42944 Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

[CMS–1523–NC] 

RIN 0938–AP84 

Medicare Program; Hospice Wage 

Index for Fiscal Year 2011 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Notice with comment period. 

SUMMARY: This notice with comment 

period announces the annual update to 

the hospice wage index for fiscal year 

2011 and continues the phase out of the 

wage index budget neutrality 

adjustment factor (BNAF), with an 

additional 15 percent BNAF reduction, 

for a total BNAF reduction in FY 2011 

of 25 percent. The BNAF phase-out will 

continue with successive 15 percent 

reductions from FY 2012 through FY 

2016. 

DATES: Effective Date: These regulations 

are effective on October 1, 2010. 

Comment Date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

September 20, 2010. 

ADDRESSES: In commenting, please refer 

to file code CMS–1523–NC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1523–NC, P.O. Box 8012, 

Baltimore, MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1523–NC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

9994 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Randy Throndset, (410) 786–0131 or 

Katie Lucas (410) 786–7723. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on issues set 

forth in section III.B of this notice to 

assist us in fully considering issues and 

developing policies. You can assist us 

by referencing the file code CMS–1523– 

NC and the specific ‘‘issue identifier’’ 

that precedes the section on which you 

choose to comment. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Background 

A. General 

1. Hospice Care 

2. Medicare Payment for Hospice Care 

B. Hospice Wage Index 

1. Raw Wage Index Values (Pre-Floor, PreReclassified, Hospital Wage Index) 

2. Changes to Core-Based Statistical Area 

(CBSA) Designations 

3. Definition of Rural and Urban Areas 

4. Areas Without Hospital Wage Data 

5. CBSA Nomenclature Changes 

6. Wage Data for Multi-Campus Hospitals 

7. Hospice Payment Rates 

II. Provisions of the Notice With Comment 

Period 

A. FY 2011 Hospice Wage Index 

1. Background 

2. Areas Without Hospital Wage Data 

3. FY 2011 Wage Index With an Additional 

15 Percent Reduced Budget Neutrality 

Adjustment Factor (BNAF) 

4. Effects of Phasing out the BNAF 

III. Solicitation of Comments and Information 

on Issues Not Proposed 

A. Changes to Hospice Certification and 

Recertification Requirements 

B. Solicitation of Comments on the 

Hospice Aggregate Cap 

IV. Waiver of Proposed Rulemaking 

V. Collection of Information Requirements 

VI. Response to Comments 

VII. Regulatory Impact Analysis 

I. Background 

A. General 

1. Hospice Care 

Hospice care is an approach to 

treatment that recognizes that the 

impending death of an individual 

warrants a change in the focus from 

curative care to palliative care for relief 

of pain and for symptom management. 

The goal of hospice care is to help 

terminally ill individuals continue life 

with minimal disruption to normal 

activities while remaining primarily in 

the home environment. A hospice uses 

an interdisciplinary approach to deliver 

medical, nursing, social, psychological, 

emotional, and spiritual services 

through use of a broad spectrum of 

professional and other caregivers, with 

the goal of making the individual as 

physically and emotionally comfortable 

as possible. Counseling services and 

inpatient respite services are available 

to the family of the hospice patient. 

Hospice programs consider both the 

patient and the family as a unit of care. 


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Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices 42945 

Section 1861(dd) of the Social 

Security Act (the Act) provides for 

coverage of hospice care for terminally 

ill Medicare beneficiaries who elect to 

receive care from a participating 

hospice. Section 1814(i) of the Act 

provides payment for Medicare 

participating hospices. 

2. Medicare Payment for Hospice Care 

Our regulations at 42 CFR part 418 

establish eligibility requirements, 

payment standards and procedures, 

define covered services, and delineate 

the conditions a hospice must meet to 

be approved for participation in the 

Medicare program. Part 418 subpart G 

provides for payment in one of four 

prospectively-determined rate categories 

(routine home care, continuous home 

care, inpatient respite care, and general 

inpatient care) to hospices based on 

each day a qualified Medicare 

beneficiary is under a hospice election. 

B. Hospice Wage Index 

Our regulations at § 418.306(c) require 

each hospice’s labor market to be 

established using the most current 

hospital wage data available, including 

any changes by OMB to the 

Metropolitan Statistical Areas (MSAs) 

definitions. OMB revised the MSA 

definitions beginning in 2003 with new 

designations called the Core Based 

Statistical Areas (CBSAs). For the 

purposes of the hospice benefit, the 

term ‘‘MSA-based’’ refers to wage index 

values and designations based on the 

previous MSA designations before 2003. 

Conversely, the term ‘‘CBSA-based’’ 

refers to wage index values and 

designations based on the OMB revised 

MSA designations in 2003, which now 

include CBSAs. In the August 11, 2004 

IPPS final rule (69 FR 48916, 49026), 

revised labor market area definitions 

were adopted at § 412.64(b), which were 

effective October 1, 2004 for acute care 

hospitals. We also revised the labor 

market areas for hospices using the new 

OMB standards that included CBSAs. In 

the FY 2006 hospice wage index final 

rule (70 FR 45130), we implemented a 

1-year transition policy using a 50/50 

blend of the CBSA-based wage index 

values and the Metropolitan Statistical 

Area (MSA)-based wage index values for 

FY 2006. The one-year transition policy 

ended on September 30, 2006. For FY 

2007 through FY 2010 we used wage 

index values based on CBSA 

designations. 

The hospice wage index is used to 

adjust payment rates for hospice 

agencies under the Medicare program to 

reflect local differences in area wage 

levels. The original hospice wage index 

was based on the 1981 Bureau of Labor 

Statistics hospital data and had not been 

updated since 1983. In 1994, because of 

disparity in wages from one 

geographical location to another, a 

committee was formulated to negotiate 

a wage index methodology that could be 

accepted by the industry and the 

government. This committee, 

functioning under a process established 

by the Negotiated Rulemaking Act of 

1990, was comprised of national 

hospice associations; rural, urban, large 

and small hospices; multi-site hospices; 

consumer groups; and a government 

representative. On April 13, 1995, the 

Hospice Wage Index Negotiated 

Rulemaking Committee signed an 

agreement for the methodology to be 

used for updating the hospice wage 

index. 

In the August 8, 1997 Federal 

Register (62 FR 42860), we published a 

final rule implementing a new 

methodology for calculating the hospice 

wage index based on the 

recommendations of the negotiated 

rulemaking committee. The committee 

statement was included in the appendix 

of that final rule (62 FR 42883). 

The reduction in overall Medicare 

payments if a new wage index were 

adopted was noted in the November 29, 

1995 notice transmitting the 

recommendations of the negotiated 

rulemaking committee (60 FR 61264). 

Therefore, the Committee also decided 

that for each year in updating the 

hospice wage index, aggregate Medicare 

payments to hospices would remain 

budget neutral to payments as if the 

1983 wage index had been used. 

As decided upon by the Committee, 

budget neutrality means that, in a given 

year, estimated aggregate payments for 

Medicare hospice services using the 

updated hospice values will equal 

estimated payments that would have 

been made for these services if the 1983 

hospice wage index values had 

remained in effect. Although payments 

to individual hospice programs may 

change each year, the total payments 

each year to hospices would not be 

affected by using the updated hospice 

wage index because total payments 

would be budget neutral as if the 1983 

wage index had been used. To 

implement this policy, a BNAF would 

be computed and applied annually to 

the pre-floor, pre-reclassified hospital 

wage index, when deriving the hospice 

wage index. 

The BNAF is calculated by computing 

estimated payments using the most 

recent completed year of hospice claims 

data. The units (days or hours) from 

those claims are multiplied by the 

updated hospice payment rates to 

calculate estimated payments. For the 

FY 2010 Hospice Wage Index Final 

Rule, that meant estimating payments 

for FY 2010 using FY 2008 hospice 

claims data, and applying the FY 2010 

hospice payment rates (updating the FY 

2009 rates by the FY 2010 hospital 

market basket update). The FY 2010 

hospice wage index values are then 

applied to the labor portion of the 

payment rates only. The procedure is 

repeated using the same claims data and 

payment rates, but using the 1983 BLSbased wage index instead of the updated 

raw pre-floor, pre-reclassified hospital 

wage index (note that both wage indices 

include their respective floor 

adjustments). The total payments are 

then compared, and the adjustment 

required to make total payments equal 

is computed; that adjustment factor is 

the BNAF. 

The August 8, 2008 FY 2009 Hospice 

Wage Index final rule (73 FR 46464) 

implemented a phase-out of the hospice 

BNAF over 3 years, beginning with a 25 

percent reduction in the BNAF in FY 

2009, an additional 50 percent 

reduction for a total of 75 percent in FY 

2010, and complete phase out of the 

BNAF in FY 2011. However, subsequent 

to the publication of the above rule, the 

American Recovery and Reinvestment 

Act of 2009 (Pub. L. 111–5) (ARRA) 

eliminated the BNAF phase-out for FY 

2009. Specifically, division B, section 

4301(a) of ARRA prohibited the 

Secretary from phasing out or 

eliminating the BNAF in the Medicare 

hospice wage index before October 1, 

2009, and instructed the Secretary to 

recompute and apply the final Medicare 

hospice wage index for FY 2009 as if 

there had been no reduction in the 

BNAF. While ARRA eliminated the 

BNAF phase-out for FY 2009, it neither 

changed the 75 percent reduction in the 

BNAF for FY 2010, nor prohibited the 

elimination of the BNAF in FY 2011 

that were previously implemented in 

the August 8, 2008 Hospice Wage Index 

final rule. 

In 2009 rulemaking for FY 2010, we 

accepted comments on the BNAF phaseout previously promulgated in 2008 

rulemaking. As a result of those 

comments, a more gradual phase-out 

was promulgated in the FY 2010 final 

rule. Specifically, in the Hospice Wage 

Index for FY 2010 Final Rule, published 

on August 6, 2009 (74 FR 39384), we 

implemented a 7-year phase-out the 

BNAF, with a 10 percent reduction in 

FY 2010, an additional 15 percent 

reduction for a total of 25 percent in FY 

2011, an additional 15 percent 

reduction for a total of 40 percent in FY 

2012, an additional 15 percent 

reduction for a total of 55 percent in FY 

2013, an additional 15 percent 


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42946 Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices 

reduction for a total of 70 percent in FY 

2014, an additional 15 percent 

reduction for a total of 85 percent in FY 

2015, and an additional 15 percent 

reduction for complete elimination in 

FY 2016. 

The hospice wage index is updated 

annually. Our most recent annual 

hospice wage index final rule, 

published in the Federal Register (74 

FR 39384) on August 6, 2009, set forth 

updates to the hospice wage index for 

FY 2010. As noted previously, that 

update also finalized a provision for a 

7-year phase-out of the BNAF, which 

was applied to the wage index values. 

The BNAF was reduced by 10 percent 

in FY 2010, and will be reduced by an 

additional 15 percent in each of the next 

6 years, for complete phase out in 2016. 

1. Raw Wage Index Values (Pre-Floor, 

Pre-Reclassified Hospital Wage Index) 

As described in the August 8, 1997 

hospice wage index final rule (62 FR 

42860), the pre-floor and prereclassified hospital wage index is used 

as the raw wage index for the hospice 

benefit. These raw wage index values 

are then subject to either a budget 

neutrality adjustment or application of 

the hospice floor to compute the 

hospice wage index used to determine 

payments to hospices. 

Pre-floor, pre-reclassified hospital 

wage index values of 0.8 or greater are 

currently adjusted by a reduced BNAF. 

Pre-floor, pre-reclassified hospital wage 

index values below 0.8 are adjusted by 

the greater of: (1) The hospice BNAF, 

reduced by 10 percent for FY 2010; or 

(2) the hospice floor (which is a 15 

percent increase) subject to a maximum 

wage index value of 0.8. For example, 

if County A has a pre-floor, prereclassified hospital wage index (raw 

wage index) value of 0.4000, we would 

perform the following calculations using 

the budget neutrality factor (which for 

this example is 0.061775 less 10 

percent, or 0.055598) and the hospice 

floor to determine County A’s hospice 

wage index: 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the 10 percent reduced BNAF: 

(0.4000 × 1.055598 = 0.4222) 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the hospice floor: (0.4000 × 1.15 = 

0.4600) 

Based on these calculations, County 

A’s hospice wage index would be 

0.4600. 

The BNAF has been computed and 

applied annually, in full or in reduced 

form, to the labor portion of the hospice 

payment. Currently, the labor portion of 

the payment rates is as follows: For 

Routine Home Care, 68.71 percent; for 

Continuous Home Care, 68.71 percent; 

for General Inpatient Care, 64.01 

percent; and for Respite Care, 54.13 

percent. The non-labor portion is equal 

to 100 percent minus the labor portion 

for each level of care. Therefore the nonlabor portion of the payment rates is as 

follows: For Routine Home Care, 31.29 

percent; for Continuous Home Care, 

31.29 percent; for General Inpatient 

Care, 35.99 percent; and for Respite 

Care, 45.87 percent. 

2. Changes to Core Based Statistical 

Area (CBSA) Designations 

The annual update to the hospice 

wage index is published in the Federal 

Register and is based on the most 

current available hospital wage data, as 

well as any changes by the Office of 

Management and Budget (OMB) to the 

definitions of MSAs, which now 

include CBSA designations. The August 

4, 2005 final rule (70 FR 45130) set forth 

the adoption of the changes discussed in 

the OMB Bulletin No. 03–04 (June 6, 

2003), which announced revised 

definitions for Micropolitan Statistical 

Areas and the creation of MSAs and 

Combined Statistical Areas. In adopting 

the OMB CBSA geographic 

designations, we provided for a 1-year 

transition with a blended hospice wage 

index for all hospices for FY 2006. For 

FY 2006, the hospice wage index for 

each provider consisted of a blend of 50 

percent of the FY 2006 MSA-based 

hospice wage index and 50 percent of 

the FY 2006 CBSA based hospice wage 

index. Subsequent fiscal years have 

used the full CBSA-based hospice wage 

index. 

3. Definition of Rural and Urban Areas 

Each hospice’s labor market is 

determined based on definitions of 

MSAs issued by OMB. In general, an 

urban area is defined as an MSA or New 

England County Metropolitan Area 

(NECMA) as defined by OMB. Under 

§ 412.64(b)(1)(ii)(C), a rural area is 

defined as any area outside of the urban 

area. The urban and rural area 

geographic classifications are defined in 

§ 412.64(b)(1)(ii)(A) through (C), and 

have been used for the Medicare 

hospice benefit since implementation. 

In the August 22, 2007 FY 2008 

Inpatient Prospective Payment System 

(IPPS) final rule with comment period 

(72 FR 47130), § 412.64(b)(1)(ii)(B) was 

revised such that the two ‘‘New England 

deemed Counties’’ that had been 

considered rural under the OMB 

definitions (Litchfield County, CT and 

Merrimack County, NH) but deemed 

urban, were no longer considered urban 

effective for discharges occurring on or 

after October 1, 2007. Therefore, these 

two counties are now considered rural 

in accordance with § 412.64(b)(1)(ii)(C). 

The requirement to adjust payments 

to reflect local differences in wages is 

codified in § 418.306(c) of our 

regulations; however there had been no 

explicit reference to § 412.64 in 

§ 418.306(c) before implementation of 

the August 8, 2008 FY 2009 Hospice 

Wage Index final rule. Although 

§ 412.64 had not been explicitly referred 

to, the hospice program has used the 

definition of ‘‘urban’’ in 

§ 412.64(b)(1)(ii)(A) and (b)(1)(ii)(B), and 

the definition of ‘‘rural’’ as any area 

outside of an urban area in 

§ 412.64(b)(1)(ii)(C). With the 

implementation of the August 8, 2008 

FY 2009 Wage Index final rule, we now 

explicitly refer to those provisions in 

§ 412.64 to make it absolutely clear how 

we define ‘‘urban’’ and ‘‘rural’’ for 

purposes of the hospice wage index. 

When the raw pre-floor, prereclassified hospital wage index was 

adopted for use in deriving the hospice 

wage index, it was decided not to take 

into account IPPS geographic 

reclassifications. This policy of 

following OMB designations of rural or 

urban, rather than considering some 

Counties to be ‘‘deemed’’ urban, is 

consistent with our policy of not taking 

into account IPPS geographic 

reclassifications in determining 

payments under the hospice wage 

index. 

4. Areas Without Hospital Wage Data 

When adopting OMB’s new labor 

market designations in FY 2006, we 

identified some geographic areas where 

there were no hospitals, and thus, no 

hospital wage index data on which to 

base the calculation of the hospice wage 

index. Beginning in FY 2006, we 

adopted a policy to use the FY 2005 prefloor, pre-reclassified hospital wage 

index value for rural areas when no 

hospital wage data were available. We 

also adopted the policy that for urban 

labor markets without a hospital from 

which hospital wage index data could 

be derived, all of the CBSAs within the 

State would be used to calculate a 

statewide urban average pre-floor, prereclassified hospital wage index value to 

use as a reasonable proxy for these 

areas. Consequently, in subsequent 

fiscal years, we applied the average prefloor, pre-reclassified hospital wage 

index data from all urban areas in that 

state, to urban areas without a hospital. 

From FY 2007 to FY 2010, the only such 

CBSA was 25980, Hinesville-Fort 

Stewart, Georgia. 

Under the CBSA labor market areas, 

there are no hospitals in rural locations 


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Federal Register / Vol. 75, No. 140 / Thursday, July 22, 2010 / Notices 42947 

in Massachusetts and Puerto Rico. Since 

there was no rural proxy for more recent 

rural data within those areas, in the FY 

2006 hospice wage index proposed rule 

(70 FR 22394, 22398), we proposed 

applying the FY 2005 pre-floor, prereclassified hospital wage index value to 

rural areas where no hospital wage data 

were available. In the FY 2006 final rule 

and in the FY 2007 update notice, we 

applied the FY 2005 pre-floor, prereclassified hospital wage index data for 

areas lacking hospital wage data in both 

FY 2006 and FY 2007 for rural 

Massachusetts and rural Puerto Rico. 

In the FY 2008 final rule (72 FR 

50214, 50217) we considered 

alternatives to our methodology to 

update the pre-floor, pre-reclassified 

hospital wage index for rural areas 

without hospital wage data. We 

indicated that we believed that the best 

imputed proxy for rural areas, would: 

(1) Use pre-floor, pre-reclassified 

hospital data; (2) use the most local data 

available to impute a rural pre-floor, 

pre-reclassified hospital wage index; 

(3) be easy to evaluate; and, (4) be easy 

to update from year-to-year. 

Therefore, in FY 2008 through FY 

2010, in cases where there was a rural 

area without rural hospital wage data, 

we used the average pre-floor, prereclassified hospital wage index data 

from all contiguous CBSAs to represent 

a reasonable proxy for the rural area. 

This approach does not use rural data; 

however, the approach uses pre-floor, 

pre-reclassified hospital wage data, is 

easy to evaluate, is easy to update from 

year-to-year, and uses the most local 

data available. In the FY 2008 rule (72 

FR at 50217), we noted that in 

determining an imputed rural pre-floor, 

pre-reclassified hospital wage index, we 

interpret the term ‘‘contiguous’’ to mean 

sharing a border. For example, in the 

case of Massachusetts, the entire rural 

area consists of Dukes and Nantucket 

counties. We determined that the 

borders of Dukes and Nantucket 

counties are contiguous with Barnstable 

and Bristol counties. Under the adopted 

methodology, the pre-floor, prereclassified hospital wage index values 

for the counties of Barnstable (CBSA 

12700, Barnstable Town, MA) and 

Bristol (CBSA 39300, Providence-New 

Bedford-Fall River, RI-MA) would be 

averaged resulting in an imputed prefloor, pre-reclassified rural hospital 

wage index for FY 2008. We noted in 

the FY 2008 final hospice wage index 

rule that while we believe that this 

policy could be readily applied to other 

rural areas that lack hospital wage data 

(possibly due to hospitals converting to 

a different provider type, such as a 

Critical Access Hospital, that does not 

submit the appropriate wage data), if a 

similar situation arose in the future, we 

would re-examine this policy. 

We also noted that we do not believe 

that this policy would be appropriate for 

Puerto Rico, as there are sufficient 

economic differences between hospitals 

in the United States and those in Puerto 

Rico, including the payment of hospitals 

in Puerto Rico using blended Federal/ 

Commonwealth-specific rates. Therefore 

we believe that a separate and distinct 

policy for Puerto Rico is necessary. Any 

alternative methodology for imputing a 

pre-floor, pre-reclassified hospital wage 

index for rural Puerto Rico would need 

to take into account the economic 

differences between hospitals in the 

United States and those in Puerto Rico. 

Our policy of imputing a rural pre-floor, 

pre-reclassified hospital wage index 

based on the pre-floor, pre-reclassified 

hospital wage index(es) of CBSAs 

contiguous to the rural area in question 

does not recognize the unique 

circumstances of Puerto Rico. While we 

have not yet identified an alternative 

methodology for imputing a pre-floor, 

pre-reclassified hospital wage index for 

rural Puerto Rico, we will continue to 

evaluate the feasibility of using existing 

hospital wage data and, possibly, wage 

data from other sources. For FY 2008 

through FY 2010, we have used the 

most recent pre-floor, pre-reclassified 

hospital wage index available for Puerto 

Rico, which is 0.4047. 

5. CBSA Nomenclature Changes 

The Office of Management and Budget 

(OMB) regularly publishes a bulletin 

that updates the titles of certain CBSAs. 

In the FY 2008 Final Rule (72 FR 50218) 

we noted that the FY 2008 rule and all 

subsequent hospice wage index rules 

and notices would incorporate CBSA 

changes from the most recent OMB 

bulletins. The OMB bulletins may be 

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

omb/bulletins/index.html. 

6. Wage Data From Multi-Campus 

Hospitals 

Historically, under the Medicare 

hospice benefit, we have established 

hospice wage index values calculated 

from the raw pre-floor, pre-reclassified 

hospital wage data (also called the IPPS 

wage index) without taking into account 

geographic reclassification under 

sections 1886(d)(8) and (d)(10) of the 

Act. The wage adjustment established 

under the Medicare hospice benefit is 

based on the location where services are 

furnished without any reclassification. 

For FY 2010, the data collected from 

cost reports submitted by hospitals for 

cost reporting periods beginning during 

FY 2005 were used to compute the 2009 

raw pre-floor, pre-reclassified hospital 

wage index data without taking into 

account geographic reclassification 

under sections 1886(d)(8) and (d)(10) of 

the Act. This 2009 raw pre-floor, prereclassified hospital wage index was 

used to derive the applicable wage 

index values for the hospice wage index 

because these data (FY 2005) are the 

most recent complete cost data. 

Beginning in FY 2008, the IPPS 

apportioned the wage data for multicampus hospitals located in different 

labor market areas (CBSAs) to each 

CBSA where the campuses were located 

(see the FY 2008 IPPS final rule with 

comment period 72 FR 47317 through 

47320)). We are continuing to use the 

raw pre-floor, pre-reclassified hospital 

wage data as a basis to determine the 

hospice wage index values because 

hospitals and hospices both compete in 

the same labor markets, and therefore, 

experience similar wage-related costs. 

We note that the use of raw pre-floor, 

pre-reclassified hospital (IPPS) wage 

data, used to derive the FY 2011 hospice 

wage index values, reflects the 

application of our policy to use that data 

to establish the hospice wage index. The 

FY 2011 hospice wage index values 

presented in this notice with comment 

period were computed consistent with 

our raw pre-floor, pre-reclassified 

hospital (IPPS) wage index policy (that 

is, our historical policy of not taking 

into account IPPS geographic 

reclassifications in determining 

payments for hospice). As implemented 

in the August 8, 2008 FY 2009 Hospice 

Wage Index final rule, for the FY 2009 

Medicare hospice benefit, the hospice 

wage index was computed from IPPS 

wage data (submitted by hospitals for 

cost reporting periods beginning in FY 

2004 (as was the FY 2008 IPPS wage 

index)), which allocated salaries and 

hours to the campuses of two multicampus hospitals with campuses that 

are located in different labor areas, one 

in Massachusetts and another in Illinois. 

Thus, in FY 2009 and subsequent fiscal 

years, hospice wage index values for the 

following CBSAs have been affected by 

this policy: Boston-Quincy, MA (CBSA 

14484), Providence-New Bedford-Falls 

River, RI-MA (CBSA 39300), ChicagoNaperville-Joliet, IL (CBSA 16974), and 

Lake County-Kenosha County, IL-WI 

(CBSA 29404). 

7. Hospice Payment Rates 

Section 4441(a) of the Balanced 

Budget Act of 1997 (BBA) amended 

section 1814(i)(1)(C)(ii) of the Act to 

establish updates to hospice rates for 

FYs 1998 through 2002. Hospice rates 

were to be updated by a factor equal to 

the market basket index, minus 1 


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percentage point. Payment rates for FYs 

since 2002 have been updated according 

to section 1814(i)(1)(C)(ii)(VII) of the 

Act, which states that the update to the 

payment rates for subsequent fiscal 

years will be the market basket 

percentage for the fiscal year. It has been 

longstanding practice to use the 

inpatient hospital market basket as a 

proxy for a hospice market basket. 

Historically, the rate update has been 

published through a separate 

administrative instruction issued 

annually in the summer to provide 

adequate time to implement system 

change requirements. Providers 

determine their payments by applying 

the hospice wage index in this notice 

with comment period to the labor 

portion of the published hospice rates. 

II. Provisions of the Notice With 

Comment Period 

A. FY 2011 Hospice Wage Index 

1. Background 

The hospice final rule published in 

the Federal Register on December 16, 

1983 (48 FR 56008) provided for 

adjustment to hospice payment rates to 

reflect differences in area wage levels. 

We apply the appropriate hospice wage 

index value to the labor portion of the 

hospice payment rates based on the 

geographic area where hospice care was 

furnished. As noted earlier, each 

hospice’s labor market area is based on 

definitions of MSAs issued by the OMB. 

For this notice with comment period, 

we used the pre-floor, pre-reclassified 

hospital wage index, based solely on the 

CBSA designations, as the basis for 

determining wage index values for the 

FY 2011 hospice wage index. 

As noted above, our hospice payment 

rules utilize the wage adjustment factors 

used by the Secretary for purposes of 

section 1886(d)(3)(E) of the Act for 

hospital wage adjustments. We are again 

using the pre-floor and pre-reclassified 

hospital wage index data as the basis to 

determine the hospice wage index, 

which is then used to adjust the labor 

portion of the hospice payment rates 

based on the geographic area where the 

beneficiary receives hospice care. We 

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

a basis for the hospice wage index, 

results in the appropriate adjustment to 

the labor portion of the costs. For the FY 

2011 update to the hospice wage index, 

we are continuing to use the most recent 

pre-floor, pre-reclassified hospital wage 

index available at the time of 

publication. 

2. Areas Without Hospital Wage Data 

In adopting the CBSA designations, 

we identified some geographic areas 

where there are no hospitals, and no 

hospital wage data on which to base the 

calculation of the hospice wage index. 

These areas are described in section 

I.B.4 of this notice with comment 

period. Beginning in FY 2006, we 

adopted a policy that, for urban labor 

markets without an urban hospital from 

which a pre-floor, pre-reclassified 

hospital wage index can be derived, all 

of the urban CBSA pre-floor, prereclassified hospital wage index values 

within the State would be used to 

calculate a statewide urban average prefloor, pre-reclassified hospital wage 

index to use as a reasonable proxy for 

these areas. Currently, the only CBSA 

that would be affected by this policy is 

CBSA 25980, Hinesville-Fort Stewart, 

Georgia. We are continuing this policy 

for FY 2011. 

Currently, the only rural areas where 

there are no hospitals from which to 

calculate a pre-floor, pre-reclassified 

hospital wage index are Massachusetts 

and Puerto Rico. In August 2007 (72 FR 

50217) we adopted a methodology for 

imputing rural pre-floor, pre-reclassified 

hospital wage index values for areas 

where no hospital wage data are 

available as an acceptable proxy; that 

methodology is also described in section 

I.B.4 of this notice with comment 

period. In FY 2011, Dukes and 

Nantucket Counties are the only areas in 

rural Massachusetts which are affected. 

We are again applying this methodology 

for imputing a rural pre-floor, prereclassified hospital wage index for 

those rural areas without rural hospital 

wage data in FY 2011. 

However, as we noted in section I.B.4 

of this notice with comment period, we 

do not believe that this policy is 

appropriate for Puerto Rico. For FY 

2011, we again use the most recent prefloor, pre-reclassified hospital wage 

index value available for Puerto Rico, 

which is 0.4047. This pre-floor, prereclassified hospital wage index value 

will then be adjusted upward by the 

hospice 15 percent floor adjustment in 

the computing of the FY 2011 hospice 

wage index. 

3. FY 2011 Wage Index With an 

Additional 15 Percent Reduced Budget 

Neutrality Adjustment Factor (BNAF) 

The hospice wage index set forth in 

this notice with comment period would 

be effective October 1, 2010 through 

September 30, 2011. We are not 

modifying the hospice wage index 

methodology. In accordance with our 

regulations and the agreement signed 

with other members of the Hospice 

Wage Index Negotiated Rulemaking 

Committee, we are using the most 

current hospital data available. For this 

notice with comment period, the FY 

2010 hospital wage index was the most 

current hospital wage data available for 

calculating the FY 2011 hospice wage 

index values. We used the FY 2010 prefloor, pre-reclassified hospital wage 

index data for this calculation. 

As noted above, for FY 2011, the 

hospice wage index values will be based 

solely on the adoption of the CBSAbased labor market definitions and the 

hospital wage index. We continue to use 

the most recent pre-floor and prereclassified hospital wage index data 

available (based on FY 2006 hospital 

cost report wage data). A detailed 

description of the methodology used to 

compute the hospice wage index is 

contained in the September 4, 1996 

hospice wage index proposed rule (61 

FR 46579), the August 8, 1997 hospice 

wage index final rule (62 FR 42860), and 

the August 6, 2009 FY 2010 Hospice 

Wage Index final rule (74 FR 39384). 

The August 6, 2009 FY 2010 Hospice 

Wage Index final rule finalized a 

provision to phase out the BNAF over 

7 years, with a 10 percent reduction in 

the BNAF in FY 2010, and an additional 

15 percent reduction over each of the 

next 6 years, with complete phaseout in 

FY 2016. Therefore, in accordance with 

the August 6, 2009 FY 2010 Hospice 

Wage Index final rule (74 FR 39384), the 

BNAF for FY 2011 was reduced by an 

additional 15 percent for a total BNAF 

reduction of 25 percent (10 percent from 

FY 2010 and 15 percent for FY 2011). 

An unreduced BNAF for FY 2011 is 

computed to be 0.060562 (or 6.0562 

percent). A 25 percent reduced BNAF, 

which is subsequently applied to the 

pre-floor, pre-reclassified hospital wage 

index values greater than or equal to 0.8, 

is computed to be 0.045422 (or 4.5422 

percent). Pre-floor, pre-reclassified 

hospital wage index values which are 

less than 0.8 are subject to the hospice 

floor calculation; that calculation is 

described in section I.B.1. 

The hospice wage index for FY 2011 

is shown in Addenda A and B. 

Specifically, Addendum A reflects the 

FY 2011 wage index values for urban 

areas under the CBSA designations. 

Addendum B reflects the FY 2011 wage 

index values for rural areas under the 

CBSA designations. 

4. Effects of Phasing Out the BNAF 

The full (unreduced) BNAF calculated 

for FY 2011 is 6.0562 percent. As 

implemented in the August 6, 2009 FY 

2010 Hospice Wage Index final rule (74 

FR 39384), for FY 2011 we are reducing 


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the BNAF by an additional 15 percent, 

for a total BNAF reduction of 25 percent 

(a 10 percent reduction in FY 2010 plus 

a 15 percent reduction in FY 2011), with 

additional reductions of 15 percent per 

year in each of the next 5 years until the 

BNAF is phased out in FY 2016. 

For FY 2011, this is mathematically 

equivalent to taking 75 percent of the 

full BNAF value, or multiplying 

0.060562 by 0.75, which equals 

0.045422 (4.5422 percent). The BNAF of 

4.5422 percent reflects a 25 percent 

reduction in the BNAF. The 25 percent 

reduced BNAF (4.5422 percent) was 

applied to the pre-floor, pre-reclassified 

hospital wage index values of 0.8 or 

greater in the FY 2011 hospice wage 

index. 

The hospice floor calculation would 

still apply to any pre-floor, prereclassified hospital wage index values 

less than 0.8. Currently, the hospice 

floor calculation has 4 steps. First, prefloor, pre-reclassified hospital wage 

index values that are less than 0.8 are 

multiplied by 1.15. Second, the 

minimum of 0.8 or the pre-floor, prereclassified hospital wage index value 

times 1.15 is chosen as the preliminary 

hospice wage index value. Steps 1 and 

2 are referred to in this notice with 

comment period as the hospice 15 

percent floor adjustment. Third, the prefloor, pre-reclassified hospital wage 

index value is multiplied by the BNAF. 

Finally, the greater result of either step 

2 or step 3 is the final hospice wage 

index value. The hospice floor 

calculation is unchanged by the BNAF 

reduction. We note that steps 3 and 4 

will become unnecessary once the 

BNAF is eliminated. 

We examined the effects of an 

additional 15 percent reduction in the 

BNAF, for a total BNAF reduction of 25 

percent, on the FY 2011 hospice wage 

index compared to remaining with the 

10 percent reduced BNAF which was 

used for the FY 2010 hospice wage 

index. The FY 2011 BNAF reduction of 

an additional 15 percent (for a total 

BNAF reduction of 25 percent) resulted 

in approximately a 0.9 percent 

reduction in most hospice wage index 

values. The elimination of the BNAF in 

FY 2016 would result in an estimated 

final reduction of the FY 2016 hospice 

wage index values of approximately 4.3 

percent compared to FY 2011 hospice 

wage index values. 

Those CBSAs whose pre-floor, prereclassified hospital wage index values 

had the hospice 15 percent floor 

adjustment applied before the BNAF 

reduction would not be affected by this 

phase-out of the BNAF. These CBSAs, 

which typically include rural areas, are 

protected by the hospice 15 percent 

floor adjustment. We have estimated 

that 19 CBSAs are already protected by 

the hospice 15 percent floor adjustment, 

and are therefore completely unaffected 

by the BNAF reduction. There are 148 

hospices in these 19 CBSAs. 

Additionally, some CBSAs with prefloor, pre-reclassified wage index values 

less than 0.8 will become newly eligible 

for the hospice 15 percent floor 

adjustment as a result of the additional 

15 percent reduction in the BNAF (for 

a total BNAF reduction of 25 percent). 

Areas where the hospice floor 

calculation would have yielded a wage 

index value greater than 0.8 if the 10 

percent reduction in BNAF were 

maintained, but which will have a final 

wage index value less than 0.8 after the 

additional 15 percent reduction in the 

BNAF (for a total BNAF reduction of 25 

percent) is applied, will now be eligible 

for the hospice 15 percent floor 

adjustment. These CBSAs will see a 

smaller reduction in their hospice wage 

index values since the hospice 15 

percent floor adjustment will apply. We 

have estimated that 5 CBSAs will have 

their pre-floor, pre-reclassified hospital 

wage index value become newly 

protected by the hospice 15 percent 

floor adjustment due to the additional 

15 percent reduction in the BNAF (for 

a total BNAF reduction of 25 percent). 

Because of the protection given by the 

hospice 15 percent floor adjustment, 

these CBSAs will see smaller percentage 

decreases in their hospice wage index 

values than those CBSAs that are not 

eligible for the hospice 15 percent floor 

adjustment. This will affect those 

hospices with lower hospice wage index 

values, which are typically in rural 

areas. There are 196 hospices located in 

these 5 CBSAs. 

Finally, the hospice wage index 

values only apply to the labor portion of 

the payment rates; the labor portion is 

described in section I.B.1 of this notice 

with comment period. Therefore the 

projected reduction in payments due 

solely to the additional 15 percent 

reduction of the BNAF (for a total BNAF 

reduction of 25 percent) is estimated to 

be 0.6 percent, as calculated from the 

difference in column 3 and column 4 of 

Table 1 in section VII of this notice with 

comment period. In addition, the 

estimated effects of the phase-out of the 

BNAF will be mitigated by any hospital 

market basket updates in payments. The 

hospital market basket update for FY 

2011 is 2.6 percent; this 2.6 percent 

does not reflect the provision in the 

Affordable Care Act which reduced the 

hospital market basket update by 0.25 

percentage point since that reduction 

does not apply to hospices. The final 

update will be communicated through 

an administrative instruction. The 

combined effects of the updated wage 

data, an additional 15 percent reduction 

of the BNAF (for a total BNAF reduction 

of 25 percent), and a hospital market 

basket update of 2.6 percent for FY 2011 

are an overall estimated increase in 

payments to hospices in FY 2011 of 1.8 

percent (column 5 of Table 1 in section 

VII of this notice with comment period). 

III. Information and Updates on Issues 

Not Proposed 

A. Changes to Hospice Certification and 

Recertification Requirements 

On March 23, 2010, President Obama 

signed into law the Affordable Care Act 

(Pub. L. 111–148). Section 3132 of this 

law requires hospices to adopt some of 

MedPAC’s hospice program eligibility 

recertification recommendations, 

including a requirement for a physician 

or nurse practitioner to have a face-toface visit with patients prior to the 180 

day recertification, and to attest that 

such a visit took place. Please see the 

Home Health Prospective Payment 

System Rate Update for Calendar Year 

2011; Changes in Certification 

Requirements for Home Health Agencies 

and Hospices Proposed Rule, which we 

expect to publish shortly, for a detailed 

discussion of the new statutory 

requirements, and for our proposals 

related to implementation for hospices, 

including proposed regulatory text 

changes of the hospice certification 

requirements. 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, we also expect to propose rules 

related to the timing of the completion 

of certifications and recertifications, to 

the inclusion of benefit period dates on 

the certification or recertification, and to 

the physician’s signature and date 

requirements for the certification or 

recertification. 

Please do not send comments on any 

of these proposals to us under this 

Hospice Wage Index Notice. Instead, 

please follow the instructions 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 to 

comment on the hospice proposals 

described in that proposed rule. We will 

respond to those comments in the Home 

Health Prospective Payment System 

Rate Update for Calendar Year 2011; 

Changes in Certification Requirements 

for Home Health Agencies and Hospices 

Final Rule. 


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B. Solicitation of Comments on the 

Hospice Aggregate Cap 

In the FY 2010 hospice wage index 

proposed rule, at 74 FR 18920–18922, 

we solicited comments on the current 

methodology of calculating the 

aggregate hospice cap. As a result of that 

solicitation, we received a number of 

comments regarding the hospice cap 

methodology, with several major themes 

emerging. Many commenters wanted 

more timely notification of cap 

overpayments. Many also requested that 

hospices have access to patients’ full 

hospice utilization history. According to 

commenters, having this information 

would enable hospices to better manage 

their aggregate cap, and to accurately 

apportion patients when they have been 

in more than 1 hospice. Some 

commenters asked that we wage-adjust 

the annual cap amount to account for 

geographic differences in costs. Other 

commenters asked that we modernize 

the cap, apportioning hospice patients 

over consecutive years, with some 

suggesting we allow a new cap amount 

for readmitted patients who experience 

a break in hospice utilization. A few 

encouraged us not to raise the cap or do 

away with the cap, as it is the only 

limitation on hospice spending, and 

curbs excesses from the minority of 

hospices with questionable admission 

practices. 

We noted, in FY 2010 rulemaking, 

that there have been some technological 

advances in our data systems which we 

believe might enable us to modernize 

the cap calculation process while 

providing information facilitating the 

ability of hospices to better manage their 

cap. For this notice with comment 

period, we provide additional details 

regarding policy options that we are 

considering for modernizing the cap 

calculation methodology. We are 

soliciting comments on the policy 

options we are considering, as well as 

comments/suggestions for other possible 

options/alternatives to modernize the 

cap calculation methodology, to be 

considered in possible future 

rulemaking. 

1. Hospice Provider and Medicare 

Contractor Access to a National 

Database Containing Full Utilization 

History 

One policy option which we are 

considering would address industry 

concerns about the timeliness of caprelated information, and hospices’ 

comments about their inability to see a 

patient’s full hospice utilization history. 

Hospices currently have the ability to 

query a beneficiary’s hospice utilization 

history; however, the process can be 

cumbersome and can involve multiple 

steps to see the complete history. 

Because the query system is linked to 

the Common Working File, it is not as 

easily changed to provide a more 

streamlined process for providers to get 

a complete beneficiary hospice 

utilization history. 

CMS has recently redesigned a 

national Provider Statistical and 

Reimbursement Report (PS&R) database; 

the PS&R currently accumulates 

statistical and reimbursement data from 

Medicare claims, and is normally used 

in preparing and settling cost reports of 

various Medicare provider types. 

Because the PS&R is built from claims 

data, it could theoretically include any 

information normally found on a claim. 

We believe this new PS&R database, 

if tailored to hospice needs, may be able 

to provide hospices with more 

streamlined information related to their 

patients’ prior hospice utilization, thus 

enabling providers to better manage 

their aggregate cap. We are investigating 

the possibility that the PS&R report 

include each patient’s total days of 

hospice care, with from and through 

dates for every hospice election, along 

with a provider identifier, for multiple 

years. Additionally, we are investigating 

whether this database could also 

include total payments for patients for 

services provided during a specific time 

period (i.e., the cap year). Specifically, 

we envision that providers could use 

this national PS&R data to accurately 

estimate their own cap while waiting for 

the ‘‘official’’ cap calculation from their 

Medicare contractor, and use their 

estimated information in their internal 

cap management. 

In addition to possibly enabling 

hospice providers to more easily obtain 

access to their patients’ full hospice 

utilization history, we believe that the 

national database and associated 

improved data processing technologies 

will enable Medicare contractors to 

adopt a more efficient automation 

approach in calculating each provider’s 

cap. This might allow contractors to 

send providers the results of their cap 

calculations sooner. 

The improved technology could 

provide an opportunity for CMS to 

consider revising the cap calculation 

methodology to apportion hospice 

patients with long stays over more than 

one year. Below, we present some 

policy options which we are 

considering related to calculation 

methodology, along with cap issues 

related to timing. 

a. Option 1: Multi-Year Apportioning 

In this option, patients who received 

hospice care in more than 1 cap 

accounting year would be apportioned 

across years on a patient-by-patient 

basis. A multi-year apportionment on a 

patient-by-patient basis raises issues 

regarding the timing of cap calculations. 

If, for example, the Medicare contractor 

is required to wait until all of a 

hospice’s Medicare beneficiaries in a 

given year die so that the contractor can 

calculate mathematically exact multiyear apportionments, the determination 

and notification of the cap and 

overpayment might be delayed for years; 

alternatively, the fiscal intermediary 

might issue a tentative determination 

subject to finalization at a later time 

(which would lead to significant 

uncertainty, among other things) or a 

‘‘final’’ determination subject to 

potentially numerous revisions in future 

years (which would also lead to 

significant uncertainty, among other 

things). In light of these issues, under 

one possible approach, the number of 

years which the beneficiary would be 

apportioned in the standard cap 

calculation process would be 

established by the Secretary. In 

examining data from claims, we found 

that 99.98 percent of all Medicare 

hospice beneficiaries who died in 2007 

began hospice care in 2006 or 2007. 

Similarly, we found that 96.83 percent 

of all Medicare hospice beneficiaries 

who died in 2008 began hospice care in 

2007 or 2008. Therefore, the Secretary 

could establish that hospice patients 

will be apportioned for cap calculation 

purposes in the year of election plus one 

additional year. In this example, if a 

patient’s hospice election spans more 

than the election year, the standard cap 

calculation methodology would 

apportion the patient over the election 

year and one subsequent year, based on 

the number of days the patient received 

hospice care in each of the two years, 

also factoring in the different hospices 

which provided care to the patient 

during these two years, with the 

fractional shares of the patient summing 

to 1. 

A number of commenters suggested 

we allow apportioning of hospice care 

over two or more years; this suggestion 

was partly due to concerns over a 

hospice admitting a patient who had 

received hospice care elsewhere in a 

previous year, and therefore could not 

be counted in the admitting hospice’s 

cap calculation. As such, we are also 

considering a process where a hospice 

provider could request the Medicare 

contractor recalculate a provider’s cap 

using a longer apportioning timeframe 

than that established in the standard 

calculation process. While any hospice 

provider could request a recalculation, 


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we would envision this process to be 

most beneficial for providers who admit 

patients with prior, long lengths of stay 

at another hospice. Where the 

recalculation involves patients served 

by more than one hospice, a reapportionment of these patients would 

be required. Therefore, a recalculation 

would be necessary for each hospice 

which provided care to any patients 

included in the recalculation. 

As described in 42 CFR 405.1885(b) 

contractors may only re-open and revise 

a hospice’s cap determination within 3 

years of the date of receipt of the 

determination of program 

reimbursement letter. Counting 

beneficiaries across multiple years 

would be subject to re-opening 

regulations. We believe that a standard 

cap calculation methodology which 

adopts a multi-year apportionment 

(such as apportioning patients in the 

year of election and one subsequent 

year), coupled with the ability for 

providers to request a recalculation to 

include a longer apportionment 

timeframe, while also providing 

hospices access to their patients’ full 

utilization history is responsive to 

commenters’ suggestions. It is a 

streamlined, ‘‘easy for hospices to 

replicate’’ process that might facilitate 

better internal management. 

b. Option 2: Deferring Major Changes to 

the Standard Aggregate Cap Calculation 

Methodology, While Allowing Providers 

To Request Recalculation of Their Cap 

to Apportion Patients Across Multiple 

Years 

We are considering coupling changes 

to the aggregate cap with overall hospice 

payment reform. As we described in last 

year’s Hospice Wage Index Final Rule 

(74 FR 39384), we are gearing up for 

hospice payment reform. MedPAC has 

suggested that the current payment 

system includes financial incentives 

which may create program 

vulnerabilities, and recommended that 

we reform the hospice payment system. 

We have been collecting additional data 

on hospice claims to analyze hospice 

resource use with the goal of reforming 

the payment system in the near future. 

Therefore, we are also considering an 

option which would defer changes to 

the current standard cap calculation 

methodology until we deploy the 

reformed payment system. This option 

would allow us to analyze how 

spending limits should be used to 

mitigate misuse of the benefit, in the 

context of broader hospice payment 

reform. Under this option, we would 

generally continue to calculate hospice 

aggregate caps using the current 

methodology, but we would allow 

hospice providers to request the 

Medicare contractor recalculate their 

cap, apportioning patients across 

multiple years, as described in Option 1. 

This option also would provide 

hospices access to the redesigned PS&R 

database as described in Option 1, 

thereby providing easier access to their 

full utilization history. 

Similar to the recalculation process 

described in Option 1, this option 

would be subject to regulatory 

requirements regarding re-opening and 

revision of a previous cap 

determination. 

2. Other Issues 

a. Aligning Timeframes 

Aligning the cap year timeframe to 

coincide with the hospice rate update 

year would likely simplify hospice 

recordkeeping and better match the 

counting of beneficiaries with 

associated Medicare payments. The 

hospice rate update year, which also 

corresponds with the Federal fiscal year, 

runs from October 1st to September 

30th; the inpatient and aggregate cap 

year currently runs from November 1st 

to October 31st; and the beneficiary 

counting timeframe for purposes of the 

current hospice aggregate cap 

calculation runs from September 28th to 

September 27th. 

The current cap accounting year 

timeframe provides for process 

efficiencies given the current 

methodology for calculating the 

aggregate cap, while allowing for 

counting the beneficiary in the reporting 

period where he or she is expected to 

use most of the days of covered hospice 

care (48 FR 38158). If we apportion 

beneficiaries across more than one year, 

we believe that there would no longer 

be an advantage to defining the cap 

accounting year differently from the 

hospice rate update year. 

For the inpatient cap, this would 

mean using the October 1st to 

September 30th timeframe for counting 

actual total Medicare patient days, total 

Medicare GIP and respite days, 

allowable Medicare GIP and respite 

days, and total actual Medicare 

payments for inpatient care provided 

during the cap year. For the aggregate 

cap, this would mean computing the 

total actual Medicare payments based 

upon services provided during the 

October 1st to September 30th 

timeframe. In doing so, all aspects of the 

inpatient and aggregate cap calculations 

would focus on the hospice rate update 

and Federal fiscal year, rather than on 

multiple different timeframes. Note that 

payments are counted based on the date 

the services are provided, not based on 

when the payments are actually made. 

Shifting the cap accounting year 

timeframes to coincide with the hospice 

rate update year would simplify the new 

cap calculation methodology. In the 

year of transition, we could allow 3 

extra days to count beneficiaries. For 

example, if these changes were to occur 

beginning with the 2012 cap year, we 

could count beneficiaries from 

September 28, 2012 to September 30, 

2013, which is 12 months plus 3 days, 

in that cap year’s calculation. In 

counting payments, we could count the 

payments for services provided in 

October twice: Once in the previous cap 

calculation, using the original 

timeframes, and again in the transition 

year cap calculation, using the fiscal 

year timeframes. In each year we would 

still have 12 months of payments (in 

this example, November 2011 to 

October 2012 in the last year using the 

original timeframes, and October 2012 

to September 2013 in the transition 

year), but in the transition year would 

have 12 months plus 3 days of 

headcount in the aggregate cap 

calculation, which would be 

advantageous to hospices. 

If we shift the cap accounting year to 

match the hospice rate update year, it 

would also affect our calculation of the 

annual cap amount. Section 

1814(i)(2)(B) of the Social Security Act 

(the Act) requires us to update the 

$6,500 cap amount by the same 

percentage as the percentage increase or 

decrease in the medical care 

expenditure category of the Consumer 

Price Index for All Urban Consumers 

(CPI–U) from March 1984 to the ‘‘fifth 

month of the accounting year’’. By 

changing the cap accounting year to 

coincide with the hospice rate update 

year and Federal fiscal year, we would 

use the CPI–U for February when 

updating the cap amount, instead of the 

current process which uses the March 

CPI–U to update the cap amount. 

b. Uniform Schedule for Mailing Cap 

Determination Letters 

Currently we do not require 

contractors to mail hospice cap 

determination letters on a particular 

date. However, if we adopted a cap 

methodology which required adjusting 

prior year cap reports, we would likely 

need to require contractors to mail cap 

determination letters on a uniform 

schedule, to avoid problems where one 

contractor does so more quickly than 

another. Without a uniformly applied 

schedule for mailing the cap 

determination letters, hospices could 

receive the letters at various times 

during the year. If we were to require 


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contractors to mail cap determination 

letters on a specific date, providers 

would be on an equal footing with 

regard to their cap notification. Finally, 

adopting this option would also create 

an environment more conducive to 

financial and business planning, as 

providers would know when to expect 

the report. 

We are soliciting public comment on 

the above suggested changes, and any 

other suggestions for ways to streamline 

the cap calculation. Please submit your 

cap-related comments in accordance 

with the instructions given on pages 

2–6 of this notice with comment period. 

IV. Waiver of Proposed Rulemaking 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register to provide a period for public 

comment before the provisions of a rule 

take effect. We can waive this 

procedure, however, if we find good 

cause that notice and comment 

procedures are impracticable, 

unnecessary, or contrary to the public 

interest and we incorporate a statement 

of finding and its reasons in the notice. 

We find it is unnecessary to undertake 

notice and comment rulemaking for the 

update in this notice because the update 

does not make any substantive changes 

in policy, but merely reflects the 

application of previously established 

methodologies which permit no 

discretion on the part of the Secretary. 

Therefore, under 5 U.S.C. 553(b)(3)(B), 

for good cause, we waive notice and 

comment procedures. 

V. Collection of Information 

Requirements 

This document does not impose 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. 

VI. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VII. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

notice with comment period 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)). We estimated the impact on 

hospices, as a result of the changes to 

the FY 2011 hospice wage index and of 

reducing the BNAF by an additional 15 

percent, for a total BNAF reduction of 

25 percent (10 percent in FY 2010 and 

15 percent in FY 2011). The BNAF 

reduction is part of a 7-year BNAF 

phase-out that was finalized in previous 

rulemaking (74 FR 39384, dated August 

6, 2009), and is not a policy change put 

forward in this notice with comment 

period. 

As discussed previously, the 

methodology for computing the hospice 

wage index was determined through a 

negotiated rulemaking committee and 

promulgated in the August 8, 1997 

hospice wage index final rule (62 FR 

42860). The BNAF, which was 

promulgated in the August 8, 1997 rule, 

is being phased out. This rule updates 

the hospice wage index in accordance 

with the August 6, 2009 FY 2010 

Hospice Wage Index final rule (74 FR 

39384), which finalized a 10 percent 

reduced BNAF for FY 2010 as the first 

year of a 7-year phase-out of the BNAF, 

to be followed by an additional 15 

percent per year reduction in the BNAF 

in each of the next 6 years. Total phaseout will be complete by FY 2016. 

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 have determined that 

this is an economically significant 

notice with comment period under 

Executive Order 12866. 

Column 4 of Table 1 shows the 

combined effects of the updated wage 

data (the 2010 pre-floor, pre-reclassified 

hospital wage index) and of the 

additional 15 percent reduction in the 

BNAF (for a total BNAF reduction of 25 

percent), comparing estimated payments 

for FY 2011 to estimated payments for 

FY 2010. The FY 2010 payments used 

for comparison have a 10 percent 

reduced BNAF applied. We estimate 

that the total hospice payments for FY 

2011 will decrease by $110 million as a 

result of the application of the updated 

wage data ($¥30 million) and the total 

25 percent reduction in the BNAF 

($¥80 million). This estimate does not 

take into account any hospital market 

basket update, which is 2.6 percent for 

FY 2011. This 2.6 percent does not 

reflect the provision in the Affordable 

Care Act which reduced the hospital 

market basket update by 0.25 percentage 

point since that reduction does not 

apply to hospices. The hospital market 

basket update and associated payment 

rates will be communicated through an 

administrative instruction. The effect of 

a 2.6 percent hospital market basket 

update on payments to hospices is 

approximately $330 million. Taking into 

account a 2.6 percent hospital market 

basket update (+$330 million), in 

addition to the updated wage data 

($¥30 million) and the total 25 percent 

reduction in the BNAF ($¥80 million), 

it is estimated that hospice payments 

would increase by $220 million in FY 

2010 ($330 million ¥ $110 million = 

$220 million). The percent change in 

payments to hospices due to the 

combined effects of the updated wage 

data, the additional 15 percent 

reduction in the BNAF (for a total BNAF 

reduction of 25 percent), and the 

hospital market basket update of 2.6 

percent is reflected in column 5 of the 

impact table (Table 1). 

We estimate that this notice with 

comment period is ‘‘economically 

significant’’ as measured by the $100 

million threshold, and hence also a 

major notice with comment period 

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 Notice. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses, if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, we 

estimate that almost all hospices are 

small entities as that term is used in the 

RFA. The great majority of hospitals and 

most other health care providers and 

suppliers are small entities, either by 

being nonprofit organizations or by 

meeting the SBA definition of a small 

business (having revenues of less than 

$7.0 million to $34.5 million in any 

1 year). While the Small Business 

Administration (SBA) does not define a 

size threshold in terms of annual 

revenues for hospices, they do define 

one for home health agencies ($13.5 

million; see http://www.sba.gov/idc/ 

groups/public/documents/ 

sba_homepage/serv_sstd_tablepdf.pdf). 

For the purposes of this notice with 


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comment period, because the hospice 

benefit is a home-based benefit, we are 

applying the SBA definition of ‘‘small’’ 

for home health agencies to hospices; 

we will use this definition of ‘‘small’’ in 

determining if this notice with comment 

period has a significant impact on a 

substantial number of small entities (for 

example, hospices). Using 2008 

Medicare hospice claims data, we 

estimate that 96 percent of hospices 

have Medicare revenues below $13.5 

million. As indicated in Table 1 below, 

there are 3,429 hospices with 2009 

claims data as of February 2010. 

Approximately 48.0 percent of Medicare 

certified hospices are identified as 

voluntary or government agencies and, 

therefore, are considered small entities. 

Most of these and most of the remainder 

are also small hospice entities because, 

as noted above, their revenues fall 

below the SBA size thresholds. 

Therefore, for purposes of the RFA, 

approximately 96 percent of hospices 

are considered small businesses 

according to the Small Business 

Administration’s size standards with 

total revenues of $13.5 million or less in 

any 1 year, and 48 percent are nonprofit 

organizations. 

We note that the hospice wage index 

methodology was previously guided by 

consensus, through a negotiated 

rulemaking committee that included 

representatives of national hospice 

associations, rural, urban, large and 

small hospices, multi-site hospices, and 

consumer groups. Based on all of the 

options considered, the committee 

agreed on the methodology described in 

the committee statement, and after 

notice and comment, it was adopted 

into regulation in the August 8, 1997 

final rule. In developing the process for 

updating the hospice wage index in the 

1997 final rule, we considered the 

impact of this methodology on small 

hospice entities and attempted to 

mitigate any potential negative effects. 

Small hospice entities are more likely to 

be in rural areas, which are less affected 

by the BNAF reduction than entities in 

urban areas. Generally, hospices in rural 

areas are protected by the hospice floor 

adjustment, which lessens the effect of 

the BNAF reduction. 

The effects of this rule on hospices are 

shown in Table 1. Overall, Medicare 

payments to all hospices will decrease 

by an estimated 0.8 percent, reflecting 

the combined effects of the updated 

wage data and the additional 15 percent 

reduction in the BNAF (for a total BNAF 

reduction of 25 percent). The combined 

effects of the updated wage data and the 

additional 15 percent reduction in the 

BNAF (for a total BNAF reduction of 25 

percent) on small or medium sized 

hospices (as defined by routine home 

care days rather than by the SBA 

definition), is ¥0.7. Furthermore, when 

including the hospital market basket 

update of 2.6 percent into these 

estimates, the combined effects on 

Medicare payment to all hospices would 

result in an estimated increase of 

approximately 1.8 percent. For small 

and medium hospices (as defined by 

routine home care days), the estimated 

effects on revenue when accounting for 

the updated wage data, the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 25 percent), and the 

hospital market basket update are 

increases in payments of 1.8 percent 

and 1.9 percent, respectively. Overall 

average hospice revenue effects will be 

slightly less than these estimates since 

according to the National Hospice and 

Palliative Care Organization, about 16 

percent of hospice patients are nonMedicare. 

HHS’ practice in interpreting the RFA 

is to consider effects economically 

‘‘significant’’ only if they reach a 

threshold of 3 to 5 percent or more of 

total revenue or total costs. As noted 

above, the combined effect of only the 

updated wage data and the additional 

15 percent reduced BNAF (for a total 

BNAF reduction of 25 percent) for all 

hospices is ¥0.8 percent. Since, by 

SBA’s definition of ‘‘small’’ (when 

applied to hospices), nearly all hospices 

are considered to be small entities, the 

combined effect of only the updated 

wage data and the additional 15 percent 

reduced BNAF (¥0.8 percent) does not 

exceed HHS’ 3.0 percent minimum 

threshold. However, HHS’ practice in 

determining ‘‘significant economic 

impact’’ has considered either total 

revenue or total costs. Total hospice 

revenues include the effect of the 

market basket update. When we 

consider the combined effect of the 

updated wage data, the additional 15 

percent BNAF reduction (for a total 

BNAF reduction of 25 percent), and the 

2.6 percent 2011 market basket update, 

the overall impact is an increase in 

hospice payments of 1.8 percent for FY 

2011. Therefore, the Secretary has 

determined that this notice with 

comment period does not create a 

significant economic impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. This notice with 

comment period only affects hospices. 

Therefore, the Secretary has determined 

that this notice with comment period 

will not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (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 notice with comment 

period is not anticipated to have an 

effect on State, local, or Tribal 

governments 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 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We have reviewed this notice with 

comment period under the threshold 

criteria of Executive Order 13132, 

Federalism, and have determined that it 

will not have an impact on the rights, 

roles, and responsibilities of State, local, 

or Tribal governments. 

B. Anticipated Effects 

1. Effects on Hospices 

This section discusses the impact of 

the projected effects of the hospice wage 

index, including the effects of a 2.6 

percent hospital market basket update 

that will be communicated separately 

through an administrative instruction. 

This notice with comment period 

continues to use the CBSA-based prefloor, pre-reclassified hospital wage 

index as a basis for the hospice wage 

index and continues to use the same 

policies for treatment of areas (rural and 

urban) without hospital wage data. The 

final FY 2011 hospice wage index is 

based upon the 2010 pre-floor, prereclassified hospital wage index and the 

most complete claims data available (FY 

2009) with an additional 15 percent 

reduction in the BNAF (combined with 

the 10 percent reduction in the BNAF 

taken in FY 2010, for a total BNAF 

reduction of 25 percent). The BNAF 

reduction is part of a 7-year BNAF 

phase-out that was finalized in previous 

rulemaking (74 FR 39384, dated August 

6, 2009), and is not a policy change put 

forward in this notice with comment 

period. 


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For the purposes of our impacts, our 

baseline is estimated FY 2010 payments 

with a 10 percent BNAF reduction, 

using the 2009 pre-floor, pre-reclassified 

hospital wage index. Our first 

comparison (column 3, Table 1) 

compares our baseline to estimated FY 

2011 payments (holding payment rates 

constant) using the updated wage data 

(2010 pre-floor, pre-reclassified hospital 

wage index). Consequently, the 

estimated effects illustrated in column 3 

of Table 1 show the distributional 

effects of the updated wage data only. 

The effects of using the updated wage 

data combined with the additional 15 

percent reduction in the BNAF (for a 

total BNAF reduction of 25 percent) are 

illustrated in column 4 of Table 1. 

We have included a comparison of the 

combined effects of the additional 15 

percent BNAF reduction (for a total 

BNAF reduction of 25 percent), the 

updated wage data, and a 2.6 percent 

hospital market basket increase for FY 

2011 (Table 1, column 5). Presenting 

these data gives the hospice industry a 

more complete picture of the effects on 

their total revenue of the hospice wage 

index discussed in this rule, the BNAF 

phase-out, and the FY 2011 hospital 

market basket update. Certain events 

may limit the scope or accuracy of our 

impact analysis, because such an 

analysis is susceptible to forecasting 

errors due to other changes in the 

forecasted impact time period. The 

nature of the Medicare program is such 

that the changes may interact, and the 

complexity of the interaction of these 

changes could make it difficult to 

predict accurately the full scope of the 

impact upon hospices. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

Table 1 shows the results of our 

analysis. In column 1, we indicate the 

number of hospices included in our 

analysis as of February 25, 2010 which 

had also filed claims in FY 2009. In 

column 2, we indicate the number of 

routine home care days that were 

included in our analysis, although the 

analysis was performed on all types of 

hospice care. Columns 3, 4, and 5 

compare FY 2011 estimated payments 

with those estimated for FY 2010. The 

estimated FY 2010 payments 

incorporate a BNAF which has been 

reduced by 10 percent. Column 3 shows 

the percentage change in estimated 

Medicare payments for FY 2011 due to 

the effects of the updated wage data 

only, compared with estimated FY 2010 

payments. The effect of the updated 

wage data can vary from region to region 

depending on the fluctuations in the 

wage index values of the pre-floor, prereclassified hospital wage index. 

Column 4 shows the percentage change 

in estimated hospice payments from FY 

2010 to FY 2011 due to the combined 

effects of using the updated wage data 

and reducing the BNAF by an additional 

15 percent (for a total BNAF reduction 

of 25 percent). Column 5 shows the 

percentage change in estimated hospice 

payments from FY 2010 to FY 2011 due 

to the combined effects of using updated 

wage data, an additional 15 percent 

BNAF reduction (for a total BNAF 

reduction of 25 percent), and a 2.6 

percent hospital market basket update. 

Table 1 also categorizes hospices by 

various geographic and hospice 

characteristics. The first row of data 

displays the aggregate result of the 

impact for all Medicare-certified 

hospices. The second and third rows of 

the table categorize hospices according 

to their geographic location (urban and 

rural). Our analysis indicated that there 

are 2,380 hospices located in urban 

areas and 1,049 hospices located in 

rural areas. The next two row groupings 

in the table indicate the number of 

hospices by census region, also broken 

down by urban and rural hospices. The 

next grouping shows the impact on 

hospices based on the size of the 

hospice’s program. We determined that 

the majority of hospice payments are 

made at the routine home care rate. 

Therefore, we based the size of each 

individual hospice’s program on the 

number of routine home care days 

provided in FY 2009. The next grouping 

shows the impact on hospices by type 

of ownership. The final grouping shows 

the impact on hospices defined by 

whether they are provider-based or 

freestanding. 

As indicated in Table 1, there are 

3,429 hospices. Approximately 48.0 

percent of Medicare-certified hospices 

are identified as voluntary (non-profit) 

or government agencies. Because the 

National Hospice and Palliative Care 

Organization estimates that 

approximately 83.6 percent of hospice 

patients in 2007 were Medicare 

beneficiaries, we have not considered 

other sources of revenue in this 

analysis. 

As stated previously, the following 

discussions are limited to demonstrating 

trends rather than projected dollars. We 

used the pre-floor, pre-reclassified 

hospital wage indexes as well as the 

most complete claims data available (FY 

2009) in developing the impact analysis. 

The FY 2011 payment rates will be 

adjusted to reflect the full hospital 

market basket, as required by section 

1814(i)(1)(C)(ii)(VII) of the Act. As 

previously noted, we publish these rates 

through administrative instructions 

rather than in a proposed rule. The FY 

2011 hospital market basket update is 

2.6 percent. This 2.6 percent does not 

reflect the provision in the Affordable 

Care Act which reduced the hospital 

market basket update by 0.25 percentage 

points since that reduction does not 

apply to hospices. Since the inclusion of 

the effect of a hospital market basket 

increase provides a more complete 

picture of projected total hospice 

payments for FY 2011, the last column 

of Table 1 shows the combined impacts 

of the updated wage data, the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 25 percent), and the 

2.6 percent hospital market basket 

update. As discussed in the FY 2006 

hospice wage index final rule (70 FR 

45129), hospice agencies may use 

multiple hospice wage index values to 

compute their payments based on 

potentially different geographic 

locations. Before January 1, 2008, the 

location of the beneficiary was used to 

determine the CBSA for routine and 

continuous home care and the location 

of the hospice agency was used to 

determine the CBSA for respite and 

general inpatient care. Beginning 

January 1, 2008, the hospice wage index 

utilized is based on the location of the 

site of service. As the location of the 

beneficiary’s home and the location of 

the facility may vary, there will still be 

variability in geographic location for an 

individual hospice. We anticipate that 

the location of the various sites will 

usually correspond with the geographic 

location of the hospice, and thus we 

will continue to use the location of the 

hospice for our analyses of the impact 

of the changes to the hospice wage 

index in this rule. For this analysis, we 

use payments to the hospice in the 

aggregate based on the location of the 

hospice. 

The impact of hospice wage index 

changes has been analyzed according to 

the type of hospice, geographic location, 

type of ownership, hospice base, and 

size. Our analysis shows that most 

hospices are in urban areas and provide 

the vast majority of routine home care 

days. Most hospices are medium-sized 


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followed by large hospices. Hospices are 

almost equal in numbers by ownership 

with 1,645 designated as non-profit or 

government hospices and 1,784 as 

proprietary. The vast majority of 

hospices are freestanding. 

2. Hospice Size 

Under the Medicare hospice benefit, 

hospices can provide four different 

levels of care days. The majority of the 

days provided by a hospice are routine 

home care (RHC) days, representing 

about 97 percent of the services 

provided by a hospice. Therefore, the 

number of RHC days can be used as a 

proxy for the size of the hospice, that is, 

the more days of care provided, the 

larger the hospice. As discussed in the 

August 4, 2005 final rule, we currently 

use three size designations to present 

the impact analyses. The three 

categories are: (1) Small agencies having 

0 to 3,499 RHC days; (2) medium 

agencies having 3,500 to 19,999 RHC 

days; and (3) large agencies having 

20,000 or more RHC days. The FY 2011 

updated wage data without any BNAF 

reduction are anticipated to decrease 

payments to small and large hospices by 

0.2 percent, and to decrease payments to 

medium hospices by 0.1 percent 

(column 3); the updated wage data and 

the additional 15 percent BNAF 

reduction (for a total BNAF reduction of 

25 percent) are anticipated to decrease 

estimated payments to small and 

medium hospices by 0.7 percent, and to 

large hospices by 0.8 percent (column 

4); and finally, the updated wage data, 

the additional 15 percent BNAF 

reduction (for a total BNAF reduction of 

25 percent), and the 2.6 percent hospital 

market basket update are projected to 

increase estimated payments by 1.8 

percent for small and large hospices, 

and by 1.9 percent for medium hospices 

(column 5). 

3. Geographic Location 

Column 3 of Table 1 shows that the 

updated wage data without the BNAF 

reduction would result in a small 

reduction in estimated payments. Urban 

hospices are anticipated to experience a 

decrease of 0.2 percent, while rural 

hospices will experience a decrease of 

0.3 percent. Urban hospices can 

anticipate an increase of 1.0 percent in 

the Mountain region, of 0.5 percent in 

New England, of 0.2 percent in the 

Pacific region, and of 0.1 percent in the 

West North Central region. The 

remaining urban regions are anticipated 

to experience a decrease of 0.4 percent 

in the Middle Atlantic, East North 

Central, West South Central regions, and 

a decrease of 0.5 in the South Atlantic, 

East South Central, and Outlying 

regions. 

Column 3 shows that for rural 

hospices, Outlying regions are 

anticipated to experience no change. 

The Middle Atlantic and East South 

Central regions are anticipated to 

experience an increase of 0.1 percent, 

while the Mountain region is 

anticipated to experience an increase of 

0.8 percent. The remaining 6 rural 

regions are anticipated to experience a 

decrease ranging from 0.2 percent in the 

South Atlantic to 1.3 percent in New 

England. 

Column 4 shows the combined effect 

of the updated wage data and the 

additional 15 percent BNAF reduction 

(for a total BNAF reduction of 25 

percent) on estimated payments, as 

compared to the FY 2010 estimated 

payments using a BNAF with a 10 

percent reduction. Overall urban and 

rural hospices are both anticipated to 

experience a 0.8 percent decrease in 

payments. Mountain urban hospices are 

anticipated to see a payment increase of 

0.4 percent. All other urban hospices are 

anticipated to experience a decrease in 

payment ranging from 0.1 percent in the 

New England region to 1.0 percent in 

the Middle Atlantic, South Atlantic, 

East North Central, East South Central, 

and West South Central regions. 

Rural hospices are estimated to 

experience an increase in payments of 

0.3 percent in the Mountain region, 

while Outlying regions are estimated to 

experience no change in payments. The 

remaining rural hospices are anticipated 

to experience estimated decreases in 

payment ranging from 0.2 percent in the 

East South Central region to 1.9 percent 

in the New England region. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 25 percent), and the 

2.6 percent hospital market basket 

update on estimated payments as 

compared to the estimated FY 2010 

payments. Note that the FY 2010 

payments had a 10 percent BNAF 

reduction applied to them. Overall, 

urban and rural hospices are anticipated 

to experience a 1.8 percent increase in 

payments. Urban hospices are 

anticipated to experience an increase in 

estimated payments in every region, 

ranging from a 1.5 percent increase in 

the South Atlantic region to a 3.0 

percent increase in the Mountain region. 

Rural hospices in every region are 

estimated to see an increase in 

payments ranging from 0.7 percent in 

the New England region to 2.9 percent 

in the Mountain region. 

4. Type of Ownership 

Column 3 demonstrates the effect of 

the updated wage data on FY 2011 

estimated payments with an additional 

15 percent BNAF reduction, for a total 

BNAF reduction of 25 percent, versus 

FY 2010 estimated payments which 

included a 10 percent BNAF reduction. 

We anticipate that using the updated 

wage data would decrease estimated 

payments to voluntary (non-profit) and 

government hospices by 0.1 percent. We 

estimate a decrease in payments for 

proprietary (for-profit) hospices of 0.3 

percent. 

Column 4 demonstrates the combined 

effects of the updated wage data and of 

the additional 15 percent BNAF 

reduction (for a total BNAF reduction of 

25 percent). Estimated payments to 

voluntary (non-profit) hospices are 

anticipated to decrease by 0.7 percent, 

while government hospices are 

anticipated to experience decreases of 

0.6 percent. Estimated payments to 

proprietary (for-profit) hospices are 

anticipated to decrease by 0.8 percent. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 25 percent), and the 

2.6 percent hospital market basket 

update on estimated payments, 

comparing FY 2011 to FY 2010 (using 

a BNAF with a 10 percent reduction). 

Estimated FY 2011 payments are 

anticipated to increase by 1.9 percent 

for voluntary (non-profit) and 

government hospices, and by 1.8 

percent for proprietary (for-profit) 

hospices. 

5. Hospice Base 

Column 3 demonstrates the effect of 

using the updated wage data, comparing 

estimated payments for FY 2011 to FY 

2010 (using a BNAF with a 10 percent 

reduction). Estimated payments are 

anticipated to decrease by 0.1 percent 

for home health agency based hospices. 

Freestanding and hospital based 

providers are anticipated to experience 

a 0.2 percent decrease in estimated 

payments. Hospices based out of skilled 

nursing facilities are anticipated to 

experience a decrease in estimated 

payments of 0.5 percent. 

Column 4 shows the combined effects 

of the updated wage data and reducing 

the BNAF by an additional 15 percent 

(for a total BNAF reduction of 25 

percent), comparing estimated payments 

for FY 2011 to FY 2010 (using a BNAF 

with a 10 percent reduction). Skilled 

nursing facility based hospices are 

estimated to see a 1.1 percent decrease, 

freestanding hospices are estimated to 

see a 0.8 percent decrease, and hospital 


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and home health agency based hospices 

are each anticipated to experience a 0.7 

percent decrease in payments. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 25 percent), and the 

2.6 percent hospital market basket 

update on estimated payments, 

comparing FY 2011 to FY 2010 (using 

a BNAF with a 10 percent reduction). 

Estimated payments are anticipated to 

increase by 1.4 percent for skilled 

nursing based facilities, to increase by 

1.8 percent for freestanding and 

hospital-based providers, and to 

increase by 1.9 percent for home health 

agency based providers. 

6. Effects on Other Providers 

This notice with comment period 

only affects Medicare hospice providers, 

and therefore has no effect on other 

provider types. 

7. Effects on the Medicare and Medicaid 

Programs 

This notice with comment period 

only affects Medicare hospice providers, 

and therefore has no effect on Medicaid 

programs. As described previously, 

estimated Medicare payments to 

hospices in FY 2011 are anticipated to 

decrease by $30 million due to the 

update in the wage index data itself, and 

to decrease by $80 million due to the 

total 25 percent reduction in the BNAF. 

However, the market basket update of 

2.6 percent is anticipated to increase 

Medicare payments by $330 million. 

Therefore the total effect on Medicare 

hospice payments is estimated to be a 

$220 million increase. The market 

basket update and associated FY 2011 

payment rates will be officially 

communicated this summer through an 

administrative instruction. 

C. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

a004/a-4.pdf), in Table 2 below, we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

provisions of this notice with comment 

period. This table provides our best 

estimate of the decrease in Medicare 

payments under the hospice benefit as 

a result of the changes presented in this 

notice with comment period on data for 

3,429 hospices in our database. All 

expenditures are classified as transfers 

to Medicare providers (that is, 

hospices). 

In accordance with the provisions of 

Executive Order 12866, this notice with 

comment period was reviewed by the 

Office of Management and Budget. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: May 18, 2010. 

Marilyn Tavenner, 

Principal Deputy Administrator and Chief 

Operating Officer, Centers for Medicare & 

Medicaid Services. 

Approved: July 14, 2010. 

Kathleen Sebelius, 

Secretary. 

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[FR Doc. 2010–17622 Filed 7–16–10; 4:15 pm] 

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