to 

determine in which benefit period the 

patient is being served, and whether a 

face-to-face visit will be required for 

recertification. 

As required by the Affordable Care 

Act, we made several proposals 

regarding § 418.22(a)(3), (a)(4), (b)(3), 

(b)(4), and (b)(5) in order to implement 

this new statutory requirement. We 

believe that required visits should be 

fairly close to the recertification date, so 

that the visit allows a current 

assessment of the patient’s continued 

eligibility for hospice services. These 

visits can be scheduled in advance, 

particularly for those patients with 

diagnoses where life expectancy is 

harder to predict. As such, in 

§ 418.22(a)(4), we proposed that hospice 

physicians or NPs make these visits no 

more than 15 calendar days prior to the 

180-day recertification and subsequent 

recertifications, and that the visit 

findings be used by the certifying 

physician to determine continued 

eligibility for hospice care. We noted 

that this 15-day timeframe also aligns 

the timeframe for recertification visits 

with the timeframe required for the 

comprehensive assessment update, as 

specified in our Conditions of 

Participation (CoPs) at § 418.54(d). This 

timeframe requirement is also consistent 


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with the timeframe required for the 

review of the plan of care, as specified 

in our CoPs at § 418.56(d). We wrote 

that the 15-day timeframe provides a 

balance between flexibility in 

scheduling the visit and enabling a 

relatively current assessment of 

continued eligibility, while also 

allowing efficiency in update and 

review processes, as required by the 

hospice CoPs. 

As noted earlier, the statute requires 

that the face-to-face encounter be used 

to determine the patient’s continued 

eligibility for hospice services. We 

proposed that the clinical findings 

gathered by the NP or by the physician 

during the face-to-face encounter with 

the patient be used in the physician 

narrative to justify why the physician 

believes that the patient has a life 

expectancy of 6 months or less. 

Accordingly, we added this proposed 

requirement to § 418.22(b)(3) as 

subparagraph(v). 

Because the statute also requires the 

hospice physician or NP to attest that 

the face-to-face encounter occurred and 

by statute only a physician may certify 

the terminal illness, at § 418.22(b)(4) we 

proposed that the face-to-face attestation 

and signature be either a separate and 

distinct area on the recertification form, 

or a separate and distinct addendum to 

the recertification form, that is easily 

identifiable and clearly titled. We also 

proposed that the attestation language 

be located directly above the physician 

or NP signature and date line. 

The attestation is a statement from the 

certifying physician or from the NP 

which attests that he or she had a faceto-face encounter with the patient. If the 

face-to-face encounter was provided by 

a NP, the attestation should also include 

a statement that the clinical findings of 

that encounter have been provided to 

the certifying physician for use in 

determining continued eligibility for 

hospice care. We proposed that the 

attestation include the name of the 

patient visited, the date of the visit, and 

that it be signed and dated by the NP or 

physician who made the visit. Hospices 

are free to use other attestation 

language, provided that it incorporates 

these required elements. These elements 

must be included whether the visit is 

made by a NP or a physician. We note 

that it is possible that the certifying 

hospice physician is the same physician 

who made the visit. 

As previously mentioned, we 

proposed to revise § 418.22 to 

incorporate these requirements and we 

proposed to add paragraphs (a)(4) and 

(b)(4) to implement the requirements for 

a face-to-face encounter with long-stay 

hospice patients and the attestation of 

that face-to-face encounter. 

In requiring a timeframe in which the 

face-to-face encounter must occur, for 

consistency, we believe it is important 

to also clarify required timeframes for 

all certifications and recertifications. 

Long-standing guidance in our Medicare 

Benefit Policy Manual’s chapter on 

hospice benefit policy allows the initial 

certification to be completed up to 14 

days in advance of the election, but does 

not address the timeframe for advance 

completion of recertifications (see CMS 

Pub. No. 100–02, chapter 9, section 

20.1). To clarify our policy in the 

regulations, and to be consistent with 

the timeframe for the newly legislated 

face-to-face encounter for 

recertifications, we proposed that both 

certifications and recertifications be 

completed no more than 15 calendar 

days prior to either the effective date of 

hospice election (for initial 

certifications), or the start date of a 

subsequent benefit period (for 

recertifications). This proposed 

timeframe also aligns with the CoP 

timeframe for updating the 

comprehensive assessment (§ 418.56(d)), 

and with the CoP timeframe for 

reviewing the plan of care (§ 418.54(d)). 

Finally, this proposed 15-day advance 

certification or recertification timeframe 

would also help ensure that the decision 

to recertify is based on current clinical 

findings, enabling greater compliance 

with Medicare eligibility criteria. We 

believe the new statutory requirements 

reflect the Congress’ desire for increased 

compliance with Medicare eligibility 

and, in order to implement these 

provisions, we proposed to revise 

§ 418.22(a)(3). 

Furthermore, longstanding manual 

guidance stipulates that the physician(s) 

must sign and date the certification or 

recertification. However, the HHS Office 

of Inspector General (OIG) recently 

found that certifications for some 

hospice patients failed to meet Federal 

requirements, including the signature 

requirement (HHS OIG, ‘‘Medicare 

Hospice Care for Beneficiaries in 

Nursing Facilities: Compliance with 

Medicare Coverage Requirements, 

September 2009’’). In keeping with the 

Congress’ desire for increased 

compliance with Medicare eligibility 

criteria, and to achieve consistency with 

the 180-day recertification attestation 

requirements, we proposed to add 

language to the certification 

requirements in our regulations to 

clarify that these documents must 

include the signature(s) of the 

physician(s) and the date each 

physician signed the document. 

Additionally, with the new statutory 

requirements for a face-to-face 

encounter prior to the 180-day 

recertification, and for every 

recertification thereafter, it is important 

for hospices to easily identify which 

benefit periods require a recertification 

visit. Hospice patients are allowed two 

90-day benefit periods followed by an 

unlimited number of 60-day benefit 

periods, so every 60-day benefit period 

is by definition beyond the 180-day 

recertification. Because we do not 

currently require that certifications or 

recertifications show the dates of the 

benefit period to which they apply, we 

proposed to add language to our 

certification and recertification 

regulations to make this a requirement 

for all hospices. While many hospices 

already include this information, there 

are some that do not. Having the benefit 

period dates on the certification would 

make it easier for the hospice to identify 

those benefit periods which would 

require a face-to-face encounter and 

would ease enforcement of this new 

statutory requirement. 

Section 1814(a)(7)(A) of the Act 

requires a valid certification or 

recertification for Medicare coverage. 

Additionally, section 1814(a)(7)(D) of 

the Act now also requires a face-to-face 

encounter with patients who reach the 

180th-day recertification. We proposed 

to revise our regulations to require that 

the physician’s signature(s), date signed, 

and the benefit period dates be included 

on the certification or recertification 

because we believe this information is 

necessary to determine if these 

documents are valid, and to ease the 

implementation of the new statutory 

requirements. We believe these 

requirements are consistent with 

practices in the hospice industry, and 

we do not believe these proposals will 

be burdensome to hospices. As such, we 

proposed to add § 418.22(b)(5) to 

incorporate these signature and date 

requirements. 

The following is a summary of the 

comments we received regarding the 

new requirements affecting hospice 

certification and recertification 

proposals. 

Comment: Commenters asked for 

clarification of whether 180 days of 

hospice care must be provided before 

the face-to-face encounter was required, 

or whether the face-to-face was required 

when a patient enters the 3rd or later 

benefit periods. Several commenters 

suggested that we clarify the proposal so 

that the focus is on benefit periods, 

which they believe is consistent with 

the intent of the statute and the 

regulation, and which is easier to track; 

these commenters suggested we change 


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the regulatory text to reference election 

periods rather than days. 

In contrast, other commenters 

suggested we reword the proposal so 

that an encounter and its accompanying 

attestation will be required after 180 

days of hospice care and every 60 days 

thereafter. The commenters wrote that 

basing the encounter timeframe on 

benefit periods rather than actual days 

of care would result in some patients 

requiring visits after only a short time in 

hospice, which the commenters believe 

was not in keeping with CMS’ intent to 

have patients with long lengths of stay 

assessed for continued eligibility. A 

commenter suggested that those 180 

days must be continuous in order to 

trigger a face-to-face encounter. 

Other commenters wrote that each 

new hospice admission should begin as 

day 1 for that hospice. One said that 

patients with a history of inappropriate 

admissions to different hospices should 

not cause the appropriate admissions to 

hospices to be penalized. Another wrote 

that although Medicare hospice is not 

fee-for-service, hospices still assume the 

risk of enrolling patients with high-cost 

medical needs based on the expectation 

that other patients will have lower cost 

medical needs. This commenter wrote 

that if a patient has had a previous 

hospice stay, and those days are 

counted toward the 180th-day 

recertification requirement, payment for 

those days was made to another 

hospice. The commenter also believes 

this invalidates an argument that the 

hospice has ‘‘accrued’’ sufficient funds 

to cover the additional costs of the 

required visits. The commenter 

suggested we not consider a patient’s 

total hospice history in defining the 

180th-day recertification requirement, 

but only focus on days of care within 

the specific hospice providing care. The 

commenter suggested that this would 

also eliminate problems related to 

accurately tracking time spent in 

hospice. 

Another commenter wrote that if a 

patient had a significant break in 

hospice service, CMS should restart the 

time clock for the 180th-day 

recertification. Several commenters 

suggested that we consider each new 

terminal diagnosis to restart the clock as 

day 1; these commenters were referring 

to situations where a patient receives 

hospice care for a terminal diagnosis 

from which he or she recovers, and later 

receives hospice care for a different 

terminal diagnosis. 

Other commenters asked for 

information about how to count the 

days when a hospice patient becomes 

eligible for Medicare in the midst of a 

non-Medicare hospice stay or when the 

patient has previously received hospice 

care outside of the Medicare hospice 

benefit. 

Response: The relevant language in 

the Affordable Care Act reads, ‘‘* * * a 

hospice physician or nurse practitioner 

has a face-to-face encounter with the 

individual to determine continued 

eligibility of the individual for hospice 

care prior to the 180th-day 

recertification and each subsequent 

recertification * * *’’ The Medicare 

statute, as amended by the Affordable 

Care Act, does not define the term 

‘‘180th-day recertification.’’ For 

purposes of this provision, the Medicare 

statute also does not specifically address 

how the face-to-face encounter 

requirement should apply in the 

situation in which a beneficiary 

completes the first 90-day benefit period 

and is recertified for a second 90-day 

benefit period but does not receive 90 

days of service in the second benefit 

period due to (for example) a revocation 

in the middle of the benefit period. 

In interpreting the statutory term 

‘‘180-day recertification,’’ we considered 

the statutory scheme and the existing 

language used in the statute and in our 

regulations, all of which is structured 

around the concept of benefit periods 

which, by statute, cannot last longer 

than a maximum number of days (90 

days for the first two and 60 days for 

subsequent benefit periods). The fact 

that the statute imposes a maximum 

number of days per period does not 

mean that an individual must receive 

hospice services for the maximum 

number of days before a statutory 

requirement can be imposed on 

subsequent benefit periods. For 

example, for payment to be made to a 

hospice provider with respect to a 

beneficiary, section 1814(a)(7) of the Act 

requires a certification (and 

recertification) at the beginning of each 

benefit period, the first two of which 

can last as long as 90 days each. 

Previously, we have interpreted these 

provisions to require a recertification at 

the beginning of each subsequent 

benefit period, even if the prior benefit 

period did not last the maximum 

number of days due to, among other 

things, the beneficiary’s revocation 

under section 1812(d)(2)(B) of the Act. 

Thus, the regulatory language at 

§ 418.22 requires certifications at the 

beginning of benefit periods rather than 

requiring certifications after a certain 

number of days of service was actually 

provided to a beneficiary. 

For the foregoing reasons, we are 

defining the 180th-day recertification to 

be the recertification which occurs at 

the start of the 3rd benefit period—that 

is, the benefit period following the 

certification for a second, 90-day benefit 

period, regardless of whether the 

beneficiary received a full 90 days of 

service in the second 90-day benefit 

period. We note that, as one commenter 

wrote, this method of counting the time 

will also be easier for hospices to track. 

We also believe that the statute 

considers the patient’s total hospice 

benefit period, rather than starting the 

clock at day 1 or period 1 for each new 

hospice or for a different terminal 

diagnosis. Furthermore, this method of 

counting benefit periods is consistent 

with how our systems operate when 

tracking Medicare hospice beneficiaries. 

We agree with the commenter who 

wrote that hospices assume the risk of 

enrolling patients with high-cost 

medical needs based on the expectation 

that other patients will have lower cost 

medical needs. As such, we believe that 

hospices should consider costs of 

patient care in the aggregate, and not on 

a per-patient basis. Therefore, we did 

not argue in the proposed rule that a 

hospice ‘‘accrues’’ sufficient funds on a 

per-patient basis to cover the cost of the 

visit based on a patient having prior 

days of care with that hospice. 

To illustrate this benefit period 

method of counting, if a hospice patient 

elected the benefit for the first time on 

June 1st, completed the 1st 90 day 

period (on August 30th), began the 2nd 

90 day period, but revoked 30 days into 

the benefit period (on September 29th), 

and re-elected hospice the following 

January, the beneficiary would be in his 

3rd benefit period. The 3rd benefit 

period would require a face-to-face visit 

at admission even though he had not 

received 180 calendar days of care. 

The Medicare hospice benefit periods 

only apply to Medicare hospice 

patients, regardless of whether Medicare 

is the primary or secondary coverage. In 

other words, non-Medicare stays are not 

considered when counting benefit 

periods to determine when a face-to-face 

encounter must occur. The first 

Medicare benefit period would begin on 

the effective date of the first Medicare 

hospice election. 

To clarify the language used about the 

timing of the requirement, we are 

modifying our proposal and the 

regulatory text to refer to the face-to-face 

encounter as being required prior to the 

3rd benefit period recertification and 

each subsequent recertification. 

Comment: Several commenters were 

concerned that they could not provide 

a face-to-face encounter within 15 days 

prior to the 180th-day recertification or 

each subsequent recertification. One 

wrote that this timeframe is a barrier to 

rational geographic batching of visits. 

They cited difficulties due to shortages 


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of physicians and NPs, particularly in 

rural areas. Several commenters said 

they would need to hire additional staff 

but were concerned about being able to 

successfully recruit a physician or NP 

because of shortages, particularly in 

rural areas. 

One wrote that there are not enough 

well-trained hospice practitioners in 

this country to handle the potential 

volume of these visits and asked if we 

were concerned that the influx of 

providers required to make these visits 

would ‘‘water down’’ the quality of the 

assessments, and negatively impact the 

delivery of care to hospice patients. 

Some noted that they have a part-time 

Medical Director with a busy private 

practice, who is simply not available to 

make the visits. One noted that in urban 

areas, traffic tie-ups add to the time 

required to make these visits. Others 

wrote that visits in rural areas require 

significant travel time, sometimes as 

long as 4 hours; one added that during 

these visits, their Medical Director 

would also be completely unavailable 

by phone for other patient and staff 

needs because in some remote areas 

there is limited cell phone service. 

One asked if there was a requirement 

regarding the location(s) where a 

required face-to-face visit could occur. 

Another commenter wrote that the 

language of the proposed regulation at 

§ 418.22(c)(4) implies that the 

practitioner must visit the patient at his 

or her home, rather than allowing the 

patient to come to the physician or NP. 

This commenter suggested that we 

change the regulatory text from ‘‘must 

visit’’ to ‘‘have a face-to-face encounter’’ 

as specified by section 3132 of the 

Affordable Care Act. A commenter 

noted that in some areas, patients would 

have to come to the physician, creating 

a burden on patients and families. 

Several commenters added that they 

cannot get frail or dying patients to the 

physicians because many cannot sit up 

in a car, and in rural areas, Emergency 

Medical Services (EMS) may be the only 

option for transportation. 

Another commenter wrote that 

patients would not be able to afford the 

ambulance ride to a physician’s office to 

make the visit; others were concerned 

that forcing a patient to travel to a 

physician was an undue hardship on 

both the patient and the family, would 

expose the patient to potentially 

infectious patients in the doctor’s office, 

and could lead to exacerbation of 

symptoms such as severe pain or 

dyspnea. 

One commenter suggested we 

consider the impact of the required visit 

on the family; another commenter wrote 

that the required visits would be an 

added stress to the family as they wait 

for confirmation from hospice staff that 

hospice care can continue. Another 

commenter wrote that if a patient 

required ambulance transport to a 

doctor’s office, it would be an 

unreimbursed expense for the hospice, 

and asked if Medicare could cover the 

ambulance ride outside of the hospice 

per diem payment amount. One 

commenter said EMS will not cross 

county lines, yet 21 percent of the 

hospice’s patients lived in a different 

county. 

Another commenter asked if the 

hospice could discharge a patient if the 

patient or family refused the physician 

visit, or delayed it, and noted that with 

15 days, there may not be time for 

adequate discharge planning. Several 

noted that some states have minimum 

discharge requirements, such as 

Alabama with a minimum 30-day 

requirement, which make the 15-day 

timeframe unworkable; one commenter 

asked how to handle the situation where 

the recertification visit determines that 

discharge is needed, but it occurs with 

less than 30 days to plan, as required by 

some State laws. This commenter asked 

that we allow for adequate discharge 

planning. 

A few commenters asked what the 

hospice should do if the visit cannot be 

made due to scheduling difficulties, 

inclement weather, unsafe road 

conditions, or due to an emergency. 

Another commenter said that a hospice 

physician might not have an attending 

physician’s dictation from the visit in 

time to make the attestation, and ask for 

more time to make the visits. One 

commenter wrote that the time 

constraints do not fit well with patients’ 

conditions if their disease trajectories 

are in rapid decline. A commenter asked 

what would be the impact on a hospice 

if the required visit was not made in the 

allowable timeframe but was earlier or 

later. This commenter also asked if this 

requirement only affected Medicare 

hospice patients. Many commenters 

asked for more time to make the visit, 

suggesting 21 or 30 days. 

Response: We appreciate commenters’ 

input on the problems in scheduling 

these face-to-face encounters, and we 

recognize that rural hospices, in 

particular, may experience more 

logistical difficulty due to the shortage 

of physicians or NPs in some areas. 

Based on concerns and 

recommendations from the public 

comments on potential logistical issues, 

we are revising our proposed policy to 

change the visit timeframe from up to 15 

days prior to the start of the 180th-day 

recertification, and each subsequent 

recertification, to a visit timeframe of up 

to 30 calendar days prior to the 3rd 

benefit period recertification, and each 

subsequent recertification. We believe 

this additional time will provide 

hospices with the flexibility they need 

to meet this Congressional mandate, to 

provide adequate time for discharge 

planning when indicated, and to 

accommodate other logistical issues 

discussed in the public comments. 

We are unclear about the meaning of 

the comment related to State laws about 

discharge, and believe it may be outside 

the scope of this rule. We are only able 

to focus on the Medicare statute and 

payment regulations, which require that 

patients who are no longer eligible for 

the benefit be discharged. The statute 

does not allow us to pay for hospice 

care for patients who are not eligible for 

the benefit. 

The regulations at § 418.26(d) require 

hospices to have a discharge planning 

process in place ‘‘that takes into account 

the prospect that a patient’s condition 

might stabilize or otherwise change 

such that the patient cannot continue to 

be certified as terminally ill.’’ The word 

‘‘prospect’’ in this regulatory text 

indicates that hospices should be 

considering whether stable or improving 

patients might become ineligible in the 

future, and plan for a possible future 

discharge. 

Hospices are required to follow State 

laws in additional to federal laws. 

However, we do not see the 

recertification requirement and any 

State discharge requirements as being in 

conflict. 

If a patient or family member refuses 

to allow the hospice physician or NP to 

make the required visit, a hospice could 

consider discharge for cause, as the 

refusal would impede the hospice’s 

ability to provide care to the patient. 

The hospice would need to follow the 

procedures for discharge for cause, 

which are given in § 418.26. 

In response to the comment 

suggesting that we change the proposed 

regulatory text at 418.22 (C)(4) from 

‘‘must visit’’ to ‘‘have a face-to-face 

encounter’’ as language of the proposed 

regulation implies that the practitioner 

must visit the patient at his or her home, 

rather than allowing the patient to come 

to the physician or NP, we are revising 

the proposed language. We believe that 

the Affordable Care Act allows hospices 

the flexibility for patients to have a faceto-face encounter with a hospice 

physician or nurse practitioner. We are 

revising the regulatory text at 

§ 418.22(a)(4) to now read, ‘‘As of 

January 1, 2011, a hospice physician or 

hospice nurse practitioner must have a 

face-to-face encounter * * *’’ We expect 

that hospices will not require patients to 


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come to the hospice physician or NP for 

the encounter if doing so would 

exacerbate symptoms or otherwise 

jeopardize the patient’s well-being; the 

hospice Conditions of Participation 

(CoPs) in § 418.100(a) require that 

hospices provide care that optimizes 

patient comfort, and is consistent with 

the patient’s and family’s needs and 

goals. All patient transport must occur 

within the context of optimizing patient 

comfort and meeting the specific needs 

and goals of patients and their families. 

If transportation to a hospice physician 

would not optimize patient comfort 

and/or meet the goals and needs of the 

patient and family, the hospice 

physician or NP would need to travel to 

the patient. If a hospice patient 

travelling to the hospice physician or 

NP required ambulance transportation 

because of his or her medical condition, 

the ambulance transportation would be 

included in the hospice per diem; it 

could not be billed to patient. 

We believe that the face-to-face 

encounters will not be an added stress 

to family members if they know they are 

a routine part of the hospice 

recertification process, and if the family 

understands that the visit has the 

potential to improve the quality of care 

for their loved one. 

In response to the commenter’s 

concern that the patient’s attending 

physician’s dictation might not be 

available to the hospice in the 15 days 

prior to the recertification, and this 

would prevent the hospice from meeting 

the 15-day timeframe that was originally 

proposed, we believe that the 

commenter appears to misinterpret the 

statutory requirement. Pursuant to 

section 3132(B) of the Affordable Care 

Act, a hospice physician or hospice NP 

must perform the encounter. The 

definition of hospice physician is 

addressed later in this section. 

In response to the comments asking 

for clarification about to which patients 

the face-to-face encounter requirement 

applies, we note that it only applies to 

Medicare hospice patients. 

Finally, we proposed clarifying some 

language in our benefit policy manual 

and aligning timeframes so that 

recertifications could not be completed 

more than 15 days prior to the start of 

the subsequent benefit period. While the 

entire recertification cannot be 

completed more than 15 days prior to 

the start of the benefit period, we are 

clarifying that the face-to-face encounter 

and its accompanying attestation are 

only parts of the recertification, and 

therefore can be completed up to 30 

calendar days prior to the start of the 

3rd benefit period recertification and 

each subsequent recertification. 

Comment: Several commenters have 

asked if the hospice face-to-face 

encounter is billable, and if so what 

reimbursement code should be used. A 

number of commenters wrote that their 

hospices do not have the resources to 

accomplish this if the visit is not 

billable; one wrote that this requirement 

could have the potential to drive smaller 

providers out of the market. They wrote 

that this requirement would be a 

financial burden, especially to rural 

providers, in the face of reductions due 

to the budget neutrality adjustment 

factor (BNAF) phase-out and future 

market basket cuts, declining charitable 

donations, increased costs, and 

demands for competitive wages. A few 

commenters mentioned that hospices 

will be absorbing more than a 14 

percent reduction in their Medicare and 

Medicaid reimbursement levels over the 

next 10 years; they wrote that these 

reductions are especially difficult for 

the hospice community since hospice 

programs are disproportionately 

dependent upon Medicare and 

Medicaid for reimbursement. These 

commenters believe the upcoming 

payment reductions place increasing 

financial pressure on hospices that seek 

to deliver quality care and comply with 

additional administrative and regulatory 

requirements. 

A number of commenters wrote that 

they could not afford this unfunded 

mandate. One rural commenter noted 

that their reimbursement is already 

lower due to wage index adjustments, 

and yet the costs of these required visits 

will fall more heavily on rural 

providers, with long distances to see 

patients; this commenter believes the 

burden to rural hospices was becoming 

‘‘almost insurmountable.’’ Commenters 

also mentioned the administrative costs 

of coordinating the visits, of changing 

existing forms and documents, and of 

increased liability risks, and several 

believe that these are not included in 

the current hospice reimbursement. 

Another noted that hospices would be 

expected to pay physicians or NPs for 

their travel time, visit time, and mileage, 

and would have additional 

administrative costs while receiving the 

same per diem payment amount. One 

commenter said that his hospice would 

be forced to reduce services to patients 

to pay for these visits. One commenter 

wrote that this requirement creates a 2- 

tiered system where providers are 

compensated better for patients under 

the 180-day recertification requirement 

than for beneficiaries who require a 

face-to-face encounter. 

Several said that they would have to 

hire someone full-time to make the 

visits, which would create significant 

financial hardship without 

reimbursement; one wrote that those 

monies would be better spent on 

providing quality care and on fair wages 

for employees. A few added that having 

a physician or NP spend hours traveling 

to see patients would be a waste of 

scarce human resources in areas where 

there are physician or NP shortages. A 

few mentioned that the net result would 

be less patient care, and more time 

spent on paperwork. 

Nearly all commenters suggested 

some form of reimbursement for the 

visit, with one commenter writing that 

all physician visits mandated by payers 

should be billable separately by the 

physician directly to the payer for 

reimbursement. One commenter was 

concerned that because these required 

visits are medically unnecessary, there 

would be no reimbursement for them, 

yet hospices would still incur costs from 

making the visits. Another commenter 

added that many physicians or NPs 

would order tests such at CAT scans or 

lab tests to obtain results that justify 

recertification of patients, and yet 

would not receive reimbursement for 

these tests. 

A few commenters suggested that any 

part of the visit that becomes medically 

necessary, including those where the 

doctor changes the plan of care (POC) or 

makes medication adjustments, should 

be billable. One commenter asked if a 

hospice could bill the patient for the 

face-to-face visit if it was not covered. 

One commenter wrote that when the 

Medicare hospice benefit was originally 

designed, physician face-to-face visits 

were viewed as an encounter for 

additional counseling, education, 

information, and support. The 

commenter asked why any physician 

face-to-face visit would not be billable. 

Another commenter cited our 

regulations at § 418.304, and asked if the 

face-to-face visit was considered part of 

the establishment and updating of the 

plan of care, or is it outside the services 

listed, and could be billed separately. If 

the visits are part of the per diem 

amount, the commenter encouraged 

CMS to review the payment rates and 

increase the per diem to reflect this 

new, mandated service. 

A number of commenters believe that 

the face-to-face requirement was beyond 

the administrative services provided by 

the hospice Medical Director, and 

outlined in the hospice claims 

processing manual in section 40.1.1 (see 

Internet Only Manual, 100–04, chapter 

11). Several commenters wrote that 

since active clinical work and a 

comprehensive analysis will be required 

of the physician (as distinguished from 

simple documentation in the medical 


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record), they believed that a billable 

visit is appropriate. Another wrote that 

while the medical decision-making is 

primarily directed at determining 

prognosis, in many cases, changes in 

medication and patient management 

may also be suggested. A different 

commenter wrote that the face-to-face 

encounter requires direct patient care 

services, including a comprehensive 

clinical assessment and is comparable to 

the billing for evaluation and 

management services provided in other 

settings and should be reimbursed as 

such. Another commenter wrote that 

there is no precedent for a physician to 

be required by law to provide a 

thorough medical assessment of a 

seriously ill patient and be constrained 

from coding, billing, or seeking usual 

and customary reimbursement for such 

care. 

For any portion of the visit that is 

billable, commenters asked how to 

document that billable portion, 

including whether to make one note or 

two. A number of commenters wrote 

that their anticipated costs for the visits 

would far exceed any reimbursement, 

particularly given the travel time and 

mileage costs. Another also noted that 

there is currently no physician 

reimbursement for Medicaid patients 

visited by the hospice physician. 

A few commenters noted that NP 

services that are equivalent to physician 

services are not currently billable unless 

the NP is the patient’s attending 

physician. One asked if this would 

change under the proposed rule. 

A commenter wrote that the Medicare 

CoPs speak to the actions of a physician 

providing medical care to a hospice 

patient as separate from the role of the 

Medical Director, and that these services 

are accounted for differently in the per 

diem payment rate. This commenter 

wrote that the roles of these two 

physicians are distinct, and that CMS 

should consider providing adequate 

reimbursement for the services being 

required. Another commenter asserted 

that if Medicare wants quality 

healthcare, Medicare must allow 

practitioners to bill for their time. 

A few commenters wrote that there 

was an established precedent in Skilled 

Nursing facilities that encounters to 

meet mandated requirements are 

billable and reimbursed by CMS, 

beyond the administrative duties of the 

Medical Director. Given this 

information, they asked us to clarify if 

the mandated visit would be billable. 

A commenter asked if we plan to 

track face-to-face encounters with a 

particular CPT code, and if it should be 

reported on the claim. Another 

commenter asked if we are concerned 

about the distortion of the actual cost 

associated with providing care to 

hospice patients if these visits are not 

captured on the claim. Some 

commenters asked us to devise a HCPCS 

code to compensate the hospice 

physician or NP for the time and 

mileage for making these visits. Others 

asked us to develop a billing code that 

would include mileage costs and travel 

time, and increase the per diems to 

reflect the additional administrative 

costs related to the proposal. One 

recommended a separately reimbursable 

fee schedule amount specific to face-toface encounter visits. 

Response: We appreciate the 

commenters concerns about the 

financial effects of the face-to-face 

requirement. However, the billing 

regulations for hospice do not allow for 

physician reimbursement for 

administrative activities of physicians. 

The certification or recertification of 

terminal illness is not a clinical 

document, but instead is a document 

supporting eligibility for the benefit. In 

the 1983 Hospice Care Final Rule, 

certifications of terminal illness were 

described as ‘‘simply determinations as 

to the patient’s medical prognosis, not 

the plan of care or the type of treatment 

actually received’’ (48 FR 56010). As 

such, the certification or recertification 

of terminal illness has been excluded 

from separate physician reimbursement 

and has been considered an 

administrative activity of the hospice 

physician. The face-to-face requirement 

is part of the recertification, and 

therefore is an administrative activity 

included in the hospice per diem 

payment rate. In contrast, the SNF 

bundle specifically excludes the 

services of physicians and other 

advanced practiced disciplines 

including NPs. Therefore, SNF 

physicians or NPs can bill for mandated 

encounters, as these visits are not part 

of the bundled payment. 

The hospice face-to-face encounter is 

an administrative requirement related to 

certifying the terminal illness mandated 

by the Affordable Care Act. By itself, it 

would not be billable, as it is considered 

administrative, as explained above and 

in section 40.1.1 of the Claims 

Processing Manual (Internet Only 

Manual 100–04, chapter 11): ‘‘Payment 

for physicians’ administrative and 

general supervisory activities is 

included in the hospice payment rates. 

These activities include participating in 

the establishment, review and updating 

of plans of care, supervising care and 

services and establishing governing 

policies.’’ Determining continued 

patient eligibility would fall under the 

‘‘general supervisory services’’ described 

at § 418.304(a)(1), rather than under 

review and update of plans of care 

described at § 418.304(a)(2). 

However, if a physician or nurse 

practitioner provides reasonable and 

necessary non-administrative patient 

care such as symptom management to 

the patient during the visit (for example, 

the physician or NP decides that a 

medication change is warranted), that 

portion of the visit would be billable. 

We believe that allowing for this type of 

billing will not only increase the quality 

of patient care, but also will help defray 

the costs to hospices of meeting this 

requirement. Hospices may not bill 

patients for face-to-face encounters or 

for any medically necessary physician 

services provided during the encounter, 

as these are hospice services. Billing for 

medically necessary care provided 

during the course of a face-to-face 

encounter should flow through the 

hospice, as the physician or NP who 

sees the patient is employed by or 

where permitted, working under 

arrangement with the hospice (for 

example, a contracted physician). 

The commenter who wrote that 

hospices cannot bill for physician 

services provided by a NP unless the NP 

is the attending physician is correct. 

The regulations at § 418.304(e) only 

allow nurse practitioner services to be 

billed when the nurse practitioner is the 

patient’s designated attending 

physician. In order to be billable, this 

regulation also requires that the NP 

must provide medically reasonable and 

necessary services that are physician 

level services, and not nursing services 

(that is, in the absence of a nurse 

practitioner, the services would be 

provided by a physician and not by a 

nurse). The regulation also excludes 

billing for services related to the 

certification of terminal illness. 

The hospice physician or NP that has 

the face-to-face encounter with the 

patient should ensure that any clinical 

findings of the visit(s) are 

communicated back to the 

interdisciplinary group (IDG), for use in 

coordinating the patient’s care. This is 

particularly true if the physician or NP 

discovers unmet medical needs during 

the billable or non-billable portion of 

the visit, so that the IDG can coordinate 

with any attending physician. Hospices 

are not to provide services that are 

duplicative of what the attending 

physician is doing and are responsible 

for coordinating with the attending 

physician if they provide any reasonable 

and necessary patient care when having 

a face-to-face encounter. If there is a 

billable portion attributable to the visit, 

hospices must maintain medical 

documentation that is clear and precise 


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to substantiate the reason for the 

services that went beyond the face-toface encounter, and which apply to the 

billed services; this can be done in one 

note. 

At this time, we do not plan to track 

these required visits with a special CPT 

code, or to create any additional HCPCS 

codes related to these visits. In the 

coming years, we will be reforming the 

hospice payment system, and will be 

analyzing hospice costs and 

reimbursements to ensure that providers 

are being paid fairly. 

We are unclear about the meaning of 

the comment that indicated that there is 

currently no physician reimbursement 

for Medicaid patients visited by the 

hospice physician. However, we note 

that the Medicare hospice benefit 

reimburses hospice physicians and 

attending physicians for reasonable and 

necessary care provided to hospice 

patients, whether the patients are dually 

eligible or not. If the commenter is 

referring to patients who have Medicaid 

only, we suggest that the commenter see 

his or her State Medicaid Manual, 

particularly sections 4305.05 and 4307, 

which deal with the Medicaid hospice 

benefit and with physician services, 

respectively. The paper-based State 

Medicaid Manual can be accessed 

through our Web site, at http://

www.cms.hhs.gov/Manuals/PBM/

itemdetail.asp?filterType=none&

filterByDID=- 

99&sortByDID=1&sortOrder=ascending

&itemID=CMS021927. 

Finally, the hospice face-to-face 

encounter is only required for 

recertifications when the patient is in 

the 3rd benefit period or beyond. By 

definition, hospice patients are 

terminally ill, with a prognosis of 6 

months or less if, the illness runs its 

normal course. Therefore, the majority 

of hospice patients should not require a 

face-to-face encounter. 

Comment: A number of commenters 

wrote that hospices cannot currently 

access accurate information in a timely 

manner to determine the status of 

previous hospice services. The 

commenters expressed concern that a 

hospice might admit a patient without 

having complete or accurate information 

about previous hospice services, and 

therefore not be aware that a face-to-face 

encounter could be required, resulting 

in denial of payment. Commenters 

stressed that without timely, accurate 

information, it is impossible for 

hospices to comply with this regulation. 

Several asked if the fiscal 

intermediary standard systems (FISS) 

was available 24 hours per day, 7 days 

per week, or if the fiscal intermediaries 

(FIs) or Medicare Administrative 

Contractors (MACs) could impose down 

times for maintenance, holidays, 

weekends, or other reasons, noting that 

many hospice admissions take place 

after hours and on weekends, and 

recommended that we review FISS 

operating hours to ensure that it is 

available at all times. A few wrote that 

FISS cannot be accessed via secure 

internet site from any computer, but that 

hospices are required to purchase 

individual licenses and connection 

capabilities for each computer. One 

wrote that if a patient is discharged 

alive from a hospice more than six 

months from the inquiry date in the 

Eligibility Home Health Inquire (ELGH), 

the ELGH screen fails to reflect the 

previous hospice election, inaccurately 

suggesting to the provider that the 

patient had never elected hospice. One 

noted that using the look-up systems to 

determine a patient’s hospice history is 

cumbersome. This commenter also 

asked how far back benefit period 

records are kept within FISS. Several 

commenters noted that many hospices 

do not bill in a timely fashion, which 

places the receiving hospice at risk even 

if the Common Work File (CWF) or 

other resources are dutifully checked at 

time of admission. One commenter 

asked that we explore options to access 

the FISS system, and to ensure 

timeliness and availability of the 

complete hospice history. 

A few commenters asked who would 

be responsible for monitoring the 

patient’s time in hospice, to know if a 

face-to-face encounter was required. The 

commenters stated they would not 

know the patient’s history otherwise. 

One asked how a hospice would know 

when the last face-to-face encounters 

took place on patients who are 

transferred or who came from out of the 

area. This commenter also asked if a 

hospice could rely on a previous faceto-face encounter if the patient is being 

transferred from another hospice within 

60 days of the last face-to-face 

encounter. Several commenters asked if 

the Provider Statistical and 

Reimbursement Report (PS&R) would be 

able to provide benefit period 

information. 

Some also wrote that hospices should 

not be held accountable for failure to 

provide a visit if the data systems were 

unable to provide them with the 

accurate and timely information needed, 

or if the provider miscalculated the 

certification or recertification dates and/ 

or face-to-face visit requirement because 

of inaccurate system information. 

Several asked that we provide clear 

guidance as to what would constitute a 

‘‘best effort’’ to secure a patient’s full 

hospice history for establishing the 

proper benefit period, and ‘‘hold 

harmless’’ those providers who have met 

the ‘‘best effort’’ standard. One 

commenter suggested we delay 

implementation of the face-to-face 

requirement until there is a CMS system 

in place that is available 24 hours per 

day, 7 days per week, and that providers 

not be responsible for knowing about 

prior hospice use if the data are not 

available in FISS. This commenter 

suggested that FISS operating hours be 

reviewed and that CMS consider 

requiring the FI/MAC contractors to 

have FISS available for longer hours and 

on nights, weekends, and holidays. 

Response: Hospices are responsible 

for verifying which benefit period a 

patient is in at admission by using the 

CWF to determine the beneficiary’s 

benefit period. The CWF is used 

because the FISS is responsible for the 

actual processing and payment of 

claims, and does not track benefit 

periods. There are several CWF query 

systems to determine which benefit 

period a hospice patient is in. Both 

ELGH and Health Insurance Query for 

Home Health Agencies (HIQH) give real 

time data; hospices should be using the 

CWF queries for the most accurate 

beneficiary information. If providers are 

unsure how to use the CWF queries, 

they should contact their MACs. 

Because CWF has 9 host sites, a 

provider would have to search through 

up to 9 databases to determine if a 

patient who moved from another part of 

the country received prior hospice care; 

a beneficiary’s records are only in 1 of 

the 9 databases, so as soon as the 

beneficiary is located, the search may 

cease. Although this may be 

cumbersome, the CWF is required to be 

available from 6 a.m. to 6 p.m. Monday 

through Friday and 6 a.m. to noon on 

Saturdays, by the time zone of the host 

site. We strive to have the CWF 

available beyond these minimum 

timeframes, but there are some regular 

downtimes: every Saturday, usually 

from 4 p.m. to past midnight, Sundays 

from 7 p.m. to 9 p.m. (central time), and 

the third Sunday of every month from 

12 a.m. to 4 a.m. (central time). 

The PS&R system cannot currently 

provide the information needed to 

determine the current benefit period, 

and the revised system is still under 

development. 

If CWF is not available, hospices have 

another option for verifying a patient’s 

hospice benefit periods, using an 

inquiry that is usually available 24 

hours per day, 7 days per week, 365 

days per year: the Health Insurance 

Portability and Accountability Act 

(HIPAA) Eligibility Transaction System 

(HETS), specifically the 270/271 


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transaction. Those hospices that file 

their claims through a clearinghouse, or 

which have a direct connection to CMS, 

or whose MAC provides an Internet 

portal, would have access to the HETS 

system as a data source for their 

eligibility. The HETS 270/271 inquiry is 

in real time, but claim information lags 

up to 24 hours. It is also a national 

database, therefore there is no need to 

search multiple host sites. A 270 

transaction is a transaction query and a 

271 transaction is the response to the 

user. A 270 transaction query for a 

patient’s benefit periods will return up 

to 3 years of data, showing all prior 

hospice benefit periods. This query 

system can be used if the CWF system 

is not available; providers can go to 

http://www.cms.gov/HETSHelp/ for 

information on the HETS 270/271 

transaction, or they can call 1–866–534– 

7315. Therefore, hospices have multiple 

ways of verifying a patient’s prior 

hospice history to determine which 

benefit period the patient is in. 

If a beneficiary has received hospice 

care at another provider, commenters 

are correct that the CWF may not be upto-date if that previous provider has not 

billed promptly. We share commenters’ 

interest that the benefit period 

information available via the CWF or 

the 270/271 transaction should be as upto-date as possible. Hospices have a 

financial incentive to bill in a timely 

fashion, and in our claims processing 

manual, we have encouraged providers 

to file their Notice of Elections as soon 

as possible after an election; similarly, 

we have often encouraged providers 

during the public CMS Open Door 

Forum discussions to bill in a timely 

fashion. In addition to checking our data 

systems for benefit period information, 

hospices can also ask the beneficiary (or 

his or her representative) if he or she 

has received hospice care previously. In 

putting forth their ‘‘best effort’’ to 

identify whether a patient requires a 

face-to-face encounter, hospices should 

not rely solely on data systems to 

determine the benefit period, but should 

also talk with the patient or 

representative where possible, and 

should document the information they 

find along with the methods used to 

find the information. 

Several commenters suggested that we 

‘‘hold harmless’’ those who rely on the 

CWF response information to determine 

whether a face-to-face encounter is 

required. We are unable to provide 

flexibility as the statutory language in 

the Act requires a certification or 

recertification in order for Medicare to 

cover hospice days of care. If a hospice 

has not had a required face-to-face 

encounter, then the recertification 

would not be complete, and we would 

be unable to cover the days of care that 

were under that recertification. 

However, we believe that the 

flexibility afforded to hospices in 

determining benefit period data 

eliminates most situations where a 

hospice does not have accurate benefit 

period data. Furthermore, we believe 

that in many cases, the patient or his or 

her representative will know if hospice 

care was provided previously. Based on 

analysis of our FY 2007 claims data, 

about 20 percent of all hospice 

beneficiaries reach benefit period 3 or 

later, and thus would require a face-toface evaluation. Of that 20 percent, only 

a fraction of those beneficiaries might 

have benefit period data that are not upto-date in the systems, and which 

cannot be verified with the patient or 

representative. In addition, of that 

fraction, another fraction will show 

benefit period 1 or 2, rather than period 

3 or later, due to having prior hospice 

care. Therefore, given the historical 

data, we do not believe that this 

situation will be common or that there 

is a need to hold hospices harmless. 

The Affordable Care Act requires that 

a hospice physician or NP have a faceto-face encounter with any patient that 

it admits in the 3rd or later benefit 

period; prior face-to-face encounters 

performed by previous providers cannot 

be used to substitute for a face-to-face 

encounter that is required by the current 

hospice. In a transfer situation, the 

benefit period does not change, so the 

originating hospice would have been 

responsible for any required face-to-face 

encounter if the patient was in the 3rd 

or later benefit period. When a patient 

is in the 3rd or later benefit period 

transfers to a new hospice, the receiving 

hospice must recertify the patient, but it 

does not have to have a face-to-face 

encounter for that current period if it 

can verify that the previous hospice 

provided the visit. 

In response to comments asking that 

we delay the effective date, we note that 

we are unable to delay implementation 

of the face-to-face requirement since the 

statutory language requires that it begins 

on January 1, 2011. 

Comment: Several commenters were 

concerned about requirements when a 

patient with a prior hospice stay 

requires a visit upon admission to a new 

hospice. This group of commenters 

along with others also noted that during 

a time of crisis, the need to admit the 

patient for pain and symptom control 

should take precedence over provision 

of any required face-to-face encounter. 

Another commenter was concerned that 

requiring a face-to-face encounter would 

create barriers to timely access and 

increase costs in situations where a 

patient elects hospice, revokes, re-elects, 

revokes, and re-elects in a short time 

period. Recertification at this 3rd benefit 

period would require a face-to-face 

encounter. One commenter noted that if 

a visit is required at admission, it may 

unduly delay needed care or prove 

impossible prior to death if the patient 

is actively dying. Several commenters 

wrote that if a patient requires a face-toface visit at admission, it will likely 

result in a break in service until the 

physician can make the visit; one 

suggested this may lead to patient and 

family complaints. This commenter 

asked whether these complaints should 

be referred to CMS, since the 

commenter has no control over this 

legislative mandate, and added that 

denial of service is a serious issue, 

especially if the patient is near death. 

Several commenters asked that we 

waive the face-to-face requirement for 

patients who, because of prior hospice 

enrollment, require a face-to-face 

encounter at admission, but whose 

death is imminent or who die within a 

week. 

One commenter asked what would be 

required if a patient transferred near the 

end of the 2nd 90-day period (for 

example, at day 175), and the 

recertification was not completed. The 

commenter wondered how much time 

the receiving hospice would have to 

complete the face-to-face encounter. 

Another commenter asked if providers 

could rely on the previous hospice’s 

face-to-face encounter if the patient was 

being transferred from another hospice 

within 60 days of the last face-to-face 

encounter, and wondered how hospices 

would know when the last face-to-face 

encounter took place. A commenter 

suggested that the initial and 

comprehensive assessment be 

communicated to the Medical Director, 

to replace the need for a face-to-face 

encounter, when a patient would 

require one upon admission. When a 

visit is required upon admission, several 

commenters suggested timeframes after 

admission to allow the visit, including 

2 days, 5 days, 15 days, and 21 days. 

Response: During a time of crisis, the 

need to admit a patient and provide 

pain and symptom control is a priority. 

Since this is a new admission, whether 

the patient is coming from another 

provider type, from home, or is 

transferring from another hospice, we 

understand that the receiving hospice 

may not have up to 30 calendar days 

prior to the start of the benefit period to 

have a face-to-face encounter. However, 

the statute requires that the visit occur 

‘‘prior to the 180th-day recertification 

and each subsequent recertification 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 70443 

***’’ (emphasis added). We do not 

have the ability to waive a statutory 

requirement or to allow the initial and 

comprehensive assessments to replace 

the required encounter. 

As noted previously, in a transfer the 

benefit period remains the same. When 

a patient in the 3rd or later benefit 

period transfers to a new hospice, the 

receiving hospice must recertify the 

patient; however, since the benefit 

period does not change with a transfer, 

the receiving hospice does not have to 

have a face-to-face encounter for that 

current period if it can verify that the 

previous hospice provided the visit. 

According to the hospice CoPs at 

§ 418.104(e), the sending hospice must 

forward to the receiving hospice the 

patient’s clinical record, which includes 

the certifications and recertifications of 

terminal illness, if requested. The 

clinical record can be used to verify 

whether or not the sending hospice 

provided any required face-to-face 

encounters. 

Our regulations describe 

recertification as a process. We 

currently allow 2 calendar days after a 

period begins for a hospice to provide 

either a written or a verbal certification 

or recertification. If a verbal certification 

is provided, the written certification, 

including the narrative, must be 

completed prior to filing the claim. 

Therefore, certification or recertification 

can occur at a point in time, but often 

occur over a period of time. 

In response to the comment asking 

whether complaints should be referred 

to CMS, we note that hospices are free 

to refer complaints to us at CMS or to 

Congressional representatives. We 

welcome input, and would consider it 

when evaluating our policies given the 

constraints of the statute. We appreciate 

the concerns that commenters have 

raised about providing a visit upon 

admission, particularly in rural areas. 

We will be examining this issue to see 

how it fits with the statutory and 

regulatory language. In the meantime, 

we will monitor the program for any 

unintended consequences. 

Comment: A number of commenters 

requested flexibility in who could make 

the face-to-face visits, and asked us to 

clarify our interpretation of ‘‘hospice 

physician or NP’’. One asked if there 

was a distinction between the physician 

as an employee (who received a W–2 

from the hospice), a contract physician 

(who receives a Form 1099 from the 

hospice), or a volunteer. Others asked if 

certification in hospice and palliative 

care was required, or if full-time, parttime, or per diem status mattered. One 

commenter wrote that the proposal to 

require a ‘‘hospice physician or nurse 

practitioner’’ to perform the face-to-face 

encounter was materially different from 

the language in section 3132 of the 

Affordable Care Act. This commenter 

suggested that we take an approach 

consistent with the definition of 

‘‘physician designee’’ in § 418.3, and 

allow the patient’s primary care 

physician, specialist, hospitalist, 

hospice Medical Director, or other 

qualified physician to perform the visit, 

provided that physician is willing to 

certify eligibility for the benefit and 

communicate the encounter results to 

the hospice certifying physician. 

Several commenters suggested 

allowing a Physician’s Assistant (PA) to 

perform the face-to-face encounter; a 

few noted that in rural areas, PAs are 

more common than NPs. Other 

commenters asked if a hospitalist could 

perform the visit. A third commenter 

wrote that if a physician can collaborate 

with a NP to make the visit, why not 

also with a registered nurse (RN). One 

commenter said that the requirement 

that a physician make the visit was an 

insult to both the RN case manager and 

to the patient, and suggested that the RN 

case manager is capable of making the 

visit. The commenter added that the 

proposed rule sends the message that an 

RN case manager is good enough when 

it merely involves a human being’s 

needs, but when it comes to 

reimbursement/money, a physician is 

required. Another commenter wrote that 

the Scope of Practice and Nurse Practice 

Acts for all Registered Nurses 

specifically allows for physical 

assessment and expects 

pathophysiology expertise. The 

commenter also added that RNs are as 

equally qualified as a NP to perform 

these assessments and report findings to 

the hospice Medical Director to 

establish eligibility. 

Another commenter raised concerns 

about using a contracted physician to 

make the visit; this physician may be 

trained and may have reviewed the 

chart, but it would likely be the first 

time this doctor has seen the patient. 

The commenter wrote that based on the 

nurse’s notes, the patient has a steady 

decline, but if the physician sees the 

patient on a good day, the physician 

may not believe that the patient is 

eligible for hospice care, and may 

recommend discharge. The commenter 

believes and highly respects the 

qualifications of physicians, in this case 

the trained nurse, certified in hospice 

and palliative care, has been seeing the 

patient multiple times per week, and is 

a better judge of the patient’s eligibility. 

Several commenters asked if NPs 

could sign the certification or 

recertifications. A few commenters 

asked that we allow medical residents 

or fellows to provide the face-to-face 

visits if they are rotating through a 

hospice or in a setting where hospice 

patients reside. One commenter asked if 

hospices can contract with physicians to 

only provide the face-to-face 

encounters, and what employment 

requirements would those physicians 

need to meet. Another commenter asked 

if a hospice could have volunteer 

physicians make the visit or contract 

with another hospice, to have their 

physician or NP make the visit. 

A few commenters recommended that 

a hospice be allowed to contract with a 

NP for the purpose of making required 

face-to-face visits, rather than requiring 

a W–2 employment relationship only. A 

commenter also asked that we clarify 

that NPs providing the face-to-face visit 

must meet Medicare’s general 

qualifications for a NP and must be 

licensed by the State in which they are 

practicing, but that they do not have to 

have a particular specialty certification 

or credentials in order to be considered 

a ‘‘hospice nurse practitioner’’ for 

purposes of providing the face-to-face 

visits. A few commenters asked if the 

NP must be the patient’s designated 

attending in order to make the required 

visit. One asked if hospices could 

contract with a NP even though the 

hospice did not have a contract with the 

physician supervising the NP. The 

commenter added that in her area, there 

were competing hospitals, which could 

create a conflict of interest if the hospice 

Medical Director was associated with 

one hospital and the contracted NP with 

a competing hospital. Another 

commenter asked that we clarify how 

supervision will work for contracted 

NPs whose role is to make the face-toface visits. 

Other commenters suggested that 

advanced practice nurses such as 

Clinical Nurse Specialists (CNS) could 

make the visit and that allowing them 

to do so would decrease the burden of 

the visits in areas where there are 

shortages of physicians or NPs, enabling 

them to meet the requirement. One 

noted that CNS can become certified in 

hospice and palliative care. 

A number of commenters suggested 

allowing the patient’s attending 

physician to perform the required visits. 

These commenters noted that in many 

rural areas, the hospice physicians do 

not assume direct medical care of the 

hospice patients, but instead determine 

continued eligibility through review of 

clinical findings reported by the 

members of the IDG. The commenters 

wrote that the attending physicians are 

involved in these hospice patients’ care, 

have a history with the patient, and may 


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be geographically closer to the patient. 

In advocating for allowing attending 

physicians to make these required visits, 

one commenter noted that because of 

historical knowledge and perspective, 

the attending physician’s medical 

opinion should be deemed relevant and 

critical to the delivery of hospice care, 

and indeed his or her signature is 

required on the initial certification. One 

commenter stated that the proposed 

regulation fails to recognize the ongoing 

relationship between an attending 

physician and the patient, by excluding 

attending physicians from the 

encounter. Another wrote that attending 

physicians would make better use of 

resources and be more in line with the 

emphasis placed on attending physician 

involvement in the 2008 Medicare CoPs 

for hospices. A different commenter 

wrote that allowing the attending 

physician to make visits would be in 

keeping with Medicare’s Home model. 

A few asked if hospices could contract 

with the patient’s attending physician to 

make the visit, and if so, would the 

billing be through the hospice or 

through Part B. One suggested that such 

billing should flow through the hospice. 

A commenter suggested that for 

hospice patients residing in a facility, 

the facility physician should be allowed 

to perform these face-to-face visits and 

report them to the physician who will 

sign the plan of care; the commenter 

added that this would promote 

coordination of care between the facility 

and hospice. 

A few commenters noted that in some 

rural areas, the only available 

physicians are employed by Rural 

Health Clinics (RHCs) or FederallyQualified Health Centers (FQHCs). 

Federal requirements applicable to both 

of these provider types create barriers to 

hospices wishing to work with them. 

One commenter stated that Medicare 

has recommended that RHC physicians 

treat hospice patients after business 

hours in a separate space other than the 

RHC, billing under Part B, which further 

inhibits health care provider 

accessibility. Another commenter asked 

for additional conversations with us to 

discuss this issue. 

A commenter stated that if a ‘‘hospice 

physician’’ is interpreted to mean a 

doctor who is employed by or under 

contract with a hospice, or the patient’s 

attending physician, hospices will begin 

making contracts with doctors to pay a 

fee for eligibility certifications whenever 

the hospice staff physicians are unable 

to have the encounter. The commenter 

believed that the potential for abuse is 

obvious, with payment given for 

favorable eligibility determinations. 

Response: The statutory language in 

the Affordable Care Act limits the 

disciplines of those who can provide a 

hospice face-to-face encounter to a 

hospice physician or NP. A few 

commenters asked why RNs could not 

meet the requirement, particularly since 

they are involved in the patient’s 

ongoing care. This statutory provision 

was based upon a recommendation 

made by MedPAC. In its 2009 Report to 

Congress, MedPAC reported that a panel 

of hospice experts agreed that more 

physician accountability was needed in 

the certification and recertification 

process. They wrote that the panel 

discussed a tension that can exist 

between the physician and 

nonphysician hospice staff which can 

lead to inappropriate recertification in 

some cases. MedPAC’s panelists 

believed that physicians sometimes 

deferred too much authority for making 

eligibility decisions to nonphysician 

staff. They added that by virtue of their 

day-to-day contact with patients, these 

staff members may form emotional 

attachments with patients that can color 

their view and their charting of a 

patient’s continued eligibility for 

hospice (Medicare Payment Advisory 

Commission, Report to Congress: 

Medicare Payment Policy, Chapter 6, 

March 2009, page 365, available at 

http://www.medpac.gov/documents/ 

Mar09_EntireReport.pdf). The panelists’ 

comments were part of the impetus for 

MedPAC’s recommendation regarding 

the face-to-face encounter which the 

Congress enacted in the Affordable Care 

Act. Accordingly, by law, RNs (other 

than NPs) are not allowed to perform 

the face-to-face visit. This is in no way 

intended to insult or to diminish the 

importance of RNs in hospice care— 

they are key to patient care in hospice, 

and provide quality, compassionate care 

to those at end-of-life. 

A commenter was concerned about a 

scenario where a contracted physician 

who is unfamiliar with the patient 

might see the patient on a day when the 

patient is doing well, clinically, and 

thus recommend for discharge when the 

patient is in fact eligible. The 

determination of eligibility involves 

considering the terminal illness, related 

conditions, co-morbidities, functional 

status, clinical indicators, laboratory 

results, etc. We believe the potential for 

a truly eligible terminally ill patient 

being found ineligible because he or she 

was doing well clinically, on the day of 

the encounter, is unlikely. Even so, the 

decision to discharge the patient is not 

made simply by the contracted 

physician, but involves the members of 

the IDG and the patient’s attending 

physician. Hospices should already 

have policies and procedures in place 

for handling a situation where there is 

disagreement about continuing 

eligibility. 

PAs and CNSs are not authorized by 

the Affordable Care Act to perform the 

face-to-face visit. Moreover, section 

1814(a)(7) of the Act explicitly prohibits 

NPs from certifying or recertifying 

hospice patients, and limits this 

function to physicians only. Therefore, 

we cannot adopt a policy to allow NPs 

to certify or recertify patients without 

change in the statute. 

Hospices cannot routinely contract 

with NPs, because NPs fall under 

nursing, which is a core service. The 

only situations under which a hospice 

could contract with a NP would be 

under extraordinary circumstances or if 

the NP service is highly specialized. 

Extraordinary circumstances generally 

would be a short-term temporary event 

that was unanticipated, and would not 

include face-to-face encounters, which 

are administrative in nature and which 

are usually planned. Examples of 

allowable extraordinary circumstances 

might include, but are not limited to, 

unanticipated periods of high patient 

loads (such as an unexpectedly large 

number of patients requiring continuous 

care simultaneously), staffing shortages 

due to illness, receiving patients 

evacuated from a disaster such as a 

hurricane or a wildfire, or temporary 

travel of a patient outside the hospice’s 

service area. Hospices may qualify for 

an ‘‘extraordinary circumstance’’ 

exemption when they believe that the 

nursing shortage has affected their 

ability to directly hire sufficient 

numbers of nurses. For details on this 

waiver, please see the letter from CMS’ 

Survey and Certification group 

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

Surveycertificationgeninfo/downloads/ 

SCLetter10_31.pdf. 

Hospices can employ NPs on a fulltime, part-time, or per diem basis if 

needed to have face-to-face encounters. 

As long as the NP is receiving a W–2 

form from the hospice, or is 

volunteering for the hospice, the NP is 

considered to be employed by the 

hospice. 

Commenters asked about other 

physicians who could be considered 

‘‘hospice physicians’’ who could be used 

to meet the face-to-face requirement, 

including attending physicians. We 

believe that to be a ‘‘hospice physician’’, 

a physician must be either employed by 

or working under arrangement with a 

hospice (i.e., contracted). Section 418.3 

defines a hospice employee as someone 

who is receiving a W–2 form from the 

hospice or who is a volunteer. We agree 


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with commenters that the attending 

physician has had a history with the 

patient, has signed the initial 

certification, and has typically remained 

involved in the patient’s care while the 

patient is under the hospice benefit. We 

do not wish to diminish this physician’s 

role; however, the regulations have 

considered services of attending 

physicians to be outside of the hospice 

benefit (which is one reason why their 

services are billed to Part B rather than 

through the hospice to Part A), and 

therefore we cannot include the 

attending physician as a ‘‘hospice 

physician.’’ By limiting ‘‘hospice 

physician’’ to those physicians who are 

employed by or working under contract 

with a hospice, we also increase 

accountability, as the hospice is in 

control over its employees and 

contracted physicians, but not over an 

outside attending physician who might 

have the encounter. Furthermore, as 

part of the effort to increase 

accountability, we are clarifying that the 

hospice physician who has the face-toface encounter must be the same 

physician who is composing the 

narrative and signing the certification. 

Given that the hospice is ultimately 

responsible for the certification, part of 

which is the face-to-face attestation, the 

hospice needs control over the timing of 

the staff visit, and over the preparation 

and review of visit documentation, 

which is used for the narrative and to 

inform the decision whether to recertify 

or not. 

Other commenters suggested that nonhospice physicians other than attending 

physicians should be able to make the 

visit (for example, hospitalists, 

specialists, primary care physicians, 

etc). In addition to not meeting the 

statutory criteria of being a ‘‘hospice 

physician,’’ we agree with the 

commenter who wrote that allowing 

physicians who are not involved with 

the patient’s overall care to have the 

visit could lead to abuse, where an 

unscrupulous doctor might continue to 

support eligibility of ineligible patients 

for a fee. Additionally, we do not 

believe that allowing any physician to 

have the required face-to-face encounter 

would be appropriate because 

determining eligibility for hospice care 

requires knowledge of the patient’s 

complete medical situation, including 

the terminal illness, related conditions, 

and other co-morbidities. Medical 

residents or fellows who are rotating 

through a hospice may provide the 

required face-to-face encounter if they 

are employed by the hospice or are 

working under contract with the 

hospice, and if they will be composing 

the narrative and signing the 

recertification. 

Physicians or NPs who volunteer for 

a hospice are considered employees, 

and could make the required visits. No 

payment is made for physician or NP 

services furnished voluntarily. 

However, some physicians and NPs may 

seek payment for certain services while 

furnishing other services on a volunteer 

basis. Payment may be made for services 

not furnished voluntarily if the hospice 

is obligated to pay the physician or NP 

for the services. 

We allow hospices to contract with 

another hospice to serve their patients, 

and would allow a hospice to arrange 

with another hospice to use its 

physicians to have the required face-toface encounter. Likewise, hospices can 

contract with physicians for the purpose 

of having face-to-face encounters with 

their patients, but as previously noted, 

the contracted physician must then be 

the same physician who composes the 

narrative and signs the certification. 

Hospice physicians and NPs can be fulltime, part-time, or work on a per diem. 

Hospice physicians and NPs are not 

required to have certification in hospice 

and palliative care. 

NPs providing the face-to-face visit 

must meet Medicare’s general 

qualifications for a NP and must be 

licensed as NPs by the State in which 

they are practicing. Physicians must 

meet the existing requirements for 

physicians in section 1861(r) of the Act. 

They must meet all State and local 

requirements as required in § 418.116. 

Finally, they must meet the licensed 

professional requirements at § 418.62. 

If physicians employed by RHCs or 

FQHCs are also employed by or working 

under arrangement with a hospice, they 

could have the required face-to-face 

encounter, however they must follow 

statutory and regulatory requirements in 

doing so. 

In summary, we are defining ‘‘hospice 

physician’’ as a physician employed by 

the hospice or working under 

arrangement with, or under contract 

with, the hospice. A hospice NP would 

be a NP employed by the hospice. 

Comment: Several commenters asked 

if the encounter could be done using 

telephone or video technology, and still 

meet regulatory requirements. A few 

suggested that a nurse could be present 

to do the physical examination under 

the direct supervision of the physician, 

who could still see the patient and 

interact with him or her. Commenters 

suggested such an approach would be 

less burdensome and less costly, 

accomplish the same objectives, and 

open the door for critical but cost 

effective physician care to underserved 

or rural areas. Commenters were 

concerned about lack of human 

resources to accomplish the visit, 

particularly in rural areas, where 

driving distances can be great, 

increasing the cost of visits, and where 

there can be shortages of physicians or 

NPs. A commenter wrote that allowing 

telehealth would be consistent with the 

objectives of health care reform, and 

would offset travel time and travel costs. 

A few commenters noted that if 

telehealth were available, it would not 

help them due to lack of proper 

communication infrastructure in some 

remote areas; others noted that they 

would be willing to invest in telehealth 

to counterbalance the cost of sending a 

physician on home visits. 

Response: We appreciate the 

commenters’ concerns about meeting 

the face-to-face requirements in rural 

areas, and their suggestions to consider 

telehealth. However, section 1834(m) of 

the Act does not include hospices as an 

originating site for telehealth. Therefore, 

hospice patients would have to go to an 

originating site for the face-to-face 

encounter. In our analysis of claims 

data, we found that only 2.9 percent 

patients who would require a face-toface encounter are in rural areas. Given 

this small volume of patients, we 

believe that not having telehealth does 

not hamper hospices’ ability to meet the 

Affordable Care Act requirements; 

however, we will continue to monitor 

this for any unintended consequences. 

Comment: A commenter wrote that in 

her hospice, the Medical Director would 

perform the face-to-face encounter and 

write the physician narrative. This 

commenter and others asked if the 

narrative and the face-to-face attestation 

could be combined; one asked if the 

visit note could serve in place of the 

narrative when the attending performs 

both functions. Several commenters 

suggested the face-to-face requirements 

were partially duplicative of the 

narrative. One notes that physicians are 

used to judging a patient’s condition 

based on records. Other commenters 

asked for clarification of the differences 

between the face-to-face attestation and 

the physician narrative, and about the 

format, wording, and location of the 

attestation, and about how notes for the 

face-to-face encounter should be entered 

in the chart; a few asked for consistent 

guidelines for the narrative and the faceto-face attestation. One commenter 

asked if the same physician is 

responsible for both the visit and the 

narrative, could the recertification visit 

documentation form be combined with 

the recertification of terminal illness 

brief narrative form with both 

attestations so that the physician does 


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not have to dictate two separate notes 

and sign two separate forms. 

A few commenters asked if the 

certification narrative and the face-toface may be performed by more than 

one individual, or if hospice physicians 

could cover for each other. A 

commenter asked why a NP would 

provide an attestation of the face-to-face 

in addition to the physician. One 

commenter wrote that the face-to-face 

attestation should be a separate and 

distinct section of the narrative, and that 

providers should use an addendum 

form for the face-to-face attestation if the 

NP or a different physician from the 

certifying physician has the encounter. 

Another commenter asked if the NP 

could prepare the narrative and have the 

physician sign off on it. A few asked if 

electronic signatures were permitted for 

the attestation, narrative, and/or 

certification or if the face-to-face 

attestation could be dictated. One asked 

if a medically necessary visit is made 

within the same timeframe (proposed at 

15 days), could the visit documentation 

serve as the narrative requirement, or 

would a separate narrative note be 

necessary. This commenter also asked 

whether it was a problem if the date of 

the visit did not coincide with the date 

of the attestation. 

A commenter asked that the 

attestation also include the National 

Provider Identifier (NPI) of the 

physician or NP making the visit, to 

increase accountability. Another 

commenter asked us to clarify what goes 

directly above the certification 

signature—the narrative or the face-toface attestation. Other commenters 

asked that the narrative attestation be 

placed above the physician’s signature 

attesting that he/she composed the 

narrative based on his/her review of the 

medical record, or if applicable, his or 

her examination of the patient. Another 

commenter asked for guidance regarding 

the validity of the narrative if a clerical 

mistake is made in recording benefit 

period dates or certification dates. This 

same commenter noted that if his 

hospice uses contracted physicians or 

NPs to make the required face-to-face 

visits, these practitioners will be less 

familiar with the patient’s history and 

disease progression, and stated that the 

narrative has the potential to be more 

informative about the patient’s 

eligibility than the visit. 

Another commenter asked if separate 

documentation would be required for 

any billable services provided during 

the visit, or could the narrative serve as 

the documentation. This commenter 

also asked what the documentation 

requirements for this visit would be. 

Several asked if there would need to be 

separate notes for the face-to-face 

encounter versus any billable portion of 

the visit. 

A commenter wrote that attesting that 

an encounter has occurred and that 

documentation has been relayed does 

not confirm that the information was 

utilized in confirming eligibility. This 

commenter believes that the 

responsibility for verifying that all 

eligibility requirements have been met 

should remain with the certifying 

physician and be included in a single 

attestation. 

A few commenters wrote that the 

additional attestation required for the 

face-to-face encounter creates an 

additional paperwork burden, and 

creates issues with forms, transcribing, 

timely documentation, and software 

updates. One commenter wrote that the 

final implementation date should be 

delayed to allow time for providers to 

update electronic and paper forms. A 

different commenter believed that it was 

burdensome, redundant, and 

unnecessary to require a physician or 

NP to attest in writing to having had a 

face-to-face encounter, and reiterated 

that the responsibility for verifying that 

the patient meets all eligibility criteria 

should remain with the physician and 

be included in a single attestation. 

Response: The face-to-face 

requirement was added to the 

requirements for physician 

recertifications. Those requirements are 

described in detail in our regulations at 

§ 418.22. In brief, currently hospices 

provide a signed certification or 

recertification which: 

• States that the patient is terminally 

ill, with a prognosis of 6 months or less 

if the illness runs its normal course; 

• Includes a written narrative either 

immediately prior to the physician’s 

signature, or as a signed addendum. The 

narrative includes a statement under the 

physician signature attesting that by 

signing, the physician confirms that 

he/she composed the narrative based on 

his/her review of the patient’s medical 

record or, if applicable, his or her 

examination of the patient; and, 

• Is accompanied by clinical 

information or other documentation 

supporting the diagnosis. 

The Affordable Care Act added a 

fourth component to the certification, 

with the face-to-face encounter and its 

attestation that the visit occurred. We 

proposed that the face-to-face attestation 

and signature be either a separate and 

distinct area on the recertification form, 

or a separate and distinct addendum to 

the recertification form, that is easily 

identifiable and clearly titled. We also 

proposed that the attestation language 

be located directly above the physician 

or NP attestation signature and date 

line. 

Like the physician narrative, the faceto-face requirement is designed to 

increase physician accountability in the 

certification process, and to ensure that 

beneficiaries are eligible for the hospice 

benefit. While the purposes of the 

narrative and the face-to-face visit are 

similar, we do not believe that the two 

are duplicative of each other. There is 

value in having a physician see a 

patient, rather than just reviewing 

medical records about that patient, in 

determining continued eligibility. 

The face-to-face attestation is a 

statement from the certifying physician 

or the NP which attests that he or she 

had a face-to-face encounter with the 

patient; if a NP had the encounter, the 

attestation should also state that the 

clinical findings of that encounter have 

been provided to the certifying 

physician for use in determining 

continued eligibility for hospice care. 

Unlike the narrative, the face-to-face 

attestation does not detail the clinical 

findings of the visit, but simply attests 

that the visit occurred. The regulations 

describing the narrative require that it 

be composed by the certifying 

physician, therefore a NP could not 

prepare it. We agree with the 

commenter who suggested that 

including the NPI of the individual who 

visited the patient increases 

accountability and we will consider 

including the NPI the face-to-face 

attestion in the future. We do not want 

to prescribe language that hospices 

should use in preparing the face-to-face 

attestation, provided the attestation 

includes the elements we have 

described. 

The face-to-face attestation statement 

includes the date of the visit, and the 

signature of the physician or NP who 

made the visit, along with the date 

signed. 

The date of the face-to-face encounter 

does not have to match the date that the 

attestation was signed; however, both 

dates should be included. 

Several commenters asked if the 

narrative could be combined with the 

face-to-face attestation. The face-to-face 

encounter can be conducted by either a 

hospice physician who completes the 

certification, or a NP, and the face-toface attestation must be signed by the 

person who conducted the visit. The 

narrative must be composed by the 

certifying physician, who by signing, 

attests that he or she composed it based 

on his or her review of the medical 

records and on examination of the 

patient (if any). We are clarifying that if 

a physician is the clinician who has the 

face-to-face encounter, then the same 


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physician should compose the narrative 

and sign the recertification. 

The hospice has the option of putting 

both the face-to-face attestation and the 

narrative, with its accompanying 

attestation and signature, on the same 

page of the recertification. We would 

require that the format be such that the 

face-to-face attestation appears separate 

and distinct from the narrative and its 

attestation; hospices are free to decide 

how to separate the sections (that is, 

through spacing, through lines, etc.). We 

agree that for consistency, the narrative 

and its accompanying attestation should 

be above the physician’s signature, and 

the face-to-face attestation should be 

above its accompanying signature, and 

are changing the regulatory text to 

reflect this. If the narrative and its 

attestation and the face-to-face 

attestation are included as part of the 

certification (rather than as an 

addendum), we suggest, but do not 

require, the order of the content to 

appear as follows: The face-to-face 

attestation (if applicable), followed by 

the physician narrative, followed by a 

narrative attestation, followed by the 

physician signature. We believe this 

order is logical as it allows the narrative 

attestation signature to be the same as 

the certification or recertification 

signature for those hospices which 

include the face-to-face attestation and 

narrative as part of the main 

certification document. 

Hospices also have the option of 

placing the face-to-face attestation, the 

physician’s or NP’s signature, the 

narrative, and its attestation and 

signature, on a single page as an 

addendum to the main certification or 

recertification. They may also have the 

face-to-face attestation and narrative on 

separate pages as addenda to the 

certification and recertification 

documents. Finally, hospices may also 

include either the face-to-face 

attestation or the narrative in the main 

certification document, and have the 

other as an addendum. We are seeking 

to give hospices greater flexibility in 

how they include this information as 

part of their recertifications. 

In summary, the narrative and face-toface attestation may be included in the 

main certification document, but should 

be separate sections. They may also be 

on a single page as part of the main 

certification or recertification document, 

or as an addendum. The face-to-face 

attestation is completed by the person 

who visited the patient: either a hospice 

physician or a NP. If a NP saw the 

patient and completed the face-to-face 

attestation, the physician should not 

also complete the face-to-face 

attestation, because the physician did 

not make the visit. However, a certifying 

physician would still have to compose 

the narrative, using clinical findings 

from any face-to-face visit, and sign the 

narrative attestation. 

We agree that attesting that an 

encounter has occurred and that 

documentation has been relayed does 

not confirm that the information was 

utilized in confirming eligibility. That is 

why we require hospice physicians to 

use the information from the face-to-face 

encounter in composing the narrative. 

We cannot combine the narrative and 

the face-to-face attestations into a single 

attestation because the statute allows 

NPs to perform face-to-face visits, but 

NPs cannot compose or sign the 

narrative. 

The face-to-face encounter must be 

documented in accordance with hospice 

policy using currently accepted 

standards of practice. The 

documentation from the face-to-face 

encounter is part of the clinical record, 

and should be used in composing the 

written narrative. It is not necessary for 

the physician or NP to make separate 

notes for any billable services provided, 

as long as the visit documentation 

clearly supports any billable services 

that were provided. Visit notes are not 

a substitute for a physician narrative, 

which is a brief explanation of the 

clinical findings that supports 

continuing eligibility for the hospice 

benefit; the narrative draws on 

information from a variety of sources, 

and not just from notes of any face-toface encounter which occurs. 

While the mandated face-to-face 

attestation does create additional 

paperwork for hospices, we believe that 

we have provided sufficient flexibility 

for providers to meet the requirement. 

We appreciate hospices’ concerns about 

required software changes and the 

timing required to make those changes. 

As noted earlier and again later in this 

final rule, our timeframe was driven by 

the required implementation date set by 

the Affordable Care Act, which was 

enacted in late March 2010. The statute 

requires implementation as of January 1, 

2011; thus, it does not provide 

flexibility with respect to the date of 

implementation. 

Electronic signatures are permitted on 

hospice certifications and 

recertifications; the narrative and the 

face-to-face attestation are parts of the 

certification or recertification, and 

therefore may also be signed 

electronically. If a physician forgets to 

date the certification, our longstanding 

policy described in our benefit policy 

manual in section 20.1 (Internet only 

manual 100–02, chapter 9) states, ‘‘If the 

physician forgets to date the 

certification, a notarized statement or 

some other acceptable documentation 

can be obtained to verify when the 

certification was obtained.’’ The 

certification or recertification applies to 

the benefit period dates noted on the 

document, therefore, if those dates are 

recorded incorrectly, the hospice could 

potentially have days of service denied 

for coverage during a medical review. 

Comment: A few commenters asked 

how the recertification visits relate to 

the local coverage determinations 

(LCDs). One commenter wrote that her 

hospice already completes guidelines 

from the LCDs for recertification, but 

much of this information requires prior 

knowledge of the patient condition to 

determine deterioration. The commenter 

noted that if the expectation is that the 

physician will be verifying the patient’s 

condition based on the LCDs, this 

should be clear. The commenter was 

concerned about the situation where a 

physician or NP visits the patient, 

documents clear and valid reasons for 

recertification, but subsequent review 

determines the patient is not eligible 

based simply on lack of certain 

measures of decline. A few commenters 

asked us to provide clear guidance on 

what the face-to-face encounter should 

include (that is, elements that make up 

an encounter) for purposes of satisfying 

the requirement. 

One commenter asked how a hospice 

should handle a situation where the 

physician determines the patient is no 

longer hospice eligible and discharges 

him, but the Quality Improvement 

Organization (QIO) finds the patient is 

hospice appropriate. The commenter 

wrote that it could not admit the patient 

in good conscience and asked for 

guidance. 

Another commenter stated that he 

hoped that CMS is funding research to 

improve LCDs, saying that there is no 

formula for predicting ‘‘six months or 

less,’’ especially for non-cancer 

diagnoses. 

Response: In general, the face-to-face 

encounter for recertification requires 

that the same clinical standards be met 

as for the initial certification. The faceto-face encounter enables the clinician 

to assess the signs and symptoms in 

relation to the patient’s terminal illness 

to determine whether the patient meets 

the clinical standards for recertification. 

When assessing the patient for hospice 

recertification, the medical records in 

addition to the face-to-face examination 

are utilized to provide a rationale for 

recertification. The clinical findings 

should include evidence from the three 

following categories: 

(1) Decline in clinical status 

guidelines (for example, decline in 


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systolic blood pressure to below 90 or 

progressive postural hypotension); 

(2) Non disease-specific base 

guidelines (that is, decline in functional 

status) as demonstrated by Karnofsky 

Performance Status or Palliative 

Performance Score and dependence in 

two or more activities of daily living; 

and 

(3) Co-morbidities. For more 

information about the criteria, please 

see local coverage determinations 

(L13653, L25678, or L29881). These 

LCDs are on the CMS Web site in the 

Medicare Coverage Database at http:// 

www.cms.gov/mcd/overview.asp. They 

are also on the local contractors’ Web 

pages. 

Predicting life expectancy is not an 

exact science. We are not currently 

funding research related to LCDs; 

research that could inform LCDs is 

completed through a number of venues, 

including academic institutions, the 

private sector, and some government 

agencies. In determining life expectancy 

for conditions with less predictable 

trajectories, hospice physicians are also 

free to use any disease-specific scores or 

scales that can help them in predicting 

life expectancy. Some providers already 

do so, and have reported that it 

improves the accuracy of their 

prognoses. 

If a patient improves or stabilizes 

sufficiently over time while in hospice, 

such that he/she no longer has a 

prognosis of 6 months or less from the 

most recent recertification evaluation or 

definitive interim evaluation, that 

patient should be considered for 

discharge from the Medicare hospice 

benefit. Such patients can be reenrolled 

for a new benefit period when a decline 

in their clinical status is such that their 

life expectancy is again 6 months or 

less. Conversely, patients in the 

terminal stage of their illness, who 

originally qualify for the Medicare 

hospice benefit but stabilize or improve 

while receiving hospice care, yet have a 

reasonable expectation of continued 

decline for a life expectancy of less than 

6 months, remain eligible for hospice 

care. 

A patient’s condition may temporarily 

improve with hospice care. When 

improvement is evident in 

documentation such as physician 

orders, medications, hospital records, 

doctor’s records, other health records, 

test reports, etc, contractors consider the 

length-of-stay and the length of 

sustained improvement. 

There should be clear evidence of the 

status of the patient’s conditions and the 

clinical factors that caused the patient to 

be not eligible or to be recertified as 

terminally ill. If the patient is 

recertified, the medical records should 

reflect the length of time the symptoms 

have been evident, evidence of 

progressive deterioration or sudden 

deterioration, and increase in frequency 

and intensity of hospice services and 

medications. 

If a patient appeals a pending 

discharge to the QIO, the QIO decision 

is binding; a hospice could not 

discharge a patient as ineligible if the 

QIO deems that patient to be eligible. 

The provider is required to continue to 

provide services for the patient. In the 

QIO response, the QIO should advise 

the provider as to why it disagrees with 

the hospice, which should help the 

provider to re-evaluate the discharge 

decision. If at another point in time the 

hospice believes that the patient is no 

longer hospice eligible, the provider 

should give timely notice to the patient 

of its decision to discharge. The patient 

could again appeal to the QIO, and the 

hospice and patient would await a new 

determination from the QIO based on 

the situation at that time. 

Comment: A number of commenters 

were concerned that the required faceto-face encounter would create access 

problems for patients, would delay care 

and thereby lead to unnecessary patient 

suffering, or would reduce the quality of 

patient care. One commenter wrote that 

doctors may be less willing to refer 

patients to hospice if required to have 

these encounters, while others were 

concerned that patients would be 

discharged; several suggested that the 

face-to-face requirement could lead to 

overall Medicare costs increasing as 

these patients use emergency rooms and 

inpatient services at end-of-life rather 

than hospice. Several commenters were 

concerned that those who were actively 

dying would have care delayed if they 

required a visit upon admission due to 

previous hospice stays, as the hospice 

may have to wait to get a hospice 

physician or NP to see the patient. 

Some commenters wrote that access 

to hospice services may be limited for 

patients who live in outlying areas, 

because of the travel time required to 

make the visits. Another commenter 

wrote that lack of transport to bring 

rural patients to a physician would lead 

to denying access to care for many 

elderly or bedbound patients unable to 

have a timely face-to-face visit. A few 

commenters suggested they may have to 

reduce their service areas to meet the 

requirement, which would jeopardize 

access to hospice services for 

beneficiaries in outlying areas. Another 

commenter believed that with staff 

shortages, meeting the face-to-face 

requirement would require the hospice 

to pull practitioners from patients who 

need the care and expertise of a 

physician or a NP to make required 

visits. The commenter believed this 

would reduce services and lower the 

quality of care that patients receive. A 

few commenters wrote that the 

requirement could lead to patient 

discharge, with one noting that the 

subsequent hospice would then have to 

incur the cost of the required visit. One 

commenter wrote that discharging 

patients could lead to ethical dilemmas 

or charges of patient abandonment. A 

few commenters suggested that the 

result of this mandate would be 

increased cost to the health care system 

if long-stay patients are discharged from 

hospice care. One commenter asked 

what options would be available to a 

hospice, or to the patients, if agencies in 

medically underserved areas are unable 

to locate physicians or NPs who are able 

and willing to make the required faceto-face visits. 

A few commenters said that volunteer 

Medical Directors used by rural 

providers cannot make these visits, 

which would force the hospice to 

discharge patients. Another commenter 

said that with the maturation of the 

baby boomer generation, demand for 

hospice services would be rising, at the 

same time that fewer qualified 

physicians are pursuing careers in 

gerontology or palliative care, and 

believes that this would intensify the 

current situation. Another commenter 

wrote that it is in his agency’s best 

interest to have physicians certified in 

hospice and palliative care to make the 

visits, but that recent requirements for 

an internship mean these physicians 

will be in shorter supply, and therefore, 

more costly to hospices. 

A few commenters were concerned 

that hospice programs may not be able 

to manage this burden, and their closure 

would affect vitally important access to 

hospice services. One wrote that the 

data collected by the Community 

Hospice Partnership, a national 

coalition researching the economic 

sustainability of not-for-profit hospices, 

estimates that the cumulative reductions 

in reimbursement would lead to closure 

of 65 percent of Wisconsin’s rural 

hospices by 2014. The commenter 

added that this proposed face-to-face 

requirement was not considered in the 

analysis, meaning rural Wisconsin 

providers would be more severely 

affected. 

Response: We appreciate the 

commenters’ concern about the 

timeliness and quality of patient care 

and about patient access to hospice 

services. We believe that this provision 

was included in the Affordable Care Act 

to ensure the continued eligibility of 


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hospice patients, who are supposed to 

have a life expectancy of 6 months or 

less. MedPAC, the OIG, and CMS have 

concerns about the appropriateness of 

some long-stay patients, who may have 

been admitted to hospice care too early 

in the course of their illness. The 

hospice face-to-face encounter is only 

required for recertifications when the 

patient is in the 3rd benefit period or 

beyond, which is after 6 months of 

hospice care for those who complete 

each benefit period. As mentioned 

previously, we found that only 2.9 

percent of all Medicare hospice 

beneficiaries were in the 3rd or later 

benefit period and in rural areas, where 

physician or NP shortages are greatest. 

Therefore, only a small percentage of all 

Medicare hospice patients will both 

require these encounters and will be in 

a rural area where physician is more of 

a concern. 

With that perspective, we believe that 

physicians will not hesitate to refer 

appropriate patients to hospice. We 

clarify, for the commenter, that it is the 

responsibility of the hospice to ensure 

that the face-to-face encounter occurs. 

We do not allow outside attending 

physicians to have the face-to-face 

encounter, and the hospice is 

responsible for either providing the 

encounter itself or for arranging for the 

encounter. Therefore, we do not believe 

that physicians will reduce referrals 

inappropriately, leading to unnecessary 

suffering and increased Medicare costs 

for patients at end-of-life. As noted in a 

previous comment, a patient may 

require a visit at admission and be 

actively dying. In this situation, a 

hospice physician or NP might see the 

patient anyway, given the circumstances 

cited; hospices are supposed to provide 

physician services to their patients 

when needed during a time of crisis. 

Our data suggest that only 1.1 percent 

of hospice beneficiaries live in rural 

areas and require a face-to-face 

encounter at admission. Therefore, we 

believe this is an infrequent situation, 

which will not lead to delays in care or 

in the admission of the patient. 

While we appreciate the additional 

training and experience of those 

physicians who specialize in 

gerontology or in palliative care, we do 

not require a hospice physician or NP to 

be certified in those specialties. 

Volunteer physicians are considered 

hospice employees, and are permitted to 

have face-to-face encounters with 

patients. As previously noted, we also 

are allowing hospices to bill for any 

medically reasonable and necessary 

patient care provided by a hospice 

physician, or by a hospice NP who is 

also the patient’s attending physician, in 

the course of a face-to-face visit. 

Therefore, hospices will receive some 

financial relief for the costs of having 

these required visits, and should not 

experience the financial burden some 

commenters described. 

As noted previously, we have also 

doubled the time allowed for making a 

required visit to 30 calendar days prior 

to the recertification date to better 

enable hospices to meet this 

requirement. Given the additional time 

for having face-to-face encounters, we 

do not believe that hospices will need 

to discharge patients due to lack of time 

to complete the face-to-face encounters, 

which could result in increases in nonhospice healthcare costs or which may 

raise ethical issues. Similarly, if a 

hospice physician or attending NP 

cannot travel to the patient for the 

required visit due to distance, time, or 

other reasons, and the hospice is 

encountering a shortage of physicians or 

NPs such that it cannot find any to hire 

or any physicians to contract with, the 

hospice can have the patient come to 

the physician or NP for the face-to-face 

encounter, provided the hospice meets 

the requirements in the CoPs regarding 

patient safety and comfort. Having the 

patient come to the physician or NP, 

when appropriate, can also be 

considered if a hospice is concerned 

that using its staff to make required faceto-face visits would reduce services or 

lead to lower quality patient care. We 

believe that requiring a face-to-face 

encounter with a hospice physician or 

nurse practitioner will lead to increased 

quality of care for hospice patients, 

rather than decreasing quality of care. 

We are unable to comment on the data 

collected by the Community Hospice 

Partnership, or their findings, as we do 

not have those data, the study methods, 

or findings, however, the 

reimbursement allowed to hospices for 

providing reasonable and necessary 

patient care in the course of a required 

face-to-face encounter should provide 

financial relief to providers. 

Comment: Several comments 

suggested alternative approaches to the 

face-to-face encounter to ensure 

continued hospice eligibility. One 

commenter suggested that hospices can 

better manage their patients by 

performing an automatic chart review 

for long-stay patients, and include better 

prognostication information on their 

recertifications. This commenter also 

wrote that her hospice is researching 

using validated prognostication tools 

which are disease specific, and which 

can be done by a RN just as effectively 

as by a physician. A different 

commenter wrote that his hospice uses 

a detailed review process for patients 

not showing decline, and is therefore 

already performing what the proposed 

rule is trying to accomplish. This 

commenter suggested that we initially 

enforce the face-to-face requirements for 

all hospices but allow those providers 

that have a lower rate of long-stay 

patients to ‘‘opt out’’ in the future. The 

commenter believes this would force 

hospices to focus on admission 

practices and not place an undue 

burden on responsible providers. 

Another commenter wrote that his 

hospice’s Discharge Management 

process is redundant in relation to the 

face-to-face requirement, and asked that 

we eliminate it. Another suggested that 

we require a separate comprehensive 

assessment for long-stay patients. 

One commenter wrote that it seemed 

like her hospice was being punished 

because a lack of Federal oversight has 

allowed some hospice programs to go 

astray. Several commenters understand 

the need to combat fraud and abuse; one 

also suggested that uncontrolled growth 

in the number of providers, 

vulnerabilities in the payment systems, 

and a diminished commitment to 

integrity by some newer providers was 

at the core of the problem, and led to illconceived regulatory changes. These 

commenters suggested that better 

enforcement of existing regulations, 

closer inspection of documentation 

through ADRs/medical review, review 

by recovery audit contractors, 

comprehensive error rate testing audits, 

Medicaid program integrity audits, zone 

program integrity audits, OIG 

investigations, more frequent surveys, 

and/or other interagency efforts to 

combat Medicare fraud would be a 

better approach. One commenter 

suggested that if we are concerned about 

the growth of hospice, we should 

implement a moratorium on new 

hospice providers for 5 years, where no 

new hospices could enter a market 

unless an existing hospice in that same 

area closes. A few commenters wrote 

that they believe the cap reimbursement 

mechanism is the best control of 

utilization rather than ‘‘Monday 

morning quarterbacking prognosis’’ or 

seeking confirmation of prognosis by a 

visit by a physician or other 

practitioner. 

A few suggested we delay or suspend 

implementation (often suggesting a 

delay until January or February 2012), 

or eliminate the requirement altogether. 

One commenter asked that if we decide 

to delay implementation, we notify the 

industry immediately, rather than 

waiting for publication of the final rule, 

so that hospices could effectively plan 

their staffing and hiring. Another noted 

that hospices have not been allowed 


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adequate time in practice to determine 

the increased level of physician 

involvement to meet this requirement. 

One wrote that we should eliminate the 

face-to-face visit prior to readmission, if 

the two physicians agree to the 

certification of terminal illness. Another 

commenter suggested we only require a 

face-to-face encounter if the Medical 

Director has not made a visit within the 

recertification period for other medical 

issues. 

Several suggested that we only require 

the face-to-face for hospices that have a 

higher than average length of stay, or 

that we apply the requirement to 

patients with stays greater than 240 

days. Other commenters suggested we 

waive the requirement for hospices that 

tend not to enroll very long-stay 

patients, or for small and rural hospices 

with less than a 25–50 person daily 

census, or for all rural hospices. 

Another commenter suggested we 

exempt patients and providers in Health 

Professional Shortage Areas from the 

requirement. One commenter suggested 

that we only apply this mandate to 

continuous service greater than 180 

days with no break in service. A few 

suggested we require the visit at 180- 

days but only at every other or every 

third recertification thereafter, or every 

180 days thereafter; another suggested 

we not require the visit at the benefit 

periods after 180 days until the total 

effects of the mandate have been 

evaluated. Some suggested a phased or 

stepped approach to implementation, 

such as applying it to hospices with a 

high proportion of long-stay patients 

first. Another suggested 100 percent 

review of patient stays over 180 days in 

providers with an unusually high 

percentage of ‘‘long-stay’’ patients. This 

commenter wrote that this would be a 

welcome edit targeted at problem 

providers. 

The same commenter also suggested 

that the face-to-face encounter be crafted 

around the provider and not the patient, 

with the encounter required prior to the 

180th day of care within a provider, 

rather than over the patient’s entire 

hospice history, with subsequent visits 

required again at each 180-day interval 

within that provider. This commenter 

suggested that if the patient transfers or 

is later admitted to another hospice, the 

180-day count would start over. To 

avoid having unscrupulous providers 

that own other provider numbers in the 

same geographic area make patient 

transfers designed to dodge the visit 

requirement, the commenter suggested 

we could have a 100 percent review of 

long-stay providers, using an edit of 

chain-related providers. 

Another commenter suggested that if 

there was greater than a 3- or 6-month 

hiatus between hospice admissions, the 

mandate should not apply to the total 

hospice stay, but instead would start 

with the subsequent hospice admission. 

Other commenters suggested that the 

hospice Medical Director could meet the 

requirement with a phone consultation 

with the patient while a hospice nurse 

was seeing the patient, at the time of the 

recertification visit. Another commenter 

believes that since the patient is 

reviewed by the hospice team at least 

every 14 days, a physician is already 

certifying his/her belief that the patient 

is indeed eligible. Others wrote that 

hospice nurses are trained in 

recognizing and documenting the 

appropriateness of patients, and are 

familiar with the patients’ history. 

These commenters stated the 

requirement was an unnecessary burden 

on hospices since nurses are adequately 

handling this now, and could 

communicate with the physician 

regarding the continued need for care 

and recertification. 

Some commenters were concerned 

that the impact of the narrative 

requirement from the August 6, 2009 FY 

2010 hospice wage index final rule (74 

FR 39384) was not yet known, and were 

concerned about the effect of the faceto-face requirement on rural providers. 

One suggested we conduct studies first 

to determine the effectiveness of the 

narrative before requiring the face-toface encounter. Others suggested that 

we waive the requirement in areas of 

documented physician shortages, and 

others suggested that we waive the 

requirement for patients that require a 

face-to-face encounter at admission and 

who die within a week or who are 

imminently terminal. 

Response: We agree with the 

commenter who suggested that 

providers can improve their patient 

management by performing automatic 

chart reviews or other review processes 

for long-stay patients. We also 

encourage hospices to consider using 

validated prognostication tools, when 

available, to inform the larger process of 

estimating life expectancy. 

We agree that preventing fraud and 

abuse is important; Medicare and other 

agencies continue in their efforts to 

identify providers who are abusing the 

hospice benefit. We also agree that the 

hospice aggregate cap is an effective 

means of controlling inappropriate 

utilization. We believe that while both 

fraud and abuse prevention and the 

aggregate cap are helpful in preventing 

inappropriately long stays, they are not 

the only means to do so. The face-toface requirement should reduce 

inappropriately long stays as physician 

accountability in the recertification 

process increases. In the effort to 

prevent fraud and abuse, the aggregate 

cap and the face-to-face encounter are 

complementary approaches to dealing 

with abuses in the hospice benefit. 

A few commenters suggested targeted 

medical reviews, and the Affordable 

Care Act also requires medical reviews 

of certain long-stay cases. 

State governments, not the Federal 

Government, control whether to place a 

moratorium on new providers, so that 

comment is outside of our purview. 

In its 2009 Report to Congress, 

MedPAC reported that a panel of 

hospice experts agreed that more 

physician accountability was needed in 

the certification and recertification 

process (Medicare Payment Advisory 

Commission, Report to Congress: 

Medicare Payment Policy, Chapter 6, 

March 2009, pg 365, available at http:// 

www.medpac.gov/documents/ 

Mar09_EntireReport.pdf). The panelists’ 

comments were part of the impetus for 

MedPAC’s recommending the face-toface encounter that the Congress 

enacted in the Affordable Care Act. 

Requiring another comprehensive 

assessment for long-stay patients would 

shift the burden of gathering 

information to ensure eligibility from 

physicians back to RNs and other staff, 

which would defeat the purpose of the 

MedPAC recommendation and would 

not follow the statutory language. 

Allowing a physician to speak by phone 

with the nurse while he or she is 

present with the patient is not a face-toface encounter as required by the law. 

Section 3132(b)(2) states that the faceto-face encounter is effective beginning 

on January 1, 2011. The statute is clear 

and we have no discretion to delay, 

phase-in, or suspend implementation, 

regardless of the type of hospice (e.g., 

rural, those with small censuses, those 

in areas of physician shortages) or for 

any other reason (other than a change in 

law). Nor can we apply the mandate to 

select situations, such as to patients 

with more than 180 days of continuous 

service, to patients who haven’t seen the 

medical director for another reason 

within the recertification period. We 

also cannot allow some providers to 

‘‘opt-out’’ of the requirement after a 

period of time, nor can we limit the 

requirement to those hospices with a 

higher percentage of long-stay patients, 

or to those patients where two 

physicians agree to the recertification. 

We cannot craft the timeframe for the 

face-to-face encounter around the 

provider, as the statutory language is 

explicit in requiring it at certain benefit 

periods. Benefit periods are counted 


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based upon a patient’s total Medicare 

hospice history, rather than a patient’s 

hospice history with a given provider. 

We cannot deviate from the statutory 

language which specifies when the faceto-face encounter must occur (‘‘prior to 

the 180th-day recertification and each 

subsequent recertification’’). We will 

continue to monitor the data for any 

unintended consequences from the 

physician narrative or from the hospice 

face-to-face requirement. 

Comment: A few commenters asked if 

hospices would be expected to perform 

a face-to-face encounter in December 

2010 for patients who will require a 

face-to-face encounter during January 

2011. One asked that we ‘‘grandfather’’ 

in patients whose recertification would 

require a face-to-face visit in January 

2011. Others asked that the requirement 

only be effective for patients admitted to 

hospice on or after January 1, 2011 

rather than including patients who were 

admitted prior to January 1, 2011, and 

whose stays crossed into 2011. One 

commenter wrote that this would allow 

hospices to marshal the necessary 

personnel and training resources, to 

create systems, and to minimize 

disruption in patient care. 

Response: In implementing the 

hospice face-to-face requirement, we 

must follow the relevant statutory 

language in the Affordable Care Act, 

which says, ‘‘a hospice physician or 

nurse practitioner has a face-to-face 

encounter with the individual to 

determine continued eligibility of the 

individual for hospice care prior to the 

180th-day recertification and each 

subsequent recertification * * *’’. 

The language does not require 

hospices to have a face-to-face 

encounter with existing patients who 

entered the 3rd or later benefit period in 

2010, and were recertified in 2010. It 

does require that patients who enter the 

3rd or later benefit period in 2011 have 

the face-to-face encounter; the statutory 

language does not give us flexibility to 

‘‘grandfather’’ in existing patients. We 

also believe that by extending the 

timeframe for the face-to-face encounter 

from 15 to 30 calendar days, hospices 

will have the flexibility to meet this 

requirement for patients who will enter 

the 3rd or later benefit periods in 2011. 

Comment: A commenter stated that 

she is not aware of any data indicating 

that a physician who sees a patient in 

a face-to-face encounter once in a 

6-month period is better able to 

prognosticate than a skilled hospice 

nurse who has seen the patient serially 

over a 6-month timeframe. The 

commenter added that unless the 

physician’s one time face-to-face 

assessment results in a more accurate 

prognosis, this requirement is of very 

questionable value in the efforts to 

improve the process. Another 

commenter wrote that the additional 

burden from the visit does not support 

a face-to-face encounter; one wrote that 

those who provide care ethically and in 

compliance with regulations would 

have an additional paperwork burden, 

but this will not effectively eliminate 

the unethical providers. Another 

commenter wrote that it would be 

extremely cumbersome to develop 

processes in-house with electronic 

records and software to meet the faceto-face requirements. One commenter 

wrote that the proposal goes beyond the 

mandates of the Affordable Care Act in 

proposing additional layers of payment 

cuts on top of the disproportionate cuts 

already scheduled for hospice. 

Another commenter said that it is not 

always feasible, practical, or efficient to 

require face-to-face encounters as 

proposed. A commenter believed that 

the attestation and narrative 

requirement already created a burden 

greater than the benefit for physicians, 

patients, and agencies, and that this 

additional face-to-face requirement 

would serve as a further barrier to care 

in areas where patients are already 

underserved, an economic hardship for 

small nonprofit providers, and would 

ultimately result in decreased quality of 

care for patients and increased costs to 

Medicare through unnecessary testing, 

procedures, hospitalizations, and 

readmissions. A commenter wrote that 

this face-to-face encounter requirement 

would lead to decreased utilization of 

hospice services, decreases lengths of 

stay if hospices discharge patients too 

soon, which may diminish the purpose 

of hospice and mute its services. Other 

commenters wrote that requiring a faceto-face visit by a physician or NP adds 

a layer of complexity not only to the 

hospice, but also to the patient’s 

routine, due to travel, location, and 

additional paperwork without any 

compensatory benefit. One commenter 

wrote that this new requirement does 

little to truly benefit the patient or to 

protect the hospice benefit from abuse. 

Another wrote that patients in small 

rural communities would be 

inconvenienced because of the 

fraudulent behavior of large for-profit 

hospices. 

Response: We appreciate the 

commenters’ thoughts on the value of 

the face-to-face encounter. We are taking 

a long-term view of the encounter, and 

expect that it will increase physician 

accountability, lead to discharge of 

ineligible beneficiaries thereby reducing 

some lengths of stay, and improve the 

quality of patient care. While we value 

the hospice nurse’s experience with the 

patient, and his or her assessment of the 

patient’s prognosis, we believe that faceto-face encounters with hospice 

physicians or NPs can only improve 

upon that process. 

We do not believe this requirement 

will decrease hospice utilization by 

eligible patients. We also do not claim 

that by itself, this requirement will 

eliminate all abuse of the hospice 

benefit. As noted previously in this 

section, this mandate complements 

other efforts related to protecting the 

hospice benefit from fraud and abuse. 

This requirement does not cut 

payments, nor do we believe it is overly 

burdensome. We have provided 

financial relief for the cost of the visits 

by allowing billing of reasonable and 

necessary patient care by the hospice 

physician or hospice attending NP that 

occurs during a required face-to-face 

encounter. We have also provided 

additional flexibility in the timing of 

visits, to assist rural providers. We 

believe these changes help ensure that 

this requirement does not serve as a 

barrier to care in underserved area, and 

will monitor for any unintended 

consequences. 

While changes in certification 

requirements may lead to additional 

paperwork or to software changes, we 

do not believe that these will be 

burdensome or overwhelming; rather 

they are a routine cost of doing 

business. We have also provided 

hospices with great flexibility in how 

they include the face-to-face attestation 

as part of their recertification 

documents. We agree that the allowable 

timeframe for making changes to 

software or to electronic records is 

short, and have addressed these 

concerns later in this section. 

We believe that in the long-term, it 

will strengthen the hospice benefit by 

returning it to the benefit the Congress 

intended, for patients who are 

terminally ill with 6 months or less to 

live. We are concerned that the hospice 

benefit is being used by some providers 

to care for chronically ill patients rather 

than terminally ill patients, or to serve 

as a long-term care benefit. We believe 

that this face-to-face requirement may 

help to ensure the continued viability of 

Medicare’s hospice benefit for those at 

end-of-life. 

Comment: A number of commenters 

wrote to support the intent of the rule 

to certify only those hospice patients 

who remain eligible for the hospice 

benefit or to increase physician 

accountability, though a few mentioned 

that those who abuse the benefit would 

find a way to circumvent the 

requirement or that the proposed rule 


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was too stringent. One wrote that it is 

a wise way to counter the growing use 

of hospice services by those who are 

chronically ill, rather than terminally 

ill. Another commenter values the sort 

of practice, which was proposed as it 

ties the persons of the treatment team 

with the patient and with the family. A 

few commenters also supported our 

proposal that a certification or 

recertification could be completed 15 

days prior to the start of the benefit 

period. A commenter from a non-profit 

hospice wrote that the Congress’ and 

CMS’ faith in the value of physician 

certification to halt abuse was 

reasonable, and was important for the 

nonprofit hospice community to 

support. 

Response: We thank the commenters 

for their support. 

Comment: A commenter was 

concerned that the timing of the 

proposed rule, with the open comment 

period until September 14th and a final 

rule not due out until late October or 

mid-November, puts a considerable 

burden on providers and their patient 

management software companies. The 

commenter wrote that software changes 

would need to be made based on the 

proposed rule, and that her software 

company could not beta test its changes 

because there is not enough time to do 

so, and to get the software out in 

November. The commenter added that 

any changes CMS makes between the 

proposed and final rules are difficult to 

accommodate, but obviously necessary. 

The commenter believes that in the 

future it would be more reasonable for 

CMS to publish proposed rules with 

adequate time for comments, review, 

and a final rule to be published several 

months before the effective date, so that 

software companies and their clients 

would have adequate time to prepare for 

the changes. The commenter added that 

due to the number of unresolved issues 

with the face-to-face proposal, the 

regulation effective date may be delayed 

which would also impact the timing of 

hiring of additional staff. A few 

commenters wrote that the timeframe, 

from publication of the final rule to its 

effective date, means that hospices have 

little time to meet with current 

physician staff to determine if they can 

manage the required visits, and to hire 

and train additional physicians and NPs 

if needed; several asked for more time 

to hire and train additional staff. 

Response: The hospice face-to-face 

requirement was included in the 

Affordable Care Act, which was enacted 

on March 23, 2010. Conforming 

amendments were added to that law on 

March 30, 2010. We typically publish 

hospice payment-related proposed rules 

in April and final rules in late July or 

early August. Because of the internal 

process to publish a proposed rule by 

the end of March and the date the 

Affordable Care Act was signed into 

law, it was too late to include the 

provisions related to the face-to-face 

requirement in a hospice proposed rule. 

The most appropriate rulemaking 

publication we could use was the HH 

proposed and final rules. In addition, 

the HH payment rules have an effective 

date of January 1st while the hospice 

payment rules are effective on 

October 1st. 

When we propose and finalize 

changes to policies, we try to do so with 

a timeframe that provides adequate time 

and flexibility to providers, contractors, 

and software vendors, to implement 

final rule requirements. In this case, the 

timing of the enactment of the 

Affordable Care Act led us to propose 

the requirements later than usual; the 

effective date of the face-to-face 

requirement is mandated in the statute, 

and we cannot change it. However, the 

timing of the proposed rule allowed for 

a 60 day public comment period and the 

final rule will be effective on January 1, 

2011. 

Comment: Some commenters asked if 

they were expected to report the 

required face-to-face visit on their 

claims. One wrote that if hospices are 

expected to report the visit, they should 

be paid for it. A commenter asked 

whether hospices should report the NP’s 

NPI number on the claim or the NPI 

number of the physician supervising the 

NP. Several commenters asked if any 

special codes should be included on 

claims when the face-to-face visit is 

combined with a patient care visit, or 

when the face-to-face visit occurs during 

a medically necessary physician visit. 

Response: We are not requiring any 

visit reporting for the required face-toface encounter on hospice claims. This 

is consistent with our policy of not 

currently requiring reporting of other 

administrative activities on hospice 

claims. Hospice claims currently show 

the NPI of the attending physician (who 

may be a NP) and the certifying 

physician, at the claim level rather than 

showing the NPI of a practitioner at the 

line-item level. If hospice physicians or 

attending NPs provide billable services 

(as described previously in this section) 

during the course of the visit, those are 

to be billed on the claim following usual 

physician billing procedures, using 

revenue code 0657 and the appropriate 

CPT codes. If billable NP attending 

physician services are included on the 

claim, the claim should also include a 

GV modifier, since NP services are paid 

at 85 percent of services provided by 

physicians. The NP’s NPI number 

would only be reported on the claim if 

the hospice NP is also the patient’s 

attending physician. 

Comment: A commenter wrote that 

hospice programs have raised concerns 

that hospice physicians or NPs may, 

during their visit to gather clinical 

findings to meet the face-to-face 

encounter requirement, be expected, by 

the patient or family members, to treat 

the patient for issues that are not related 

to the terminal diagnosis. The 

commenter noted that this is a 

particular concern in cases where the 

patient is not under the direct medical 

care of the hospice Medical Director but 

under the care of his or her primary care 

physician. The commenter suggested 

that CMS should acknowledge the 

potential for such professional/ethical 

conflicts and make every effort to avoid 

establishment of any barriers (either 

through hospice CoPs or coverage 

requirements) that would prevent the 

physician or NP from providing 

adequate notice or explanation to a 

patient or responsible family member 

regarding the purpose of the hospice 

face-to-face encounter. 

Response: The hospice physician is 

responsible for providing care for the 

terminal illness and related conditions, 

and for caring for any unmet medical 

needs that the patient’s attending 

physician (if any) has not addressed. If 

both the hospice physician and the 

attending physician are involved in the 

patient’s care, the patient is taught who 

to consider ‘‘primary’’ and contact first. 

The hospice is to collaborate with the 

patient’s attending physician (if any) in 

obtaining the initial certification, in 

performing the comprehensive 

assessment and any updates to that 

assessment, in developing the written 

plan of care, in discharging the patient, 

etc. Therefore, there should already be 

a working relationship with the 

patient’s attending physician; in having 

a required face-to-face encounter, the 

physician or NP should coordinate with 

the attending physician in providing 

any care to the patient. Because the 

required face-to-face encounter is 

usually an expected event, the hospice 

has time for such coordination. If the 

hospice physician or attending NP 

provides reasonable and necessary 

patient care while making a required 

face-to-face visit, the hospice may bill 

for those non-administrative physician 

services, as described previously in this 

final rule. 

Comment: A commenter wrote that 

CMS has provided no clarity regarding 

the hospice’s exposure should the faceto-face requirement not be met. 


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Response: The face-to-face 

requirement is part of the hospice 

recertification process. Having a valid 

recertification is a statutory requirement 

for coverage and payment. We would 

have grounds to demand and recoup 

payments for claims that were paid 

based on an invalid recertification due 

to not satisfying the face-to-face 

requirement. 

Comment: A commenter 

recommended that CMS continue to 

accept the hospice date stamp on POCs 

returned to the agency by physicians 

who forget or fail to date their signature 

on this document. 

Response: At this time, there is 

nothing to preclude a hospice from 

using a date stamp if a physician fails 

to date his or her signature on the POC. 

Comment: One commenter wrote that 

including the benefit period dates on 

the certification and recertification 

forms imposes a clerical task in 

physician charting. The commenter 

asked why this was proposed if the faceto-face encounter requirement is based 

upon actual days of care. 

Response: As noted previously, the 

face-to-face encounter is based upon 

benefit periods and not on actual days 

of care. Therefore, it is helpful to show 

benefit periods on the certification. As 

we wrote in the proposed rule, having 

the benefit period dates on the 

certification makes it easier for the 

hospice to identify those benefit periods 

which require a face-to-face encounter, 

and will ease enforcement of this new 

statutory requirement. Additionally, 

including the benefit period dates on 

certifications or recertifications 

simplifies the medical review process. 

The physician does not have to be the 

one to fill in the benefit period dates, 

but he or she should know what period 

of time the document covers. 

Comment: A commenter wrote that 

this rule was proposed as intended to be 

applied to hospices that routinely skew 

the length of stay averages with long 

lengths of stay and exceed the hospice 

caps. The commenter added that it is 

now applicable to every certified 

hospice regardless of appropriate 

lengths of stay or not. 

Response: Our proposal is entirely 

based on section 3132(b) of the 

Affordable Care Act. The Affordable 

Care Act did not limit the face-to-face 

requirement to certain hospices, but 

required it of all certified hospices. 

Comment: A commenter wrote that if 

CMS plans to reimburse the face-to-face 

visits, long term care (LTC) facilities 

should not be involved in hospice 

billing as the proposed rule is clearly 

focused on hospice operations, not 

those of the LTC that contracts with the 

hospice so patients may receive hospice 

services. The commenter asked that if 

CMS anticipates any increased 

responsibilities of LTC providers, that 

his organization be included in any 

stakeholder discussions. Finally, the 

commenter asked that we clarify that 

the role of LTC providers will not 

change under this new regulation. 

Response: These requirements affect 

hospices only and do not affect or 

change the responsibilities of LTC 

providers that serve hospice patients 

who reside in their facilities. 

Comment: A commenter asked if the 

new requirement for physician or NP 

face-to-face encounters replaces current 

RN assessments of hospice patients. 

Response: This new requirement does 

not affect the roles and responsibilities 

of hospice nurses. Hospice nurses 

should continue to care for and assess 

patients in accordance with the CoPs. 

They should continue to provide care 

for the palliation and management of 

the terminal illness and related 

conditions. 

Comment: A commenter asked if the 

new face-to-face requirement allowed 

the Medical Director to certify hospice 

patients. Several commenters urged that 

electronic signatures be accepted for 

certifications and recertifications or on 

the attestations. Another commenter 

asked if having a different diagnosis at 

admission would affect the face-to-face 

requirement. 

Response: Hospice Medical Directors 

have always been able to certify or 

recertify hospice patients. Additionally, 

electronic signatures on certifications 

and recertifications continue to be 

allowed; the narrative and the face-toface attestation are parts of the 

certification, and therefore both can be 

signed electronically. The new face-toface requirement does not affect either 

of these policies. The face-to-face 

encounter is required based upon being 

in the 3rd or later benefit period, 

considering the entire hospice history, 

regardless of diagnosis. 

Comment: A commenter wrote that if 

the face-to-face encounter must occur 

within 2 weeks of the start-of-care date, 

and be documented, the industry could 

not afford this. This commenter noted 

also that hospices have little or no 

influence over physician behavior to 

comply with the additional scheduling 

and documentation requirements of this 

proposed rule. 

Response: We believe this comment is 

related to the HH face-to-face 

requirement, but it was unclear from the 

language used, so we will respond from 

a hospice perspective. The hospice faceto-face certification is not required at 

start-of-care unless, when considering 

the patient’s entire hospice history, the 

start-of-care coincides with the 

recertification at the 3rd or later benefit 

period. If a hospice employs or contracts 

with a physician, it has influence 

regarding physician compliance with 

these requirements. 

Comment: A commenter wrote that a 

recent Duke University study showed 

that patients who died under the care of 

hospice cost the Medicare program an 

average of $2,300 less than those who 

did not. This commenter believes that 

the current reimbursement model no 

longer fits with the evolution of the 

hospice benefit since 1983. The 

commenter also believes that this 

maturation of hospice necessitates a full 

scale review and evaluation of the 

current reimbursement model. The 

commenter added that changes to the 

benefit and payment system should 

preserve access the hospice benefit, 

quality care, and reasonable 

reimbursement rates to maintain a 

viable and stable delivery system. The 

commenter also wrote that hospice 

patients should not have to forgo 

curative care that might lengthen their 

lives and enhance their quality of life. 

This commenter also wrote that the 

Congress should prevent CMS from 

implementing payment rate cuts in 

hospice until the Secretary is able to 

justify that the cuts do not negatively 

impact patients and access to care. The 

commenter suggested that the Congress 

prevent us from implementing the 

payment rate to ensure the full market 

basket update for the hospice benefit, 

and that they preserve the BNAF; 

commenters suggested a rural add-on 

payment to ensure access for rural 

patients and to compensate for the 

financial burden of the face-to-face 

visits. 

A few commenters who opposed the 

elimination of the BNAF wrote that we 

moved the hospice wage index away 

from one which was agreed upon years 

ago; one asked that we suspend the 

phase-out until a better approach for 

wage index adjustment is developed. 

Another commenter believes the 

hospice wage patterns do not mirror 

those of hospitals. This commenter 

wrote that hospices compete in the same 

labor market as hospitals, which are 

allowed to reclassify. The commenter 

urged us to develop a voluntary pilot 

project to test a hospice specific wage 

index, and hopes that we will slow the 

phase-out. A few commenters also urged 

that we maintain the aggregate hospice 

cap, as it protects against abuse of the 

benefit. One supported our efforts to 

improve the calculation and 

enforcement of the cap, provided those 

efforts do not take away from payment 


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reform. A different commenter 

suggested we have standards for data 

submitted on cost reports and not use 

data from agencies that submit reports 

that are missing required information. 

Response: Some of these comments 

are outside the scope of this rule so we 

will not respond to them in this final 

rule. However, we will respond to those 

comments related to the Affordable Care 

Act. Section 3132(a) of the Affordable 

Care Act requires that we begin 

reforming the hospice payment system 

no earlier than October 1, 2013. We 

have been collecting additional data 

from hospices for several years now, in 

preparation for payment reform. Any 

reformed payment model that we 

propose would preserve access to 

hospice care, encourage quality care, 

and would fairly pay providers. Section 

3140 of the Affordable Care Act requires 

that we conduct a concurrent care 

demonstration project where hospice 

services will be provided without the 

beneficiary having to forgo curative 

care. The results of this 3-year 

demonstration project will help inform 

future decisions about any changes to 

the hospice benefit. In the Affordable 

Care Act, the Congress also reduced the 

market basket update for hospice, but 

those reductions will not occur until 

2013, and therefore are not included in 

the FY 2011 payment rates. We do not 

have the statutory authority to provide 

a rural add-on to hospices. The BNAF 

phase-out was finalized in the August 6, 

2009 final rule, and is outside the scope 

of this rule. Likewise, the hospice wage 

index, cost reports, and cap are outside 

the scope of this rule, and therefore we 

cannot comment, though we appreciate 

the commenter’s support regarding the 

hospice aggregate cap. 

In summary, as a result of the 

comments we received on the proposed 

rule, we are finalizing the proposals 

made in the proposed rule with the 

following changes: 

• We are changing the regulatory text 

at § 418.22(a)(4) to clarify that we are 

counting a beneficiary’s time across all 

hospices based upon benefit periods 

rather than on actual days of hospice 

care. Therefore, a face-to-face encounter 

will be required prior to the 3rd benefit 

period recertification and each 

recertification thereafter. 

• We are clarifying in the regulatory 

text at § 418.22(a)(4) that the hospice 

physician or nurse practitioner is not 

required to go to the patient for the faceto-face encounter, but that the patient is 

allowed to travel to the hospice 

physician or nurse practitioner when 

medically appropriate. 

• We are changing the regulatory text 

at § 418.22(a)(4) so that hospice 

physicians or nurse practitioners will 

have up to 30 calendar days prior to the 

3rd benefit period recertification, and 

up to 30 calendar days prior to each 

recertification thereafter, to have the 

face-to-face encounter. 

• We are changing the regulatory text 

at § 418.22(b)(3)(iii) so that the narrative 

attestation is directly above physician’s 

signature, rather than directly below it. 

• We clarified that hospices may bill 

for reasonable and necessary care 

provided to the patient by a hospice 

physician in the course of having a 

required face-to-face encounter with a 

patient. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information (COI) 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. In order to fairly 

evaluate whether an information 

collection should be approved by OMB, 

section 3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

A. ICRs Regarding Therapy Coverage 

Requirements 

As described previously in this rule, 

we are clarifying our coverage 

requirements for skilled services 

provided by therapists, which are 

described in § 409.44(c). Our 

clarifications include requirements to: 

Document necessity for a course of 

therapy (§ 409.44(c)(1)); include clinic 

notes which reflect progress toward 

goals, which incorporate the functional 

assessment and reassessments, which 

justify medical necessity, which 

describe the content of progress notes, 

and which include objective evidence of 

the expectation that the patient’s 

condition will improve 

(§ 409.44(c)(2)(i)); document any 

variable factors that influence the 

patient’s condition or affect the patient’s 

response to treatment, and include 

objective measurements of progress 

toward goals in the clinical record 

(409.44(c)(2)(iv)). 

These clarifications to our coverage 

requirements in § 409.44(c) are already 

part of our current Conditions of 

Participation (CoPs) and are approved 

under OMB# 0938–1083. The current 

CoPs at § 484.12 already require that the 

HHA and its staff comply with accepted 

professional standards and principles 

that apply to professionals furnishing 

services in an HHA. Those accepted 

professional standards include complete 

and effective documentation, such as we 

described in our proposals. 

Additionally, § 484.32 of the CoPs 

already requires in part that the 

therapist prepare clinical and progress 

notes. Section 484.55 of the CoPs 

already requires that HHAs provide a 

comprehensive assessment that 

‘‘accurately reflects the patient’s current 

health status and includes information 

that may be used to demonstrate 

progress toward achievement of desired 

outcomes’’. Because these clarifications 

to our coverage requirements in 

§ 409.44(c) reflect longstanding policy 

from our CoPs as well as from accepted 

standards of clinical practice, we 

believe that these requirements will not 

create any additional burden on HHAs. 

Additionally, our coverage regulations 

at § 409.44(c)(2)(i) already mandate that 

for therapy services to be covered in the 

HH setting, the services must be 

considered under accepted practice to 

be a specific, safe, and effective 

treatment for the beneficiary’s 

condition. We are revising 

§ 409.44(c)(2)(i) to require a functional 

assessment on the 13th and 19th 

therapy visit, and at least every 30 days, 

to determine continued need for therapy 

services, and to ensure material progress 

toward goals. The functional assessment 

does not require a special visit to the 

patient, but is conducted as part of a 

regularly scheduled therapy visit. 

Functional assessments are necessary to 

demonstrate progress (or the lack 

thereof) toward therapy goals, and are 

already part of accepted standards of 

clinical practice, which include 

assessing a patient’s function on an 

ongoing basis as part of each visit. 

Our current CoPs at § 484.55 already 

require that HHAs ‘‘identify the patient’s 

continuing need for home care * * *’’. 

Functional assessments of therapy need 

guide HHAs in determining whether 

continued therapy is necessary. 

Therefore, we believe that the 

requirement to perform a functional 

assessment at the 13th and 19th visits, 

and at least every 30 days, will also not 


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create any burden on HHAs. Rather, we 

have clarified the minimum timeframes 

for functional assessments in the 

coverage regulations. Longstanding CoP 

policy at § 484.55 requires HHAs to 

document progress toward goals; 

therefore, we again do not believe that 

performing or documenting functional 

assessments at these 3 time-points 

would create a new burden. Both the 

functional assessment and its 

accompanying documentation are 

already part of existing HHA practices 

and accepted standards of clinical 

practice, and are approved under OMB# 

0938–1083. Therefore, we do not believe 

these proposed requirements place any 

new documentation requirements on 

HHAs. We also believe that a prudent 

HHA would self-impose these 

requirements in the course of doing 

business. 

We are revising the currently 

approved PRA package (OMB# 0938– 

1083) to describe these clarifications to 

the regulatory text. 

B. ICRs Regarding HHA Capitalization 

As stated above, we are revising 

§ 489.28(a) to state that a newly 

enrolling HHA must consistently 

maintain sufficient capitalization 

between the time it submits its 

enrollment application until 3 months 

after its provider agreement becomes 

effective. The HHA will therefore be 

required to submit proof of 

capitalization at multiple points during 

this period. 

In the proposed rule, we estimated 

that a newly enrolling HHA would be 

required to submit such proof 3 times 

prior to receiving Medicare billing 

privileges, and that the burden involved 

in doing so would be 1.5 hours on each 

occasion. We further projected that 500 

newly enrolling HHAs (of which 200 

would become enrolled) would be 

requested to furnish this data. The total 

annual burden would therefore be 2,250 

hours (500 HHAs × 3 submissions × 1.5 

hours). 

We are adopting the aforementioned 

estimates for this final rule. These 

estimates are reflected in Table 14. 

TABLE 14—ESTIMATED ANNUAL REPORTING AND RECORDKEEPING BURDEN

OMB No. Requirement Respondents Responses Hour burden Total 

None ...................................................... § 489.28(a) 500 500 4.5 2,250 

C. ICRs Regarding the Home Health 

Face-To-Face Encounter Requirement 

The Affordable Care Act amends the 

requirements for physician certification 

of HH services contained in sections 

1814(a)(2)(C) and 1835(a)(2)(A) of the 

Act by requiring that prior to certifying 

a patient as eligible for HH services, the 

physician must document that the 

physician/NPP has had a face-to-face 

encounter (including through the use of 

telehealth. The Affordable Care Act 

provision does not amend the statutory 

requirement that a physician must 

certify a patient’s eligibility for 

Medicare’s HH benefit (see sections 

1814(a)(2)(C) and 1835(a)(2)(A) of the 

Act). In this rule, we are amending 

§ 424.22(a)(1)(v) to require the certifying 

physician sign and date the 

documentation entry into the 

certification that the face-to-face patient 

encounter occurred no more than 90 

days prior to the HH start of care date 

by himself or herself, or by an allowed 

NPP for initial certifications. We are 

requiring that the certifying physician’s 

documentation of the face-to-face 

patient encounter be either a separate 

and distinct area on the certification, or 

a separate and distinct addendum to the 

certification, that is easily identifiable 

and clearly titled, dated, and signed by 

the certifying physician, and that it 

include the clinical findings of that 

encounter. 

The burden associated with the 

documentation requirement for the 

patient’s face-to-face encounter by the 

physician and certain allowed 

nonphysician practitioners includes the 

time for each HHA to develop a revised 

certification form or certification 

addendum which the HHA provides to 

the physician. The revised certification 

form or addendum to the certification 

must allow the physician to record that 

a face-to-face patient encounter has 

occurred. The revised form or 

addendum must also include the 

patient’s name, a designated space for 

the physician to provide the date of the 

patient encounter, a designated space 

for the physician’s documentation of the 

face-to-face encounter, and a designated 

space for the physician to provide his/ 

her signature and the date signed. 

There were 9,432 HHAs that filed 

claims in CY 2008. We estimate it 

would take each HHA 15 minutes of the 

HH administrator’s time to develop and 

review the above described form 

language and 15 minutes of clerical time 

for each HHA to revise their existing 

initial certification form or to create an 

addendum with that form language. The 

estimated total one-time burden for 

developing the patient encounter form 

would be 4,716 hours. 

The certifying physician’s burden for 

composing the face-to-face 

documentation which includes how the 

clinical findings of the encounter 

support eligibility; writing, typing, or 

dictating the face-to-face 

documentation; signing, and dating the 

patient’s face-to-face encounter is 

estimated at 5 minutes for each 

certification. We estimate that there 

would be 2,926,420 initial HH episodes 

in a year based on our 2008 claims data. 

As such, the estimated burden for 

documenting, signing, and dating the 

patient’s face-to-face encounter would 

be 243,868 hours for CY 2011. 

We reiterate that our longstanding 

policy has been that physicians must 

sign and date the certification statement 

that the patient is in need of HH 

services and meets the eligibility 

requirements to receive the benefit. 

Therefore, our making this requirement 

explicit in the regulation poses no 

additional burden to HHAs. 

Additionally, it has been our 

longstanding manual policy that 

physicians must sign and date the 

certification and any recertifications. 

Our current regulations only address the 

physician’s signing of the certification 

and recertification. In this rulemaking, 

we are strengthening our regulations at 

§ 424.22 to achieve consistency with the 

timing and documentation of the faceto-face encounter and to mirror our 

longstanding manual policy by revising 

our regulations to make it a requirement 

that physicians not only sign, but also 

date certifications and recertifications. 

Because it has been our longstanding 

manual policy that physicians sign and 

date certifications and recertifications, 

and we are merely making this 

requirement explicit in our regulations, 

there is no additional burden to 

physicians. 

Based on the criteria for payment of 

physician supervision of a patient 

receiving Medicare-covered services 

provided by a participating HHA as 

stipulated in the description of HCPC 

code G0181, our making the patient 

encounter requirement explicit in the 

regulation poses no additional burden to 

physician offices. Tables 15 and 16 


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summarize the burden estimate 

associated with these requirements. 

TABLE 15—ESTIMATED ONE-TIME FORM DEVELOPMENT BURDEN

OMB No. Requirement HHAs Responses Hour burden Total 

(hours) 

0938–1083 § 424.22(a)(1)(v) 9,432 1 .5 4,716 

TABLE 16—ESTIMATED PHYSICIANS BURDEN FOR DOCUMENTING, SIGNING, AND DATING ENCOUNTER

OMB No. Requirement Patients Responses Hour burden Total 

(hours) 

0938–1083 § 424.22(a)(1)(v) 2,926,420 1 .0833333 243,868 

Details of our burden estimates are 

availabe in the Paperwork Reduction 

Act (PRA) package approved under 

OMB# 0938–1083. We are revising this 

currently approved package to 

incorporate these requirements. 

D. ICRs Regarding the Requirements for 

Hospice Certification Changes 

As described previously in this final 

rule, as of January 1, 2011 the 

Affordable Care Act requires physicians 

or NPs to attest that they determined 

continued hospice eligibility through a 

face-to-face encounter with all hospice 

patients prior to the 3rd benefit period 

recertification and at every subsequent 

recertification. We will require the 

physician or NP to sign and date an 

attestation statement that he or she had 

a face-to-face encounter with the 

patient, and include the date of that 

visit. This attestation would be a 

separate and distinct part of the 

physician recertification, or an 

addendum to the physician 

recertification. 

The burden associated with this 

attestation requirement is the time for 

each hospice to develop simple 

attestation language to attach as an 

addendum or include as part of the 

recertification document, and the time 

for the physician or NP to include the 

patient name, the date that the patient 

was visited, the visiting physician or NP 

signature, and the date signed. As of 

February 2010, there were 3,429 

hospices with claims filed in FY 2009. 

We estimate it would take each hospice 

15 minutes of administrative time to 

develop and review the attestation 

language, and 15 minutes of clerical 

time to revise their existing 

recertification form or to create an 

addendum. The estimated total one-time 

burden for developing the attestation 

form would be 1,714 hours. 

The burden for completing the 

attestation form is estimated at 30 

seconds for each recertification at 180 

days or beyond. We used the 

distribution of lengths of stay from 

hospice claims data to estimate the 

percentage of patients who required 

recertification at 180 days, and at 

subsequent 60-day benefit periods. We 

estimated that there would be 457,382 

recertifications at 180 days or beyond, 

each of which requires an attestation. 

We assume that 90 percent of the visits 

were performed by physicians and 10 

percent by nurse practitioners, based on 

our analysis of FY 2009 physician and 

NP hospice billing data, with 30 

seconds time allowed to sign and date 

the attestation statement, and to write in 

the name of the patient and the date of 

the visit, resulting in an estimated total 

burden to complete the attestation form 

of 3,811 hours for CY 2011. In the FY 

2010 hospice rule (74 FR 39384), we 

finalized a requirement that the 

recertifying physician include a brief 

narrative explanation of the clinical 

findings which support continued 

hospice eligibility. Effective January 1, 

2011, regulation text changes to require 

this narrative to describe why the 

clinical findings of the face-to-face 

encounter, occurring at the 180-day 

recertification and all subsequent 

recertifications, continue to support 

hospice eligibility. However, these 

regulation changes are for clarification. 

The narrative requirement finalized in 

FY 2010 requires that the narrative 

include why the clinical findings of any 

physician/NP/patient encounter support 

continued hospice eligibility. Therefore, 

the only documentation burden 

associated with this requirement is the 

signed and dated attestation that the 

encounter occurred. 

In addition, commenters asked that 

we change the regulatory language at 

§ 418.22(b)(3)(iii) to require the 

physician’s signature to follow the 

narrative attestation statement, rather 

than to be above it on the form. The 

commenters believed that the signature 

should ‘‘close the loop’’, and that this 

placement would be consistent with the 

face-to-face attestation requirements. We 

agree with the commenters, and are 

finalizing this as a change in the 

regulation. We do not believe that 

moving the signature underneath the 

narrative attestation (rather than leaving 

it above it) creates any additional 

burden to hospices. The estimate of 

administrative burden to create the faceto-face attestation includes enough 

administrative time for form revision to 

cover moving the narrative attestation 

signature line. 

We reiterate that our longstanding 

policy has been that physicians must 

sign and date the certification and any 

recertifications. Therefore, our making 

this requirement explicit in the 

regulation poses no additional burden to 

hospices. We also clarified the 

timeframe which the certifications and 

recertifications cover by requiring 

physicians to include the dates of the 

benefit period to which the certification 

or recertification applies. We believe 

this is already standard practice at 

nearly all hospices, but are addressing it 

in regulation. Using the distribution of 

lengths of stay from 2007 and 2008 

claims data, we estimate that there 

would be 1,733,663 initial certifications 

and recertifications during the course of 

a year. We estimate that it would take 

a physician 30 seconds at most to 

include the benefit period dates. We 

estimate that the time to require 

physicians to include the benefit period 

dates on the certification or 

recertification would be 30 seconds per 

certification or recertification, for a total 

burden of 14,447 hours for CY 2011. 

Table 17 summarizes the burden 

estimate associated with these 

requirements. 


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Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 70457 

TABLE 17—ESTIMATED ANNUAL RECORDKEEPING BURDEN

OMB No. Requirements Units Responses Hour burden Total 

0938–1067 ...................... 418.22(b)(4) 3,429 hospices ......................................................... 1 0 .50 1,714 

0938–1067 ...................... 418.22(b)(4) 457,382 ≥ 180-day recerts ....................................... 1 0 .0083333 3,811 

0938–1067 ...................... 418.22(b)(5) 1,733,663 All certs. & recerts .................................. 1 0 .0083333 14,447 

Details of our burden estimates are 

available in the PRA package approved 

under OMB# 0938–1067. We are 

revising this currently approved 

package to incorporate these 

requirements. 

We received one comment about the 

burden estimate of the hospice face-toface attestation, and one about an 

addition to the face-to-face attestation. 

Comment: A commenter wrote that 

the administrative burden calculated by 

CMS did not include the staff time 

required to track down these face-to-face 

encounters. The administrative cost that 

was calculated is not included in the 

reimbursement for hospices. 

Response: The above mentioned 

burden estimate only reflects the burden 

associated with any additional required 

documentation. In this case, the 

additional required documentation is 

the attestation of the face-to-face 

encounter. Our burden estimate 

includes the administrative time to 

develop an attestation form as well as 

the time that we believe would be 

required to revise the hospice’s existing 

certification or recertification forms, if 

necessary. The requirement as stated in 

§ 418.22 pertains to additional 

documentation only, that is, 

documentation requirements 

subsequent to the face-to-face 

encounter; therefore, the estimate above 

does not include any burden associated 

with the administrative coordination 

and conduct of face-to-face encounters 

or tracking the encounters. 

E. ICRs Regarding the Home Health Care 

CAHPS Survey (HHCAHPS) 

As part of the DHHS Transparency 

Initiative on Quality Reporting, we are 

implementing a process to measure and 

publicly report patients’ experiences 

with HH care they receive from 

Medicare-certified HHAs with the Home 

Health Care CAHPS (HHCAHPS) survey. 

The HHCAHPS was developed and 

tested by the Agency for Healthcare 

Research and Quality (AHRQ) and is 

part of the family of CAHPS surveys, is 

a standardized survey for HH patients to 

assess their HH care providers and the 

quality of the HH care they received. 

Prior to the HHCAHPS, there was no 

national standard for collecting data 

about HH care patients’ perspectives of 

their HH care. 

Section 484.250, Patient Assessment 

Data, will require an HHA to submit to 

CMS HHCAHPS data in order for CMS 

to administer the payment rate 

methodologies described in § 484.215, 

§ 484.230, and § 484.235. The burden 

associated with this is the time and 

effort put forth by the HHA to submit 

the HHCAHPS data, the patient burden 

to respond to the survey, and the cost 

to the HHA to pay the survey vendor to 

collect the data on their behalf. This 

burden is currently accounted for under 

OMB# 0938–1066. 

The HHCAHPS survey received OMB 

clearance on July 18, 2009, and the 

number is 0938–1066. In that PRA 

package, we did not state the burden to 

the HHAs concerning the hours that 

they would need to secure an approved 

HHCAHPS vendor and to pay for that 

vendor. In this rule, we have included 

the burden directly affecting HHAs, 

which is the burden to select a survey 

vendor from http://www.homehealth 

cahps.org and to sign a contract with 

that survey vendor that will conduct 

HHCAHPS on behalf of the HHA. We 

have determined that this would take 

16.0 hours for each HHA. It is noted that 

91 percent of all HHAs (9,890 HHAs of 

a total of 10,998 HHAs) would be 

conducting HHCAHPS, since about 9 

percent of HHAs will be exempt from 

conducting HHCAHPS because they 

have less than 60 eligible patients in the 

year. In Table 18, we have listed this 

burden to the HHAs: 

TABLE 18—ESTIMATED ANNUAL BURDEN ON HHAS FOR VENDOR SELECTION

OMB No. Requirements Units Responses Hour burden Total 

0938–1066 § 484.250(c)(2) 9,890 1 16.0 158,240 

OMB Number 0938–1066 will be 

revised to reflect the update concerning 

burden to the HHAs for vendor services 

for HHCAHPS. 

Section 5201 of the DRA requires 

HHAs to submit data for purposes of 

measuring health care quality, and links 

the quality data submission to payment. 

This requirement is applicable for CY 

2007 and each subsequent year. If an 

HHA does not submit quality data, the 

HH market basket percentage increase 

will be reduced 2 percentage points. In 

accordance with the statue, we 

published a final rule (71 FR 65884, 

65935) in the Federal Register on 

November 9, 2006 to implement the 

pay-for-reporting requirement of the 

DRA, codified at § 484.225(h) and (i). 

In the CY 2010 HH PPS proposed rule 

(August 13, 2009), we to expand the HH 

quality measures reporting requirements 

to include the CAHPS® Home Health 

Care (HHCAHPS) Survey, as initially 

discussed in the May 4, 2007 proposed 

rule (72 FR 25356, 25452) and in the 

November 3, 2008 Notice (73 FR 

65357,65358). As part of the DHHS 

Transparency Initiative, we proposed to 

implement a process to measure and 

publicly report patient experiences with 

HH care using a survey developed by 

AHRQ in its CAHPS® program. In the 

CY 2010 HH PPS final rule, we stated 

our intention to move forward with the 

HHCAHPS and link the survey to the 

CY 2012 annual payment update under 

the DRA ‘‘pay-for-reporting’’ 

requirement. 

As part of this requirement, each HHA 

sponsoring a HHCAHPS Survey must 

prepare and submit to its survey vendor 

a file containing patient data on patients 

served the preceding month that will be 

used by the survey vendor to select the 

sample and field the survey. This file 

(essentially the sampling frame) for 

most HHAs can be generated from 

existing databases with minimal effort. 

For some small HHAs, preparation of a 

monthly sample frame may require 

more time. However, data elements 

needed on the sample frame will be kept 

at a minimum to reduce the burden on 

all HHAs. 


emcdonald on DSK2BSOYB1PROD with RULES2
70458 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget. 

Attention: CMS Desk Officer, [CMS– 

1510–F] 

Fax: (202) 395–6974; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

IV. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 directs 

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). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). We estimate that this 

rulemaking is ‘‘economically significant’’ 

as measured by the $100 million 

threshold, and hence also a major rule 

under the Congressional Review Act. 

Accordingly, we have prepared a 

Regulatory Impact Analysis that to the 

best of our ability presents the costs and 

benefits of the rulemaking. 

1. CY 2011 Update 

The update set forth in this final rule 

applies to Medicare payments under HH 

PPS in CY 2011. Accordingly, the 

following analysis describes the impact 

in CY 2011 only. We estimate that the 

net impact of the proposals in this rule 

is approximately $960 million in CY 

2011 savings. The $960 million impact 

to the proposed CY 2011 HH PPS 

reflects the distributional effects of an 

updated wage index ($20 million 

increase) plus the 1.1 percent HH 

market basket update ($210 million 

increase), for a total increase of $230 

million. The 3.79 percent case-mix 

adjustment applicable to the national 

standardized 60-day episode rates ($700 

million decrease) plus the 2.5 percent 

returned from the outlier provisions of 

the Affordable Care Act ($490 million 

decrease) results in a total decrease of 

$1,190 million, which, when added to 

the $230 million increase, totals savings 

of $960 million in CY 2011. The $960 

million in savings is reflected in the first 

row of column 3 of Table 19 below as 

a 4.89 percent decrease in expenditures 

when comparing the current CY 2010 

HH PPS to the proposed CY 2011 HH 

PPS. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses, if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to $34.5 

million in any 1 year. For the purposes 

of the RFA, our updated data show that 

approximately 95 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 one year. Individuals and States are 

not included in the definition of a small 

entity. The Secretary has determined 

that this final rule would have a 

significant economic impact on a 

substantial number of small entities. In 

the proposed rule, we stated that our 

analysis reveals that nominal case-mix 

continues to grow under the HH PPS. 

Specifically, nominal case-mix has 

grown from the 11.75 percent growth 

identified in our analysis for CY 2008 

rulemaking to 17.45 percent for this 

year’s rulemaking. Because we have not 

yet accounted for all of the increase in 

nominal case-mix, that is case-mix that 

is not real (real being related to 

treatment of more resource intense 

patients), case-mix reductions are 

necessary. As such, we believe it 

appropriate to reduce the HH PPS rates 

now, so as to move towards more 

accurate payment for the delivery of HH 

services. We have amended the proposal 

that would have implemented two 

successive years of payment reductions, 

with each year’s reduction at 3.79 

percent. Instead we are finalizing in this 

rule only the first year’s reduction (for 

CY 2011) while we study additional 

case-mix data, and methods to 

incorporate such data, into our 

methodology for measuring real vs. 

nominal case-mix change. Other 

reductions to HH PPS payments 

discussed in this rule were mandated in 

provisions in the Affordable Care Act. 

Our analysis shows that small HHAs 

and large HHAs are impacted relatively 

similarly by the final provisions of this 

rule. Further detailed impact 

assessment, by facility type, is presented 

in the analysis below. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604. For 

purposes of section 1102(b) of the Act, 

we define a small rural hospital as a 

hospital that is located outside of a 

metropolitan statistical area and has 

fewer than 100 beds. This final rule 

applies to HHAs. Therefore, the 

Secretary has determined that this final 

rule would not have a significant 

economic impact on the operations of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2010, that 

threshold is approximately $135 

million. This final rule is not 

anticipated to have an effect on State, 

local, or tribal governments in the 

aggregate, or on the private sector, of 

$135 million or more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule (and subsequent final rule) that 

imposes substantial direct requirement 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. We have 

reviewed this final rule under the 

threshold criteria of Executive Order 

13132, Federalism, and have 

determined that it would not have 

substantial direct effects on the rights, 

roles, and responsibilities of States, 

local or tribal governments. 

B. Anticipated Effects 

This final rule sets forth updates to 

the HH PPS rates contained in the CY 

2010 notice published on November 10, 

2009. The impact analysis of this final 

rule presents the estimated expenditure 

effects of policy changes proposed in 

this rule. We use the latest data and best 

analysis available, but we do not make 

adjustments for future changes in such 


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variables as number of visits or casemix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare HH 

benefit, based on Medicare claims from 

2008. We note that certain events may 

combine to limit the scope or accuracy 

of our impact analysis, because such an 

analysis is future-oriented and, thus, 

susceptible to errors resulting from 

other changes in the impact time period 

assessed. Some examples of such 

possible events are newly-legislated 

general Medicare program funding 

changes made by the Congress, or 

changes specifically related to HHAs. In 

addition, changes to the Medicare 

program may continue to be made as a 

result of the BBA, the BBRA, the 

Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection 

Act of 2000, the MMA, the DRA, the 

Affordable Care Act, or new statutory 

provision. Although these changes may 

not be specific to the HH PPS, the 

nature of the Medicare program is such 

that the changes may interact, and the 

complexity of the interaction of these 

changes could make it difficult to 

predict accurately the full scope of the 

impact upon HHAs. 

Table 19 represents how HHA 

revenues are likely to be affected by the 

policy changes proposed in this rule. 

For this analysis, we used linked HH 

claims and OASIS assessments; the 

claims represented a 20-percent sample 

of 60-day episodes occurring in CY 

2008. The first column of Table 19 

classifies HHAs according to a number 

of characteristics including provider 

type, geographic region, and urban and 

rural locations. The second column 

shows the payment effects of the wage 

index only. The third column shows the 

payment effects of all the policies 

outlined earlier in this rule. For CY 

2011, the average impact for all HHAs 

is a .08 percent increase in payments 

due to the effects of the wage index. The 

overall impact, for all HHAs, in 

estimated total payments from CY 2010 

to CY 2011, is a decrease of 

approximately 4.89 percent. There is 

very little difference in the estimated 

impact on HHAs when looking at the 

type of facility. Freestanding HHAs are 

estimated to see a 4.88 percent decrease 

in payments while facility based HHAs 

are estimated to see a 4.92 percent 

decrease. Similarly, voluntary not-forprofit HHAs are estimated to see a 4.97 

percent decrease in payments, while forprofit HHAs are estimated to see a 4.84 

percent decrease in payments. Rural 

agencies are estimated to see a 4.67 

percent decrease in payment in CY 

2011, while urban agencies are 

estimated to see a 4.93 percent decrease 

in payments. Agencies in New England 

(¥5.39 percent) and in the South 

(¥5.19 percent) are estimated to 

experience the largest decreases, while 

HHAs in the Pacific (¥4.49 percent) 

and the West (¥4.66 percent) are 

estimated to have less of a decrease in 

payments in CY 2011. In general, 

smaller agencies are estimated to see 

less of a decrease in payments in CY 

2011, than are larger agencies, with 

agencies with 100–199 first episodes 

estimated to see a 4.73 percent decrease 

and agencies with 200 or more first 

episodes estimated to see a 4.93 percent 

decrease in payment in CY 2011. 

We supplemented our impact analysis 

from the proposed rule by linking to 

Medicare cost report data which has 

total revenues for HHAs. Using total 

revenues and the $13.5 million 

threshold of the RFA, we categorized an 

HHA as being either small or large. To 

perform this analysis, we were able to 

match approximately 72 percent of the 

cost report data to our model. For the 

remainder of the agencies in the model, 

we proxy for large agencies as those 

agencies with at least 750 first episodes 

(doing so results in approximately 95 

percent of agencies being classified as 

small and 5 percent of agencies being 

large, which is reflective of what our 

cost report files show us). This analysis 

provides similar results to the one using 

first episodes as a measure of an 

agency’s size in that small HHAs fare 

slightly better, a 4.84 percent decrease 

in payments, than do large HHAs, 

which are estimated to experience a 

5.01 percent decrease in payments in 

CY 2011. 

Section 3131(c) of the Affordable Care 

Act amended section 421(a) of the 

MMA. The amended section 421(a) of 

the MMA provides an increase of 3 

percent of the payment amount 

otherwise made for HH services 

furnished in a rural area, with respect to 

episodes and visits ending on or after 

April 1, 2010 and before January 1, 

2016. Column 3 of Table 19 displays a 

comparison of estimated payments in 

CY 2010, including a 3 percent rural 

add-on for the last three quarters of CY 

2010, to estimated payments in CY 

2011, including a 3 percent rural addon for all four quarters of CY 2011. 

TABLE 19—IMPACTS BY AGENCY TYPE

Group 

Comparisons 

Percent change 

due to the effects 

of the updated 

wage index only 

Impact of all CY 

2011 policies 1

(percent) 

All Agencies: 0.08 ¥4.89 

Type of Facility: 

Free-Standing/Other Vol/NP ................................................................................................................. ¥0.10 ¥4.99 

Free-Standing/Other Proprietary .......................................................................................................... 0.16 ¥4.85 

Free-Standing/Other Government ........................................................................................................ ¥0.23 ¥4.97 

Facility-Based Vol/NP ........................................................................................................................... ¥0.08 ¥4.95 

Facility-Based Proprietary .................................................................................................................... 0.20 ¥4.68 

Facility-Based Government .................................................................................................................. ¥0.06 ¥4.86 

Subtotal: Freestanding .................................................................................................................. 0.10 ¥4.88 

Subtotal: Facility-based ................................................................................................................. ¥0.05 ¥4.92 

Subtotal: Vol/NP ............................................................................................................................ ¥0.09 ¥4.97 

Subtotal: Proprietary ...................................................................................................................... 0.17 ¥4.84 

Subtotal: Government ................................................................................................................... ¥0.15 ¥4.92 

Type of Facility (Rural * Only): 

Free-Standing/Other Vol/NP ................................................................................................................. 0.00 ¥4.70 

Free-Standing/Other Proprietary .......................................................................................................... 0.26 ¥4.61 

Free-Standing/Other Government ........................................................................................................ ¥0.43 ¥5.01 

Facility-Based Vol/NP ........................................................................................................................... ¥0.10 ¥4.73 

Facility-Based Proprietary .................................................................................................................... 0.20 ¥4.53 


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70460 Federal Register / Vol. 75, No. 221 / Wednesday, November 17, 2010 / Rules and Regulations 

TABLE 19—IMPACTS BY AGENCY TYPE—Continued 

Group 

Comparisons 

Percent change 

due to the effects 

of the updated 

wage index only 

Impact of all CY 

2011 policies 1

(percent) 

Facility-Based Government .................................................................................................................. ¥0.12 ¥4.78 

Type of Facility (Urban * Only): 

Free-Standing/Other Vol/NP ................................................................................................................. ¥0.12 ¥5.03 

Free-Standing/Other Proprietary .......................................................................................................... 0.15 ¥4.89 

Free-Standing/Other Government ........................................................................................................ 0.02 ¥4.93 

Facility-Based Vol/NP ........................................................................................................................... ¥0.07 ¥5.01 

Facility-Based Proprietary .................................................................................................................... 0.20 ¥4.78 

Facility-Based Government .................................................................................................................. 0.03 ¥4.95 

Type of Facility (Urban* or Rural*): 

Rural ..................................................................................................................................................... 0.10 ¥4.67 

Urban .................................................................................................................................................... 0.07 ¥4.93 

Facility Location: Region*: 

North ..................................................................................................................................................... ¥0.34 ¥5.19 

South .................................................................................................................................................... 0.18 ¥4.80 

Midwest ................................................................................................................................................. 0.01 ¥4.98 

West ...................................................................................................................................................... 0.33 ¥4.66 

Outlying ................................................................................................................................................. ¥0.11 ¥5.03 

Facility Location: 

Area of the Country: 

New England ........................................................................................................................................ ¥0.54 ¥5.39 

Mid Atlantic ........................................................................................................................................... ¥0.23 ¥5.08 

South Atlantic ....................................................................................................................................... 0.05 ¥4.94 

East South Central ............................................................................................................................... ¥0.09 ¥5.04 

West South Central .............................................................................................................................. 0.41 ¥4.58 

East North Central ................................................................................................................................ 0.07 ¥4.95 

West North Central ............................................................................................................................... ¥0.22 ¥5.11 

Mountain ............................................................................................................................................... ¥0.15 ¥5.05 

Pacific ................................................................................................................................................... 0.54 ¥4.49 

Outlying ................................................................................................................................................. ¥0.11 ¥5.03 

Facility Size: (Number of First Episodes): 

< 19 .............................................................................................................................................................. 0.21 ¥4.88 

20 to 49 ........................................................................................................................................................ 0.20 ¥4.86 

50 to 99 ........................................................................................................................................................ 0.26 ¥4.77 

100 to 199 .................................................................................................................................................... 0.25 ¥4.73 

200 or More ................................................................................................................................................. 0.01 ¥4.93 

Facility Size: (estimated total revenue) 

Small (estimated total revenue <= $13.5 million) ................................................................................ 0.14 ¥4.84 

Large (estimated total revenue > $13.5 million) .................................................................................. ¥0.08 ¥5.01 

Note: Based on a 20 percent sample of CY 2008 claims linked to OASIS assessments. 

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

based on the site of service of the beneficiary. 

REGION KEY: 

New England = Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic =Pennsylvania, New Jersey, 

New York; South Atlantic = Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia; 

East North Central = Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central =Alabama, Kentucky, Mississippi, Tennessee; West North 

Central = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central =Arkansas, Louisiana, Oklahoma, 

Texas; Mountain =Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; Pacific =Alaska, California, Hawaii, Oregon, 

Washington; Outlying = Guam, Puerto Rico, Virgin Islands. 1 Percent change due to the effects of the update wage index, the 1.1 percent HH market basket update, the 3.79 percent reduction to the national standardized episode rates, the national per-visit rates, the LUPA add-on payment amount, the 5 percent decrease in the rates due to the 

Affordable Care Act, the new approximate 2.5 percent target for outliers as a percentage of total HH PPS payments, a 0.67 FDL ratio, 10 percent outlier cap, and the 3 percent rural add-on. 

In a separate, supplemental analysis, 

as merely an indicator of possible access 

to care issues, we looked at estimated 

margins of HHAs, by county, and the 

estimated effect that the provisions of 

this rule might have on HHA margins. 

We note that predicting the size of the 

increase in negative-margin agencies as 

a result of this rule is difficult to do 

because many agencies may find ways 

to cut costs or increase revenues so that 

margins do not deteriorate. We also note 

that margin analysis alone is not an 

accurate access to care indicator. Many 

factors affect whether agencies with low 

or negative margin would close or not, 

such as the organization’s mission, the 

availability of alternate sources of 

funding, and whether or not the 

organization is embedded in a larger 

one. 

We performed the following analysis 

for the purposes of identifying potential 

access risks associated with this rule. In 

particular, we looked to identify 

whether the finalized policies of this 

rule might increase the number of 

counties not served by at least one HHA 

with a positive margin. The analysis 

demonstrated that the occurrence of 

such counties was very infrequent. 

Looking further, we also identified that 

the counties we identified had at least 

one HHA in a contiguous county with 

a positive margin. As we have 

previously described, we believe HH 


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industry margins are sufficient to 

support a rate reduction of this size. We 

note here as we have elsewhere in this 

rule that MedPac projected 2011 

margins would remain high, at 13.7 

percent (assuming the previously 

planned rate reduction of ¥2.71 percent 

in 2011), and MedPAC also reported 

that the number of agencies continues to 

grow, reaching in excess of 10,400 in 

2009, a 50 percent increase since 2002. 

We again note that access to care was 

not found to be inadequate in 2002, 

when the number of agencies nationally 

was much lower than it is today. Thus, 

we do not believe that the finalized 

policies in this rule will result in access 

to care issues. We would note that the 

above described analysis is an indicator 

that access to care will not be an issue 

as a result of the provisions of this rule. 

C. Alternative Considered 

As stated above, in section IV.A. of 

this rule, Overall Impact, we estimate 

that this final rule would have a 

significant economic impact on a 

substantial number of small entities. In 

the proposed rule, our analysis on the 

impact on small HHAs was from an 

episodic perspective. As a result of the 

public comments received on the 

proposed rule, we supplemented our 

impact from the proposed rule by 

linking to Medicare cost report data, 

which has reported total revenues for 

HHAs. The results of that supplemental 

analysis reveal that in using Medicare 

cost report data and a $13.5 million 

threshold to determine small versus 

large HHAs, the effect on small HHAs is 

virtually unchanged from that which 

was described in the proposed rule. 

In CY 2008 rulemaking, we 

promulgated case-mix reductions of 

2.75 percent for CY 2008, CY 2009, CY 

2010, and 2.71 percent for CY 2011. 

Since that rulemaking, our analysis still 

shows that case-mix continues to grow. 

More specifically, nominal case-mix has 

grown from the 11.75 percent growth 

identified in our analysis for the CY 

2008 rulemaking to 17.45 percent for 

this rule. While the 2.71 percent casemix reduction was promulgated in CY 

2008 rulemaking, because nominal casemix continues to grow and thus to date 

we have not accounted for all of the 

increase in nominal case-mix growth, 

we believe it appropriate to reduce HH 

PPS rates now, so as to move towards 

more accurate payment for the delivery 

of HH services under the Medicare HH 

benefit. 

Furthermore, we have amended our 

proposal from the proposed rule, which 

would have implemented 2 successive 

years of case-mix reductions at 3.79 

percent, and are instead finalizing only 

one 3.79 percent reduction for CY 2011. 

We will study additional case-mix data, 

and methods to incorporate such data, 

into our methodology for measuring real 

versus nominal case-mix change in 

future rulemaking. 

The other reductions to the HH PPS 

payments discussed in this rule and 

included in the final provisions of this 

rule are not discretionary as they are 

required by the Affordable Care Act. 

D. Accounting Statement and Table 

Whenever a rule is considered a 

significant rule under Executive Order 

12866, we are required to develop an 

Accounting Statement showing the 

classification of the expenditures 

associated with the provisions of this 

final rule. 

Table 20 provides our best estimate of 

the decrease in Medicare payments 

under the HH PPS as a result of the 

changes presented in this final rule 

based on the best available data. The 

expenditures are classified as a transfer 

to the Federal Government of $960 

million. 

TABLE 20—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2010 HH 

PPS CALENDAR YEAR TO THE 2011 

HH PPS CALENDAR YEAR

Category Transfers 

Annualized Monetized 

Transfers.

Negative transfer— 

Estimated decrease 

in expenditures: 

$960 million. 

From Whom to Whom Federal Government 

to HH providers. 

E. Conclusion 

In conclusion, we estimate that the 

net impact of the proposals in this rule 

is approximately $960 million in CY 

2011 savings. The $960 million impact 

to the proposed CY 2011 HH PPS 

reflects the distributional effects of an 

updated wage index ($20 million 

increase), the 1.1 percent HH market 

basket update ($210 million increase), 

the 3.79 percent case-mix adjustment 

applicable to the national standardized 

60-day episode rates ($700 million 

decrease), as well as the 2.5 percent 

returned from the outlier provisions of 

the Affordable Care Act ($490 million 

decrease). This analysis above, together 

with the remainder of this preamble, 

provides a Regulatory Impact Analysis. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 409 

Health facilities, Medicare. 

42 CFR Part 418 

Health facilities, Hospice care, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health Professions, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 484 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 489 

Health facilities, Medicare, Reporting 

and recordkeeping requirements. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapters IV and V as set forth below: 

PART 409—HOSPITAL INSURANCE 

BENEFITS 

■ 1. The authority citation for part 409 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

Subpart E—Home Health Services 

Under Hospital Insurance 

■ 2. Section 409.44 is amended by 

revising paragraphs (c)(1), (c)(2)(i), 

(c)(2)(iii), and (c)(2)(iv) to read as 

follows: 

§ 409.44 Skilled services requirements. 

* * * * * 

(c) * * * 

(1) Speech-language pathology 

services and physical or occupational 

therapy services must relate directly and 

specifically to a treatment regimen 

(established by the physician, after any 

needed consultation with the qualified 

therapist) that is designed to treat the 

beneficiary’s illness or injury. Services 

related to activities for the general 

physical welfare of beneficiaries (for 

example, exercises to promote overall 

fitness) do not constitute physical 

therapy, occupational therapy, or 

speech-language pathology services for 

Medicare purposes. To be covered by 

Medicare, all of the requirements apply 

as follows: 

(i) The patient’s plan of care must 

describe a course of therapy treatment 

and therapy goals which are consistent 

with the evaluation of the patient’s 


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function, and both must be included in 

the clinical record. The therapy goals 

must be established by a qualified 

therapist in conjunction with the 

physician. 

(ii) The patient’s clinical record must 

include documentation describing how 

the course of therapy treatment for the 

patient’s illness or injury is in 

accordance with accepted professional 

standards of clinical practice. 

(iii) Therapy treatment goals 

described in the plan of care must be 

measurable, and must pertain directly to 

the patient’s illness or injury, and the 

patient’s resultant impairments. 

(iv) The patient’s clinical record must 

demonstrate that the method used to 

assess a patient’s function included 

objective measurements of function in 

accordance with accepted professional 

standards of clinical practice enabling 

comparison of successive measurements 

to determine the effectiveness of therapy 

goals. Such objective measurements 

would be made by the qualified 

therapist using measurements which 

assess activities of daily living that may 

include but are not limited to eating, 

swallowing, bathing, dressing, toileting, 

walking, climbing stairs, or using 

assistive devices, and mental and 

cognitive factors. 

(2) * * * 

(i) The services must be considered 

under accepted standards of 

professional clinical practice, to be a 

specific, safe, and effective treatment for 

the beneficiary’s condition. Each of the 

following requirements must also be 

met: 

(A) The patient’s function must be 

initially assessed and periodically 

reassessed by a qualified therapist, of 

the corresponding discipline for the 

type of therapy being provided, using a 

method which would include objective 

measurement as described in 

§ 409.44(c)(1)(iv). If more than one 

discipline of therapy is being provided, 

a qualified therapist from each of the 

disciplines must perform the assessment 

and periodic reassessments. The 

measurement results and corresponding 

effectiveness of the therapy, or lack 

thereof, must be documented in the 

clinical record. 

(B) At least every 30 days a qualified 

therapist (instead of an assistant) must 

provide the needed therapy service and 

functionally reassess the patient in 

accordance with § 409.44(c)(2)(i)(A). 

Where more than one discipline of 

therapy is being provided, a qualified 

therapist from each of the disciplines 

must provide the needed therapy 

service and functionally reassess the 

patient in accordance with 

§ 409.44(c)(2)(i)(A) at least every 30 

days. 

(C) If a patient is expected to require 

13 therapy visits, a qualified therapist 

(instead of an assistant) must provide all 

of the therapy services on the 13th 

therapy visit and functionally reassess 

the patient in accordance with 

§ 409.44(c)(2)(i)(A). Exceptions to this 

requirement are as follows: 

(1) The qualified therapist’s visit can 

occur after the 10th therapy visit but no 

later than the 13th therapy visit when 

the patient resides in a rural area or 

when documented circumstances 

outside the control of the therapist 

prevent the qualified therapist’s visit at 

the 13th therapy visit. 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide all of the therapy services and 

functionally reassess the patient in 

accordance with § 409.44(c)(2)(i)(A) 

during the visit associated with that 

discipline which is scheduled to occur 

close to but no later than the 13th 

therapy visit per the plan of care. 

(D) If a patient is expected to require 

19 therapy visits, a qualified therapist 

(instead of an assistant) must provide all 

of the therapy services on the 19th 

therapy visit and functionally reassess 

the patient in accordance with 

§ 409.44(c)(2)(A). Exceptions to this 

requirement are as follows: 

(1) This required qualified therapist 

service can instead occur after the 16th 

therapy visit but no later than the 19th 

therapy visit when the patient resides in 

a rural area or documented 

circumstances outside the control of the 

therapist preclude the qualified 

therapist service at the 19th therapy 

visit. 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide the therapy service and 

functionally reassess the patient in 

accordance with § 409.44(c)(2)(i)(A) 

during the visit which would occur 

close to but before the 19th visit per the 

plan of care. 

(E) Pursuant to the requirements 

described in paragraphs (c)(2)(i)(A)(B), 

(C), and (D) above, subsequent therapy 

visits will not be covered until the 

following conditions are met: 

(1) The qualified therapist has 

completed the reassessment and 

objective measurement of the 

effectiveness of the therapy as it relates 

to the therapy goals. 

(2) The qualified therapist has 

determined if goals have been achieved 

or require updating. 

(3) The qualified therapist has 

documented measurement results and 

corresponding therapy effectiveness in 

the clinical record in accordance with 

§ 409.44(c)(2)(i)(H) of this section. 

(F) If the criteria for maintenance 

therapy, described at 

§ 409.44(c)(2)(iii)(B) and (C) of this 

section are not met, the following 

criteria must also be met for subsequent 

therapy visits to be covered: 

(1) If the objective measurements of 

the reassessment do not reveal progress 

toward goals, the qualified therapist 

together with the physician must 

determine whether the therapy is still 

effective or should be discontinued. 

(2) If therapy is to be continued in 

accordance with § 409.44(c)(2)(iv)(B)(1) 

of this section, the clinical record must 

document with a clinically supportable 

statement why there is an expectation 

that the goals are attainable in a 

reasonable and generally predictable 

period of time. 

(G) Clinical notes written by therapy 

assistants may supplement the clinical 

record, and if included, must include 

the date written, the signature, 

professional designation, and objective 

measurements or description of changes 

in status (if any) relative to each goal 

being addressed by treatment. Assistants 

may not make clinical judgments about 

why progress was or was not made, but 

must report the progress or the 

effectiveness of the therapy (or lack 

thereof) objectively. 

(H) Documentation by a qualified 

therapist must include the following: 

(1) The therapist’s assessment of the 

effectiveness of the therapy as it relates 

to the therapy goals; 

(2) Plans for continuing or 

discontinuing treatment with reference 

to evaluation results and or treatment 

plan revisions; 

(3) Changes to therapy goals or an 

updated plan of care that is sent to the 

physician for signature or discharge; 

(4) Documentation of objective 

evidence or a clinically supportable 

statement of expectation that the patient 

can continue to progress toward the 

treatment goals and is responding to 

therapy in a reasonable and generally 

predictable period of time; or in the case 

of maintenance therapy, the patient is 

responding to therapy and can meet the 

goals in a predictable period of time. 

* * * * * 

(iii) For therapy services to be covered 

in the home health setting, one of the 

following three criteria must be met: 

(A) There must be an expectation that 

the beneficiary’s condition will improve 

materially in a reasonable (and generally 

predictable) period of time based on the 

physician’s assessment of the 

beneficiary’s restoration potential and 

unique medical condition. 


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(1) Material improvement requires 

that the clinical record demonstrate that 

the patient is making improvement 

towards goals when measured against 

his or her condition at the start of 

treatment. 

(2) If an individual’s expected 

restorative potential would be 

insignificant in relation to the extent 

and duration of therapy services 

required to achieve such potential, 

therapy would not be considered 

reasonable and necessary, and thus 

would not be covered. 

(3) When a patient suffers a transient 

and easily reversible loss or reduction of 

function which could reasonably be 

expected to improve spontaneously as 

the patient gradually resumes normal 

activities, because the services do not 

require the performance or supervision 

of a qualified therapist, those services 

are not to be considered reasonable and 

necessary covered therapy services. 

(B) The unique clinical condition of a 

patient may require the specialized 

skills, knowledge, and judgment of a 

qualified therapist to design or establish 

a safe and effective maintenance 

program required in connection with 

the patient’s specific illness or injury. 

(1) If the services are for the 

establishment of a maintenance 

program, they must include the design 

of the program, the instruction of the 

beneficiary, family, or home health 

aides, and the necessary periodic 

reevaluations of the beneficiary and the 

program to the degree that the 

specialized knowledge and judgment of 

a physical therapist, speech-language 

pathologist, or occupational therapist is 

required. 

(2) The maintenance program must be 

established by a qualified therapist (and 

not an assistant). 

(C) The unique clinical condition of a 

patient may require the specialized 

skills of a qualified therapist to perform 

a safe and effective maintenance 

program required in connection with 

the patient’s specific illness or injury. 

Where the clinical condition of the 

patient is such that the complexity of 

the therapy services required to 

maintain function involve the use of 

complex and sophisticated therapy 

procedures to be delivered by the 

therapist himself/herself (and not an 

assistant) or the clinical condition of the 

patient is such that the complexity of 

the therapy services required to 

maintain function must be delivered by 

the therapist himself/herself (and not an 

assistant) in order to ensure the patient’s 

safety and to provide an effective 

maintenance program, then those 

reasonable and necessary services shall 

be covered. 

(iv) The amount, frequency, and 

duration of the services must be 

reasonable and necessary, as determined 

by a qualified therapist and/or 

physician, using accepted standards of 

clinical practice. 

(A) Where factors exist that would 

influence the amount, frequency or 

duration of therapy services, such as 

factors that may result in providing 

more services than are typical for the 

patient’s condition, those factors must 

be documented in the plan of care and/ 

or functional assessment. 

(B) Clinical records must include 

documentation using objective measures 

that the patient continues to progress 

towards goals. If progress cannot be 

measured, and continued progress 

towards goals cannot be expected, 

therapy services cease to be covered 

except when— 

(1) Therapy progress regresses or 

plateaus, and the reasons for lack of 

progress are documented to include 

justification that continued therapy 

treatment will lead to resumption of 

progress toward goals; or 

(2) Maintenance therapy as described 

in § 409.44(c)(2)(iii)(B) or (C) is needed. 

PART 418—HOSPICE CARE 

■ 3. The authority citation for part 418 

continues to read as follows: 

Authority: Secs 1102 and 1871 of the 

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

1395hh). 

Subpart B—Eligibility, Election and 

Duration of Benefits 

■ 4. Section 418.22 is amended by— 

■ A. Revising paragraphs (a)(3) and 

(b)(3)(iii). 

■ B. Adding paragraphs (a)(4), (b)(3)(v), 

(b)(4), and (b)(5). 

The revisions and additions read as 

follows: 

§ 418.22 Certification of terminal illness. 

(a) * * * 

(3) Exceptions. (i) If the hospice 

cannot obtain the written certification 

within 2 calendar days, after a period 

begins, it must obtain an oral 

certification within 2 calendar days and 

the written certification before it 

submits a claim for payment. 

(ii) Certifications may be completed 

no more than 15 calendar days prior to 

the effective date of election. 

(iii) Recertifications may be 

completed no more than 15 calendar 

days prior to the start of the subsequent 

benefit period. 

(4) Face-to-face encounter. As of 

January 1, 2011, a hospice physician or 

hospice nurse practitioner must have a 

face-to-face encounter with each 

hospice patient, whose total stay across 

all hospices is anticipated to reach the 

3rd benefit period, no more than 30 

calendar days prior to the 3rd benefit 

period recertification, and must have a 

face-to-face encounter with that patient 

no more than 30 calendar days prior to 

every recertification thereafter, to gather 

clinical findings to determine continued 

eligibility for hospice care. 

(b) * * * 

(3) * * * 

(iii) The narrative shall include a 

statement directly above the physician 

signature attesting that by signing, the 

physician confirms that he/she 

composed the narrative based on his/her 

review of the patient’s medical record 

or, if applicable, his/her examination of 

the patient. 

* * * * * 

(v) The narrative associated with the 

3rd benefit period recertification and 

every subsequent recertification must 

include an explanation of why the 

clinical findings of the face-to-face 

encounter support a life expectancy of 

6 months or less. 

(4) The physician or nurse 

practitioner who performs the face-toface encounter with the patient 

described in (a)(4), must attest in 

writing that he or she had a face-to-face 

encounter with the patient, including 

the date of that visit. The attestation of 

the nurse practitioner shall state that the 

clinical findings of that visit were 

provided to the certifying physician, for 

use in determining whether the patient 

continues to have a life expectancy of 6 

months or less, should the illness run its 

normal course. The attestation, its 

accompanying signature, and the date 

signed, must be a separate and distinct 

section of, or an addendum to, the 

recertification form, and must be clearly 

titled. 

(5) All certifications and 

recertifications must be signed and 

dated by the physician(s), and must 

include the benefit period dates to 

which the certification or recertification 

applies. 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

■ 5. The authority citation for part 424 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

Subpart B—Certification and Plan 

Requirements 

■ 6. Section 424.22 is amended by— 

■ A. Adding paragraph (a)(1)(v). 


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■ B. Revising paragraph (a)(2), (b)(1), 

and (d). 

The revisions and additions read as 

follows: 

§ 424.22 Requirements for home health 

services. 

(a) * * * 

(1) * * * 

(v) The physician responsible for 

performing the initial certification must 

document that the face-to-face patient 

encounter, which is related to the 

primary reason the patient requires 

home health services, has occurred no 

more than 90 days prior to the home 

health start of care date or within 30 

days of the start of the home health care 

by including the date of the encounter, 

and including an explanation of why 

the clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

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

respectively. Under sections 

1814(a)(2)(C) and 1835(a)(2)(A) of the 

Act, the face-to-face encounter must be 

performed by the certifying physician 

himself or herself or by a nurse 

practitioner, a clinical nurse specialist 

(as those terms are defined in section 

1861(aa)(5) of the Act) who is working 

in collaboration with the physician in 

accordance with State law, a certified 

nurse midwife (as defined in section 

1861(gg)of the Act) as authorized by 

State law, or a physician assistant (as 

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

Act) under the supervision of the 

physician. The documentation of the 

face-to-face patient encounter must be a 

separate and distinct section of, or an 

addendum to, the certification, and 

must be clearly titled, dated and signed 

by the certifying physician. 

(A) The nonphysician practitioner 

performing the face-to-face encounter 

must document the clinical findings of 

that face-to-face patient encounter and 

communicate those findings to the 

certifying physician. 

(B) If a face-to-face patient encounter 

occurred within 90 days of the start of 

care but is not related to the primary 

reason the patient requires home health 

services, or the patient has not seen the 

certifying physician or allowed 

nonphysician practitioner within the 90 

days prior to the start of the home 

health episode, the certifying physician 

or nonphysician practitioner must have 

a face to face encounter with the patient 

within 30 days of the start of the home 

health care. 

(C) The face-to-face patient encounter 

may occur through telehealth, in 

compliance with Section 1834(m) of the 

Act and subject to the list of payable 

Medicare telehealth services established 

by the applicable physician fee schedule 

regulation. 

(D) The physician responsible for 

certifying the patient for home care 

must document the face-to-face 

encounter on the certification itself, or 

as an addendum to the certification (as 

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

section), that the condition for which 

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

the primary reason the patient requires 

home health services, and why the 

clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

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

respectively. The documentation must 

be clearly titled, dated and signed by the 

certifying physician. 

(2) Timing and signature. The 

certification of need for home health 

services must be obtained at the time 

the plan of care is established or as soon 

thereafter as possible and must be 

signed and dated by the physician who 

establishes the plan. 

(b) * * * 

(1) Timing and signature of 

recertification. Recertification is 

required at least every 60 days, 

preferably at the time the plan is 

reviewed, and must be signed and dated 

by the physician who reviews the plan 

of care. The recertification is required at 

least every 60 days when there is a— 

* * * * * 

(d) Limitation of the performance of 

physician certification and plan of care 

functions. The need for home health 

services to be provided by an HHA may 

not be certified or recertified, and a plan 

of care may not be established and 

reviewed, by any physician who has a 

financial relationship as defined in 

§ 411.354 of this chapter, with that 

HHA, unless the physician’s 

relationship meets one of the exceptions 

in section 1877 of the Act, which sets 

forth general exceptions to the referral 

prohibition related to both ownership/ 

investment and compensation; 

exceptions to the referral prohibition 

related to ownership or investment 

interests; and exceptions to the referral 

prohibition related to compensation 

arrangements. 

(1) If a physician has a financial 

relationship as defined in § 411.354 of 

this chapter, with an HHA, the 

physician may not certify or recertify 

need for home health services provided 

by that HHA, establish or review a plan 

of treatment for such services, or 

conduct the face-to-face encounter 

required under sections 1814(a)(2)(C) 

and 1835(a)(2)(A) of the Act unless the 

financial relationship meets one of the 

exceptions set forth in § 411.355 

through § 411.357 of this chapter. 

(2) A Nonphysician practitioner may 

not perform the face-to-face encounter 

required under sections 1814(a)(2)(C) 

and 1835(a)(2)(A) of the Act if such 

encounter would be prohibited under 

paragraph (d)(i) if the nonphysician 

practitioner were a physician. 

Subpart P—Requirements for 

Establishing and Maintaining Medicare 

Billing Privileges 

■ 7. Section 424.502 is amended by 

adding the definition of ‘‘Change in 

Majority Ownership’’ in alphabetical 

order to read as follows: 

§ 424.502 Definitions. 

* * * * * 

Change in Majority Ownership occurs 

when an individual or organization 

acquires more than a 50 percent direct 

ownership interest in an HHA during 

the 36 months following the HHA’s 

initial enrollment into the Medicare 

program or the 36 months following the 

HHA’s most recent change in majority 

ownership (including asset sale, stock 

transfer, merger, and consolidation). 

This includes an individual or 

organization that acquires majority 

ownership in an HHA through the 

cumulative effect of asset sales, stock 

transfers, consolidations, or mergers 

during the 36-month period after 

Medicare billing privileges are conveyed 

or the 36-month period following the 

HHA’s most recent change in majority 

ownership. 

* * * * * 

■ 8. Section 424.510 is amended by 

adding paragraph (d)(9) to read as 

follows: 

§ 424.510 Requirements for enrolling in 

the Medicare program. 

* * * * * 

(d) * * * 

(9) In order to obtain enrollment and 

to maintain enrollment for the first three 

months after Medicare billing privileges 

are conveyed, a home health agency 

must satisfy the home health ‘‘initial 

reserve operating funds’’ requirement as 

set forth in § 489.28 of this chapter. 

* * * * * 

■ 9. Section 424.530 is amended by 

adding paragraph (a)(8)to read as 

follows: 

§ 424.530 Denial of enrollment in the 

Medicare program. 

(a) * * * 

(8) Initial Reserve Operating Funds. (i) 

CMS or its designated Medicare 


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contractor may deny Medicare billing 

privileges if, within 30 days of a CMS 

or Medicare contractor request, a home 

health agency (HHA) cannot furnish 

supporting documentation which 

verifies that the HHA meets the initial 

reserve operating funds requirement 

found in § 489.28(a) of this title. 

(ii) CMS may deny Medicare billing 

privileges upon an HHA applicant’s 

failure to satisfy the initial reserve 

operating funds requirement found in 

42 CFR 489.28(a). 

* * * * * 

■ 10. Section 424.535 is amended by 

adding paragraph (a)(11) to read as 

follows: 

§ 424.535 Revocation of enrollment and 

billing privileges in the Medicare program. 

(a) * * * 

(11) Initial Reserve Operating Funds. 

CMS or its designated Medicare 

contractor may revoke the Medicare 

billing privileges of an HHA and the 

corresponding provider agreement if, 

within 30 days of a CMS or Medicare 

contractor request, the HHA cannot 

furnish supporting documentation 

verifying that the HHA meets the initial 

reserve operating funds requirement 

found in 42 CFR § 489.28(a). 

* * * * * 

■ 11. Section 424.550 is amended by 

adding paragraphs (b)(1) and (b)(2) to 

read as follows: 

§ 424.550 Prohibitions on the sale or 

transfer of billing privileges. 

* * * * * 

(b) * * * 

(1) Unless an exception in (b)(2) of 

this section applies, if there is a change 

in majority ownership of a home health 

agency by sale (including asset sales, 

stock transfers, mergers, and 

consolidations) within 36 months after 

the effective date of the HHA’s initial 

enrollment in Medicare or within 36 

months after the HHA’s most recent 

change in majority ownership, the 

provider agreement and Medicare 

billing privileges do not convey to the 

new owner. The prospective provider/ 

owner of the HHA must instead: 

(i) Enroll in the Medicare program as 

a new (initial) HHA under the 

provisions of § 424.510 of this subpart. 

(ii) Obtain a State survey or an 

accreditation from an approved 

accreditation organization. 

(2)(i) The HHA submitted two 

consecutive years of full cost reports. 

For purposes of this exception, low 

utilization or no utilization cost reports 

do not qualify as full cost reports. 

(ii) An HHA’s parent company is 

undergoing an internal corporate 

restructuring, such as a merger or 

consolidation. 

(iii) The owners of an existing HHA 

are changing the HHA’s existing 

business structure (for example, from a 

corporation to a partnership (general or 

limited); from an LLC to a corporation; 

from a partnership (general or limited) 

to an LLC) and the owners remain the 

same. 

(iv) An individual owner of an HHA 

dies. 

* * * * * 

PART 484—HOME HEALTH SERVICES 

■ 12. The authority citation for part 484 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395(hh)). 

Subpart E—Prospective Payment 

System for Home Health Agencies 

■ 13. Section 484.250 is revised to read 

as follows: 

§ 484.250 Patient assessment data. 

(a) An HHA must submit to CMS the 

OASIS–C data described at § 484.55 

(b)(1) and Home Health Care CAHPS 

data in order for CMS to administer the 

payment rate methodologies described 

in § 484.215, § 484.230, and § 484.235 of 

this subpart, and meet the quality 

reporting requirements of section 1895 

(b)(3)(B)(v) of the Act. 

(b) An HHA that has less than 60 

eligible unique HHCAHPS patients 

annually must submit to CMS their total 

HHCAHPS patient count to CMS in 

order to be exempt from the HHCAHPS 

reporting requirements. 

(c) An HHA must contract with an 

approved, independent HHCAHPS 

survey vendor to administer the 

HHCAHPS on its behalf. 

(1) CMS approves an HHCAHPS 

survey vendor if such applicant has 

been in business for a minimum of three 

years and has conducted surveys of 

individuals and samples for at least 2 

years. For HHCAHPS, a ‘‘survey of 

individuals’’ is defined as the collection 

of data from at least 600 individuals 

selected by statistical sampling methods 

and the data collected are used for 

statistical purposes. All applicants that 

meet these requirements will be 

approved by CMS. 

(2) No organization, firm, or business 

that owns, operates, or provides staffing 

for a HHA is permitted to administer its 

own Home Health Care CAHPS 

(HHCAHPS) Survey or administer the 

survey on behalf of any other HHA in 

the capacity as an HHCAHPS survey 

vendor. Such organizations will not be 

approved by CMS as HHCAHPS survey 

vendors. 

PART 489—PROVIDER AGREEMENTS 

AND SUPPLIER APPROVAL 

■ 14. The authority citation for part 489 

continues to read as follows: 

Authority: Secs. 1102, 1819, 1820(e), 1861, 

1864(m), 1866, 1869, and 1871 of the Social 

Security Act (42 U.S.C. 1302, 1395i–3, 1395x, 

1395aa(m), 1395cc, 1395ff, and 1395hh). 

Subpart B—Essentials of Provider 

Agreements 

■ 15. Section 489.28 is amended by— 

■ A. Revising paragraphs (a) and (g). 

■ B. Adding paragraph (c)(1). 

■ C. Reserving paragraph (c)(2). 

The addition and revisions read as 

follows: 

§ 489.28 Special capitalization 

requirements for HHAs. 

(a) Basic rule. An HHA entering the 

Medicare program on or after January 1, 

1998, including a new HHA as a result 

of a change of ownership, if the change 

of ownership results in a new provider 

number being issued, must have 

available sufficient funds, which we 

term ‘‘initial reserve operating funds,’’ at 

the time of application submission and 

at all times during the enrollment 

process up to the expiration of the 3- 

month period following the conveyance 

of Medicare billing privileges to operate 

the HHA for the three-month period 

after Medicare billing privileges are 

conveyed by the Medicare contractor, 

exclusive of actual or projected accounts 

receivable from Medicare. 

* * * * * 

(c) * * * 

(1) In selecting the comparative HHAs 

as described in this paragraph (c), the 

CMS contractor shall only select HHAs 

that have provided cost reports to 

Medicare. When selecting cost reports 

for the comparative analysis, CMS will 

exclude low utilization or no utilization 

cost reports. 

(2) [Reserved.] 

* * * * * 

(g) Billing Privileges. (1) CMS may 

deny Medicare billing privileges to an 

HHA unless the HHA meets the initial 

reserve operating funds requirements of 

this section. 

(2) CMS may revoke the Medicare 

billing privileges of an HHA that fails to 

maintain and comply with the initial 

reserve operating funds requirements of 

this section for the three-month period 

after it receives its Medicare billing 

privileges. 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 


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Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: October 26, 2010. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: October 29, 2010. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

Note: The following addenda will not be 

published in the Code of Federal Regulations. 

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[FR Doc. 2010–27778 Filed 11–2–10; 4:15 pm] 

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