39384 Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 405 and 418 

[CMS–1420–F] 

RIN 0938–AP45 

Medicare Program; Hospice Wage 

Index for Fiscal Year 2010 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule will set forth 

the hospice wage index for fiscal year 

2010. The final rule adopts a MedPAC 

recommendation regarding a process for 

certification and recertification of 

terminal illness. In addition, this final 

rule will also revise the phase-out of the 

wage index budget neutrality 

adjustment factor (BNAF), with a 10 

percent BNAF reduction in FY 2010. 

The BNAF phase-out will continue with 

successive 15 percent reductions from 

FY 2011 through FY 2016. 

DATES: Effective Date: These regulations 

are effective on October 1, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Randy Throndset, (410) 786–0131. 

Katie Lucas, (410) 786–7723. 

SUPPLEMENTARY INFORMATION: 

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 Urban and Rural 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 Proposed Rule and 

Analysis of and Responses to Public 

Comments 

A. FY 2010 Hospice Wage Index 

1. Background 

2. Areas without Hospital Wage Data 

3. FY 2010 Wage Index with Reduced 

Budget Neutrality Adjustment Factor 

(BNAF) 

4. Effects of Phasing out the BNAF 

B. Change to the Physician Certification 

and Recertification Process, § 418.22 

C. Update of Covered Services, § 418.202(f) 

D. Clarification of Payment Procedures for 

Hospice Care, § 418.302 

E. Clarification of Intermediary 

Determination and Notice of Amount of 

Program Reimbursement, § 405.1803 

F. Technical and Clarifying Changes 

III. Comments on Other Policy Issues 

A. Recertification Visits, § 418.22 

B. Hospice Aggregate Calculation 

C. Hospice Payment Reform 

IV. Update on Additional Hospice Data 

Collection 

V. Provisions of the Final Regulations 

VI. Collection of Information Requirements 

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. 

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 

Sections 1812(d), 1813(a)(4), 

1814(a)(7), 1814(i) and 1861(dd) of the 

Act, and 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 

that the wage index for all labor markets 

in which Medicare-participating 

hospices do business be established 

using the most current hospital wage 

data available, including any changes by 

Office of Management and Budget 

(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 49026), the 

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 finalized a 1-year 

transition policy using a 50/50 blend of 

the CBSA-based wage index values and 

the MSA-based wage index values for 

FY 2006. The one-year transition policy 

ended on September 30, 2006. For FY 

2007, FY 2008, and FY 2009, 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 promulgating a new 

methodology for calculating the hospice 

wage index based on the 

recommendations of the negotiated 

rulemaking Committee, using a hospital 

wage index rather than continuing to 

use the Bureau of Labor Statistics (BLS) 

data. The committee statement was 


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Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 39385 

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 wage index 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 this 

final rule, that means 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 

factor). 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 BLS-based wage index 

instead of the updated pre-floor, prereclassified 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 hospice wage index is updated 

annually. Our most recent update, 

published in the Federal Register (73 

FR 46464) on August 8, 2008, set forth 

updates to the hospice wage index for 

FY 2009. That update also finalized a 

provision for a 3-year phase-out of the 

BNAF, which was applied to the wage 

index values. As discussed in detail in 

section I.B.1 below, the update was later 

revised with the February 17, 2009 

passage of the American Recovery and 

Reinvestment Act (ARRA), which 

eliminated the BNAF phase-out for FY 

2009. 

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 BNAF or 

application of the hospice floor 

calculation 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 

adjusted by the BNAF. Pre-floor, prereclassified hospital wage index values 

below 0.8 are adjusted by the greater of: 

(1) The hospice BNAF; or (2) the 

hospice 15 percent floor adjustment, 

which is a 15 percent increase subject 

to a maximum wage index value of 0.8. 

For example, if County A has a prefloor, pre-reclassified hospital wage 

index (raw wage index) value of 0.4000, 

we would perform the following 

calculations using the BNAF (which for 

this example is 0.060988; we added 1 to 

simplify the calculation) 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 BNAF: (0.4000 × 1.060988 = 

0.4244). 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the hospice 15 percent floor 

adjustment: (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 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 non-labor portion of the 

payment rates is as follows: for Routine 

Home Care, 31.29 percent; for 

Continuous Home Care, 31.29 percent; 

for General Inpatient Care, 35.99 

percent; and for Respite Care, 45.87 

percent. 

The August 8, 2008 FY 2009 Hospice 

Wage Index final rule (73 FR 46464) 

promulgated 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 FY 2009 rule, 

the American Recovery and 

Reinvestment Act of 2009 (P.L. 111–5) 

(ARRA) eliminated the BNAF reduction 

for FY 2009. Specifically, division B, 

section 4301(a) of ARRA prohibited the 

Secretary from beginning the phasingout or eliminating of 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. We did so in an 

administrative instruction to our 

intermediaries, which was issued as 

Change Request (CR) #6418 (Transmittal 

#1701, dated 3/13/2009). CR 6418 is 

available on the Web at http:// 

www.cms.hhs.gov/Hospice/ 

Transmittals/itemdetail.asp?filterType=

none&filterByDID=0&sortByDID=1&sort

Order=descending&itemID=

CMS1222448&intNumPerPage=10. 

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, as 

set out in the August 8, 2008 Hospice 

Wage Index final rule. The provision in 

the ARRA that eliminated the FY 2009 

BNAF reduction provided the hospice 

industry additional time to prepare for 

the FY 2010 75 percent BNAF reduction 

and the FY 2011 BNAF elimination. 

Therefore, in accordance with the 

August 8, 2008 FY 2009 Hospice Wage 

Index final rule, the rationale presented 

in that final rule, and consistent with 

section 4301(a) of ARRA, in our 

proposed rule we said we planned to 

reduce the BNAF by 75 percent in FY 

2010 and ultimately eliminate the BNAF 

in 2011. We accepted comments on the 

BNAF reductions. 

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 OMB to the 

definitions of MSAs, which now 

include CBSA designations. The August 

4, 2005 hospice wage index final rule 

(70 FR 45130) set forth the adoption of 

the changes discussed in the OMB 

Bulletin No. 03–04 (June 6, 2003), 


jlentini on DSKJ8SOYB1PROD with RULES2
39386 Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 

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. 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 considered rural in 

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

The recommendations to adjust 

payments to reflect local differences in 

wages are codified in § 418.306(c) of our 

regulations; however there had been no 

explicit reference to § 412.64 in 

§ 418.306(c) before the promulgation 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 

promulgation 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. Litchfield 

County, CT and Merrimack County, NH 

are considered rural areas for hospital 

IPPS purposes in accordance with 

§ 412.64. Effective October 1, 2008, 

Litchfield County, CT was no longer 

considered part of urban CBSA 25540 

(Hartford-West Hartford-East Hartford, 

CT), and Merrimack County, NH was no 

longer considered part of urban CBSA 

31700 (Manchester-Nashua, NH). 

Rather, these counties are now 

considered to be rural areas within their 

respective States under the hospice 

payment system. When the pre-floor, 

pre-reclassified 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. 

The only affected CBSA is 25980, 

Hinesville-Fort Stewart, Georgia. 

Under the CBSA labor market areas, 

there are no hospitals in rural locations 

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 to 

areas lacking hospital wage data in rural 

Massachusetts and rural Puerto Rico. 

In the FY 2008 hospice wage index 

final rule (72 FR 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, and again in 

FY 2009, 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 hospice 

wage index final rule (72 FR 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 


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hospital wage index based on the prefloor, 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 and FY 2009, we 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 hospice wage index 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 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 

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 pre-floor, pre-reclassified 

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 are located 

(see the FY 2008 IPPS final rule with 

comment period (72 FR 47317 through 

47320)). We are continuing to use the 

pre-floor, pre-reclassified hospital wage 

data as a basis to determine the hospice 

wage index values for FY 2010 because 

hospitals and hospices both compete in 

the same labor markets, and therefore, 

experience similar wage-related costs. 

We note that the use of pre-floor, prereclassified hospital (IPPS) wage data, 

used to derive the FY 2010 hospice 

wage index values, reflects the 

application of our policy to use that data 

to establish the hospice wage index. The 

FY 2010 hospice wage index values 

presented in this notice were computed 

consistent with our pre-floor, prereclassified hospital (IPPS) wage index 

policy (that is, our historical policy of 

not taking into account IPPS geographic 

reclassifications in determining 

payments for hospice). As finalized 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, the FY 2009 hospice wage index 

values for the following CBSAs were 

affected by this policy: Boston-Quincy, 

MA (CBSA 14484), Providence-New 

Bedford-Falls River, RI–MA (CBSA 

39300), Chicago-Naperville-Joliet, IL 

(CBSA 16974), and Lake CountyKenosha 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 percentage increase in the hospital 

market basket index, minus 1 

percentage point. However, neither the 

BBA nor subsequent legislation 

specified alteration to the hospital 

market basket adjustment to be used to 

compute hospice payments for fiscal 

years beyond 2002. 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. In the 

FY 2010 Inpatient Prospective Payment 

System/Rate Year (RY) 2010 Long Term 

Care Hospital Prospective Payment 

System proposed rule (74 FR 24154), we 

proposed to rebase and revise the 

inpatient hospital operating 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. Hospices 

determine their payments by applying 

the hospice wage index in this final rule 

to the labor portion of the published 

hospice rates. 

II. Provisions of the Proposed Rule and 

Analysis of and Responses to Public 

Comments 

On April 24, 2009 we published a 

proposed rule in the Federal Register 

(74 FR 18912) that set forth the 

proposed hospice wage index for FY 

2010. We received 729 timely items of 

correspondence. In general, those who 

commented strongly opposed the policy 

to reduce the BNAF adjustment in 

hospice and were supportive of 

modifications to the hospice 

certification and recertification of the 

terminal illness process. An in-depth 

summary of the public comments and 

our responses to those comments are set 

forth under the appropriate headings. 

A. FY 2010 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 final rule, we will use the prefloor, pre-reclassified hospital wage 

index, based solely on the CBSA 

designations, as the basis for 

determining wage index values for the 

FY 2010 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 will 

again use the pre-floor and prereclassified 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, 

pre-reclassified hospital wage index 

data, as a basis for the hospice wage 

index, results in the appropriate 


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adjustment to the labor portion of the 

costs. For the FY 2010 update to the 

hospice wage index, we will continue to 

use the most recent pre-floor, prereclassified hospital wage index 

available at the time of publication. 

Comment: A commenter noted that 

the hospital-based wage index has 

undergone multiple changes over the 

past 10 years and that providers were 

not invited to provide comment for CMS 

to consider when formalizing these 

changes. This commenter stated that 

CMS previously cited the BNAF as a 

mitigating factor that offset some of the 

adverse impacts on hospice of changes 

in the hospital wage index. A few 

commenters wrote that the existence of 

exceptions to the hospital wage index 

system in the form of reclassifications 

demonstrates the unfairness and 

inadequacy of the hospital-based wage 

index system, and one suggested it puts 

hospices at a disadvantage in attracting 

and retaining employees. One 

commenter suggested that limits be 

established on the allowable annual 

changes in index values from one year 

to the next to achieve wage index 

stability. Several commenters 

mentioned that a 2007 MedPAC report 

on the hospital wage index suggested 

that CMS repeal the existing hospital 

wage index and develop a new one. The 

commenter stated that MedPAC 

recommended that CMS evaluate the 

use of the revised wage index in other 

Medicare payment systems, which 

includes hospice. 

Response: The pre-floor, prereclassified hospital wage index was 

adopted in 1998 as the wage index from 

which the hospice wage index is 

derived. The Negotiated Rulemaking 

Committee considered several wage 

index options: (1) Continuing with 

Bureau of Labor Statistics data; (2) using 

updated hospital wage data; (3) using 

hospice-specific data; and (4) using data 

from the physician payment system. 

The Committee determined that the prefloor, pre-reclassified hospital wage 

index was the best option for hospice. 

The pre-floor, pre-reclassified hospital 

wage index is updated annually, and 

reflects the wages of highly skilled 

hospital workers. 

We agree that the hospital-based wage 

index has undergone some changes in 

the past 10 years. Those changes were 

implemented through rulemaking, 

which provided the public an 

opportunity to provide comments. 

Therefore, we disagree that hospice 

providers have not had an opportunity 

to comment on hospital wage index 

changes. 

The reclassification provision 

provided at section 1886(d)(10) of the 

Act is specific to hospitals. We believe 

the use of the most recent available prefloor and pre-reclassified hospital wage 

index results in the most appropriate 

adjustment to the labor portion of 

hospice costs as required in 42 CFR 

418.306(c). Additionally, use of the prefloor, pre-reclassified hospital wage data 

avoids further reductions in certain 

rural statewide wage index values that 

result from reclassification. We also 

note that the wage index adjustment is 

based on the geographic area where the 

beneficiary is located, and not where the 

hospice is located. 

We continue to believe that the prefloor, pre-reclassified hospital wage 

index, which is updated yearly and is 

used by many other CMS payments 

systems including home health, 

appropriately accounts for geographic 

variances in labor costs for hospices. 

Home health agencies and hospices are 

Medicare’s only home-based benefits, 

and home health agencies and hospices 

share labor pools. Home health agencies 

experience the same wage index 

fluctuations, but do not receive an 

adjustment such as the BNAF. We 

believe that in the interest of parity, 

both home-based benefits should use a 

hospital-based wage index without a 

BNAF applied. In the future, when 

looking into reforming the hospice 

payment system, we will consider wage 

index alternatives, to include those 

recommended by MedPAC. 

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 final rule. Beginning in FY 

2006, we adopted a policy that, for 

urban labor markets without an urban 

hospital from which a pre-floor, prereclassified hospital wage index can be 

derived, all of the urban CBSA pre-floor, 

pre-reclassified hospital wage index 

values within the State would be used 

to calculate a statewide urban average 

pre-floor, 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, Georgia. We 

will to continue this policy for FY 2010. 

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 final rule. In FY 2010, 

Dukes and Nantucket Counties are the 

only areas in rural Massachusetts which 

are affected. We are again applying this 

methodology for imputing a rural prefloor, pre-reclassified hospital wage 

index for those rural areas without rural 

hospital wage data in FY 2010. 

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

this final rule, we do not believe that 

this policy is appropriate for Puerto 

Rico. For FY 2010, we are continuing to 

use the most recent pre-floor, prereclassified hospital wage index value 

available for Puerto Rico, which is 

0.4047. This pre-floor, pre-reclassified 

hospital wage index value will then be 

adjusted upward by the hospice 15 

percent floor adjustment in the 

computing of the FY 2010 hospice wage 

index. 

We received no comments on this 

section of the proposed rule. 

3. FY 2010 Wage Index With a Reduced 

Budget Neutrality Adjustment Factor 

(BNAF) 

The hospice wage index set forth in 

this final rule will be effective October 

1, 2009 through September 30, 2010. We 

are not incorporating any modifications 

to the hospice wage index methodology. 

In accordance with our regulations at 42 

CFR 418.306(c) 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 final rule, the FY 2009 hospital 

wage index was the most current 

hospital wage data available for 

calculating the FY 2010 hospice wage 

index values. We used the FY 2009 prefloor, pre-reclassified hospital wage 

index data for this calculation. 

As noted above, for FY 2010, 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 2005 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 8, 2008 FY 2009 Hospice 

Wage Index final rule (73 FR 46464). 

The August 8, 2008 FY 2009 Hospice 

Wage Index final rule finalized a 

provision to phase out the BNAF over 

3 years, starting with a 25 percent 

reduction in the BNAF in FY 2009, an 


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additional 50 percent reduction for a 

total of a 75 percent reduction in FY 

2010, and complete phase out in FY 

2011. However, on February 17, 2009, 

the President signed ARRA (Pub. L. 

111–5); Section 4301(a) of ARRA 

eliminated the BNAF phase-out for FY 

2009. Therefore, in an administrative 

instruction (Change Request 6418, 

Transmittal 1701, dated 3/13/2009) 

entitled ‘‘Revision of the Hospice Wage 

Index and the Hospice Pricer for FY 

2009,’’ we instructed CMS contractors to 

use the revised FY 2009 hospice Pricer, 

which included a revised hospice wage 

index to reflect a full (unreduced) BNAF 

rather than the 25 percent reduced 

BNAF promulgated in the August 8, 

2008 FY 2009 Hospice Wage Index final 

rule. 

While ARRA eliminated the BNAF 

phase-out for FY 2009, it did not change 

the 75 percent reduction in the BNAF 

for FY 2010, or the complete phase-out 

of the BNAF in FY 2011 that was 

previously promulgated in the August 8, 

2008 FY 2009 Hospice Wage Index final 

rule. 

The history of the BNAF and a 

detailed discussion of the events which 

led to its application to the hospice 

wage index were included in the August 

8, 2008 FY 2009 Hospice Wage Index 

final rule. We proposed and finalized 

the BNAF reduction in that final rule 

based on the following rationale. 

First, the original purpose of the 

BNAF was to prevent reductions in 

payments to the majority of hospices 

whose wage index was based on the 

original hospice wage index, which was 

artificially high due to flaws in the 1981 

BLS data. Additionally, the BNAF was 

adopted to ensure that aggregate 

payments made to the hospice industry 

would not be decreased or increased as 

a result of the wage index change. While 

incorporating a BNAF into hospice wage 

indices could be rationalized in 1997 as 

a way to smooth the transition from an 

old wage index to a new one, since 

hospices have had plenty of time to 

adjust to the then new wage index, it is 

difficult to justify maintaining in 

perpetuity a BNAF which was in part 

compensating for artificially high data 

to begin with. 

Second, the new wage index adopted 

in 1997 resulted in increases in wage 

index values for hospices in certain 

areas. The BNAF applies to hospices in 

all areas. Thus, hospices in areas that 

would have had increases without the 

BNAF received an artificial boost in the 

wage index for the past 11 years. We 

believe that continuation of this excess 

payment can no longer be justified. 

Third, an adjustment factor that is 

based on 24-year-old wage index values 

is not in keeping with our goal of using 

a hospice wage index that is as accurate, 

reliable, and equitable as possible in 

accounting for geographic variation in 

wages. We believe that those goals can 

be better achieved by using the prefloor, pre-reclassified hospital wage 

index, without the outdated BNAF, 

which would be consistent with other 

providers. For instance, Medicare 

payments to home health agencies, that 

utilize a similar labor mix, are adjusted 

by the pre-floor, pre-reclassified 

hospital wage index without any budget 

neutrality adjustment. We believe that 

using the pre-floor, pre-reclassified 

hospital wage index provides a good 

measure of area wage differences for 

both these home-based reimbursement 

systems. 

Fourth, in the 13 years since concerns 

about the impact of switching from an 

old to a new wage index were voiced, 

the hospice industry and hospice 

payments have grown substantially. 

Hospice expenditures in 2006 were $9.2 

billion, compared to about $2.2 billion 

in 1998. Aggregate hospice expenditures 

are increasing at a rate of about $1 

billion per year. MedPAC reports that 

expenditures are expected to grow at a 

rate of 9 percent per year through 2015, 

outpacing the growth rate of projected 

expenditures for hospitals, skilled 

nursing facilities, and physician and 

home health services. We believe that 

this growth in Medicare spending for 

hospice indicates that the original 

rationale of the BNAF, to cushion the 

impact of using the new wage index, is 

no longer justified. These spending 

growth figures also indicate that any 

negative financial impact to the hospice 

industry as a result of eliminating the 

BNAF is no longer present, and thus the 

need for a transitional adjustment has 

passed. 

Fifth, 13 years ago the industry also 

voiced concerns about the negative 

financial impact on individual hospices 

that could occur by adopting a new 

wage index. In August 1994 there were 

1,602 hospices; currently there are 3,328 

hospices. Clearly any negative financial 

impact from adopting a new wage index 

in 1997 is no longer present, or we 

would not have seen this growth in the 

industry. The number of Medicarecertified hospices has continued to 

increase, with a 26 percent increase in 

the number of hospice providers from 

2001 to 2005. This ongoing growth in 

the industry also suggests that phasing 

out the BNAF would not have a negative 

impact on access to care. Therefore, for 

these reasons, we believe that 

continuing to apply a BNAF for the 

purpose of mitigating any adverse 

financial impact on hospices or negative 

impact on access to care is no longer 

necessary. In the April 24, 2009 

proposed rule, we stated that we 

intended to continue the phase-out of 

the BNAF with a 75 percent reduction 

in FY 2010 and complete elimination in 

FY 2011. 

Comment: All but one of those who 

commented on the BNAF were opposed 

to the BNAF phase-out. One commenter 

felt that any reductions in payment, 

such as the BNAF, need to be in ‘‘sync’’ 

with overall health care reform as it 

relates to hospice. Others felt that any 

phase-out should be delayed to see if or 

how the BNAF fits into future hospice 

payment reform. Another commenter 

noted inconsistent levels of per-capita 

health care spending across states, 

particularly at the end of life. 

One commenter believed that CMS 

proposed to reduce the BNAF by 75 

percent in the FY 2010 hospice wage 

index proposed rule, and believes that 

this proposal is contrary to the intent of 

Congress. This commenter believed that 

the provision in ARRA which 

eliminated the FY 2009 25 percent 

BNAF reduction, showed that Congress 

intended CMS to delay the first year of 

the three-year BNAF phase-out to begin 

the 25 percent reduction of the BNAF in 

FY 2010 instead of FY 2009. While this 

commenter strongly recommended that 

CMS withdraw its proposal to phase out 

the BNAF, he also suggested that at a 

minimum we should spread the phase 

out over a 3-year period, starting in FY 

2010 with a 25 percent reduction. A 

number of commenters also suggested 

different phase-out options from the 

current policy that we described in the 

proposed rule. One suggested a 7-year 

phase-out, with a 10 percent reduction 

in FY 2010, and an additional 15 

percent reduction over each of the 

following 6 fiscal years. Another 

suggested a 4-year phase-out, at 25 

percent per year, starting in FY 2010. 

Another suggested that we phase out the 

BNAF over 2 years, at 50 percent per 

year, starting in FY 2010. Another 

commenter suggested an even phase-out 

over 3 years starting in FY 2010. Several 

commenters noted that a more gradual 

phase-out would minimize the impact 

on hospices given the economic 

downturn, and the increased costs that 

hospices would incur in complying 

with the new CoPs, which were 

published on June 5, 2008 (73 FR 32088) 

and effective December 2, 2008; and 

with the new data collection 

requirements. 

Response: The FY 2010 hospice wage 

index proposed rule did not re-propose 

the 75 percent BNAF reduction, though 

we did accept comments on the BNAF 

reductions. Instead, we promulgated the 


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BNAF reductions in the FY 2009 

hospice wage index final rule. At that 

time, we announced a 25 percent 

reduction in FY 2009, an additional 50 

percent reduction for a total of 75 

percent in FY 2010, and complete 

elimination of the BNAF in FY 2011. 

ARRA eliminated the BNAF reduction 

in FY 2009, but the bill’s language did 

not address the reduction in FY 2010 

and the elimination of the BNAF in FY 

2011 that were finalized in the FY 2009 

hospice wage index final rule. Though 

the BNAF phase-out was finalized in the 

FY 2009 rule, we accepted comments on 

it in this rule. While we explained in the 

FY 2010 hospice wage index proposed 

rule that ARRA’s delay allowed 

additional time to prepare for the BNAF 

reduction, ARRA’s delay was not our 

rationale for the 75 percent reduction. 

Our rationale for the BNAF phase-out 

was presented in the FY 2009 hospice 

wage index proposed and final rules 

and was discussed above. 

We appreciate the commenters’ 

concerns about how the BNAF phaseout would fit into the larger scenario of 

health care reform. Health care reform is 

a major agenda item for the 

Administration, and may affect the 

Medicare hospice benefit. We are not 

clear what the commenter is referring to 

regarding inconsistent health care 

spending by state, and believe this 

comment is outside the scope of our 

rule. While we cannot speak to the 

various health care reform measures 

under discussion in Congress, we 

continue to believe that the BNAF is an 

outdated adjustment, for the reasons 

previously mentioned in this section. 

However, we concur with the 

commenter that we should evaluate the 

impact of the BNAF reduction in the 

context of how this type of adjustment 

will fit into our plans for future hospice 

payment reform. 

A more gradual phase-out provides 

additional opportunity to evaluate the 

impact of the BNAF reduction in the 

context of how this type of adjustment 

will fit into hospice payment reform. As 

we describe in section IV of this final 

rule, we are moving forward with our 

plans to collect additional data from 

hospices to advance our goals for 

increasing the accuracy of hospice 

payments. This longer BNAF phase-out 

allows us the opportunity to more 

thoroughly assess the impact of iterative 

BNAF reductions while we are 

performing our hospice payment reform 

analyses. As such, we believe that a 

more gradual phase-out would be 

appropriate at this time. Therefore, in 

response to public comments 

recommending this course of action, we 

are finalizing a phase-out of the BNAF 

over 7 years, with a 10 percent 

reduction in FY 2010, and additional 15 

percent reduction for a total of 25 

percent in FY 2011, an additional 15 

percent reduction for a total 40 percent 

in FY 2012, an additional 15 percent 

reduction for a total of 55 percent in FY 

2013, an additional 15 percent 

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. We will continue to evaluate 

the impact of the BNAF. To move 

reform forward, we look to the industry 

for their participation (for example, in 

providing technical assistance and/or 

offering to serve as pilot or 

demonstration sites in testing a new 

payment system). We reserve the right 

to revisit the BNAF phase-out should 

plans for hospice payment reform be 

delayed, or for other reasons the 

Secretary deems appropriate. 

Comment: One commenter wrote in 

support of the BNAF reduction, citing 

possibly fraudulent behaviors by a 

specific hospice, and citing what the 

commenter believed to be inappropriate 

spending by that hospice, including 

trips to Las Vegas and dinners at fivestar restaurants. 

Response: We appreciate the support 

for the BNAF phase-out, but note that 

we proposed and finalized the phaseout based on the rationale presented 

earlier in this section. We cannot 

comment on the discretionary spending 

patterns of individual hospices. We 

have forwarded the comment to our 

Program Integrity group for review and 

possible action. 

Comment: A commenter believes that 

the BNAF phase-out was advanced to 

meet short-term budget goals, without 

collecting and analyzing data to 

determine if substantive changes to the 

hospice payment system were needed, 

and how any proposed changes would 

affect hospice programs and 

beneficiaries. He added that MedPAC 

had made recommendations related to 

reform of the hospice payment system, 

and that MedPAC had suggested that 

those changes be undertaken in a budget 

neutral fashion, with a transition period, 

and that the changes would require 

Congressional action. The commenter 

wrote that MedPAC had pointed out the 

lack of sufficient data to accurately 

model payment changes, and suggested 

that those changes could not be 

implemented before 2013 at the earliest. 

The commenter felt that the payment 

reduction resulting from the BNAF 

reduction would disproportionately 

impact some segments of the hospice 

community more than others and that 

CMS did not have the data to determine 

whether improvements in the rate 

structure could be made, and what such 

changes should look like. The 

commenter felt that implementing an 

across-the-board cut is inappropriate 

and unfounded. Some asked that no 

reduction in the BNAF occur until a full 

review of the data related to the cost of 

providing services is completed. 

Finally, one commenter suggested we 

do a full study of the utility and efficacy 

of hospice. 

Response: MedPAC’s discussion of 

payment reform refers to an evaluation 

of and possible change to the entire 

hospice payment system. We agree with 

MedPAC’s assessment that we do not 

have sufficient data yet to reform the 

entire hospice payment system, which 

would require legislative authority to 

do, and we are in the process of 

collecting the data that MedPAC has 

recommended. The BNAF phase-out 

was not included in MedPAC’s 

discussion on reform of the entire 

hospice payment system. We proposed 

and finalized the policy to phase out the 

BNAF to remove an outdated 

adjustment from the wage index, to 

increase accuracy of payments, and to 

bring about parity with the home health 

wage index, since both home health 

agencies and hospices compete in the 

same labor market. 

The rationale for the BNAF phase-out 

in the FY 2009 proposed and final rules 

is set out in section II.A.3 of this final 

rule. Discussion of the regulatory and 

economic impacts of the BNAF phaseout were set out in the FY 2009 

proposed and final rules, in the FY 2010 

proposed rule, and are in this final rule. 

Comment: Several commenters wrote 

that CMS should use negotiated 

rulemaking to collaborate fully with 

hospice stakeholders before reducing or 

eliminating the BNAF. Some 

commenters noted that there is no 

requirement to phase out the BNAF, and 

that the negotiated rulemaking was not 

intended to be temporary or transitional. 

Several suggested that the BNAF should 

not be phased out without going 

through a negotiated rulemaking 

process. One commenter noted that 

CMS never suggested that the BNAF had 

ever been calculated inappropriately or 

that it was not achieving its intended 

goal of keeping total hospice payments 

under the new wage index the same as 

they would have been under the old 

BLS wage index. This commenter wrote 

that since the BNAF is achieving its 

intended purpose, CMS has no legal 

requirement or policy reason to 

eliminate it. This commenter also wrote 

that CMS insists on budget neutrality in 

all of its payment systems, and therefore 


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the public expected the BNAF 

implemented by the Committee to 

continue. 

Other commenters stated that while 

CMS asserted that the purpose of the 

BNAF was to smooth the transition from 

an outdated BLS-based wage index to 

the hospital-based wage index in 1998, 

the language in several payment rules 

suggested that the BNAF was not a time 

limited adjustment and was to be 

applied annually, during and after the 

transition to the hospital-based wage 

index. A few commenters noted that 

hospices have adjusted to the BNAF as 

an integral part of the wage index. A 

commenter said CMS’ rationale for 

phasing out the BNAF suggested that 

eliminating the BNAF would restore 

fairness to the hospice wage index, 

when in reality no wage index 

methodology is perfect. 

Response: As we stated in the FY 

2009 proposed and final rules, we 

continue to believe that the hospice 

wage index negotiating committee 

intended the BNAF to mitigate the 

negative financial impact of the 1998 

hospice wage index change. We 

continue to believe that because of the 

growth in the industry and the amount 

of time that has passed since the wage 

index change, the rationale for 

maintaining the BNAF is no longer 

justified and it is time for a policy 

change. In addition, from a parity 

perspective, we believe that a pre-floor, 

pre-reclassified hospital wage index is 

appropriate for use in adjusting rates for 

geographic variances in both of our 

home-based benefits, hospice and home 

health. Nothing in our data analysis has 

shown us that hospice labor costs differ 

substantially from home health labor 

costs. Therefore, we believe we cannot 

justify the 6 percent increase in the 

hospice wage index and the 

corresponding approximate 4 percent 

increase in aggregate payments as a 

result of the BNAF. We believe that the 

BNAF was originally put into place 

protect beneficiary access to hospice 

care. We believe the Negotiated 

Rulemaking Committee was primarily 

concerned about those areas of the 

country that would see their payments 

dramatically reduced as a result of the 

wage index change. The Committee was 

concerned that the payment reductions 

might affect the viability of hospices in 

these areas, thus ultimately risking 

access to care. The Committee also 

intended that aggregate payments to 

hospices not be reduced as a result of 

the wage index change. While we agree 

with the commenter that our 1998 

regulation describes that the BNAF be 

applied during and after the transition 

to the new wage index, we also note that 

that same regulation describes that in 

the event that we decide to change this 

methodology, we would propose to do 

so in rulemaking. In the beginning of 

this section of the FY 2010 hospice 

wage index final rule, we cited our 

rationale from the FY 2009 hospice 

wage index final rule as to why we 

believe a policy change was warranted. 

However, as noted previously, we are 

phasing out the BNAF more gradually, 

over a 7 year period. We are reducing 

the BNAF in FY 2010 by 10 percent, and 

then reducing it further by an additional 

15 percent for each of the next 6 years, 

so that it is fully phased-out by FY 2016. 

We will evaluate the impact of the 

BNAF reduction in the context of how 

this type of adjustment will fit into our 

plans for future hospice payment 

reform. As such, we believe that a more 

gradual phase-out is appropriate at this 

time. 

As previously noted, the decision to 

transition from the BLS-based wage 

index to the hospital-based wage index 

was a long process. In the October 14, 

1994 proposed rule (59 FR 52130), we 

noted that both CMS (formally HCFA) 

and industry projections indicated that 

most hospices would have their wage 

indices lowered if a new wage index 

were based on unadjusted hospital data. 

The preamble of the final rule stated 

that, ‘‘During the discussions 

preliminary to developing a new wage 

index, the industry voiced concerns 

over the adverse financial impact of a 

new wage index on individual hospices 

and a possible reduction in overall 

Medicare hospice care payments’’ (59 

FR 52130). There were also concerns 

that access to hospice care could be 

affected. We noted that as a result of the 

impact of the lower payments to 

hospices in the aggregate, the new wage 

index would have to be at least budget 

neutral (59 FR 52131). The Committee 

Statement of April 13, 1995, which was 

published in a notice on November 29, 

1995 (60 FR 61265), said that we would 

apply a factor to achieve budget 

neutrality, and noted that budget 

neutrality meant that aggregate 

Medicare hospice payments using the 

new hospital-based wage index would 

have to equal estimated payments that 

would have been made under the 

original hospice wage index. 

We disagree with the commenter who 

wrote that Medicare insists on budget 

neutrality in all of its payment systems, 

and therefore we should keep the 

BNAF. The commenter is correct that in 

many (but not all) of our other payment 

systems, we apply a budget neutrality 

adjustment each year when a wage 

index change occurs to ensure that 

aggregate payments made using the new 

wage index are the same as payments 

made using the prior year’s wage index. 

A wage index is essentially an index of 

wage weights which are relative to 1, 

reflecting relative geographic differences 

in labor costs. Because the hospital 

wage data are updated each year, and 

these are the usual data upon which our 

wage indices are built, the year-to-year 

change in total Medicare benefit 

payments is minor. The yearly update 

enables the relative weight values of the 

wage indices to reflect current 

geographic wage fluctuations. The 

hospice budget neutrality adjustment 

factor differs from these budget 

neutrality adjustments in a significant 

way. Because the original, 1981 Bureau 

of Labor Statistics based hospice wage 

index wasn’t updated since it was first 

created, the relative weights of the wage 

index values became inaccurate over the 

years, ultimately resulting in inaccurate 

hospice payments in most areas of the 

country, and erroneously low payments 

in other areas of the country. By the 

mid-1990s the weights were so distorted 

and inaccurate, that we were paying 

hospices more in the aggregate than we 

would have paid had a wage index 

which was reflective of more current 

geographic wage variances in labor costs 

been used, such as the yearly updated 

hospital wage index. This inaccuracy 

resulted in an unintended increase in 

payments. By continuing to apply the 

BNAF in perpetuity, we are no longer 

simply adjusting hospice payments for 

differences in geographic variances in 

labor costs; rather we are perpetrating 

artificially-inflated payments associated 

with inaccurate wage weights. 

As we described in the rationale 

provided at the beginning of this 

section, we do not believe that the 

Committee foresaw the tremendous 

growth in the hospice industry that has 

occurred in the past 12 years. As a result 

of this growth, the surge of new entrants 

into the industry over the past 12 years 

has benefited from this adjustment. We 

continue to believe that the Committee 

adopted the BNAF to help existing 

hospices transition to the 1998 wage 

index change. We note that in the late 

1990’s almost all hospices were not-forprofit. Impact analysis performed by 

participants in the negotiating process 

showed pockets of the country where 

the migration to the new hospital wage 

index would result in wage index values 

dramatically decreasing nearly 30 

percent during the 3-year transition. The 

Committee was clearly concerned about 

hospice viability in those areas of the 

country, with a corresponding concern 

about access to care. We continue to 

believe that the unique BNAF 


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methodology, coupled with the 3-year 

transition period, served to address 

those concerns. It also continues to be 

our belief that because of the growth in 

the number of hospices, and the growth 

in the beneficiaries served that has 

occurred during the last decade, the 

Committee’s goal to ensure that access 

to hospice care not be reduced as a 

result of the wage index change has 

been achieved. Therefore, we believe 

that this unique methodology for 

achieving budget neutrality has served 

its purpose and is no longer necessary, 

and we are phasing out this adjustment. 

We agree with the commenter that the 

language in the August 8, 1997 final rule 

indicated that the BNAF would be 

applied during and after the transition 

period (62 FR 42862), which we believe 

we have done; however, this language 

did not imply that the BNAF could 

never be changed or eliminated. That 

same final rule clearly stated that if it 

became necessary to change the wage 

index methodology, we would do so 

through notice and comment 

rulemaking (62 FR 42863). 

Comment: A commenter wrote that 

CMS tried to diminish the size of the 

BNAF reduction by noting that they will 

be ‘‘mitigated’’ by market basket 

updates. The commenter said that 

market basket updates are essentially 

cost of living increases intended to keep 

providers’ payments in line with 

increased costs. The commenter felt that 

by doing away with the BNAF through 

a regulatory process, CMS is essentially 

eliminating the hospice payment 

update, and then making a further cut, 

and making an end-run around the 

congressionally-established payment 

system for hospice services. He added 

that CMS had implemented the BNAF 

phase-out without seeking input from 

knowledgeable stakeholders, including 

Congress, and without relying on a 

deliberative and inclusive process, over 

a short three-month timeframe. 

Response: The commenter appears to 

suggest that, because Congress has 

determined that hospice payment rates 

are to be increased each year by the 

market basket update factor, it therefore 

follows that hospice payments must 

increase each year by the same 

percentage. We disagree, and believe 

that the commenter is looking at the 

market basket update alone, when 

instead Medicare payments to hospices 

are affected by other things—including 

the hospice wage index. Calculating the 

hospice payment rates for the four types 

of hospice services is merely the first 

step in determining how much hospices 

will be paid for services in any 

particular year. Once those rates are 

determined (by taking the prior year’s 

rates and adjusting them by the market 

basket update factor), we apply the 

hospice wage index to the labor 

component of the payment rate. The 

values in that index change from year to 

year based on data CMS collects 

regarding hospital wages in different 

labor markets. Some hospices end up 

being paid at a rate lower than what 

they would have received based solely 

on the market basket update factor, 

while some end up being paid at a 

higher rate. These fluctuations occur 

every year, and they would continue to 

occur regardless of whether or not we 

phase out the BNAF. By requiring the 

hospice payment rates to be adjusted 

annually using the market basket update 

factor, Congress was not guaranteeing 

that hospices, individually or in the 

aggregate, would always receive an 

identical adjustment in payments. On 

the contrary, although Congress imposes 

a statutory cap on payments and sets the 

payment rates for the four categories of 

hospice services (based on the market 

basket update factor), it otherwise gives 

the Secretary the exceedingly broad 

authority to develop (and revise as 

necessary) the administrative tools used 

to calculate actual hospice payments 

under Medicare. See Section 

1814(i)(1)(A) of the Act (‘‘[T]he amount 

paid to a hospice program with respect 

to hospice care for which payment may 

be made under this part shall be an 

amount equal to the costs which are 

reasonable and related to the cost of 

providing hospice care or which are 

based on such other tests of 

reasonableness as the Secretary may 

prescribe in regulations * * * ’’). 

Following the commenter’s reasoning, 

the Secretary would be prohibited from 

taking any action that would result in 

hospices receiving less than what they 

would receive if the adjusted rates (i.e., 

with the market basket update factor 

applied) were applied with no further 

modification. Indeed, we would be 

prohibited from using the wage index 

entirely, because using that index 

necessarily means that some hospices 

will receive less in payments than they 

would if the market basket updateadjusted rates were applied without 

further alteration. While we have on 

occasion sought industry input before 

proposing changes, we are not required 

to seek stakeholder input beyond that of 

providing a comment period. 

Comment: A commenter wrote that 

CMS justified phasing out the BNAF in 

part because the combination of 

increases in the wage index in certain 

areas with the BNAF led to an artificial 

boost in the wage index for the past 11 

years, which CMS concluded was an 

excess payment. While this commenter 

disagrees that some hospices received 

an ‘‘artificial boost’’ in payments due to 

the BNAF, this commenter suggested 

that CMS change the methodology for 

the limited number of hospices that 

CMS believes benefited unduly from the 

’’artificial boost’’ given by the BNAF. 

This commenter felt that CMS has failed 

to analyze the impact of the elimination 

of the BNAF on hospices and on 

Medicare beneficiaries in need of 

hospice services. The analysis should 

evaluate the current role and impacts of 

the BNAF phase-out in light of the other 

elements of the hospice wage index, and 

how those elements have changed over 

time, and the effects of those changes. 

As an example, this commenter noted 

that hospitals are allowed geographic 

reclassifications which hospices are not, 

and CMS has not shown whether and to 

what extent hospices are disadvantaged 

by this. 

Response: We continue to believe that 

applying the BNAF to the hospitalbased wage index does not accurately, 

account for geographic variances in 

hospice labor costs. When the hospice 

industry changed from the BLS-based 

wage index to the pre-floor, prereclassified hospital wage index, it 

began using more accurate, more current 

data which are updated annually. When 

that transition occurred, there were 

hospices whose wage index value 

increased, but many hospices saw their 

wage index value decrease. This is 

because the BLS-based wage index 

values, which were applied to hospice 

payments, were artificially high in some 

areas of the country. The Committee 

itself acknowledged that the BLS data 

were ‘‘inaccurate and outdated’’ in its 

Committee Statement (62 FR 42883). 

The hospital-based wage index was 

considered more accurate by the 

Committee, even though its wage index 

values were lower for many hospices. 

Therefore before the transition to the 

hospital-based wage index, many 

hospices were receiving payments that 

were inflated due to the artificially high 

BLS-based wage index. 

In addition, the BNAF was put into 

place to mitigate the potential adverse 

financial impact to hospice providers of 

changing wage indices, since the change 

would lead to a reduction in payments, 

which could threaten access to care. 

However, as we previously described in 

the comment above, the BNAF has been 

applied not only to those hospices that 

were in existence at the time of the wage 

index change, but also to those new 

hospices that were established after 

1998. We continue to believe that these 

new entrants have received an artificial 

boost to their payments as a result of the 


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BNAF, which was not the intent of the 

negotiating committee. 

As noted above, because of the 

inaccurate and outdated nature of the 

BLS-based wage data, those payments 

would also be inaccurate, and CMS 

must do its best to ensure the accuracy 

of Medicare payments. Therefore we 

believe that it is appropriate to phaseout the BNAF for all hospices, and not 

just those who are new entrants, or 

whose wage index values did not drop 

with the shift to the hospital-based wage 

index. 

The payment reduction which would 

occur as a result of a BNAF phase-out 

applies equally to all hospices except 

for providers eligible for the hospice 

floor calculation. That calculation 

lessens the effect on those providers 

eligible for the floor, which are typically 

in rural areas. 

There are no statutory provisions that 

explicitly permit entities other than 

hospitals to reclassify. We note that 

sections 1886(d)(8)(B) & 1886 (d)(10) of 

the Social Security Act explicitly permit 

hospitals to seek reclassification. By 

contrast, no language in Section 

1814(i)(1)(A) of the Act provides any 

indication that Congress intended 

hospices to reclassify. Our regulations at 

42 CFR 418.306(c) state only that CMS 

will issue annually, in the Federal 

Register, a hospice wage index based on 

the most current available CMS hospital 

wage data, including changes to the 

definitions of Metropolitan Statistical 

Areas. 

As noted previously, we are assessing 

the impact of the BNAF phase-out more 

slowly, due to the more gradual 7-year 

phase-out which is being finalized in 

this rule. 

Comment: A few commenters 

mentioned that CMS had said in 2008 

that since hospices and home health 

agencies use a similar labor pool, and 

since the home health wage index does 

not include the BNAF, this further 

supports phasing out the BNAF. The 

commenter wrote that there are 

significant differences between hospice 

and home health, and said that the issue 

is the difference in the payment 

systems. The commenter wrote that it is 

inappropriate to assume, without any 

analysis, that the absence of a BNAF in 

the home health wage index is evidence 

that the BNAF can and should be 

eliminated from the hospice wage 

index, and that do so would result in a 

more accurate and equitable payment 

methodology. 

Response: There are differences in the 

home health and hospice payment 

systems. However, the purpose of a 

wage index is to account for geographic 

variances in labor costs, regardless of 

the system used to reimburse those 

costs, along with non-labor costs. As we 

described in our FY 2009 proposed and 

final rules, we believe that there should 

be a level playing field for recruiting 

and retaining staff for home-based 

benefits such as hospice and home 

health. Because hospices and home 

health agencies share labor pools, we 

believe that there should be consistency 

in the wage index used by both these 

home-based benefits. Nothing in our 

data analysis has shown us that hospice 

labor costs differ substantially from 

home health labor costs, making it 

difficult to justify the BNAF which 

provides a 6 percent increase in the 

hospice wage index, which equals about 

4 percent more in payments over the 

payments otherwise applicable. We 

continue to believe that the pre-floor, 

pre-reclassified hospital wage index 

provides a good measure to account for 

geographic variances in labor costs for 

both these home-based benefits. Home 

health agencies also experience annual 

fluctuations in the hospital wage index 

values, however, they do not receive a 

BNAF adjustment. Phasing-out the 

BNAF enables us to achieve this 

consistency. 

Comment: Several commenters stated 

that CMS has concluded that the growth 

in the hospice benefit was due to the 

BNAF, in order to justify its elimination. 

The commenters noted a number of 

factors that have contributed to the 

hospice industry’s growth, including an 

increased number of beneficiaries using 

the benefit, longer lengths of stay, 

increased acceptance of hospices for 

end-of-life care by the physician and 

patient/family communities, changes in 

the mix of patients using hospice, and 

educational efforts by providers and by 

CMS to beneficiaries and health care 

providers. One commenter noted that 

the number of Medicare certified 

hospices had decreased from the 3,255 

reported by CMS in December 2008 to 

the 3,206 hospices reported as of 

January 29, 2009. Another commenter 

stated that hospice is a small portion of 

all Medicare spending. 

Response: We disagree with the 

comment that we concluded that the 

growth in the hospice industry was due 

to the BNAF or that the BNAF reduction 

is a reaction to the growth in hospice 

reimbursements. However, the 

commenters correctly noted several 

factors that have contributed to industry 

growth. In our FY 2009 proposed and 

final rules, we indicated that the BNAF 

phase-out was not a reaction to that 

growth—in the proposed rule, rather we 

stated that the BNAF was put in place 

to mitigate any adverse financial impact 

that then-existing individual hospices 

might have experienced as a result of 

transitioning to the new hospital-based 

wage index in 1998. We note that 

industries do not typically expand and 

grow during times of financial adversity; 

often there is industry contraction 

instead. We stated that the growth in the 

industry is an indication that any 

adverse financial effects of transitioning 

to a new wage index had ended. 

We disagree with the commenter who 

believes that the numbers of Medicarecertified hospices have decreased, and 

can explain the differences in the 

figures which might lead to that 

conclusion. The report from Data 

Compendium dated December 2008 

showed Medicare-certified hospices; 

these data are drawn from survey and 

certification records. The data in the 

impact tables in our wage index 

proposed and final rules are also 

originated from survey and certification 

data, but those data are limited to those 

Medicare-certified hospices which have 

filed claims. Because of the time 

allowed for claims to be submitted and 

for the claims files to be finalized, the 

claims files used in proposed and final 

rules typically lag. Therefore, the data 

presented in the impact tables in our 

proposed and final rules show the 

numbers of Medicare-certified hospices 

which have filed claims, and are 

typically less than the numbers which 

the survey and certification system 

reports, which simply show the number 

of Medicare-certified hospices. That 

number often increases between the 

proposed and final rules, since we 

receive updated claims information 

which we use for the final rule. 

Additionally, with respect to newlycertified Medicare hospices, there may 

be a lag between certification and 

submission of Medicare claims. Thus, 

the total number of Medicare-certified 

hospices may legitimately be greater in 

number than the number of Medicarecertified hospices that submit Medicare 

hospice claims in a given year. 

To make a proper comparison, one 

must either compare impact table data 

for one year to impact table data for 

another year, or compare survey and 

certification data without ties to claims 

filed for one year to survey and 

certification data without ties to claims 

filed to another year. For example, the 

Table 1 of this FY 2010 final rule shows 

that there are 3,328 hospices. We used 

January 29, 2009 survey and 

certification data, but tied it to FY 2008 

claims as of March 2009. In the FY 2009 

final rule, there were 3,111 hospices; 

that rule tied February 2008 survey and 

certification data to FY 2007 claims as 

of March 2008. Based on these data, the 

number of hospices increased by 217, 


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which represents a 7 percent increase 

from 2008 to 2009. 

We agree that hospice spending 

relative to all Medicare spending is a 

small portion that will account for an 

estimated 2.3 percent of Medicare 

spending overall in FY 2009. The 

growth in hospice spending has 

outpaced the rate of growth for other 

Medicare provider types, and the CMS 

Office of the Actuary projects that it will 

continue to do so over the next decade. 

Furthermore, CMS has a responsibility 

to safeguard trust fund dollars by paying 

accurately and appropriately for all 

Medicare services. 

Comment: Several comments 

suggested other ways that CMS could 

save Medicare dollars without phasing 

out the BNAF. Many commenters said 

that we should encourage more patients 

to elect hospice care, and cited a Duke 

University study which found that 

hospice can save Medicare money at the 

end of life; one suggested we focus on 

assisting physicians and hospitals in 

providing more education about 

hospice. Several suggested we target 

fraud and abuse. One commenter 

suggested we target the for-profit 

hospices whose practices have 

inappropriately raised Medicare costs, 

rather than making a payment reduction 

which impacts non-profits and forprofits equally. A commenter also 

suggested we focus payment reductions 

on hospices with aberrant lengths of 

stay. Other commenters felt that phasing 

out the BNAF penalizes hospices that 

do the right thing with a substantial rate 

cut because large for-profit hospices 

have managed to ‘‘game’’ the system. 

Several commenters felt that rather than 

addressing potential abuses, CMS is 

choosing to implement across-the-board 

actions without regard to the impact on 

the lowest and most efficient end of the 

provider spectrum, or on access. A 

commenter wrote that instead of 

focusing on the root cause of increasing 

hospice expenditures (an aging 

population, quality services, increased 

understanding of the benefit, etc.), CMS 

is simply cutting reimbursement. One 

wrote that the rationale for payment 

reduction seems at odds with a careful 

and thoughtful consideration of changes 

in the payment approach that will best 

serve hospice patients, agencies, and the 

Federal budget. 

Response: We encourage eligible 

Medicare beneficiaries who would like 

to receive hospice care to consider 

electing the benefit. We also support 

educational outreach to all provider 

types to increase understanding of the 

benefits associated with hospice care. 

We believe that hospice provides 

quality, compassionate care for those at 

the end of life, and often does so in a 

cost-effective fashion. We agree that 

hospice can save Medicare dollars, 

though it does not always do so. 

The BNAF phase-out was not 

promulgated because of growing 

hospice expenditures, although those 

expenditures did suggest a favorable 

business climate for the hospice 

industry. We are aware that those rising 

expenditures also indicated increasing 

numbers of eligible beneficiaries and 

increasing understanding and use of the 

benefit which we have encouraged. The 

BNAF phase-out was also not 

promulgated as a means of limiting 

fraud or abuse or of recovering dollars 

due to questionable or inappropriate 

practices by some hospices. Rather, our 

rationale for promulgating the BNAF 

phase-out is the same as that described 

in the FY 2009 proposed and final rules, 

and is included at the beginning of this 

section of the FY 2010 hospice wage 

index final rule. The rationale was 

carefully considered as part of a 

thoughtful process. We determined that 

a special adjustment which was adopted 

to mitigate the impact of wage index 

change in 1998, which results in a 

greater than 4 percent annual aggregate 

increase in payments over what would 

have been paid otherwise, could not 

continue to be justified. We recognize 

that the BNAF reductions affect 

providers equally unless the providers 

are eligible for the hospice floor 

calculation, in which case the 

reductions may have less effect. The 

hospice floor calculation limits the 

impact that the BNAF reduction can 

have on some smaller, rural providers. 

As noted previously, we are phasing out 

the BNAF more gradually, reducing it in 

FY 2010 by 10 percent instead of by 75 

percent, as promulgated in the FY 2009 

final rule and as presented in the FY 

2010 hospice wage index proposed rule. 

We will continue the phase-out over the 

next 6 years, at an additional 15 percent 

each year. We will evaluate the impact 

of the BNAF reduction in the context of 

how this type of adjustment will fit into 

our goals for future hospice payment 

reform. As such, we believe that a more 

gradual phase-out is appropriate at this 

time. 

The impact of the 10 percent BNAF 

reduction for FY 2010 is shown in 

section VII of this final rule. 

Regarding the comment about 

targeting some for-profit hospices for a 

payment reduction, we typically do not 

adjust payments based on type of 

ownership, and do not have the 

statutory authority to do so, nor do we 

believe that such an approach is 

appropriate. 

We believe that the vast majority of 

hospices provide care to their patients 

in a legal and ethical fashion that is not 

fraudulent or abusive of Medicare or its 

requirements. However, we realize that 

there is a small minority of providers 

who engage in fraud or abuse, and we 

remind commenters that they can report 

suspected fraud or abuse to the Office of 

the Inspector General at 1–800–HHS– 

TIPS or to the Medicare Customer 

Service Center at 1–800–MEDICARE. 

After considering the comments 

received and alternate phase-out 

scenarios provided by commenters, we 

are finalizing the FY 2010 hospice wage 

index final rule with a BNAF which has 

been reduced by 10 percent, rather than 

continuing with the 75 percent 

reduction which was promulgated in 

the FY 2009 hospice wage index final 

rule, and planned for FY 2010. We are 

finalizing a 7-year phase-out, 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 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 phase-out in FY 2016. We will 

continue to evaluate the impact of the 

BNAF reduction as we perform our 

hospice payment reform analyses. 

We believe that a more gradual phaseout is appropriate given the hospice 

payment reform analyses which are 

underway; however, we reserve the 

right to change this phase-out timeframe 

through notice and comment 

rulemaking should hospice payment 

reform be delayed or for other reasons 

that the Secretary deems appropriate. 

The unreduced BNAF for FY 2010 is 

computed to be 0.061775 (or 6.1755 

percent). A 10 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 0.055598 (or 5.5598 

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 2010 

is shown in Addenda A and B. 

Specifically, Addendum A reflects the 

FY 2010 wage index values for urban 

areas under the CBSA designations. 

Addendum B reflects the FY 2010 wage 

index values for rural areas under the 

CBSA designations. 


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4. Effects of Phasing Out the BNAF 

The full (unreduced) BNAF calculated 

for FY 2010 is 6.1775 percent. As noted 

in the previous subsection, we are 

phasing out the BNAF over a total of 7 

years. We are reducing the BNAF by 10 

percent for FY 2010, with additional 15 

percent reductions for each of the next 

6 years. Therefore total phase-out will 

occur in FY 2016. 

For FY 2010, this is mathematically 

equivalent to taking 90 percent of the 

full BNAF value, or multiplying 

0.061775 by 0.90, which equals 

0.055598 (5.5598 percent). The BNAF of 

5.5598 percent reflects a 10 percent 

reduction in the BNAF. The 10 percent 

reduced BNAF (5.5598 percent) will be 

applied to the pre-floor, pre-reclassified 

hospital wage index values of 0.8 or 

greater in the FY 2010 hospice wage 

index. 

The hospice floor calculation will still 

apply to any pre-floor, pre-reclassified 

hospital wage index values less than 

0.8. Currently, the hospice floor 

calculation has 4 steps. First, pre-floor, 

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 final rule as the 

hospice 15 percent floor adjustment. 

Third, the pre-floor, pre-reclassified 

hospital wage index value is multiplied 

by the BNAF. Finally, the greater result 

of either step 2 or step 3 is chosen as 

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 a 10 

percent reduction in the BNAF versus 

using the full BNAF of 6.1775 percent 

on the FY 2010 hospice wage index. The 

FY 2010 BNAF reduction of 10 percent 

resulted in approximately a 0.57 to 0.59 

percent reduction in most hospice wage 

index values. The phase-out of the 

BNAF over the following 6 fiscal years 

at 15 percent per year will result in an 

additional estimated annual reduction 

of the hospice wage index values of 

approximately 0.9 percent per year. 

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 18 CBSAs are already protected by 

the hospice 15 percent floor adjustment, 

and are therefore completely unaffected 

by the BNAF reduction. There are over 

120 hospices in these 18 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 10 percent 

reduced BNAF. Areas where the hospice 

floor calculation would have yielded a 

wage index value greater than 0.8 if the 

full BNAF were applied, but which will 

have a final wage index value less than 

0.8 after the 10 percent reduced BNAF 

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 3 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 10 percent reduction in the 

BNAF. This will affect those hospices 

with lower wage index values, which 

are typically in rural areas. There are 9 

hospices located in these 3 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 final 

rule. Therefore the projected reduction 

in payments due to the updated wage 

data and the 10 percent reduction of the 

BNAF will be less than the projected 

reduction in the wage index value itself. 

We estimated a projected reduction in 

payments of ¥0.7 percent, as described 

in column 4 of Table 1 in section VII of 

this final rule. In addition, the estimated 

effects of the phase-out of the BNAF 

will be lessened by any hospital market 

basket updates to payments. The 

hospital market basket update for FY 

2010 is 2.1 percent and will be officially 

communicated through an 

administrative instruction. The 

combined effects of the updated wage 

data, the 10 percent reduction of the 

BNAF and a hospital market basket 

update of 2.1 percent for FY 2010 is an 

overall estimated increase in payments 

to hospices in FY 2010 of 1.4 percent 

(column 5 of Table 1 in section VII of 

this final rule). 

Comment: Many commenters wrote 

that they had already pared back 

expenses, and that they could not 

absorb any cuts, particularly with the 

present economic downturn; smaller 

providers and rural providers in 

particular said that they may not be able 

to survive the payment reduction. A 

number of commenters indicated that 

because of the economy, their hospices 

had already implemented a variety of 

spending reductions, including hiring or 

wage freezes, and a few said that they 

had already laid off some personnel. 

Some indicated that they would 

postpone hiring for vacant positions. 

Many also wrote that hiring and wage 

freezes, layoffs, and wage reductions 

would lead to higher caseloads, and 

likely lower the quality or quantity of 

services provided, as well as reduce 

morale. Some were concerned that they 

would lose nursing staff to hospitals if 

they could not pay nurses 

competitively. One wrote that when the 

upswing finally comes, it will be 

difficult to hire and train quality 

employees in a timely manner, adding 

to staffing costs overall. 

Many commenters, particularly in 

rural areas, said that a payment 

reduction would force them to reduce 

their service area, leaving some rural 

beneficiaries without access to any 

hospice care. One commenter noted that 

smaller hospices generally provide 

better, more personal care, but if they 

cannot survive, only large hospices will 

remain in business; this commenter felt 

that patients and families will have 

lower quality care as a result. Others 

noted that they would cut back services 

provided, and mentioned that 

bereavement programs, outreach 

programs, proven alternative therapies, 

staff training, and volunteer training 

would be targeted. A number of 

commenters felt that the BNAF 

reduction would ultimately increase 

Medicare costs, as patients in a crisis 

would go to the hospital if hospice 

staffing was too low to respond quickly, 

or if patients lost access to care and 

were forced into other post-acute 

settings or into hospitals at the end of 

life. 

One commenter reported that 

hospices had also postponed a planned 

expansion of services or of facilities. 

This commenter mentioned the closure 

of an inpatient unit or consolidation of 

offices as other cost cutting measures 

taken due to the economic climate. 

Multiple commenters wrote that a 

payment cut would force them to lay off 

workers, which is contrary to the Obama 

Administration’s stated goal of 

preserving jobs and stimulating growth. 

A few stated that ARRA’s delay of the 

FY 2009 BNAF reduction saved 3,000 

jobs, and that these jobs will be at risk 

if the BNAF reduction is implemented 

for FY 2010. 

Several commenters also indicated 

that donations usually help them to 

meet their expenses, but that with the 

recession and stock market decline, 

their donors had less to give; they wrote 

that donations were greatly reduced and 

fundraising was more difficult. As a 


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result, some said they were already 

operating with negative margins. 

Several commenters said that small or 

medium hospices would be more 

affected than larger hospices, and that 

their margins could not absorb greater 

expenses or a payment reduction. Some 

cited MedPAC’s margin analysis, which 

showed average hospice margins at 3.4 

percent, stating that they could not 

survive the 3.2 percent payment 

reduction reported in the FY 2010 

proposed rule. A few noted that for 

some, the payment reduction is far 

greater than 3.2 percent, citing 5 percent 

or 9 percent reductions overall for their 

CBSA. 

Additionally, several commenters 

said that a payment reduction would 

force them to reduce or eliminate care 

to indigent patients and to the 

uninsured. They noted that they had 

previously accepted all patients without 

regard to ability to pay, and that their 

revenues from Medicare and from 

donations enabled them to absorb the 

costs of providing care to the uninsured; 

one commenter wrote that her hospice 

is ‘‘mandated’’ to accept all eligible 

patients, regardless of ability to pay. 

Given the economic climate, 

particularly the current unemployment 

rate, many felt that this was the wrong 

time to be reducing payments. 

Response: While we are sensitive to 

the issues raised by commenters, and to 

the possible effects of the BNAF 

reduction, we continue to believe that 

we cannot justify an adjustment factor 

which was adopted to mitigate the 

impact of a 1998 wage index change, 

and which results in what we believe to 

be an inappropriate increase in overall 

hospice payments of approximately 4 

percent annually over what would have 

been paid in absence of the BNAF. 

Therefore, for the reasons described in 

this FY 2010 hospice wage index final 

rule and in the FY 2009 hospice wage 

index final rule, we will phase out the 

BNAF. However, as noted in the 

previous section, given the efforts to 

reform the hospice payment system, we 

are finalizing a more gradual phase-out 

of the BNAF over 7 years. We believe it 

would be prudent to take additional 

time to evaluate the BNAF phase-out in 

the context of these reforms, in order to 

allow for further consideration of any 

consequences that might result from the 

phase-out. 

Regarding MedPAC’s margin analysis, 

we refer commenters to MedPAC’s 2008 

report entitled ‘‘Report to the Congress: 

Reforming the Payment System’’ 

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

Jun08_EntireReport.pdf], which lists 

limitations of the analysis which could 

lead to an underestimation of hospice 

margins. In response to the commenters 

who believed that the impact of the 

BNAF reduction is greater in some 

areas, we note that the reductions in 

payments which exceed the 3.2 percent 

reported in our FY 2010 proposed rule 

impact summary are not due to the 

BNAF phase-out, but are due to the 

normal fluctuations in the pre-floor, prereclassified hospital wage index. The 

BNAF affects all hospices equally, 

except for those eligible for the hospice 

floor calculation (i.e., hospices with prefloor, pre-reclassified hospital wage 

index values less than 0.8). Those 

hospices which are eligible for the 

hospice floor calculation are either 

completely protected from the effects of 

the BNAF reduction, or will experience 

lessened effects. Most of these hospices 

are in rural areas. 

We applaud hospices which provide 

care to the uninsured and to indigent 

patients. We note that Medicare hospice 

patients have nearly all of their hospice 

care paid for by Medicare; the copayments for prescription drugs and for 

respite care are very small. This benefits 

all hospice patients, but particularly low 

income patients, as the out-of-pocket 

costs are minimal. We also note that 

hospices develop their own policies 

about taking eligible patients without 

insurance or the means to pay; Medicare 

does not ‘‘mandate’’ that hospices take 

all eligible patients regardless of ability 

to pay or insurance status. 

Finally, the costs of complying with 

the new CoPs and with the data 

collection requirements are normal costs 

of doing business, for which hospices 

have had ample time to prepare. 

Comment: One commenter wrote that 

the Negotiated Rulemaking Committee 

was familiar with the serious 

disruptions that could occur in the 

delivery of healthcare services through 

a change in the payment distribution 

methodology. The commenter felt that 

stability in delivery of hospice care is 

dependent on payment stability, which 

is lost if CMS phases out the BNAF. A 

few commenters wrote that we did not 

have enough data or data analysis to 

justify the elimination of the decade old 

BNAF, and felt that our eliminating the 

BNAF was arbitrary and capricious. One 

said that without a careful analysis of all 

the effects of the phase-out, phasing out 

the BNAF would be arbitrary and 

capricious and a violation of the 

Administrative Procedures Act. Some 

wrote that we had not carefully 

analyzed the impact of this action. One 

commenter wrote that historically, 

Congress has rejected the 

Administration’s requests to reduce 

hospice reimbursement rates, 

understanding that any reduction in rate 

must necessarily reduce quality of care 

or access to care. This commenter felt 

that the 2009 NPRM is inconsistent with 

the legislative intent to maintain and 

ensure adequate hospice funding levels. 

Response: We presented our rationale 

for the BNAF phase-out in the FY 2009 

proposed and final rules and in section 

II.A.3 of this final rule. Commenters 

have argued that we have not 

considered the effects of reducing the 

BNAF on hospices; we disagree, and 

refer the commenters to the impact 

section of our rule, which set out 

detailed information on the effects of 

reducing the BNAF. 

More than adequate access to hospice 

care was reported by MedPAC [see 

‘‘Report to the Congress: Reforming the 

Payment System’’, chapter 8, available 

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

Jun08_EntireReport.pdf], and suggests 

that a BNAF phase-out will not impede 

access to hospice care. Given this 

information, we continue to believe that 

a BNAF phase-out will not impede 

access to hospice care. Congress 

mandated the payment rates and the 

market basket updates. Congress did not 

mandate that we apply in perpetuity a 

special adjustment to the hospice wage 

index that has the effect of raising 

aggregate hospice payments by about 4 

percent annually over what CMS would 

have paid absent the BNAF. 

We appreciate the commenters’ 

concerns regarding possible effects of a 

payment reduction. The BNAF affects 

all hospices equally, except for those 

eligible for the hospice floor calculation 

(i.e., hospices with a pre-floor, prereclassified hospital wage index values 

less than 0.8). Those hospices which are 

eligible for the hospice floor calculation 

are either completely protected from the 

effects of a BNAF reduction, or 

experienced lessened effects. Most of 

these hospices are in rural areas. 

We also do not believe that our 

actions in phasing-out the BNAF were 

arbitrary or capricious. We believe that 

the rationale and impacts provided in 

the FY 2009 and FY 2010 proposed and 

final rules are clear, and that we met all 

the requirements of the Administrative 

Procedures Act. 

Comment: Many commenters wrote 

that this is the wrong time for a payment 

reduction due to rising costs, 

particularly gasoline. Rural providers in 

particular cited the rising cost of 

gasoline combined with service areas 

that cover thousands of square miles 

and generate significant mileage costs. 

Additionally, others wrote that the 1983 

per diems were not designed to cover 

the costs of technology and of expensive 

palliative treatments, and said hospices 

couldn’t afford a payment reduction on 


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top of that. Another wrote that hospices 

had had to spend more to implement 

the new Conditions of Participation and 

data collection requirements, but 

received no additional reimbursement 

to cover the cost of these changes. They 

felt that if the BNAF were phased out as 

described in the proposed rule, hospices 

would be subjected to multiple 

significant changes over a short period 

of time, and that too many reforms at 

once could have a negative impact on 

access to quality hospice services and 

relations operations. Others cited rising 

wages, benefit costs, and insurance 

costs. 

Many commenters also felt that this 

was the wrong time to reduce 

reimbursement given the nation’s 

demographics. Some expressed concern 

that access to hospice would be reduced 

if hospices could not survive the BNAF 

reductions or if they had to reduce their 

service areas, at a time when there are 

more baby boomers eligible for hospice. 

They noted that the demand for hospice 

would be increasing as the geriatric 

population increases, and one said she 

was disconcerted to hear of CMS’ 

concern over the growing utilization of 

hospice. One wrote that demographers 

in his state projected more persons 

without caregivers in the home; less 

money for hospices erodes hospices’ 

capacity to provide care, and may lead 

to an increase in costly nursing home 

stays. 

A few noted that a payment reduction 

was inconsistent with the health care 

reform being discussed in Washington, 

as hospice saves Medicare money and 

should be supported and expanded. 

Many commenters noted that a study 

done at Duke University has shown that 

hospice is cost-effective, and saves 

Medicare dollars overall while 

providing quality end-of-life care. A 

commenter also referred to the 

Dartmouth Atlas Report (2008) which 

found that hospices were the only postacute provider to significantly reduce 

hospitalizations. Another commenter 

wrote that if patients could not access 

hospice and end up in hospitals, it 

would burden an already strained 

hospital healthcare delivery system. 

Two commenters suggested we also 

consider the ‘‘secondary savings’’ that 

hospice brings by positively affecting 

conditions unrelated to the patient’s 

terminal diagnosis, by benefitting the 

physical and emotional health of the 

caregivers, and of the children of 

hospice patients. 

Response: We appreciate the 

commenters’ concerns about rising costs 

and about access to hospice care. We 

understand that costs are rising and that 

it is vital to preserve access to hospice 

care for Medicare beneficiaries. The 

hospital market basket update which is 

used to update payment rates for all 

hospices includes an energy component 

that is sensitive to petroleum costs 

among other costs. It is reasonable to 

expect that future market basket updates 

will continue to account for any 

continuation of rising fuel costs. 

In addition, we believe that the 

requirements associated with the CoPs 

and data collection are part of the cost 

of doing business, and that the industry 

has had ample time to plan and budget 

for these changes. We do not believe 

that these requirements will have 

adverse affects on admissions or 

services, but instead expect that the 

emphasis on quality and the increased 

awareness of visits provided could 

enhance services. 

We believe that in a time of economic 

pressures, all businesses, including 

hospices, will seek to operate more 

efficiently. However, we plan to monitor 

the effect of the BNAF reduction to 

assess whether unanticipated effects 

occur. 

We agree that the Medicare hospice 

benefit has been of tremendous benefit 

to those at the end of life and to their 

families, and applaud those who serve 

the dying as hospice staff and 

volunteers. We also agree that the 

hospice benefit often saves Medicare 

money, and appreciate the studies 

which have highlighted the areas where 

it provides costs savings to the Medicare 

program. However, hospice care does 

not save money in every instance. In 

their June 2008 report, MedPAC noted 

that ‘‘hospice’s net reduction in 

Medicare spending decreases the longer 

the patient is enrolled and beneficiaries 

with very long hospice stays may incur 

higher Medicare spending than those 

who do not elect hospice.’’ (MedPAC, 

Report to the Congress: Reforming the 

Delivery System, chapter 8, ‘‘Evaluating 

Medicare’s Hospice Benefit’’, MedPAC: 

Washington, DC, p. 209). 

We agree that we should evaluate the 

impact of the BNAF reduction in the 

context of how this type of adjustment 

will fit into our goals for future hospice 

payment reform that could affect 

payment to hospices. As such, we 

believe that a more gradual phase-out 

would be appropriate at this time. For 

the reasons described above, we do not 

believe that hospice access will be 

impeded due to a 10 percent BNAF 

reduction, and therefore, do not believe 

that Medicare costs would be shifted 

from hospice to more expensive forms 

of care. 

The hospice industry is growing and 

the demand for hospice services is 

likely to grow in the future, particularly 

with an aging population. CMS has 

encouraged hospice usage, and we 

expect the hospice benefit to continue to 

grow. We will monitor the impact of the 

BNAF phase-out for any unintended 

impact. 

Comment: A few commenters wrote 

that any reductions in Medicare 

reimbursement will trickle down to the 

private sector and to Medicaid, affecting 

funding for care for all patients, not just 

those on Medicare. One wrote that CMS 

had not considered the effects of the 

BNAF reduction on Medicaid. 

Response: Our Medicare payments are 

intended to be accurate and to 

adequately pay for resource use in 

providing care to Medicare patients. We 

do not develop Medicare payment 

policy to enable providers to offset the 

costs of non-Medicare patients. Indeed, 

the Act at section 1861(v)(1) prohibits 

providers subject to reasonable-cost 

payment from using Medicare funds to 

subsidize care for non-Medicare 

patients. 

We received several comments which 

were outside the scope of this rule, and 

which we are set out below. 

Comment: A commenter wrote that in 

addition to payment reductions that 

would result from the elimination of the 

BNAF, hospices may also be faced with 

cuts imposed through the productivity 

adjustment factor proposed in the draft 

health reform bill being circulated by 

the House of Representatives. 

Response: Because this comment 

concerns potential future legislative 

changes, this comment is outside the 

scope of this rule. Therefore we are 

unable to respond. 

We received several other comments 

which were outside the scope of this 

rule, and which are set out below. 

However because they are related to 

hospice payments, we will briefly 

address them. 

Comment: A few commenters 

requested that CMS conduct a study to 

determine the appropriate hospice per 

diem for services to rural areas. 

Response: This comment is outside 

the scope of this rule, however we will 

address it briefly. Medicare pays one of 

four daily rates to hospice providers, 

based on the intensity level of care the 

patient requires. These per diem 

payment rates are the same, regardless 

of whether the services are provided in 

an urban area or a rural area. The 

hospice wage index, which includes a 

floor calculation which benefits many 

rural providers, is the vehicle we use to 

adjust for geographic variances in labor 

costs. In a time of high gasoline costs, 

we are sensitive to concerns from rural 

hospices that the additional time and 

distance required to visit a rural patient 


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adds significantly to their costs, and 

their assertion that payments are not 

adequate. However, an additional 

payment for rural providers, which is 

sometimes called a rural add-on 

payment, would have to be legislated. 

We will consider the situation of rural 

providers once we begin the process of 

hospice payment system reform. 

Comment: One person suggested we 

rate all end-of-life care and fund only 

those hospices which provide excellent 

services. 

Response: While outside the scope of 

this rule, we will consider this as we 

move forward hospice payment reform. 

Comment: As alternative cost-cutting 

measures, a commenter suggested we 

regulate the standards of care, and 

ensure that providers follow the 

Conditions of Participation; another 

suggested more frequent surveys. 

Another suggested that unnecessary 

medical tests and procedures performed 

to avoid litigation and paid for by 

Medicare should be the target of funding 

cuts. One commenter suggested we 

eliminate the tax credit for not-for-profit 

nursing homes and hospices that don’t 

embody that not-for-profit spirit, and 

make them pay taxes on their income. 

One suggested we focus on nursing 

home chains that create hospice chains 

solely for additional billing 

opportunities. Another suggested we go 

after providers who exploit the dying 

with false hope that curative measures 

will lengthen their lives or improve 

their quality of life. Two commenters 

felt that if the BNAF phase-out occurs, 

politicians would have excellent health 

insurance and hospice care, but that the 

average American would have barebones hospice coverage. A commenter 

wrote that we should require all 

hospices to be non-profits, so that more 

money goes to patient care. 

Response: We appreciate these 

comments, but they are outside the 

scope of this rule. 

B. Change to the Physician Certification 

and Recertification Process, § 418.22 

The Medicare Payment Advisory 

Commission (MedPAC) has noted an 

increasing proportion of hospice 

patients with stays exceeding 180 days, 

and significant variation in hospice 

length of stay. MedPAC has questioned 

whether there is sufficient 

accountability and enforcement related 

to certification and recertification of 

Medicare hospice patients. Currently, 

our policy requires the hospice medical 

director or physician member of the 

interdisciplinary group and the patient’s 

attending physician (if any) to certify 

the patient as having a terminal illness 

for the initial 90-day period of hospice 

care. Subsequent benefit periods only 

require recertification by the hospice 

medical director or by the physician 

member of the hospice interdisciplinary 

group. These certifications must 

indicate that the patient’s life 

expectancy is 6 months or less if the 

illness runs its normal course, and must 

be signed by the physician. The medical 

record must include documentation that 

supports the terminal prognosis. 

At their November 6, 2008 public 

meeting, MedPAC presented the 

findings of an expert panel of hospice 

providers convened in October 2008; 

that panel noted that while many 

hospices comply with the Medicare 

eligibility criteria, some are enrolling 

and recertifying patients who are not 

eligible. 

The expert panel noted that there 

were several reasons for the variation in 

compliance. First, they noted that in 

some cases there was limited medical 

director engagement in the certification 

or recertification process. Physicians 

had delegated this responsibility to the 

staff involved with patients’ day-to-day 

care, and simply signed off on the 

paperwork. Second, inadequate charting 

of the patient’s condition or a lack of 

staff training had led some physicians to 

certify patients who were not truly 

eligible for Medicare’s hospice benefit. 

Finally, some panelists cited financial 

incentives associated with long-stay 

patients. The panelists mentioned 

anecdotal reports of hospices using 

questionable marketing strategies to 

recruit patients without mentioning the 

terminal illness requirement, and of 

hospices failing to discharge patients 

who had improved or enrolling patients 

who had already been discharged or 

turned away from other hospices. 

Consensus emerged among the panelists 

that more accountability and oversight 

of certification and recertification are 

needed. MedPAC used the panel’s input 

in making recommendations related to 

the certification process, which can be 

found in chapter 6 (‘‘Reforming 

Medicare’s Hospice Benefit’’) of 

MedPAC’s March 2009 report entitled 

‘‘Report to the Congress: Medicare 

Payment Policy’’ which is available at 

http://www.medpac.gov/chapters/ 

Mar09_Ch06.pdf. 

We believe that those physicians that 

are certifying a hospice patient’s 

eligibility can reasonably be expected to 

synthesize in a few sentences the 

clinical aspects of the patient’s 

condition that support the prognosis. 

We believe that such a requirement, as 

suggested by the expert panel and by 

MedPAC, would encourage greater 

physician engagement in the 

certification and recertification process 

by focusing attention on the physician’s 

responsibility to set out the clinical 

basis for the terminal prognosis 

indicated in the patient’s medical 

record. 

To increase accountability related to 

the physician certification and 

recertification process, we are making a 

change to § 418.22. Specifically, we are 

adding a new paragraph (b)(3) to 

§ 418.22, to require that physicians that 

certify or recertify hospice patients as 

being terminally ill include a brief 

narrative explanation of the clinical 

findings that support a life expectancy 

of 6 months or less. We originally 

proposed that the narrative should be 

written or typed on the certification 

form itself. 

In our proposed rule, we wrote that 

we do not believe that an attachment 

should be permissible because an 

attachment could easily be prepared by 

someone other than the physician. We 

solicited comments on whether this 

requirement would increase physician 

engagement in the certification and 

recertification process. 

Comment: Many commenters stated 

that this requirement would be a burden 

to hospices. Commenters referred to our 

regulations at § 418.22 which require 

that the clinical information and other 

documentation supporting the terminal 

prognosis must be included in the 

medical record, stating that the narrative 

would duplicate information in the 

medical record. Several commenters 

further stated that many hospice doctors 

have no clinical contact with the 

hospice patients, and that doctors 

currently base the certification of 

terminal illness on the medical record 

information alone. Therefore, they 

believe that this requirement would 

result in physicians simply rephrasing 

what was already in the medical record. 

Several commenters suggested CMS 

determine whether this requirement is 

feasible for small hospices with only a 

part-time medical director. Other 

commenters suggested that CMS require 

the narrative only on recertifications, 

stating that MedPAC’s suggestion was 

intended to ensure that long-stay 

hospice patients continue to be hospiceeligible. Additionally, they said given 

that two physicians determine initial 

eligibility, a narrative at initial 

certification is unnecessary and 

burdensome. One commenter suggested 

an alternative to the narrative, 

suggesting that an attestation statement 

be included on the certification and 

recertification form stating that the 

pertinent medical record information 

has been reviewed by the physician. 

Many commenters supported this 

requirement as a way to ensure more 


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physician involvement with the patient 

and increase engagement in the 

certification of terminal illness. Some 

cautioned CMS to not allow a typed 

narrative, fearing that the hospice nurse 

would type it, and the physician would 

simply sign off without performing the 

sort of physician review and 

involvement that CMS intended. 

Some commenters supported the 

requirement, but encouraged CMS to 

reconsider that the narrative must be 

present on the certification and 

recertification form, asking CMS to 

consider accepting an attachment. A few 

commenters believed that hospices 

which have electronic medical records 

may incur costly software modifications 

if the narrative must be included on the 

certification and recertification. The 

commenters believed that as long as the 

physician’s written or electronic 

signature was included on the narrative, 

it would make no difference if the 

narrative was an addendum. 

Several commenters stated that CMS 

should provide illustrative examples to 

help hospices and physicians 

understand the scope of acceptable 

responses. 

Many commenters were supportive of 

the proposal, but cautioned CMS that 

not all patients show measurable 

indications of decline at the time of 

every recertification. These commenters 

cautioned CMS to not regulate the 

process such that hospices will be 

encouraged to discharge patients 

inappropriately. 

Another commenter encouraged that 

CMS be clear that neither check boxes 

nor standard language should be 

permitted to satisfy the requirement, 

that we clarify that this narrative must 

be composed by the physician 

performing the certification or 

recertification, and that the certification 

and recertification forms containing the 

narrative should include under the 

physician’s signature a statement 

indicating that by signing, the physician 

confirms that he/she composed the 

narrative based on his/her review. 

Response: We thank the writers for 

their comments. We concur with the 

commenter who states that 42 CFR 

418.22(b) requires clinical information 

and other documentation supporting the 

terminal prognosis to be included in the 

medical record. However, we disagree 

that the inclusion of the clinical 

narrative duplicates the medical record 

information, or that the narrative should 

be completed only at the time of 

recertification. Rather, as we stated in 

the proposed rule, we believe that the 

physician must synthesize the patient’s 

comprehensive medical information in 

order to compose this brief clinical 

justification narrative, which we believe 

will increase physician accountability 

associated with the terminal prognosis. 

This synthesis should not be a simple 

restatement of the medical record facts, 

but instead sets out the physician’s 

rationale as to how the facts justify the 

prognosis. We also disagree that a 

statement on the certification and 

recertification form that the physician 

attests he has reviewed the medical 

record accomplishes the increased 

physician accountability goal. Our 

intent is for the physician to justify his 

prognosis, rather than simply sign a 

form. While our regulations have always 

required the physician to perform this 

sort of review, we believe often the 

physician relies too heavily on the 

hospice staff for the prognosis 

determination in both the certification 

and recertification of terminal illness. 

Because the physician has always 

been required to perform the review 

needed to make a terminal illness 

prognosis, we disagree that the 

corresponding short narrative which 

describes the physician’s clinical 

justification associated with the 

prognosis is overly burdensome. 

However, we do understand that many 

physicians prefer to dictate rather than 

hand-write their clinical findings. And 

we agree with commenters who stated 

that some electronic health record 

systems may more easily produce an 

addendum containing the clinical 

justification. Therefore, we have 

decided that a typed addendum 

containing the narrative which is 

electronically or hand signed by the 

physician will be acceptable. We also 

agree with the commenters who 

suggested that the narrative include an 

attestation, and that we clarify some 

criteria associated with the narrative 

requirement. Therefore, we clarify that: 

(1) The narrative must be composed by 

the physician performing the 

certification or recertification and not by 

other hospice personnel; (2) the 

narrative should include, under the 

physician signature, a statement 

indicating that by signing, the physician 

confirms that he/she composed the 

narrative based on his/her review of the 

patient’s medical record or, if 

applicable, examination of the patient; 

(3) the narrative reflects the patient’s 

individual clinical circumstances, and 

should not contain checked boxes or 

standard language used for all patients; 

and (4) in the case of the initial 

certification, we require either the 

attending physician or the hospice 

medical director to compose and sign 

the clinical narrative. 

We believe that the narrative will 

curtail the practice described by one 

commenter who stated that the 

physician relies solely on hospice staff 

and hospice staff entries in the medical 

record for the prognosis determination, 

and has little interaction with the 

patient. 

While we agree with the commenter 

who stated that this requirement helps 

address MedPAC concerns associated 

with long stays in hospice, we also 

believe that this requirement on the 

initial certification helps ensure that 

only hospice- eligible patients are 

admitted to hospice. We disagree with 

the commenter who suggested CMS 

include an illustrative example of 

narrative language, since the intent of 

the narrative is to capture the 

physician’s synthesis of each patient’s 

unique conditions. 

In response to the commenter who 

cautioned CMS that not all patients 

show measurable indications of decline 

at the time of every recertification, we 

believe this commenter was concerned 

that CMS may regulate the process such 

that hospices will be encouraged to 

discharge patients inappropriately. This 

comment appears to suggest that the 

physician narrative may risk patients 

being discharged inappropriately at 

recertification time. We disagree that 

this is a risk. CMS regulations at 42 CFR 

418.22, certification of terminal illness, 

describe in detail the requirements that 

are necessary to certify and recertify 

patients that are terminally ill. We also 

acknowledge that at recertification, not 

all patients may show measurable 

decline. We believe that the physician 

may choose to include facts such as that 

as part of his narrative, if he or she 

believes it to be pertinent in his or her 

justification. 

We are finalizing our proposal to 

require that physicians who certify or 

recertify hospice patients as terminally 

ill include a brief narrative explanation 

of the clinical findings that support a 

life expectancy of six months or less. 

We are modifying our original proposal 

in that we will allow the narrative to 

either be part of the certification and 

recertification forms, or it may be on an 

addendum to the certification and 

recertification forms which is 

electronically or hand signed by the 

physician. If the narrative is part of the 

certification or recertification form, then 

the narrative must be located 

immediately prior to the physician’s 

signature. If the narrative exists as an 

addendum to the certification or 

recertification form, in addition to the 

physician’s signature on the 

certification or recertification form, the 

physician must also sign immediately 

following the narrative in the 

addendum. The narrative must reflect 


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the patient’s individual clinical 

circumstances. The narrative must not 

contain check boxes or standard 

language used for all patients. In the 

case of the initial certification, we 

require either the attending physician or 

the hospice medical director to compose 

and sign the narrative. We also require 

that the narrative include under the 

physician signature, a statement 

indicating that by signing, the physician 

confirms that he/she composed the 

narrative based on his/her review of the 

patient’s medical record or, if 

applicable, examination of the patient. 

C. Update of Covered Services, 

§ 418.202 

In Part 418, subpart F, we describe 

covered hospice services. In § 418.200, 

Requirements for Coverage, we note that 

covered services must be reasonable and 

necessary for the palliation or 

management of the terminal illness as 

well as related conditions. We also note 

that services provided must be 

consistent with the plan of care. The 

language at § 418.202, ‘‘Covered 

services’’, describes specific types of 

hospices services that are covered. 

Section 418.202(f) describes the 

coverage of medical appliances and 

supplies, including drugs and 

biologicals. The last sentence of 

§ 418.202(f) states that covered medical 

supplies ‘‘include those that are part of 

the written plan of care.’’ 

The updated CoPs, which were 

effective as of December 2008, now 

require that hospices include all 

comorbidities in the plan of care, even 

if those comorbidities are not related to 

the terminal diagnosis. In § 418.54(c)(2) 

we refer to assessing the patient for 

complications and risk factors that affect 

care planning. Comorbidities that are 

unrelated to the terminal illness need to 

be addressed in the comprehensive 

assessment and should be on the plan 

of care, clearly marked as comorbidities 

unrelated to the terminal illness. 

However, the hospice is not responsible 

for providing care for the unrelated 

comorbidities. Because the hospice is 

not responsible for providing the care 

for these unrelated comorbidities, we 

are revising § 418.202(f) to state that 

medical supplies covered by the 

Medicare hospice benefit include only 

those that are part of the plan of care 

and that are for the palliation or 

management of the terminal illness or 

related conditions. 

Comment: Commenters supported the 

proposed clarification in § 418.202 

which currently states that medical 

supplies covered by the hospice benefit 

include those that are part of the plan 

of care and that are related to the 

palliation and management of the 

terminal illness or related conditions. 

One commenter stated that because it is 

difficult for hospices to determine 

which conditions are related to the 

terminal illness, that CMS should also 

require hospices to have written policies 

describing their processes for 

determining whether care is related to 

the terminal illness or related 

conditions. One commenter wrote that 

in the absence of companion rules in 

SNFs, this rule as written has the 

potential to cause confusion and 

conflict within the facilities as the 

facility providers seek resolution on the 

integration of the care plan and the 

related cost and responsible party. 

Response: We appreciate the support 

received for the clarification at 42 CFR 

section 418.202. The comments 

regarding written policies describing the 

processes for determining what is 

related to the terminal illness, and about 

companion rules in SNFs, are outside 

the scope of this payment rule, and 

therefore we are unable to respond. 

However, we have forwarded these 

comments to the group within CMS 

which handles facility Conditions of 

Participation, for their consideration in 

future rulemaking. 

We are finalizing the change to 

§ 418.202 as proposed. 

D. Clarification of Payment Procedures 

for Hospice Care, § 418.302 

Section 1861(dd) of the Act limits 

coverage of and payment for inpatient 

days for hospice patients. There are 

sometimes situations when a hospice 

patient receives inpatient care but is 

unable to return home, even though the 

medical situation no longer warrants 

general inpatient care (GIP), or even 

though 5 days of respite have ended. In 

computing the inpatient cap, the 

hospice can only count inpatient days 

in which GIP or respite care is provided 

and billed as GIP or respite days. For 

example, assume a patient received 5 

days of respite care while a caregiver 

was out of town, but the caregiver’s 

return was delayed for a day due to 

circumstances beyond her control. The 

patient had to remain as an inpatient for 

a 6th day, but was no longer eligible for 

respite care. According to 

§ 418.302(e)(5), the hospice should 

switch from billing for respite care to 

billing for routine home care on the 6th 

day. The hospice should only count 5 

days toward the inpatient cap, not 6 

days, since only 5 inpatient days were 

provided and billed to Medicare as 

respite days. 

Because we have received several 

inquiries about how to count inpatient 

days that are provided and billed as 

routine home care, we are revising 

§ 418.302(f)(2) to clarify that only 

inpatient days in which GIP or respite 

care is provided and billed are counted 

as inpatient days when computing the 

inpatient cap. 

Comment: Commenters supported the 

proposal to clarify that inpatient care 

provided and billed as GIP or respite 

should be the only inpatient care 

included in the inpatient cap 

calculation. However one commenter 

wrote that her hospice does not agree 

that inpatient respite services should be 

charged against the inpatient cap, given 

the changes in the CoP regulations with 

respect to 24-hour RN coverage. 

Response: We appreciate commenters’ 

support for this proposal. The Social 

Security Act requires the inclusion of 

respite services in the inpatient cap 

calculation (see section 

1861(dd)(2)(A)(iii) of the Act). 

Therefore, we cannot make a change to 

this requirement. We are finalizing the 

change to 42 CFR § 418.302 as proposed. 

E. Clarification of Intermediary 

Determination and Notice of Amount of 

Program Reimbursement, § 405.1803 

Currently, hospices that exceed either 

the inpatient cap or the aggregate cap 

are sent a letter by their contractor 

(regional home health and hospice 

intermediary (RHHI) or fiscal 

intermediary (FI)), detailing the cap 

results, along with a demand for 

repayment. As described in an 

administrative instruction (CR 6400, 

Transmittal 1708, issued April 3, 2009) 

effective July 1, 2009, this letter of 

determination of program 

reimbursement will be sent to every 

hospice provider, regardless of whether 

or not the hospice has exceeded the cap. 

A demand for repayment will be 

included for those hospices which have 

exceeded either cap. If a hospice 

disagrees with the contractor’s cap 

calculations, the hospice has appeal 

rights which are set out at 42 CFR 

§ 418.311 and Part 405, subpart R. The 

letter of determination of program 

reimbursement shall include language 

describing the hospice’s appeal rights. 

We proposed clarifying the language at 

§ 405.1803 to note that for the purposes 

of hospice, the determination of 

program reimbursement letter sent by 

the contractors serves as the written 

notice reflecting the intermediary’s 

determination of the total amount of 

reimbursement due the hospice, which 

is commonly called a Notice of Program 

Reimbursement or NPR. Additionally, 

we proposed clarifying 

§ 405.1803(a)(1)(i) to note that in the 

case of hospice, the reporting period 

covered by the determination of 


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program reimbursement letter is the 

hospice cap year and the bases for the 

letter are the cap calculations rather 

than reasonable cost from cost report 

data. 

Comment: Commenters supported the 

proposed clarification, but asked that 

CMS also clarify that the time period for 

filing cap appeals does not begin until 

the hospice receives the letter of 

determination of program 

reimbursement. Additionally, they 

asked CMS to clarify that hospices 

should not be required to wait until they 

receive these letters to appeal issues 

unrelated to the caps. Many commenters 

also were dissatisfied with the amount 

of time between the end of a cap year 

and the hospice receiving the 

determination letter. 

Response: We thank commenters for 

their support of this clarification, and 

for their questions, which point out an 

addition to regulatory text which would 

be helpful. Several commenters had 

questions related to the timing of 

appeals because of the location of the 

proposed changes to the regulatory text. 

To avoid confusion, we have established 

a separate subsection at § 405.1803(a)(3) 

entitled ‘‘Hospice Caps’’. This section 

includes the language originally 

proposed for § 405.1803(a) and 

§ 405.1803(a)(1)(i). Additionally, we are 

adding a sentence to the regulatory text 

at § 405.1803(a)(3) which notes that the 

timeframe for hospice cap appeals 

begins with receipt of the determination 

of program reimbursement letter. 

Commenters also asked about the 

timing when appealing issues unrelated 

to the caps. The timing of all other 

claims appeals is unrelated to the 

determination of program 

reimbursement letters, and those 

appeals are governed under 42 CFR 

418.311. When appealing claims 

decisions, providers should continue to 

follow the procedures and timeframes 

outlined in the CMS Claims Processing 

Manual (IOM 100–04), Chapter 29 

(‘‘Appeals of Claims Decisions’’), which 

can be accessed through the CMS 

Hospice Center Web page at http:// 

www.cms.hhs.gov/center/hospice.asp. 

Finally, we have taken note of the 

long timeframe some commenters 

currently report in receiving the results 

of their cap calculations, and will 

consider this information in any 

changes to the cap calculation 

methodology that might be made in the 

future. 

For this final rule, we are revising the 

proposed changes to § 405.1803. 

Specifically, we are creating a separate 

section at § 405.1803(a)(3) subtitled 

‘‘Hospice Caps’’, providing the same 

information that we had proposed be in 

§ 405.1803(a) and § 405.1803(a)(1)(i). 

The regulatory text at § 405.1803(a) and 

§ 405.1803(a)(1)(i)is to be unchanged. 

Additionally, we will add a sentence to 

the new section at § 405.1803(a)(3) to 

note that the timeframe for appeals of 

cap calculation results begins with 

receipt of the determination of program 

reimbursement letter. 

F. Technical and Clarifying Changes 

We are incorporating the following 

technical changes to clarify existing 

regulations text, correct errors that we 

have identified in the regulations, 

remove obsolete cross references, or to 

ensure consistent use of terminology in 

our regulations. 

1. Clarification of the Statutory Basis for 

Hospice Regulation, § 418.1 

Currently, the statutory basis for the 

hospice regulations is described at 

§ 418.1, and notes that Part 418 

implements section 1861(dd) of the Act. 

The regulation describes section 

1861(dd) of the Act as specifying 

covered hospice services and the 

conditions that a hospice program must 

meet to participate in the Medicare 

program. While that is correct, section 

1861(dd) of the Act also specifies some 

limitations on coverage and payment for 

inpatient hospice care. In the proposed 

rule we proposed clarifying § 418.1 by 

adding a sentence noting that section 

1861(dd) of the Act limits coverage and 

payment for inpatient hospice care. 

We received no comments on this 

proposal, and are finalizing the changes 

as proposed. 

2. Update of the Scope of Part, § 418.2 

The current regulations at § 418.2 

(‘‘Scope of part.’’) describe each of the 

subparts in Part 418. Some of these 

subparts have been revised or removed 

due to the update of the hospice 

conditions of participation (CoPs) in 

2008 (73 FR 32088). Specifically, 

subpart B specifies the eligibility and 

election requirements, along with the 

duration of benefits. Subparts C and D 

specify the Conditions of Participation, 

with subpart C now entitled ‘‘Patient 

Care’’ rather than ‘‘General Provisions 

and Administration’’, and subpart D 

now entitled ‘‘Organizational 

Environment’’ rather than ‘‘Core 

Services’’. Subpart E, which was 

previously described as specifying 

reimbursement methods and 

procedures, was removed and reserved 

for future use with the update of the 

CoPs. Subparts F and G now relate to 

payment policy, to include covered 

services and hospice payment; currently 

subpart F is incorrectly described in 

§ 418.2 as specifying coinsurance 

amounts. Finally, subpart H should be 

referred to as specifying coinsurance 

amounts applicable to hospice care, 

rather than subpart F as the regulation 

currently reads. Accordingly, we 

proposed to update section § 418.2 to 

reflect the current organization and 

scope of Part 418. 

We received no comments on this 

proposal, and are finalizing the changes 

as proposed. 

3. Revision of Hospice Aide and 

Homemaker Services, § 418.76 

In the proposed rule, we proposed to 

incorporate a technical correction at 

§ 418.76(f)(1) to clarify that home health 

agencies that have been found out of 

compliance with paragraphs (a) or (b) of 

§ 484.36, regarding home health aide 

qualifications, are prohibited from 

providing hospice aide training. The 

word ‘‘out’’ was inadvertently omitted 

from the regulation text in the June 5, 

2008 hospice final rule. 

We received no comments on this 

proposal, and are finalizing the changes 

as proposed. 

4. Clarification of Hospice Multiple 

Location, § 418.100 

For the sake of clarity, in the 

proposed rule we proposed to delete the 

word ‘‘that’’ from § 418.100(f)(1)(iii), 

regarding multiple locations. The 

revised element would require that the 

lines of authority and professional and 

administrative control must be clearly 

delineated in the hospice’s 

organizational structure and in practice, 

and must be traced to the location 

which was issued the certification 

number. 

We received no comments on this 

proposal, and are finalizing the changes 

as proposed. 

5. Revision to Short Term Inpatient 

Care, § 418.108 

In the proposed rule, we proposed to 

correct in § 418.108(b)(1)(ii) an 

erroneous reference to § 418.110(f), 

‘‘Patient rooms’’. This section, which 

addresses facilities that are considered 

acceptable for the provision of respite 

care to hospice patients, was intended 

to reference the standard at § 418.110(e), 

‘‘Patient areas’’. The published reference 

to standard (f) was a typographic error, 

and we are correcting it by changing the 

reference to standard (e). 

We received no comments on this 

proposal, and are finalizing the changes 

as proposed. 

6. Clarification of the Requirements for 

Coverage, § 418.200 

Section 418.200 describes the 

requirements for coverage for Medicare 


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hospice services, and references 

§ 418.58 (‘‘Conditions of Participation— 

Plan of care’’). This cross reference is no 

longer accurate; section § 418.58 was 

updated with the publication of the new 

CoPs in 2008, and is now § 418.56. In 

the proposed rule we proposed to detail 

the requirements for coverage related to 

the plan of care rather than cross refer 

to the CoPs regulations. This revision 

would make clearer that the statute 

requires review of the plan of care as a 

condition for coverage of hospice 

services. However, we are continuing to 

include a reference to the updated CoP 

section (418.56) for a comprehensive 

description of our expectations 

associated with the plan of care. 

The statute specifies requirements for 

hospice coverage in section 

1814(a)(7)(A) through (C) of the Act. The 

Act requires that the hospice medical 

director and the patient’s attending 

physician certify the terminal illness for 

the initial period of hospice care and 

that the medical director recertify the 

terminal illness for each subsequent 

benefit period. Additionally, the Act 

requires that a plan of care exist before 

care is provided; that the plan of care be 

reviewed periodically by the attending 

physician, the medical director, and the 

interdisciplinary group; and that care be 

provided in accordance with the plan of 

care. In the proposed rule, we proposed 

to clarify § 418.200 to incorporate each 

of these requirements for coverage, 

rather than cross referencing other CoPs. 

We received no comments on this 

proposal, and are finalizing the changes 

as proposed, except that we are 

continuing to include the CoP crossreference. 

7. Incorporation of the Term ‘‘Hospice 

Aide,’’ § 418.202, § 418.204, and 

§ 418.302 

Over the last several years, we have 

worked with the industry to update the 

hospice CoPs. These efforts culminated 

in publication of a final rule in 2008, 

which was effective December 2, 2008. 

The revised CoPs redesignated the 

‘‘home health aide’’ who works in 

hospice as a ‘‘hospice aide’’. We are 

revising § 418.202(g), § 418.204(a), and 

§ 418.302 to include the new 

terminology. 

Comment: One commenter suggested 

we remove the language ‘‘home health 

aide’’ and just use the term ‘‘hospice 

aide’’. 

Response: We appreciate this 

comment. However, we are keeping the 

reference to a ‘‘home health aide’’ in the 

regulations, because that is how the 

Social Security Act refers to aides in 

hospice. Consequently, we are finalizing 

the change as proposed. 

8. Clarification of Administrative 

Appeals § 418.311 

A hospice that does not believe its 

payments have been properly 

determined may request a review from 

the intermediary or from the Provider 

Reimbursement Review Board (PRRB), 

depending on the amount in 

controversy. Section 418.311 details the 

procedures for appealing a payment 

decision and also refers to Part 405, 

Subpart R. 

In the proposed rule, we proposed to 

clarify the last sentence of this section, 

which currently notes that ‘‘the methods 

and standards for the calculation of the 

payment rates by CMS are not subject to 

appeal.’’ The payment rates referred to 

are the national rates which are set by 

statute, and updated according to the 

statute using the hospital market basket 

(unless Congress instructs us to update 

the rates differently). To ensure better 

understanding of what is not subject to 

appeal, we proposed to revise § 418.311 

to provide that methods and standards 

for the calculation of the statutorily 

defined payment rates by CMS are not 

subject to appeal. 

We received no comments on this 

proposal, and are finalizing the changes 

as proposed. 

III. Comments on Other Policy Issues 

A. Recertification Visits, § 418.22 

As noted earlier, MedPAC convened 

an expert panel from the hospice 

industry in late 2008. That panel noted 

that some hospices were enrolling and 

recertifying patients who they 

determined were not eligible for hospice 

care under the Medicare benefit, and a 

consensus emerged that greater 

accountability and oversight were 

needed in the certification and 

recertification process. To further 

increase accountability in the 

recertification process, several of the 

panelists suggested to MedPAC that an 

additional policy change be made to the 

recertification process. Several panelists 

supported a requirement that a hospice 

physician or advanced practice nurse 

visit the patient at the time of the 180- 

day recertification to assess continued 

eligibility, and at every recertification 

thereafter to assess the patient’s 

continued eligibility. MedPAC 

recommended that the physician or 

advanced practice nurse be required to 

attest that the visit took place. MedPAC 

used the panel’s input in making 

recommendations related to the 

certification process, which can be 

found in chapter 6 (‘‘Reforming 

Medicare’s Hospice Benefit’’) of 

MedPAC’s March 2009 report entitled 

‘‘Report to the Congress: Medicare 

Payment Policy’’ which is available at 

http://www.medpac.gov/chapters/ 

Mar09_Ch06.pdf. 

At this time, we are not making any 

policy change to require visits by 

physicians or advanced practice nurses 

in order to recertify patients. We note 

that the statute requires a physician to 

certify and recertify terminal illness for 

hospice patients, and specifically 

precludes nurse practitioners from 

doing so at 1814(a)(7)(A) of the Act. A 

recertification visit to a hospice patient 

by a nurse practitioner would not 

relieve the physician of his or her legal 

responsibility to recertify the terminal 

illness of such hospice patient. The 

physician is ultimately responsible for 

the recertification determination. 

However, the visit, if performed by a 

nurse practitioner, could potentially 

serve as an additional, objective source 

of information for the physician in the 

recertification of terminal illness 

decision. We are also considering other 

options related to a nurse practitioner 

making recertification visits. For 

example, a nurse practitioner who is 

involved in a patient’s day-to-day care 

may not be as objective in assessing 

eligibility for recertification as a nurse 

practitioner who is not caring for that 

patient regularly. One option to better 

ensure that a nurse practitioner visit 

results in additional, objective clinical 

assessment of the patient’s condition 

might be to require that such nurse 

practitioner not be involved in the 

hospice patient’s day-to-day care. Also, 

there are different possible approaches 

regarding the timeframe for making 

visits. Visits by a physician or nurse 

practitioner could be made within a 

timeframe close to the recertification 

deadline, such as the 2 week period 

centered around the recertification date, 

thereby allowing a window of time 

surrounding the recertification 

timeframe for a visit to occur. 

While we are not making a policy 

change regarding recertification visits at 

this time, we did solicit comments on 

the suggestion to require physician or 

nurse practitioner visits for hospice 

recertifications at or around 180 days 

and for every benefit period thereafter. 

We solicited comments on all aspects of 

this suggestion, including practical 

issues of implementation. We will 

analyze and consider the comments 

received in possible future policy 

development. 

Comment: Many commenters 

supported this requirement, but only if 

the visits were adequately reimbursed, 

stating that current payments are not 

sufficient to cover the costs of these 

visits, especially where patients reside 

in remote areas. Some commenters 


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urged the visits be performed by a 

physician experienced in end-of-life 

care. Others stated that the visit be 

thorough and comprehensive, and 

include patient and family counseling 

about alternate care arrangements if 

appropriate. Many commenters stated 

that advanced practice nurses should 

not perform the visits, stating that the 

goal of increased physician 

accountability would be achieved with 

a physician visit. Other commenters 

suggested that the visits occur only at 

the 180 day recertification. Similarly, 

many commenters suggested that the 

visits occur at 180 days and at every 

other recertification after that. Many 

commenters suggested the visit could 

occur within two or three week window 

around the recertification timeframe. 

One commenter suggested an alternative 

process to review non-cancer patients at 

90 and 180 days. Commenters 

encouraged CMS to work with the 

industry to identify all issues which 

may be associated with such a 

requirement. 

In the April 24, 2009 hospice wage 

index proposed rule, we suggested that 

if it were determined appropriate for a 

nurse practitioner to render such a visit, 

that an option to better ensure that an 

objective clinical assessment of the 

patient’s condition occurred might be to 

require that the nurse practitioner not be 

involved in the day-to-day care for that 

hospice patient. One commenter 

suggested that, due to shortages in nurse 

practitioners, we consider allowing the 

nurse practitioner who was involved in 

the patient’s day-to-day care to perform 

some but not all of the recertification 

visits. The commenter further suggested 

that the nurse practitioner who was 

involved in the patient’s day-to-day care 

not be allowed to render the first 

recertification visit and not be allowed 

to render such visits for consecutive 

recertifications. Additionally, this same 

commenter stated that the recertification 

visits should occur over a reasonable 

timeframe before the recertification 

date. This commenter believes that if 

the ‘‘visit were to occur after the 

recertification date, it could create a 

disincentive for hospices to discharge a 

patient since it would result in a lack of 

payment for days of care already 

provided beyond the recertification 

date.’’ One commenter suggested that 

nurse training be developed to certify 

nurses in hospice eligibility evaluations. 

Another commenter stated that the visit 

must be performed by someone familiar 

with the patient so that changes in the 

patient’s condition are identified. 

Many commenters opposed this 

requirement. Commenters were 

concerned that this recertification 

requirement would be burdensome to 

providers and would result in decreased 

access to care. These same commenters 

were concerned that the lack of 

physician resources in small and rural 

hospices that only have a part-time 

medical director would make it 

impossible to perform these visits. Some 

commenters indicated that nurse 

practitioners are just as scarce in rural 

areas as physicians. Some commenters 

stated that there would be no increased 

quality associated with these visits, and 

that visits should be used to improve 

care, not monitor eligibility. Similarly, 

other commenters suggested we target 

for contractor review hospices with 

long-stay patients rather than penalize 

all hospices with this costly 

requirement. A commenter stated that 

these visits would upset the families, 

and are not an efficient use of resources. 

One commenter stated that it would be 

difficult for hospices to hire medical 

directors if this requirement were 

adopted. 

Response: We appreciate the 

comments received from the public 

concerning this matter and will 

continue to analyze and consider those 

comments and suggestions in future 

rulemaking. 

B. Hospice Aggregate Cap Calculation 

As described in section 1814(i)(2)(A) 

through (C) of the Act, when the 

Medicare hospice benefit was 

implemented, the Congress included an 

aggregate cap on hospice payments. The 

hospice aggregate cap limits the total 

aggregate payment any individual 

hospice can receive in a year. The 

Congress stipulated that a ‘‘cap amount’’ 

be computed each year. The cap amount 

was set at $6,500 per beneficiary when 

first enacted in 1983 and is adjusted 

annually by the change in the medical 

care expenditure category of the 

consumer price index for urban 

consumers from March 1984 to March of 

the cap year. The cap year is defined as 

the period from November 1st to 

October 31st, and was set in place in the 

December 16, 1983 hospice final rule 

(48 FR 56022). This timeframe was 

chosen as the cap year since the 

Medicare hospice program began on 

November 1, 1983 (48 FR 56022). For 

the 2008 cap year, the cap amount was 

$22,386.15 per beneficiary. This cap 

amount is multiplied by the number of 

Medicare beneficiaries who received 

hospice care in a particular hospice 

during the year, resulting in its hospice 

aggregate cap, which is the allowable 

amount of total Medicare payments that 

hospice can receive for that cap year. A 

hospice’s total reimbursement for the 

cap year cannot exceed the hospice 

aggregate cap. If its aggregate cap is 

exceeded, then the hospice must repay 

the excess back to Medicare. 

Using the most recent (2008) payment 

rates before wage adjustment, the 2008 

cap amount ($22,386.15) is roughly 

equal to the cost of providing routine 

home care for 166 days. Because the 

hospice aggregate cap is computed in 

the aggregate for the entire hospice, 

rather than on a per beneficiary basis, 

hospices that admit a mix of short-stay 

and long stay Medicare beneficiaries 

will rarely exceed the cap. On average, 

lower expenditures made on behalf of 

Medicare beneficiaries with shorter 

hospice stays offset the expenditures 

made on behalf of Medicare 

beneficiaries with longer stays such that 

in the aggregate, the majority of 

hospices do not exceed the calculated 

aggregate cap. 

Until recently, very few hospices ever 

exceeded the aggregate cap. The 

Government Accountability Office 

(GAO) found that between 1999 and 

2002, less than 2 percent of hospices 

exceeded the aggregate cap (United 

States Government Accountability 

Office, ‘‘Medicare Hospice Care. 

Modifications to Payment Methodology 

May Be Warranted’’. October 2004, 

Washington, DC. p. 18). MedPAC 

reported that the number of hospices 

that exceeded the aggregate cap has 

grown steadily between 2002 and 2005, 

but remains just under 8 percent as of 

2005 (Medicare Payment Advisory 

Commission, ‘‘Report to the Congress: 

Reforming the Delivery System’’. June 

2008. Washington, DC. p. 212). We do 

not believe that hospices are exceeding 

the aggregate cap due to our 

intermediaries’ method of calculating 

the aggregate cap. Rather, MedPAC’s 

analyses suggest that certain hospices 

exceed the aggregate cap due to 

‘‘significantly longer lengths of stay’’ 

than hospices that do not exceed the cap 

[MedPAC, p. 214–15]. MedPAC suggests 

that longer average lengths of stay at 

certain hospices could be due, in part, 

to a change in their patient case-mix 

that has brought in more patients with 

less predictable disease trajectories 

[MedPAC, p. 213–14]. However, patient 

case-mix was not found to account for 

all of the discrepancy in length of stay 

[MedPAC, p. 214–15]. MedPAC also 

found that for-profit ownership, smaller 

patient loads, and being a freestanding 

facility were correlated with longer 

lengths of stay and the consequent 

likelihood of exceeding the aggregate 

cap [MedPAC, p. 212–215]. 

As stated above, in our current 

hospice aggregate cap calculation 

methodology, the intermediary 

calculates each hospice’s aggregate cap 


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39404 Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 

amount by multiplying the perbeneficiary cap amount by the number 

of Medicare beneficiaries counted in 

each cap year. Patients who receive 

hospice care in more than one cap year 

are counted so that, in the aggregate, the 

‘‘number of Medicare beneficiaries’’ for 

each year is reduced to reflect the 

proportion of time patients receive in 

other years. Hospices are currently 

required to submit a report of their 

Medicare beneficiary unduplicated 

census to their intermediary within 30 

days of the end of the cap year. Our 

current methodology also apportions the 

beneficiary across multiple hospices if 

the beneficiary receives care from more 

than one hospice during the cap year, 

with the proportional shares summing 

to 1. The intermediary reduces each 

hospice’s Medicare beneficiary count by 

that fraction which represents 

proportional days of care the beneficiary 

received in another hospice during the 

year, with all the proportional shares 

summing to 1. 

In counting the Medicare beneficiaries 

for the unduplicated census report, we 

instruct hospices to use a slightly 

different timeframe from the cap year 

used to count payments. When 

determining a hospice’s expenditures 

during a cap year, the intermediary 

sums all claims submitted by the 

hospice for services performed during 

the cap year, which begins on November 

1st of each year and ends on the October 

31st of the following year. However, we 

instruct hospices to include those 

beneficiaries who elect the benefit 

between September 28th of each year 

and September 27th of the following 

year, rather than following the 

November 1st to October 31st cap year. 

CMS (then HCFA) used mean length of 

stay from demonstration project data to 

determine the point at which to include 

a beneficiary in calculating the hospice 

cap. Using half of the mean length of 

stay, or 70 days/2 = 35 days, CMS 

implemented a timeframe for counting 

beneficiaries that began less than 35 

days from the end of the cap year. 

Therefore, the timeframe for counting 

beneficiaries was set as September 28th 

through September 27th (48 FR 56022). 

This method of reducing the number of 

Medicare beneficiaries counted in a cap 

year to reflect time spent in other years 

was implemented because it allows for 

counting the beneficiary in the reporting 

period where he or she used most of the 

days of covered hospice care (48 FR 

38158). We believe that the regulation 

complies with the statutory 

requirements without being unduly 

burdensome. This approach has the 

major advantage of allowing each 

hospice to estimate its aggregate cap 

calculation within a short period of time 

after the close of a cap year. While we 

believe that the current hospice 

aggregate cap methodology equitably 

meets the statutory requirements for 

calculating the hospice aggregate cap set 

out at section 1814(i)(2) of the Act, the 

availability of more sophisticated 

databases and data systems provides us 

with an opportunity to incorporate 

efficiencies in the cap calculation 

process. The lack of sophisticated data 

systems in place in the 1980’s limited 

our options for how to efficiently 

compute the hospice aggregate cap. In 

the 1980’s access to claims data was 

very slow, and searchable claims 

databases were virtually non-existent. 

While the current system still has 

limitations, the advancement of 

technology has brought with it provider 

access to benefit period information in 

the Common Working File (CWF), 

which was created in the 1990’s, and 

faster processing speeds, which allow 

contractors and hospices easier access to 

claims information for hospice aggregate 

cap calculation purposes. Therefore, we 

are now able to consider more efficient 

approaches to calculating the aggregate 

cap. 

The time required for intermediaries 

to compute each hospice’s aggregate cap 

and send demand letters when 

overpayments exist delays our recovery 

of those overpayments and may also 

contribute to some hospices exceeding 

the cap in subsequent years. Hospices 

have described receiving demands for 

cap overpayments more than a year after 

the end of the cap year, and have 

expressed concern that they are not 

timely notified about their cap 

overpayments. Hospices which don’t 

closely monitor compliance with their 

aggregate cap may not have anticipated 

an overpayment, and the lag in 

notification may contribute to the risk of 

a hospice exceeding its aggregate cap in 

the subsequent year. More timely 

notification of overpayments would 

enable hospices to more quickly review 

their admissions practices, and make 

necessary changes to ensure that all 

their patients meet the eligibility 

requirements for hospice care. 

We are exploring a number of 

different hospice aggregate cap 

implementation methodology changes 

to address these issues, and to take 

advantage of the technological 

efficiencies available. Specifically, we 

are exploring enhancements to our 

current methodology which will 

improve the timeliness of hospices’ 

notification of cap overpayments, will 

enable such overpayments to be 

collected more quickly, and which will 

encourage hospices to be more 

proactively involved in managing their 

admissions practices such that they do 

not exceed their hospice aggregate cap. 

We are considering several changes to 

the annual hospice aggregate cap 

calculation implementation 

methodology which could help hospices 

avoid exceeding the aggregate cap. 

If a beneficiary receives hospice care 

for an extended period of time, or elects 

hospice toward the end of a cap year, he 

or she is more likely to cross into more 

than 1 cap year, or to receive care from 

more than 1 hospice. If we made a 

mathematically precise determination of 

the proportion of time each patient 

spent in each cap year at each hospice 

from which they received care, in order 

for a given cap year report to be final, 

adjustments to that cap year report 

would have to continue until the 

beneficiary actually died. Only then 

could a final determination of the 

aggregate cap be made for a given year 

for each hospice that had treated the 

beneficiary. Such an approach could be 

viewed as particularly burdensome to 

the hospice as a hospice’s financial 

system would likely need to be able to 

continually react to subsequent hospice 

aggregate cap calculations, readjusting 

payments to Medicare to account for an 

overpayment amount that is everchanging, that is, until the beneficiary 

dies. 

A variation of this approach would 

allow apportioning of beneficiaries who 

receive care in more than 1 cap period 

over 2 consecutive years. This approach 

would minimize, but not completely 

eliminate, the adjustments required to 

prior year cap calculations. This method 

still has the effect of delaying the final 

cap determination. However, it raises 

questions about scenarios where a 

beneficiary received hospice care in his 

first and second cap year, either revoked 

or was discharged from the benefit, and 

returned to a different hospice at a 

much later date, such as in the third cap 

year. We would like public input from 

hospices, patient groups, other provider 

types, academics, and members of the 

general public on how to best handle 

this or similar scenarios. 

Besides considering different 

approaches to counting beneficiaries, 

another option is to require hospices to 

compute their own hospice aggregate 

cap and submit a certified cap report to 

their contractors, along with any 

overpayment, 7 months after the end of 

the cap year. The information used for 

the hospice aggregate cap calculation 

originates with hospices, and is 

available to them through the CWF or 

through their own accounting records. 

Requiring hospices to compute and 


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Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 39405 

report their own hospice aggregate cap 

would result in hospices being proactive 

in managing their cap calculations. In 

this approach, contractors would still 

verify the reported cap. 

We solicited comments on these and 

other policy options in an effort to 

gather more information on this issue, 

and any other possible underlying 

issues that may exist. 

Comment: Most commenters 

encouraged CMS to more timely notify 

providers of their cap overpayments, 

stating that the current delay in 

notification is burdensome, results in 

overpayments generated for prior years, 

and does not allow providers to make 

timely corrections. Many commenters 

suggested CMS apportion the cap over 

consecutive years if the patient received 

service over more than 1 year. Some 

hospices were agreeable to CMS’ 

suggestion that hospices should 

calculate and report their own certified 

cap report, with the caveat that patients’ 

full utilization history be made available 

to hospices in order for them to 

accurately compute the report. Others 

expressed concern that there should be 

penalties imposed for erroneous 

reporting. Other commenters opposed 

submission of a cap report, for burden 

reasons, and because patients’ full 

utilization is not currently available to 

them. Several commenters suggested 

that cap amount be adjusted for 

geographic variances in costs. 

Commenters also requested that CMS 

allow a new cap amount for readmitted 

beneficiaries who experience a break in 

hospice utilization. Some commenters 

suggested we consider common 

ownership as a factor in the cap 

calculation. Many commenters stated 

that the cap needs to be modernized. 

Others stated that the suggestions CMS 

described in the solicitation for 

comments will only exacerbate the cap 

problems, suggesting CMS instead 

should consider methods that will 

ensure admissions and discharge 

decisions are not based on fears of 

financial liability associated with a cap. 

One commenter expressed concerns 

about how we would transition to a new 

calculation methodology. Another 

commenter stated that all hospices 

should receive cap feedback from the 

fiscal intermediary to enable them to 

monitor their cap better. 

Many submitted comments that were 

beyond the scope of the solicitation for 

suggestions associated with cap 

calculation methodology improvements. 

Some stated that the cap currently 

encourages hospice providers to focus 

on their financial bottom line instead of 

patient needs, and incentivizes hospices 

to inappropriately discharge patients, 

and not admit patients with less 

predictable trajectories. Others 

suggested that CMS suspend the 

aggregate cap until hospice payment 

reform occurs, and suggesting CMS 

improve national coverage 

determination processes. One 

commenter stated that the cap doesn’t 

account for geographic factors that may 

affect a hospice’s patient population, 

which may increase their risk of 

exceeding the cap. Many commenters 

expressed support for the aggregate cap, 

with one stating that CMS should 

generate alerts to physicians and 

hospice medical directors with a high 

percentage of long-stay patients, and 

ultimately revoke their billing 

privileges. 

Response: We appreciate the 

comments received from the public 

concerning this matter and will 

continue to analyze and consider those 

comments and suggestions in future 

rulemaking. 

C. Hospice Payment Reform 

Since the inception of the hospice 

benefit in 1983, the amount that the 

Medicare program has spent on this 

benefit has grown considerably. The 

number of unduplicated hospice 

Medicare beneficiaries has increased 

from 401,140 in FY 1998 to 986,435 in 

FY 2007, which represents a 146 

percent increase. Additionally, at the 

inception of the benefit, most hospice 

patients elected hospice care due to 

terminal cancer. The profile of the 

hospice patient has changed in recent 

years such that hospices now provide 

care to beneficiaries with a wide range 

of terminal conditions. In calendar year 

(CY) 1998, 54 percent of hospice 

patients had terminal cancer diagnoses. 

In CY 2007, only 28 percent of hospice 

patients had terminal cancer diagnoses. 

With the diversity of diagnoses, hospice 

stays began to increase. The national 

average length of stay for patients in 

hospice has risen from 48 days per 

patient in CY 1998 to 73 days per 

patient in CY 2006. Additionally, long 

hospice stays have grown even longer 

by about 50 percent. Between 2000 and 

2005, hospices in the 90th percentile for 

average length of stay increased their 

average length of stay from 144 to 212 

days. 

MedPAC has performed extensive 

analysis of the hospice benefit over the 

past few years, and has recommended 

that CMS reform the hospice payment 

structure to ensure greater 

accountability in the hospice benefit. 

MedPAC believes that the current 

hospice payment system contains 

incentives that make long hospice stays 

more profitable, which may result in 

misuse of the benefit. 

Medicare spending for hospice is 

rapidly growing, more than tripling 

between 2000 and 2007. In fiscal year 

(FY) 1998, expenditures for the 

Medicare hospice benefit were $2.2 

billion, while in FY 2007, expenditures 

for the Medicare hospice benefit were 

$10.6 billion, more than the Medicare 

program spends on inpatient 

rehabilitation hospitals, critical access 

hospitals, long term care hospitals, or 

psychiatric hospitals. Medicare hospice 

spending is expected to continue to 

grow, and will account for roughly 2.3 

percent of overall Medicare spending in 

FY 2009. 

The number of hospice agencies has 

also grown by over 80 percent since 

1997. The growth is overwhelmingly in 

the for-profit category. In 1997, there 

were 1,834 hospices, about 20 percent of 

which were for-profit and 80 percent 

were non-profit. In 2009, there were 

3,328 hospices, and 51 percent of these 

are for-profit entities. Since 2000, nearly 

all hospices newly participating in 

Medicare are for-profit entities. 

MedPAC reports that the newly 

participating hospices have margins five 

to six times higher than more 

established hospices. MedPAC estimates 

that, on average, hospice Medicare 

margins were approximately 3.4 percent 

in 2005. However, the for-profit 

hospices are estimated to have margins 

ranging from 15.9 percent in 2003 to 

11.8 percent in 2005. 

In their analyses of the hospice 

benefit in their June 2008 ‘‘Report to the 

Congress,’’ MedPAC found that hospice 

care is more costly at the beginning and 

end of an episode of hospice care, 

because of the intensity of services 

provided during those times. Hospices 

provide more visits to a patient right 

after a patient elects hospice and in the 

time shortly before death, than they 

provide during the middle of the 

episode. In its March, 2009 report 

entitled ‘‘Report to the Congress: 

Medicare Payment Policy’’, MedPAC 

suggested that payments to hospices 

should decline as the beneficiary’s 

length of stay increases, thus better 

reflecting intensity and frequency of the 

hospice services provided over the 

course of treatment. MedPAC also 

suggested that payment to hospices 

should increase during the period just 

prior to the patient’s death to reflect the 

higher resource usage during this time 

[see, chapter 6 (‘‘Reforming Medicare’s 

Hospice Benefit’’) of MedPAC’s March 

2009 report entitled ‘‘Report to the 

Congress: Medicare Payment Policy’’ 

which is available at http:// 


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www.medpac.gov/chapters/ 

Mar09_Ch06.pdf]. 

MedPAC believes this payment 

structure would better reflect hospice 

patient resource usage and hospice 

costs, and would encourage hospices to 

admit patients at the time in their 

illness which provides the most benefit 

to the patient. 

We solicited comments regarding 

MedPAC’s suggestions on reforming the 

hospice payment system, as well as 

broader comments and suggestions 

regarding hospice payment reform. We 

note that MedPAC’s suggested payment 

reforms would require Congressional 

action to change the statute. 

Comment: Many commenters 

supported MedPAC’s payment model. 

Some made specific recommendations 

regarding which time periods in the stay 

should warrant a higher payment. Some 

commenters suggested that a hospice 

payment system that is a case-mix 

adjusted would be appropriate. One 

commenter suggested a site of care 

adjustment, to reflect more adequate 

compensation for hospices in rural 

versus urban areas, and for care 

provided to patients in congregate living 

arrangements. The commenter suggested 

that CMS also require Medicaid to pay 

room and board charges directly to the 

nursing home in the case of dually 

eligible routine home care patients who 

reside in nursing homes. This 

commenter also suggested CMS analyze 

the appropriateness of payments for 

respite and continuous home care. 

Commenters feared that the MedPAC 

payment model would result in 

decreased access to hospice care, 

especially for patients with non-cancer 

diagnoses, with one commenter 

suggesting that CMS shouldn’t change 

the payment structure simply because a 

small number of providers are abusing 

the system. Rather, this commenter 

suggested that CMS deal with 

inappropriate use of hospice via 

increased surveying. 

Other commenters feared that 

MedPAC’s suggestion would create 

incentives for inappropriate hospice 

provider behavior such as incentivizing 

admission late in a patient’s disease 

trajectory. One commenter suggested 

instead of reforming hospice payments, 

CMS should consider the role of hospice 

and costs in the total health care 

picture. Other commenters encouraged 

CMS to consider the impact payment 

changes would have on quality of care. 

Some commenters expressed concern 

about the administrative burden 

associated with a payment system 

change, with one suggesting that CMS 

consider an approach that would blend 

rates. One commenter encouraged CMS 

to consider other possible payment 

models. Commenters urged CMS to 

carefully analyze all data including cost 

data before reforming the hospice 

payment structure, to avoid unintended 

consequences. A few commenters 

suggested that CMS consider a pilot or 

demonstration to test a revised payment 

model prior to national implementation. 

Commenters also suggested that CMS 

involve the industry by holding 

technical expert panel (TEP) sessions in 

order to more fully identify, address, 

and consider the issues surrounding 

hospice payment reform. Many 

commenters urged CMS to ensure that 

payment reform would be effectuated in 

a budget neutral way. 

Response: We appreciate the 

comments received from the public 

concerning possible hospice payment 

reform. We will continue to review and 

consider those comments received as we 

analyze hospice data (to include recent 

expansions of the hospice data collected 

on the claim) in our work towards 

ensuring the accuracy and 

appropriateness of payments to 

hospices. 

IV. Update on Additional Hospice Data 

Collection 

Over the past several years MedPAC, 

the GAO, and the Office of the Inspector 

General have all recommended that 

CMS collect more comprehensive data 

in order to better evaluate trends in 

utilization of the Medicare hospice 

benefit. We have been phasing in this 

process to collect more comprehensive 

data on hospice claims. We also began 

collecting additional data on hospice 

claims beginning in January 2007 

through an administrative instruction 

(CR 5245, Transmittal 1011, issued July 

28, 2006), when we started required 

reporting of a HCPCS code on the claim 

to describe the location where services 

were provided (Phase 1). In addition, we 

issued an administrative instruction (CR 

5567, Transmittal 1494, issued April 29, 

2008) requiring Medicare hospices to 

provide detail on their claims about the 

number of physician, nurse, aide, and 

social worker visits provided to 

beneficiaries. The start date of this 

mandatory CR 5567 reporting 

requirement was July 2008 (Phase 2). On 

several occasions, industry 

representatives have communicated to 

CMS that the newly required claims 

information was not comprehensive 

enough to accurately reflect hospice 

care. A major concern was that CMS 

was not requiring reporting of the visit 

intensity. As a result of these concerns, 

we committed to working with the 

industry to expand the data collection 

requirements. In October 2008, we 

solicited comments via a posting on 

CMS’ hospice center Web site (http:// 

www.cms.hhs.gov/center/hospice.asp) 

on an approach to collecting additional 

data about hospice resource use. We 

asked about data collection using 

hospice claims, along with data 

collection using hospice cost reports. 

This final rule provides an update on 

the additional data collection. 

Based on the feedback received from 

our October 2008 Web posting, we 

revised our plans for Phase 3 of the 

claims data collection. Those plans were 

described in CR 6440 (Transmittal 

1738), which was issued on May 15, 

2009, and will have a mandatory 

effective date of January 1, 2010. 

Phase 3 will involve collecting new 

data on hospice claims. In addition to 

the existing visit reporting requirement, 

we are requiring visit time reporting in 

15 minute increments for nurses, social 

workers, and aides. We are requiring 

visit and visit time reporting in 15 

minute increments from physical 

therapists, occupational therapists, and 

speech language therapists. We are also 

requiring reporting of some social 

worker phone calls and their associated 

time, within certain limits. Specifically, 

we are requiring the reporting of social 

worker calls that are necessary for the 

palliation and management of the 

terminal illness and related conditions 

as described in the patient’s plan of care 

(for example, counseling, speaking with 

a patient’s family, or arranging for a 

placement). Furthermore, only social 

worker phone calls related to providing 

and or coordinating care to the patient 

and family, and documented as such in 

the clinical records, are to be reported. 

Visit and time data collection for respite 

and general inpatient care provided by 

non-hospice staff in contract facilities 

would be exempt from the reporting 

requirement. Finally, travel time, 

documentation time, and 

interdisciplinary group time are not to 

be included in the time reporting. These 

changes necessitate line-item billing on 

hospice claims. 

While other Medicare provider types 

(for example, home health agencies) 

have had to provide similar information 

on their claims, hospices have 

historically not been required to provide 

this information. This additional data 

collection will bring the requirements 

for hospice claims more in line with the 

claim requirements of other Medicare 

benefits, and provide valuable 

information about services provided to 

Medicare beneficiaries. 

We also note that this additional data 

collection uses existing revenue codes 

and existing UB–04 and 837I claim 

forms. Those claims forms were 


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Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 39407 

previously approved by the OMB under 

control number #0938–0997. As stated 

above, these changes were issued 

through an administrative instruction 

(CR 6440, Transmittal 1738) issued on 

May 15, 2009. 

Additionally, we are developing plans 

to revise the hospice cost reports to 

include additional sources of revenue, 

and to gather more detailed data on 

services provided by volunteers, by 

chaplains, by counselors, and by 

pharmacists. We will continue to work 

with the industry to seek out the best 

approach to these and any other changes 

we may make in order to collect useful 

information on hospice services. 

V. Provisions of the Final Regulations 

This final rule incorporates many of 

the provisions of the proposed rule. 

Those provisions of this final rule that 

differ from the proposed rule are as 

follows: 

In section II.A.3, instead of reducing 

the BNAF by 75 percent in FY 2010 and 

eliminating it in FY 2011, we are 

finalizing the BNAF phase-out over 7 

years, with a 10 percent BNAF 

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 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 

phase-out in FY 2016. 

In section II.B, we are finalizing our 

proposal to require that physicians who 

certify or recertify hospice patients as 

terminally ill include a brief narrative 

explanation of the clinical findings that 

support a life expectancy of six months 

or less. We are revising our original 

proposal to allow the narrative to either 

be part of the certification and 

recertification forms, or an addendum to 

the certification and recertification 

forms which is electronically or hand 

signed by the physician. If the narrative 

is part of the certification or 

recertification form, then the narrative 

must be located immediately prior to 

the physician’s signature. If the 

narrative exists as an addendum to the 

certification or recertification form, in 

addition to the physician’s signature on 

the certification or recertification form, 

the physician must also sign 

immediately following the narrative in 

the addendum. The narrative must 

reflect the patient’s individual clinical 

circumstances. The narrative must not 

contain checked boxes or standard 

language used for all patients. In the 

case of the initial certification, we 

require either the attending physician or 

the hospice medical director compose 

and sign the narrative. We also require 

that the narrative include under the 

physician signature, a statement 

indicating that by signing, the physician 

confirms that he/she composed the 

narrative based on his/her review of the 

patient’s medical record or, if 

applicable, examination of the patient. 

In section II.E, we are modifying our 

proposal to change regulatory text in 42 

CFR 405.1803. We are creating a 

separate section at § 405.1803(a)(3) 

which will be subtitled ‘‘Hospice Caps’’ 

and which will provide the same 

information that we had proposed be in 

§ 405.1803(a) and § 405.1803(a)(1)(i). We 

are leaving the regulatory text at 

§ 405.1803(a) and § 405.1803(a)(1)(i) 

unchanged. Additionally, we are adding 

a sentence to the new section at 

§ 405.1803(a)(3) to note that the 

timeframe for appeals of cap calculation 

results begins with receipt of the 

determination of program 

reimbursement letter. 

In section II.F, we are modifying our 

proposal to change the regulatory text in 

42 CFR § 418.200. We are continuing to 

include a reference to the updated CoP 

section (418.56) for a comprehensive 

description of our expectations 

associated with the plan of care, rather 

than the removing the reference as 

proposed. 

VI. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

the issue for the following section of 

this document that contains information 

collection requirements (ICRs): 

Section 418.22 Certification of 

terminal illness. 

Section 418.22 requires the physician 

to include on or with the certification or 

recertification a brief narrative 

explanation of the clinical findings that 

support a life expectancy of 6 months or 

less. 

The burden associated with this 

requirement is the time and effort put 

forth by the physician to include a brief 

narrative explanation of the clinical 

findings that supports a life expectancy 

of 6 months or less. We received the 

following comment during the 60-day 

comment period for the proposed stage 

of this rule: 

Comment: One commenter felt that 

the burden on hospices would be more 

than 5 minutes, suggesting that it would 

take physicians 30 minutes per 

certification to comply with the 

narrative requirements. 

Response: We disagree that requiring 

a narrative on the certification would 

take 30 minutes of the physician’s time. 

As we stated in the proposed rule, 

physicians are already supposed to be 

reviewing the patient’s clinical record 

when certifying or recertifying a patient. 

If hospices are complying with the 

current certification requirements, then 

the additional time to add a narrative 

would only be the time to synthesize the 

medical information. After reviewing 

the data, we still believe that composing 

the narrative should take a physician 

approximately 5 minutes. However, in 

re-examining the data and our previous 

assumptions and estimates from the 

proposed rule, we have re-estimated our 

burden estimate, which is now 

consistent with those assumptions used 

in the associated PRA package. 

We estimate that a narrative would be 

provided on 1,138,653 certifications and 

recertifications annually. At 5 minutes 

per narrative, the total annual burden 

associated with this requirement is 5 

minutes × 1,138,653/60 minutes per 

hour = 94,888 hours. The current 

requirements for § 418.22 are approved 

under OMB# 0938–0302 with an 

expiration date of 8/31/2009. We will 

revise the PRA package to reflect this 

change in burden. 

If you would like to comment on this 

information collection and 

recordkeeping requirement, please 

submit your comments to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Attention: CMS Desk Officer, [1420–F] 

Fax: (202) 395 6974; or E-mail: 

OIRA_submission@omb.eop.gov. 


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39408 Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 

VII. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism, 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 2010 

hospice wage index and of reducing the 

BNAF by 10 percent. 

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 8, 2008 FY 2009 

Hospice Wage Index final rule (73 FR 

46464), which originally finalized a 75 

percent reduced BNAF for FY 2010 as 

the second year of a 3-year phase-out of 

the BNAF. However, as noted 

previously, we believe that a more 

gradual phase-out provides additional 

opportunity to evaluate the impact of 

the BNAF reduction in the context of 

how this type of adjustment will fit into 

our goals for hospice payment reform. 

We are finalizing a 10 percent BNAF 

reduction in FY 2010 as the first year of 

a 7-year phase-out, with an additional 

15 percent BNAF reduction to occur in 

each of the next 6 years. Total phase-out 

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 final rule is 

not an economically significant rule 

under this Executive Order. 

Column 4 of Table 1 shows the 

combined effects of the updated wage 

data (the 2009 pre-floor, pre-reclassified 

hospital wage index) and of the 10 

percent reduction in the BNAF, 

comparing estimated payments for FY 

2010 to estimated payments for FY 

2009. In keeping with the American 

Recovery and Reinvestment Act (ARRA) 

mentioned earlier in this final rule, the 

FY 2009 payments used for comparison 

have a full (unreduced) BNAF applied. 

We estimate that the total hospice 

payments for FY 2010 will decrease by 

$90 million as a result of the application 

of the updated wage data (¥$40 

million) and the 10 percent reduction in 

the BNAF (¥$50 million). This estimate 

does not take into account any hospital 

market basket update, which is 2.1 

percent for FY 2010. The final hospital 

market basket update and associated 

payment rates will be communicated 

through an administrative instruction. 

The effect of a 2.1 percent hospital 

market basket update on payments to 

hospices is approximately $260 million. 

Taking into account a 2.1 percent 

hospital market basket update (+$260 

million), in addition to the updated 

wage data (¥$40 million) and the 10 

percent reduction in the BNAF (¥$50 

million), it is estimated that hospice 

payments would increase by $170 

million in FY 2010 ($260 million ¥$90 

million = $170 million). The percent 

change in payments to hospices due to 

the combined effects of the updated 

wage data, the 10 percent reduction in 

the BNAF, and the hospital market 

basket update of 2.1 percent is reflected 

in column 5 of the impact table (Table 

1). 

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. The majority of hospices and 

most other providers and suppliers are 

small entities, either by nonprofit status 

or by having revenues of less than $7 

million to $34.5 million in any 1 year 

(for details, see http://www.sba.gov/ 

contractingopportunities/officials/size/ 

index.html). 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 final rule, 

because the hospice benefit is a homebased 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 final rule has a significant impact 

on a substantial number of small entities 

(for example, hospices). Using 2007 

Medicare hospice claims data, we 

estimate that 96 percent of hospices 

have Medicare revenues below $13.5 

million. Additionally, using available 

2007 Medicare cost report data, we 

estimate that roughly 94 percent of 

hospices have total patient revenues 

below $13.5 million. 

As indicated in Table 1 below, there 

are 3,328 hospices as of January 29, 

2009. Approximately 48.5 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. 

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 0.7 percent, reflecting 

the combined effects of the updated 

wage data and the 10 percent reduction 

in the BNAF. The combined effects of 

the updated wage data and the 10 

percent reduction to the BNAF on small 

or medium sized hospices (as defined 

by routine home care days rather than 

by the SBA definition), is ¥0.6 or ¥0.7 

percent, respectively. Furthermore, 

when including the hospital market 

basket update of 2.1 percent into these 

estimates, the combined effects on 

Medicare payment to all hospices would 

result in an estimated increase of 

approximately 1.4 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 10 percent 

BNAF reduction, and the hospital 

market basket update are increases in 

payments of 1.5 percent and 1.4 percent, 

respectively. Overall average hospice 

revenue effects will be slightly less than 

these estimates since according the 


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National Hospice and Palliative Care 

Organization, about 16 percent of 

hospice patients are non-Medicare. 

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 10 percent 

reduced BNAF for all hospices is ¥0.7 

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 10 

percent reduced BNAF (¥0.7 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 10 percent 

BNAF reduction, and the 2.1 percent 

2009 market basket update, the overall 

impact is an increase in hospice 

payments of 1.4 percent for FY 2010. 

Therefore, the Secretary has determined 

that this final rule 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 a 

metropolitan statistical area and has 

fewer than 100 beds. Therefore, the 

Secretary has determined that this final 

rule 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 about 

$100 million or more in 1995 dollars, 

updated for inflation. That threshold is 

currently approximately $133 million in 

2009. This final rule is not anticipated 

to have an effect on State, local, or 

Tribal governments or on the private 

sector of $133 million or more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We have reviewed this final rule under 

the threshold criteria of Executive Order 

13132, Federalism, and have 

determined that it will not have an 

impact on the rights, roles, and 

responsibilities of State, local, or Tribal 

governments. 

B. Anticipated Effects 

This section discusses the impact of 

the projected effects of the hospice wage 

index, including the effects of a 2.1 

percent hospital market basket update 

that will be communicated separately 

through an administrative instruction. 

This final rule continues to use the 

CBSA-based pre-floor, pre-reclassified 

hospital wage index as a basis for the 

hospice wage index and continues to 

use the same policies for treatment of 

areas (rural and urban) without hospital 

wage data. The final FY 2010 hospice 

wage index is based upon the 2009 prefloor, pre-reclassified hospital wage 

index and the most complete claims 

data available (FY 2008) with a 10 

percent reduction in the BNAF. 

For the purposes of our impacts, our 

baseline is estimated FY 2009 payments 

(without any BNAF reduction) using the 

2008 pre-floor, pre-reclassified hospital 

wage index. Our first comparison 

(column 3, Table 1) compares our 

baseline to estimated FY 2010 payments 

(holding payment rates constant) using 

the updated wage data (2009 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 

10 percent reduction in the BNAF are 

illustrated in column 4 of Table 1. 

We have included a comparison of the 

combined effects of the 10 percent 

BNAF reduction, the updated wage 

data, and a 2.1 percent hospital market 

basket increase for FY 2010 (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 phaseout, and the FY 2010 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. 

TABLE 1—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

HOSPITAL WAGE INDEX DATA, REDUCING THE BNAF BY 10 PERCENT AND APPLYING A 2.1 PERCENT HOSPITAL MARKET BASKET UPDATE FOR THE FY 2010 HOSPICE WAGE INDEX, COMPARED TO THE FY 2009 HOSPICE WAGE INDEX

WITH NO BNAF REDUCTION

Number of 

hospices* 

Number of 

routine home 

care days in 

thousands 

Percent 

change in hospice payments 

due to FY2010 

wage index 

change 

Percent 

change in hospice payments 

due to wage 

index change 

and 10% 

reduction 

in BNAF 

Percent 

change in hospice payments 

due to wage 

index change, 

10% 

reduction 

in BNAF 

and market 

basket 

update 

(1) (2) (3) (4) (5) 

ALL HOSPICES ................................................................... 3,328 71,440 ¥0.3 ¥0.7 1.4 

URBAN HOSPICES ...................................................... 2,291 61,856 ¥0.3 ¥0.7 1.4 

RURAL HOSPICES ...................................................... 1,037 9,584 ¥0.3 ¥0.6 1.4 

BY REGION—URBAN: 

NEW ENGLAND ........................................................... 128 2,286 ¥0.3 ¥0.8 1.3 

MIDDLE ATLANTIC ...................................................... 226 6,479 ¥0.5 ¥0.9 1.2 


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TABLE 1—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

HOSPITAL WAGE INDEX DATA, REDUCING THE BNAF BY 10 PERCENT AND APPLYING A 2.1 PERCENT HOSPITAL MARKET BASKET UPDATE FOR THE FY 2010 HOSPICE WAGE INDEX, COMPARED TO THE FY 2009 HOSPICE WAGE INDEX

WITH NO BNAF REDUCTION—Continued 

Number of 

hospices* 

Number of 

routine home 

care days in 

thousands 

Percent 

change in hospice payments 

due to FY2010 

wage index 

change 

Percent 

change in hospice payments 

due to wage 

index change 

and 10% 

reduction 

in BNAF 

Percent 

change in hospice payments 

due to wage 

index change, 

10% 

reduction 

in BNAF 

and market 

basket 

update 

(1) (2) (3) (4) (5) 

SOUTH ATLANTIC ....................................................... 331 13,701 ¥0.7 ¥1.1 1.0 

EAST NORTH CENTRAL ............................................. 318 8,796 ¥0.8 ¥1.2 0.8 

EAST SOUTH CENTRAL ............................................. 176 4,459 ¥0.5 ¥0.9 1.2 

WEST NORTH CENTRAL ............................................ 178 4,098 0.0 ¥0.4 1.7 

WEST SOUTH CENTRAL ............................................ 431 8,181 ¥0.3 ¥0.7 1.4 

MOUNTAIN ................................................................... 214 5,372 ¥0.3 ¥0.7 1.4 

PACIFIC ........................................................................ 253 7,315 1.1 0.7 2.8 

OUTLYING .................................................................... 36 1,170 ¥1.2 ¥1.2 0.9 

BY REGION—RURAL: 

NEW ENGLAND ........................................................... 26 184 0.1 ¥0.3 1.8 

MIDDLE ATLANTIC ...................................................... 45 496 ¥0.8 ¥1.2 0.9 

SOUTH ATLANTIC ....................................................... 131 1,893 ¥0.5 ¥0.9 1.2 

EAST NORTH CENTRAL ............................................. 146 1,592 ¥1.0 ¥1.4 0.7 

EAST SOUTH CENTRAL ............................................. 152 1,957 ¥0.5 ¥0.9 1.2 

WEST NORTH CENTRAL ............................................ 192 1,029 0.3 ¥0.1 2.0 

WEST SOUTH CENTRAL ............................................ 184 1,386 0.5 0.2 2.3 

MOUNTAIN ................................................................... 108 610 ¥0.8 ¥1.1 0.9 

PACIFIC ........................................................................ 52 426 1.3 0.9 3.0 

OUTLYING .................................................................... 1 11 0.0 0.0 2.1 

ROUTINE HOME CARE DAYS: 

0–3499 DAYS (small) ................................................... 647 1,128 ¥0.2 ¥0.6 1.5 

3500–19,999 DAYS (medium) ...................................... 1,616 16,297 ¥0.3 ¥0.7 1.4 

20,000+ DAYS (large) .................................................. 1,065 54,016 ¥0.3 ¥0.7 1.4 

TYPE OF OWNERSHIP:** 

VOLUNTARY ................................................................ 1,190 30,071 ¥0.3 ¥0.7 1.4 

PROPRIETARY ............................................................ 1,713 35,548 ¥0.3 ¥0.7 1.4 

GOVERNMENT ............................................................ 425 5,822 ¥0.6 ¥0.9 1.1 

HOSPICE BASE: 

FREESTANDING .......................................................... 2,156 54,293 ¥0.3 ¥0.7 1.4 

HOME HEALTH AGENCY ........................................... 595 10,195 ¥0.2 ¥0.6 1.5 

HOSPITAL .................................................................... 559 6,714 ¥0.2 ¥0.6 1.5 

SKILLED NURSING FACILITY .................................... 18 238 ¥0.5 ¥1.0 1.1 

BNAF = Budget Neutrality Adjustment Factor 

*OSCAR data as of January 29, 2009, for hospices with claims filed in FY 2008 

**In previous years, there was also a category labeled ‘‘Other’’; these were Other Government hospices, and have been combined with the 

‘‘Government’’ category. 

Note: Comparison is to FY 2009 estimated payments from the August 8, 2008 FY 2009 Hospice Wage Index final rule (73 FR 46464), but with 

no BNAF reduction. 

REGION KEY: New England = Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic = Pennsylvania, 

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

West Virginia; East North Central = Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central = Alabama, Kentucky, Mississippi, Tennessee; West North Central = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central = Arkansas, Louisiana, Oklahoma, Texas; Mountain = Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; Pacific = Alaska, California, 

Hawaii, Oregon, Washington; Outlying = Guam, Puerto Rico, Virgin Islands. 

Table 1 shows the results of our 

analysis. In column 1, we indicate the 

number of hospices included in our 

analysis as of January 29, 2009 which 

had also filed claims in FY 2008. 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 2010 estimated payments 

with those estimated for FY 2009. The 

estimated FY 2009 payments 

incorporate a BNAF which has not been 

reduced. Column 3 shows the 

percentage change in estimated 

Medicare payments from FY 2009 to FY 

2010 due to the effects of the updated 

wage data only, with estimated FY 2009 

payments. Column 4 shows the 

percentage change in estimated hospice 

payments from FY 2009 to FY 2010 due 

to the combined effects of using the 

updated wage data and reducing the 

BNAF by 10 percent. Column 5 shows 

the percentage change in estimated 

hospice payments from FY 2009 to FY 

2010 due to the combined effects of 

using updated wage data, a 10 percent 


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BNAF reduction, and a 2.1 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 2,291 hospices located in urban 

areas and 1,037 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 2008. 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 

3,328 hospices. Approximately 48.5 

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 

2008) in developing the impact analysis. 

The FY 2010 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 

2010 hospital market basket update is 

2.1 percent. Since the inclusion of the 

effect of a hospital market basket 

increase provides a more complete 

picture of projected total hospice 

payments for FY 2010, the last column 

of Table 1 shows the combined impacts 

of the updated wage data, the 10 percent 

BNAF reduction, and the 2.1 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 

followed by large hospices. Hospices are 

almost equal in numbers by ownership 

with 1,615 designated as non-profit or 

government hospices and 1,713 as 

proprietary. The vast majority of 

hospices are freestanding. 

1. 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 2010 

updated wage data without any BNAF 

reduction are anticipated to decrease 

payments to small hospices by 0.2 

percent, and to decrease payments to 

medium and large hospices by 0.3 

percent (column 3); the updated wage 

data and the 10 percent BNAF reduction 

are anticipated to decrease estimated 

payments to small hospices by 0.6 

percent, and to medium and large 

hospices by 0.7 percent (column 4); and 

finally, the updated wage data, the 10 

percent BNAF reduction, and the 2.1 

percent hospital market basket update 

are projected to increase estimated 

payments by 1.5 percent for small 

hospices, and by 1.4 percent for 

medium and large hospices (column 5). 

2. 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 

and rural hospices are both anticipated 

to experience a decrease of 0.3 percent. 

For urban hospices, an increase of 1.1 

percent is anticipated to be experienced 

in the Pacific regions. No change in 

payments is anticipated for hospices in 

the West North Central region. The 

remaining urban regions are anticipated 

to experience a decrease ranging from 

0.3 percent in the New England, West 

South Central, and Mountain regions to 

a 1.2 percent decrease in Outlying 

regions. 

Column 3 shows that for rural 

hospices, Outlying regions are 

anticipated to experience no change. 

Five regions are anticipated to 

experience a decrease ranging from 0.5 

percent in the South Atlantic and East 

South Central regions, to 1.0 percent in 

the East North Central region. The 

remaining regions are anticipated to 

experience an increase ranging from 0.1 

percent in the New England region to 

1.3 percent in the Pacific region. 

Column 4 shows the combined effect 

of the updated wage data and the 10 

percent BNAF reduction on estimated 

payments, as compared to the FY 2009 

estimated payments using a BNAF with 

no reduction. Overall urban hospices 

are anticipated to experience a 0.7 

percent decrease in payments, while 

rural hospices expect a 0.6 percent 

decrease. Pacific urban hospices are 

anticipated to see a payment increase of 

0.7 percent. All other urban hospices are 

anticipated to experience a decrease in 

payment ranging from ¥0.4 percent in 

the West North Central region to 1.2 

percent in the East North Central and 

Outlying regions. 

Rural hospices are estimated to 

experience an increase in payments of 

0.2 percent in the West South Central 

region and 0.9 percent in the Pacific 

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 0.1 

percent in the West North Central region 


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39412 Federal Register / Vol. 74, No. 150 / Thursday, August 6, 2009 / Rules and Regulations 

to 1.4 percent in the East North Central 

region. 

Column 5 shows the combined effects 

of the updated wage data, the 10 percent 

BNAF reduction, and the 2.1 percent 

hospital market basket update on 

estimated payments as compared to the 

estimated FY 2009 payments. Note that 

the FY 2009 payments had no BNAF 

reduction applied to them. Overall, 

urban and rural hospices are anticipated 

to experience a 1.4 percent increase in 

payments. Urban hospices are 

anticipated to experience an increase in 

estimated payments in every region, 

ranging from a 0.8 percent increase in 

the East North Central region to a 2.8 

percent increase in the Pacific region. 

Rural hospices in every region are 

estimated to see an increase in 

payments ranging from 0.7 percent in 

the East North Central region to 3.0 

percent in the Pacific region. 

3. Type of Ownership 

Column 3 demonstrates the effect of 

the updated wage data on FY 2010 

estimated payments versus FY 2009 

estimated payments with no BNAF 

reduction applied to them. We 

anticipate that using the updated wage 

data would decrease estimated 

payments to voluntary (non-profit) and 

proprietary (for-profit) hospices by 0.3 

percent. We estimate a decrease in 

payments for government hospices of 

0.6 percent. 

Column 4 demonstrates the combined 

effects of the updated wage data and of 

the 10 percent BNAF reduction. 

Estimated payments to voluntary (nonprofit) and proprietary (for-profit) 

hospices are anticipated to decrease by 

0.7 percent, while government hospices 

are anticipated to experience decreases 

of 0.9 percent. 

Column 5 shows the combined effects 

of the updated wage data, the 10 percent 

BNAF reduction, and the 2.1 percent 

hospital market basket update on 

estimated payments, comparing FY 

2010 to FY 2009 (using a BNAF with no 

reduction). Estimated FY 2010 

payments are anticipated to increase by 

1.4 percent for voluntary (non-profit) 

and proprietary (for-profit) hospices, 

and by 1.1 percent for government 

hospices. 

4. Hospice Base 

Column 3 demonstrates the effect of 

using the updated wage data, comparing 

estimated payments for FY 2010 to FY 

2009 (using a BNAF with no reduction). 

Estimated payments are anticipated to 

decrease by 0.3 percent for freestanding 

facilities. Home health and hospital 

based facilities 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 10 percent, comparing FY 

2010 to FY 2009 (using a BNAF with no 

reduction) estimated payments. Skilled 

nursing facility based hospices are 

estimated to see a 1.0 percent decrease, 

freestanding hospices are estimated to 

see a 0.7 percent decrease, and hospital 

and home health agency based hospices 

are each anticipated to experience a 0.6 

percent decrease in payments. 

Column 5 shows the combined effects 

of the updated wage data, the 10 percent 

BNAF reduction, and the 2.1 percent 

hospital market basket update on 

estimated payments, comparing FY 

2010 to FY 2009 (using a BNAF with no 

reduction). Estimated payments are 

anticipated to increase by 1.1 percent 

for skilled nursing based facilities, to 

increase by 1.4 percent for freestanding 

facilities, and to increase by 1.5 percent 

for home health agency and hospital 

based facilities. 

C. Accounting Statement 

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 rule. 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 final rule on 

data for 3,328 hospices in our database. 

All expenditures are classified as 

transfers to Medicare providers (that is, 

hospices). 

TABLE 2— ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2009 TO FY 

2010 

[in millions] 

Category Transfers 

Annualized Monetized 

Transfers.

$¥90 

From Whom to Whom .. Federal Government to Hospices. 

*The $90 million reduction in transfers includes the 10 percent reduction in the BNAF 

and the updated wage data. It does not include the hospital market basket update, 

which is 2.1 percent. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 405 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medical 

devices, Medicare, Reporting and 

recordkeeping requirements, Rural 

areas, X-rays. 

42 CFR Part 418 

Health Facilities, Hospice care, 

Medicare, Reporting and recordkeeping 

requirements. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 405—FEDERAL HEALTH 

INSURANCE FOR THE AGED AND 

DISABLED 

■ 1. The authority citation for part 405 

subpart R continues to read as follows: 

Authority: Secs. 205, 1102, 1814(b), 

1815(a), 1833, 1861(v), 1871, 1872, 1878, and 

1886 of the Social Security Act (42 U.S.C. 

405, 1302, 1395f(b), 1395g(a), 1395l, 

1395x(v), 1395hh, 1395ii, 1395oo, and 

1395ww). 

Subpart R—Provider Reimbursement 

Determinations and Appeals 

■ 2. Section 405.1803 is amended by 

adding paragraph (a)(3) as follows: 

§ 405.1803 Intermediary determination and 

notice of amount of program 

reimbursement. 

* * * * * 

(a) * * * 

(3) Hospice caps. With respect to a 

hospice, the reporting period for the cap 

calculation is the cap year; and the 

intermediaries’ determination of 

program reimbursement letter, which 

provides the results of the inpatient and 

aggregate cap calculations, shall serve as 

a notice of program reimbursement. The 

time period for filing cap appeals begins 

with receipt of the determination of 

program reimbursement letter. 

* * * * * 

PART 418—HOSPICE CARE 

■ 3. The authority citation for part 418 

continues to read as follows: 

Authority: Secs 1102 and 1871 of the 

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

1395hh). 


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Subpart A—General Provision and 

Definitions 

■ 4. Section 418.1 is amended by 

revising the introductory text to read as 

follows: 

§ 418.1 Statutory basis. 

This part implements section 

1861(dd) of the Social Security Act (the 

Act). Section 1861(dd) of the Act 

specifies services covered as hospice 

care and the conditions that a hospice 

program must meet in order to 

participate in the Medicare program. 

Section 1861(dd) also specifies 

limitations on coverage of, and payment 

for, inpatient hospice care. The 

following sections of the Act are also 

pertinent: 

* * * * * 

■ 5. Section 418.2 is revised to read as 

follows: 

§ 418.2 Scope of part. 

Subpart A of this part sets forth the 

statutory basis and scope and defines 

terms used in this Part. Subpart B 

specifies the eligibility and election 

requirements and the benefit periods. 

Subparts C and D specify the conditions 

of participation for hospices. Subpart E 

is reserved for future use. Subparts F 

and G specify coverage and payment 

policy. Subpart H specifies coinsurance 

amounts applicable to hospice care. 

Subpart B—Eligibility, Election and 

Duration of Benefits 

■ 6. Section 418.22 is amended by 

adding a new paragraph (b)(3) to read as 

follows: 

§ 418.22 Certification of terminal illness. 

* * * * * 

(b) * * * 

(3) The physician must include a brief 

narrative explanation of the clinical 

findings that supports a life expectancy 

of 6 months or less as part of the 

certification and recertification forms, or 

as an addendum to the certification and 

recertification forms. 

(i) If the narrative is part of the 

certification or recertification form, then 

the narrative must be located 

immediately prior to the physician’s 

signature. 

(ii) If the narrative exists as an 

addendum to the certification or 

recertification form, in addition to the 

physician’s signature on the 

certification or recertification form, the 

physician must also sign immediately 

following the narrative in the 

addendum. 

(iii) The narrative shall include a 

statement under the physician signature 

attesting that by signing, the physician 

confirms that he/she composed the 

narrative based on his/her review of the 

patient’s medical record or, if 

applicable, his or her examination of the 

patient. 

(iv) The narrative must reflect the 

patient’s individual clinical 

circumstances and cannot contain check 

boxes or standard language used for all 

patients. 

* * * * * 

Subpart C—Conditions of 

Participation: Patient Care Non-Core 

Services 

■ 7. Section 418.76 is amended by 

revising paragraph (f)(1) to read as 

follows: 

§ 418.76 Condition of participation: 

Hospice aide and homemaker services. 

(f) Standard: Eligible competency 

organizations. 

* * * * * 

(1) Had been out of compliance with 

the requirements of § 484.36(a) and 

§ 484.36 (b) of this chapter. 

* * * * * 

Subpart D—Conditions of 

Participation: Organizational 

Environment 

■ 8. Section 418.100 is amended by 

revising paragraph (f)(1)(iii) to read as 

follows: 

§ 418.100 Condition of participation: 

Organization and administration of service. 

* * * * * 

(f) * * * 

(1) * * * 

(iii) The lines of authority and 

professional and administrative control 

must be clearly delineated in the 

hospice’s organizational structure and 

in practice, and must be traced to the 

location which was issued the 

certification number. 

* * * * * 

§ 418.108 [Amended] 

■ 9. In paragraph (b)(1)(ii), the cross 

reference to ‘‘§ 418.110(f)’’ is revised to 

read ‘‘§ 418.110(e)’’. 

Subpart F—Covered Services 

■ 10. Section 418.200 is revised to read 

as follows: 

§ 418.200 Requirements for coverage. 

To be covered, hospice services must 

meet the following requirements. They 

must be reasonable and necessary for 

the palliation and management of the 

terminal illness as well as related 

conditions. The individual must elect 

hospice care in accordance with 

§ 418.24. A plan of care must be 

established and periodically reviewed 

by the attending physician, the medical 

director, and the interdisciplinary group 

of the hospice program as set forth in 

§ 418.56. That plan of care must be 

established before hospice care is 

provided. The services provided must 

be consistent with the plan of care. A 

certification that the individual is 

terminally ill must be completed as set 

forth in section § 418.22. 

■ 11. Section § 418.202 is amended by 

revising paragraphs (f) and (g) to read as 

follows: 

§ 418.202 Covered services. 

* * * * * 

(f) Medical appliances and supplies, 

including drugs and biologicals. Only 

drugs as defined in section 1861(t) of 

the Act and which are used primarily 

for the relief of pain and symptom 

control related to the individual’s 

terminal illness are covered. Appliances 

may include covered durable medical 

equipment as described in § 410.38 of 

this chapter as well as other self-help 

and personal comfort items related to 

the palliation or management of the 

patient’s terminal illness. Equipment is 

provided by the hospice for use in the 

patient’s home while he or she is under 

hospice care. Medical supplies include 

those that are part of the written plan of 

care and that are for palliation and 

management of the terminal or related 

conditions. 

(g) Home health or hospice aide 

services furnished by qualified aides as 

designated in § 418.94 and homemaker 

services. Home health aides (also known 

as hospice aides) may provide personal 

care services as defined in § 409.45(b) of 

this chapter. Aides may perform 

household services to maintain a safe 

and sanitary environment in areas of the 

home used by the patients, such as 

changing bed linens or light cleaning 

and laundering essential to the comfort 

and cleanliness of the patient. Aide 

services may include assistance in 

maintenance of a safe and healthy 

environment and services to enable the 

individual to carry out the treatment 

plan. 

* * * * * 

■ 12. Section § 418.204 is amended by 

revising paragraph (a) to read as follows: 

§ 418.204 Special coverage requirements. 

(a) Periods of crisis. Nursing care may 

be covered on a continuous basis for as 

much as 24 hours a day during periods 

of crisis as necessary to maintain an 

individual at home. Either homemaker 

or home health aide (also known as 


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hospice aide) services or both may be 

covered on a 24-hour continuous basis 

during periods of crisis but care during 

these periods must be predominantly 

nursing care. A period of crisis is a 

period in which the individual requires 

continuous care to achieve palliation 

and management of acute medical 

symptoms. 

* * * * * 

Subpart G—Payment for Hospice Care 

■ 13. Section 418.302 is amended by 

revising paragraphs (b)(2) and (f)(2) to 

read as follows: 

§ 418.302 Payment procedures for hospice 

care. 

* * * * * 

(b) * * * 

(2) Continuous home care day. A 

continuous home care day is a day on 

which an individual who has elected to 

receive hospice care is not in an 

inpatient facility and receives hospice 

care consisting predominantly of 

nursing care on a continuous basis at 

home. Home health aide (also known as 

a hospice aide) or homemaker services 

or both may also be provided on a 

continuous basis. Continuous home care 

is only furnished during brief periods of 

crisis as described in § 418.204(a) and 

only as necessary to maintain the 

terminally ill patient at home. 

* * * * * 

(f) * * * 

(2) At the end of a cap period, the 

intermediary calculates a limitation on 

payment for inpatient care to ensure 

that Medicare payment is not made for 

days of inpatient care in excess of 20 

percent of the total number of days of 

hospice care furnished to Medicare 

patients. Only inpatient days that were 

provided and billed as general inpatient 

or respite days are counted as inpatient 

days when computing the inpatient cap. 

* * * * * 

■ 14. Section 418.311 is revised to read 

as follows: 

§ 418.311 Administrative appeals. 

A hospice that believes its payments 

have not been properly determined in 

accordance with these regulations may 

request a review from the intermediary 

or the Provider Reimbursement Review 

Board (PRRB) if the amount in 

controversy is at least $1,000 or $10,000, 

respectively. In such a case, the 

procedure in 42 CFR part 405, subpart 

R, will be followed to the extent that it 

is applicable. The PRRB, subject to 

review by the Secretary under 

§ 405.1874 of this chapter, shall have 

the authority to determine the issues 

raised. The methods and standards for 

the calculation of the statutorily defined 

payment rates by CMS are not subject to 

appeal. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: July 20, 2009. 

Charlene Frizzera, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: July 29, 2009. 

Kathleen Sebelius, 

Secretary. 

Editor’s note: The following addenda will 

not appear in the Code of Federal 

Regulations. 

BILLING CODE 4120–01–P 


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[FR Doc. E9–18553 Filed 7–30–09; 4:15 pm] 

BILLING CODE 4120–01–C 


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