43236 Federal Register / Vol. 75, No. 141 / Friday, July 23, 2010 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

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

489 

[CMS–1510–P] 

RIN 0938–AP88 

Medicare Program; Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2011; 

Changes in Certification Requirements 

for Home Health Agencies and 

Hospices 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would set 

forth an update to the Home Health 

Prospective Payment System (HH PPS) 

rates, including: The national 

standardized 60-day episode rates, the 

national per-visit rates, the non-routine 

medical supply (NRS) conversion 

factors, and the low utilization payment 

amount (LUPA) add-on payment 

amounts, under the Medicare 

prospective payment system for HHAs 

effective January 1, 2011. This rule also 

proposes to update the wage index used 

under the HH PPS and, in accordance 

with The Affordable Care Act of 2010 

(The Affordable Care Act), Public Law 

111–148, to update the HH PPS outlier 

policy. In addition, this rule proposes 

changes to the home health agency 

(HHA) capitalization requirements. This 

rule further proposes to add clarifying 

language to the ‘‘skilled services’’ 

section. Finally, this rule incorporates 

new legislative requirements regarding 

face-to-face encounters with providers 

related to home health and hospice care. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on September 14, 2010. 

ADDRESSES: In commenting, please refer 

to file code CMS–1510–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1510–P, P.O. Box 1850, Baltimore, 

MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1510–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Randy Throndset, (410) 786–0131 

(overall HH PPS). 

James Bossenmeyer, (410) 786–9317 (for 

information related to payment 

safeguards). 

Doug Brown, (410) 786–0028 (for 

quality issues). 

Kathleen Walch, (410) 786–7970 (for 

skilled services requirements and 

clinical issues). 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Background 

A. Statutory Background 

B. System for Payment of Home Health 

Services 

C. Updates to the HH PPS 

II. Provisions of the Proposed Regulation 

A. Case-Mix Measurement 

B. Hypertension Diagnosis Coding Under 

the HH–PPS 

C. Therapy Coverage Requirements 

D. Collecting Additional Claims Data for 

Future HH PPS Enhancements and 

Soliciting Comments on HH PPS 

Improvements 

E. Outlier Policy 

1. Background 

2. Regulatory Update 

3. Statutory Update 

4. Outlier Cap 

5. Loss Sharing Ratio and Fixed Dollar 

Ratio 

6. Solicitation of Comments Regarding 

Imputed Costs 

F. Proposed CY 2011 Payment Update 

1. Home Health Market Basket Update 

2. Home Health Care Quality Improvement 

a. OASIS 

b. Home Health Care CAHPS Survey (HH 

CAHPS) 

3. Home Health Wage Index 

4. Proposed CY 2011 Payment Update 

a. National Standardized 60-Day Episode 

Rate 

b. Proposed Updated CY 2011 National 

Standardized 60-Day Episode Payment 

Rate 

c. Proposed National Per-Visit Rates Used 

To Pay LUPA’s and Compute Imputed 

Costs Used in Outlier Calculations 

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d. Proposed LUPA Add-On Payment 

Amount Update 

e. Non-Routine Medical Supply 

Commission Factor Update 

5. Rural Add-On 

G. Enrollment Provisions for HHAs 

1. HHA Capitalization 

2. Change of Ownership 

3. Change in Majority Ownership Within 

36 Months of Initial Enrollment or 

Change in Ownership 

H. Home Health Face-to-Face Encounter 

I. Solicitation of Comments: Future Plans 

To Group HH PPS Claims Centrally 

During Claims Processing 

J. Proposed New Requirements Affecting 

Hospice Certifications and 

Recertification 

III. Collection of Information Requirements 

IV. Regulatory Impact Analysis 

I. Background 

A. Statutory Background 

The Balanced Budget Act of 1997 

(BBA) (Pub. L. 105–33) enacted on 

August 5, 1997, significantly changed 

the way Medicare pays for Medicare 

home health services. Section 4603 of 

the BBA mandated the development of 

the home health prospective payment 

system (HH PPS). Until the 

implementation of a HH PPS on October 

1, 2000, home health agencies (HHAs) 

received payment under a retrospective 

reimbursement system. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered home health services 

provided under a plan of care (POC) that 

were paid on a reasonable cost basis by 

adding section 1895 of the Social 

Security Act (the Act), entitled 

‘‘Prospective Payment for Home Health 

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

requires the Secretary to establish a HH 

PPS for all costs of home health services 

paid under Medicare. 

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

requires that: (1) The computation of a 

standard prospective payment amount 

include all costs for home health 

services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary, and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage level 

differences among HHAs. 

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

addresses the annual update to the 

standard prospective payment amounts 

by the home health applicable 

percentage increase. Section 1895(b)(4) 

of the Act governs the payment 

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

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of an appropriate 

case-mix change adjustment factor that 

adjusts for significant variation in costs 

among different units of services. 

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

Act requires the establishment of wage 

adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to home health services 

furnished in a geographic area 

compared to the applicable national 

average level. Pursuant to 1895(b)(4)(C), 

the wage-adjustment factors used by the 

Secretary may be the factors used under 

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

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

amended by Section 3131 of the 

Affordable Care Act signed by the 

President on March 23, 2010 (Pub. L. 

111–148), gives the Secretary the option 

to make additions or adjustments to the 

payment amount otherwise paid in the 

case of outliers because of unusual 

variations in the type or amount of 

medically necessary care. Section 

3131(b) revised Section 1895(b)(5) so 

that total outlier payments in a given 

fiscal year (FY) or year may not exceed 

2.5 percent of total payments projected 

or estimated. 

In accordance with the statute, as 

amended by the BBA, we published a 

final rule (65 FR 41128) in the Federal 

Register on July 3, 2000, to implement 

the 1997 HH PPS legislation. The July 

2000 final rule established requirements 

for the new HH PPS for home health 

services as required by section 4603 of 

the BBA, as subsequently amended by 

section 5101 of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act 

(OCESAA) for Fiscal Year 1999 (Pub. L. 

105–277), enacted on October 21, 1998; 

and by sections 302, 305, and 306 of the 

Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act 

(BBRA) of 1999 (Pub. L. 106–113), 

enacted on November 29, 1999. The 

requirements include the 

implementation of a HH PPS for home 

health services, consolidated billing 

requirements, and a number of other 

related changes. The HH PPS described 

in that rule replaced the retrospective 

reasonable cost-based system that was 

used by Medicare for the payment of 

home health services under Part A and 

Part B. For a complete and full 

description of the HH PPS as required 

by the BBA, see the July 2000 HH PPS 

final rule (65 FR 41128 through 41214). 

On February 8, 2006, the Deficit 

Reduction Act of 2005 (Pub. L. 109–171) 

(DRA) was enacted. Section 5201 of the 

DRA added new Section 

1895(b)(3)(B)(v) to the Act, which 

requires HHAs to submit data for 

purposes of measuring health care 

quality, and links the quality data 

submission to payment. This 

requirement is applicable for CY 2007 

and each subsequent year. If an HHA 

does not submit quality data, the home 

health market basket percentage 

increase is reduced 2 percentage points. 

In accordance with the statute, we 

published a final rule (71 FR 65884, 

65935) in the Federal Register on 

November 9, 2006, to implement the 

pay-for-reporting requirement of the 

DRA, which was codified at 42 CFR 

484.225(h) and (i). 

The Affordable Care Act made 

additional changes to the HH PPS. One 

of the changes in section 3131 of the 

Affordable Care Act is the amendment 

to section 421(a) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act (MMA) of 2003 (Pub. 

L. 108–173) as amended by section 

5201(b) of the Deficit Reduction Act of 

2005 (Pub. L. 109–171). The amended 

section 421(a) of the MMA requires, for 

home health services furnished in a 

rural area (as defined in section 

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

episodes and visits ending on or after 

April 1, 2010 and before January 1, 

2016, that the Secretary increase by 3 

percent the payment amount otherwise 

made under section 1895 of the Act. 

B. System for Payment of Home Health 

Services 

Generally, Medicare makes payment 

under the HH PPS on the basis of a 

national standardized 60-day episode 

payment rate that is adjusted for the 

applicable case-mix and wage index. 

The national standardized 60-day 

episode rate includes the six home 

health disciplines (skilled nursing, 

home health aide, physical therapy, 

speech-language pathology, 

occupational therapy, and medical 

social services). Payment for nonroutine medical supplies (NRS) is no 

longer part of the national standardized 

60-day episode rate and is computed by 

multiplying the relative weight for a 

particular NRS severity level by the NRS 

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

Payment for durable medical equipment 

covered under the home health benefit 

is made outside the HH PPS payment. 

To adjust for case-mix, the HH PPS uses 

a 153-category case-mix classification to 

assign patients to a home health 

resource group (HHRG). Clinical needs, 

functional status, and service utilization 

are computed from responses to selected 

data elements in the OASIS assessment 

instrument. 

For episodes with four or fewer visits, 

Medicare pays on the basis of a national 

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per-visit rate by discipline; an episode 

consisting of four or fewer visits within 

a 60-day period receives what is referred 

to as a low utilization payment 

adjustment (LUPA). Medicare also 

adjusts the national standardized 60-day 

episode payment rate for certain 

intervening events that are subject to a 

partial episode payment adjustment 

(PEP adjustment). For certain cases that 

exceed a specific cost threshold, an 

outlier adjustment may also be 

available. 

C. Updates to the HH PPS 

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

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. 

Our August 29, 2007 final rule with 

comment period set forth an update to 

the 60-day national episode rates and 

the national per-visit rates under the 

Medicare prospective payment system 

for HHAs for CY 2008. For analysis 

performed on CY 2005 home health 

claims data indicated a 12.78 percent 

increase in the observed case-mix since 

2000. The case-mix represented the 

variations in conditions of the patient 

population served by the HHAs. Then a 

more detailed analysis was performed 

on the 12.78 percent increase in casemix to see if any portion of that increase 

was associated with a real change in the 

actual clinical condition of home health 

patients. CMS examined data on 

demographics, family severity, and nonhome health Part A Medicare 

expenditure data to predict the average 

case-mix weight for 2005. As a result of 

that analysis, CMS recognized that an 

11.75 percent increase in case-mix was 

due to changes in coding practices and 

documentation rather than to treatment 

of more resource-intensive patients. 

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

underlying change in patient health 

status, CMS implemented a reduction 

over 4 years in the national 

standardized 60-day episode payment 

rates and the NRS conversion factor. 

That reduction was to be taken at 2.75 

percent per year for three years 

beginning in CY 2008 and at 2.71 

percent for the fourth year in CY 2011. 

CMS indicated that it would continue to 

monitor for any further increase in casemix that was not related to a change in 

patient status, and would adjust the 

percentage reductions and/or 

implement further case-mix change 

adjustments in the future. 

Most recently, we published a final 

rule in the Federal Register on 

November 10, 2009 (74 FR 58077) that 

set forth the update to the 60-day 

national episode rates and the national 

per-visit rates under the Medicare 

prospective payment system for home 

health services for CY 2010. 

II. Provisions of the Proposed 

Regulation 

A. Case-Mix Measurement 

Since the HH PPS CY 2008 proposed 

rule, we have stated in HH PPS 

rulemaking that we would continue to 

monitor case-mix changes in the HH 

PPS and to update our analysis to 

measure change in case-mix, both 

nominal and real. We have continued to 

monitor case-mix changes, and our 

latest analysis continues to support the 

payment adjustments which we 

implemented in the CY 2008 HH PPS. 

As discussed in the CY 2010 rule, the 

analysis then indicated a 15.03 percent 

increase in the overall observed casemix since 2000. We next determined 

what portion of that increase was 

associated with a real change in the 

actual clinical condition of home health 

patients. 

As was done for the CY 2008 final 

rule, we used data from the pre-PPS 

period to estimate a regression-based, 

predictive model of individual case-mix 

weights based on measures of patients’ 

demographic characteristics, clinical 

status, inpatient history, and Medicare 

costs in the time period leading up to 

their home health episodes. The 

regression coefficients from this model 

were applied to later episodes, allowing 

estimation of how much of the change 

in observed case-mix is attributable to 

changes in patient characteristics over 

time. We classify the sources of casemix change into two major types: 

predicted and unpredicted. Predicted 

(or real) change is based on the 

relationship between patient 

characteristics and case-mix (that is 

coefficients from the regression model) 

and changes in the characteristics of 

patients over time (that is the change in 

mean values of the model covariates). 

Unpredicted (or nominal) change is the 

portion of case-mix change that cannot 

be explained by changes in patient 

characteristics. Nominal case-mix 

change is assumed to reflect differences 

over time in agency coding practices. 

Our best estimate in the CY 2010 rule 

was that approximately 9.77 percent of 

the 15.03 percent increase in the overall 

observed case-mix between the IPS 

baseline and 2007 was real, that is, due 

to actual changes in patient 

characteristics. Our estimate was that a 

13.56 percent nominal increase (15.03— 

(15.03 × 0.0977)) in case-mix was due to 

changes in coding procedures and 

documentation rather than to treatment 

of more resource-intensive patients. 

We have since updated that analysis 

to include an additional year of data (CY 

2008) for this CY 2011 proposed rule. 

This analysis was based on regression 

coefficients from CY 2008 episodes that 

reflect the relationship between model 

covariates and case-mix using the 

HHRG153 system. We used these 

regression coefficients combined with 

changes in patient characteristics to 

measure the amount of predicted case 

mix change for 2007 through 2008. 

Our analyses indicate a 19.40 percent 

increase in the overall observed casemix since 2000. Our estimate is that 

approximately 10.07 percent of the total 

increase in the overall observed casemix between the IPS baseline and 2008 

is real, that is, associated with actual 

changes in patient characteristics. 

Specifics regarding this analysis are 

described later in this section. 

The estimate of real case-mix change 

is a small proportion of the total change 

in case mix since the IPS baseline. With 

each successive sample, beginning with 

2005 data (in the CY 2008 final rule), 

the predicted average national case-mix 

weight has changed very little because 

the variables (such as preadmission 

location, non-home health Part A 

Medicare expenditures, and inpatient 

stay classification, as mentioned above) 

in the model used to predict case-mix 

are not changing much. At the same 

time, the actual average case-mix has 

continued to grow steadily. Thus, the 

gap between the predicted case-mix 

value, which is based on information 

external to the OASIS, and the actual 

case-mix value, has increased with each 

successive year of data. Consequently, 

as a result of this analysis, we recognize 

that a 17.45 percent nominal increase 

(19.40 ¥ (19.40 × 0.1007)) in case-mix 

is due to changes in coding practices 

and documentation rather than to 

treatment of more resource-intensive 

patients. This 17.45 percent increase in 

case mix reflects a much larger increase 

in nominal case-mix from the IPS 

baseline to 2008 than had been 

previously been occurring under the HH 

PPS. Specifically, from 2000 to 2007, we 

observed about a 1 percent per year 

increase in total average case-mix. 

However, that annual change increased 

to slightly more than 4 percent between 

2007 and 2008. 

We wanted to determine how this 

growth in case-mix weight from 2007 to 

2008 was affected by the changes 

implemented with the 2008 

refinements. We identified these average 

case-mix values by estimating the 

average case mix weight on the 2007 

claims of a random 20 percent sample 

of HH beneficiaries. We used two 

groupers—the 80-group 2007 grouper 

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(average = 1.2606) and the 153-group 

2008 grouper (average = 1.2552). The 

difference in averages was ¥0.0054, 

indicating that the changeover to the 

new 2008 grouper algorithm itself 

slightly reduced the average case mix 

weight. 

Next, to assess behavioral changes 

which may have been incentivized by 

the 2008 refinements, we estimated the 

average case mix weights on both 2007 

claims data and 2008 claims data for a 

random 20 percent sample of HH 

beneficiaries, using the 2008 grouper. 

(Only non-LUPA episodes are included 

in this analysis, as LUPA episodes are 

not paid using case mix weights.) We 

compared the resulting averages. The 

total change using the 2008 grouper was 

0.0533: the 2007 average was 1.2552 and 

the 2008 average was 1.3085. It is 

important to note that this comparison 

of the 2007 and 2008 claims data uses 

the same grouper (the 153-group system, 

which includes co-morbid conditions), 

and that this estimate of national 

average case-mix on the 2007 sample 

differs very little (that is ¥.0054) from 

the estimate we derived from using the 

actual grouper in effect in 2007. 

We decomposed the change in 

average case-mix weight, 0.0533, into an 

effect of the 2007–2008 shift in the 

distribution of the number of therapy 

visits per episode, and an effect of the 

2007–2008 change in the average casemix weight at each count of therapy 

visits in the distribution. The latter is 

assumed to result mostly from the 

incentives to report co-morbid 

conditions, stemming from the 

introduction of the 153 group system. 

The former is assumed to result 

mostly from a behavioral response on 

the part of agencies to the new system 

of therapy thresholds introduced in 

2008. Prior to 2008, case mix weights 

were generally highest for episodes that 

met the single, 10-visit therapy 

threshold. Under the system in place 

since 2008, multiple thresholds above 

and below 10 therapy visits were 

created. By creating multiple thresholds 

and severity steps between thresholds, 

we intended to move incentives away 

from payment-driven therapy treatment 

plans to clinically driven ones. 

However, creating a new set of high 

therapy thresholds above 13 therapy 

visits, to adequately compensate 

agencies for treating the relatively few 

patients needing such large amounts of 

therapy, also may have had unintended 

consequences. One such consequence 

may have been that agencies responded 

by padding treatment plans to reach the 

new, higher thresholds. Episodes which 

would require such high numbers of 

therapy visits generally would have very 

high case mix weights (mostly weights 

of 2 or higher). 

The decomposition method first holds 

the average case mix weight constant (at 

the 2007 values) at each level of therapy 

visits, and measures the effect of the 

shift to the new distribution of therapy 

visits. The method then holds the 

distribution of therapy visits constant 

(at the 2007 distribution) and measures 

the effect of the change in average case 

mix weight at each level of therapy 

visits. The results were that .0205, or 38 

percent (.0205/.0533=.38), of the total 

change in average case-mix weights 

from 2007 to 2008 was due to the shift 

in distribution of therapy visits per 

episode. 

Figure 1 illustrates the 2007 through 

2008 change in the proportion of 

episodes delivering each individual 

number of therapy visits. Several 

changes are notable. First, the 

percentage of episodes increased at the 

new, higher therapy visit thresholds 

(14–19 and 20+). The share of episodes 

at 20 visits or more increased from 4.4 

percent in 2007 to 5.3 percent in 2008, 

a substantial increase of about 20 

percent. The large shift towards therapy 

visit levels of 14 and higher was 

unexpected. 

Second, the percentage of episodes at 

the single therapy threshold (10 visits) 

that existed before 2008 decreased, as 

did the percentage of episodes between 

11 and 13 therapy visits. In 2007, as a 

proportion of all episodes with at least 

one therapy visit, episodes with 10 to 13 

therapy visits were 32 percent; by 2008, 

only 21 percent of all therapy episodes 

were in this range. (Note: Figure 1 

displays percents of total non-LUPA 

episodes, not just episodes with at least 

one therapy visit.) Third, the proportion 

of episodes at the new threshold below 

10 visits, which is 6 visits, increased, as 

did the proportion of episodes with 7, 

8, or 9 visits. The system of therapy 

steps we defined for the 2008 

refinements included a step for 7–9 

visits (see Table 4 of The August 29, 

2007 final rule [72 FR 49762]). Finally, 

the proportion of total episodes 

receiving any therapy visits increased 

slightly, from 54 percent to 55 percent. 

The average number of therapy visits 

per episode increased from 5.63 to 5.83 

(data not shown). 

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The remaining .0328, or 62 percent of 

the total change (.0328/.0533=.62) in 

overall average case-mix weight from 

2007 to 2008 was due to an increase in 

the average case-mix weight at each 

level of therapy visits per episode. Table 

1 shows the increases. 

The averages increased for all levels 

of therapy visits per episode, with the 

change ranging from 0.02 to 0.05. The 

percentage changes appear to decline 

with more therapy visits, because the 

level of the average case mix value 

increases with each number of therapy 

visits; however, there was no rising 

trend in the absolute change as the 

number of therapy visits increased. 

Looking directly into the reporting of 

comorbidities, we examined the 

proportion of episodes that had 

nonblank diagnoses reported in M0240 

(Diagnoses and Severity Index). Our 

concern was that agencies were 

reporting more comorbidities, since the 

refined system allocates case mix points 

for secondary diagnoses, whereas the 

system prior to the refinements did not. 

Longstanding OASIS manual language 

instructs providers to encode diagnosis 

on the OASIS only when the condition 

is unresolved and only when the 

condition has an impact on the home 

health care. The data comparing the 

percentages are shown in Table 2. 

The results were a substantial 

increase in the percentage of episodes 

with a reported diagnosis code in 

M0240: A 10.4 percentage point 

increase from 2007–2008 in M0240d; a 

16.4 percentage point increase in 

M0240e; and a 19.9 percentage point 

increase in M0240f. Table 2 also 

indicates that these changes represented 

a significantly larger increase in 

completion rates in these diagnosis 

fields compared to annual increases of 

about 3.0 percentage points in 2005– 

2006, and about 7.0 percentage points in 

2006–2007. We note that we published 

the proposed refinements in the May 

2007 Federal Register (72 FR 25356). 

Release of the proposal around mid-year 

could have been a factor in the higher 

growth of these episodes during the 

period 2006 through 2007, relative to 

2005 through 2006. 

We believe it is unlikely that the 

actual disease burden of home health 

patients, as indicated by reported 

comorbidities, changed so dramatically 

in a single year; instead, we believe the 

incentives to report more comorbidities 

under the refined case mix system are 

the reason for the large increases in 

reported comorbidities. 


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An illustrative instance of diagnosis 

coding change under the HH PPS 

refinements is hypertension. Our 

analysis of 8 years of claims shows that 

reporting of this diagnosis grew 

exceedingly quickly in 2008. Table 3 

shows the proportion of HH PPS claims 

reporting essential hypertension, 

according to ICD–9–CM hypertension 

code, for 2001 to 2008. The data 

indicate a sudden jump of 

approximately 12 percentage points in 

reporting of unspecified hypertension 

when the refined HH PPS added 

hypertension as a case mix code in 

2008. Annual changes in use of this 

code were small up until 2005 (in the 

range of 0.1 to 2.4 percentage points), 

after which there were two years of 

6-percentage point increases, followed 

by the 12-percentage point increase 

coincident with the 2008 refinements. 

Malignant hypertension is unusual; it 

has been falling as a percentage of 

episodes. Reporting of benign 

hypertension, which is somewhat more 

common than malignant hypertension, 

has been slowly rising since 2001. 

At the same time, there are 

indications that the services utilization 

associated with the most commonly 

reported hypertension diagnosis code, 

hypertension, unspecified, no longer is 

responsible for added resource 

requirements in home care. Originally, 

hypertension was selected for inclusion 

in the refined HH PPS system because 

data suggested it elevated utilization. 

Table 4a illustrates the trends; it shows 

the average number of visits per 

episode, according to type of 

hypertension diagnosis code. (We 

exclude outlier cases because of the 

effect that growing numbers of outlier 

episodes may have had beginning 

around 2005 and 2006; extremely large 

numbers of visits in the distribution can 

distort the average.) 

Generally episodes reporting 

malignant or benign hypertension 

exhibit a decline in number of visits per 

episode during the middle of the 8-year 


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period. The averages then rise slightly. 

The averages for episodes reporting 

unspecified hypertension declined until 

2005, and then stabilized. 

Comparing these data with averages 

for episodes not reporting hypertension, 

we see that hypertension is generally 

associated with more visits, especially if 

the hypertension was reported as 

malignant or benign. However, in 2007, 

the unspecified hypertension episodes 

had an average number of visits 

equivalent to that of the non-HBP 

episodes. By 2008, the average number 

of visits for episodes not reporting 

hypertension rose slightly, while the 

average for unspecified hypertension 

did not. As a result, by 2008, the average 

number of visits for claims reporting 

unspecified hypertension is slightly 

lower than the average for claims not 

reporting hypertension. Further, the 

benign hypertension episodes, with a 

slightly increased share of the sample 

between 2007 and 2008, exhibited a 

small reduction in the average number 

of visits. 

This pattern illustrates an expected 

effect of nominal coding change. We 

observe a 12-percentage point increase 

in use of unspecified hypertension, but 

no longer do these hypertension 

patients use more resources than others. 

These results appear possibly consistent 

with a phenomenon in which agencies 

increased their reporting of 

hypertension in situations where it did 

not meet the home health diagnosis 

reporting criteria. More generally, the 

results are suggestive of changed coding 

practice in which less-severe episodes 

are being reported with hypertension in 

2008 than used to be the case. 

These analyses of the change in the 

therapy visit distribution, change in 

average case mix weights at each level 

of therapy visits, increased use of 

secondary diagnosis fields, and the 

change in reporting of hypertension all 

suggest that the refinements which were 

implemented in 2008 affected case-mix 

weights, with greater therapy visits and 

reporting of co-morbidities each as 

contributing factors. However, as 

described below, the analyses do not 

indicate a significant increase in real 

case-mix. Experience with previous 

analyses reported in our past regulations 

shows that relatively small proportions 

of the total case mix change since the 

IPS baseline can be considered real case 

mix change. 

Our estimate that 10.07 percent of the 

total percentage change in the national 

average case mix weight since the IPS 

baseline is due to real change in case 

mix, is consistent with past results. 

Most of the case mix change has been 

due to improved coding, coding practice 

changes, and other behavioral responses 

to the prospective payment system, such 

as more use of high therapy treatment 

plans. We are therefore proposing to 

exercise authority to compensate for 

nominal case mix change by making 

reductions to the PPS rates, as we have 

done since 2008. 

For this year’s analysis, we used the 

same approach, a model designed to 

measure real change in case mix, which 

we developed for the CY 2008 HH PPS 

final rule (72 FR 49841) and continue to 

use for HH PPS rulemaking. For this 

year’s analyses, we utilized a fuller 

version of the 3M APR–DRG grouper 

that allowed us to expand the number 

of APR–DRG-related groups in the 

model. As previously, we included 

indicators for each APR–DRG group’s 

different severity level if at least 25 

episodes had the APR–DRG/severity 

combination in the IPS period file. This 

expanded APR–DRG model was used to 

re-estimate the IPS period model of 

case-mix weight. 

We also rebased the expanded APR– 

DRG model on CY2008 data, using casemix weights produced by the refined 

(153-group) HH PPS grouper. One slight 

difference in the rebased model is that 

because we are using 2008 data, the 

‘‘living arrangement’’ variables are 

missing on follow-up OASIS 

assessments. Consequently, we were not 

able to use this variable in the re-based 

model. 

We used the results of that rebasing to 

predict real case mix for 2007. The 

national average case mix weight in 

2008 was 1.3085. The rebased model of 

real case mix predicts a quantity change 

in real case mix of ¥0.0025 when 

working backwards from 2008 (1.3085) 

to 2007 (1.3060). The predicted level of 

real case mix in 2007, which we derived 

from the IPS-based model is 1.1152. To 

compute a predicted real case mix level 

for 2008, we increased the predicted 

level of real case mix in 2007, 1.1152, 

by the percentage growth (1.3085/ 

1.3060) in real case mix that we 

estimated from the rebased model. The 

result is a predicted level of real case 


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mix in 2008 of 1.1173 ((1.3085/1.3060) 

× 1.1152 = 1.1173). 

To compute the predicted quantity 

change in real case mix from the IPS 

baseline to 2008, we subtracted from the 

IPS baseline average case mix weight 

from the predicted level the real case 

mix in IPS, for a quantity change of 

0.0214 (1.1173 ¥ 1.0959 = 0.0214). The 

total difference in case mix from 

baseline to 2008 is 0.2126 (1.3085 ¥ 

1.0959 = 0.2126). Therefore, the 

quantity change from baseline to 2008 

in real case mix represents a 10.07 

percent increase (0.0214/0.2126 = 

0.1007 or 10.07 percent). 

The percent change in overall case 

mix from the IPS baseline to 2008 is 

19.40 percent ((1.3085/1.0959) ¥ 1 = 

0.1940 or 19.40 percent). To estimate 

the percent growth in case mix due to 

nominal change (that is, change in case 

mix not due to actual changes in patient 

acuity), we reduced the overall 19.40 

percent change in case mix by the 10.07 

percent increase due to real case mix 

change, which yielded a residual of 

17.45 percent ((1 ¥ 0.1007) * 0.1940 = 

0.1745). 

As we fully described earlier in this 

proposed rule, our August 29, 2007, 

final rule for CY 2008 finalized a 

reduction over 4 years in the national 

standardized 60-day episode payments 

rates to account for an 11.75 percent 

increase in case-mix which was not 

related to treatment of more resource 

intense patients. The 11.75 percent 

increase was based on an analysis of 

data through 2005. We finalized a 2.75 

percent reduction each year for 2008, 

2009 and 2010, and 2.71 percent 

reduction for CY 2011 to account for 

this growth in case-mix. We have stated 

in HH PPS rulemaking, since the CY 

2008 HH PPS proposed rule, that we 

might find it necessary to adjust the 

annual offsets (case-mix reduction 

percentages) as new data became 

available. Because our current analysis 

reveals that nominal case-mix has 

continued to grow, we are faced with 

having to account for the additional 

increase in nominal case-mix beyond 

that which was identified for CY 2008 

rulemaking. If we were to account for 

the remainder of the 17.45 percent 

residual increase in nominal case-mix 

over CY 2011 and CY 2012, we estimate 

that the percentage reduction to the 

national standardized 60-day episode 

rates and the NRS conversion factor for 

nominal case-mix change for each of the 

two calendar years (2011 and 2012) of 

the case-mix change adjustment would 

be 3.79 percent per year. If we were to 

fully account for the remaining residual 

increase in nominal case-mix in CY 

2011, we estimate that the percentage 

reduction to the national standardized 

60-day episode rates and the NRS 

conversion factor would be 7.43 

percent. Because the Affordable Care 

Act contains other provisions which 

have an effect on HH PPS payments, we 

are not proposing to account for the 

entire residual increase in nominal casemix in CY 2011, instead we propose to 

account for the identified increase over 

CY 2011 and CY 2012. We propose to 

impose a 3.79 percent reduction per 

year to the national standardized 60-day 

episode rates and the NRS conversion 

factor for CY 2011 and CY 2012. Should 

we identify further increases in nominal 

case-mix as more current data become 

available, it is our intent to account 

fully for those increases when they are 

identified, rather than continuing to 

phase-in the reductions over more than 

1 year. We will continue to monitor any 

future changes in case-mix as more 

current data become available and make 

updates as appropriate. 

B. Hypertension Diagnosis Coding 

Under the HH PPS 

As part of this rule, we are proposing 

to remove ICD–9–CM code 401.9, 

Unspecified Essential Hypertension, 

and ICD–9–CM code 401.1, Benign 

Hypertension, from the HH PPS case 

mix model’s hypertension group, 

originally reflected in Table 2B of the 

August 29, 2007, CY 2008 HH PPS final 

rule (72 FR 49762) (subsequent updates 

to Table 2B have been provided in HH 

PPS grouper software releases). In this 

section we explain the basis for this 

proposal. 

As part of our refinements to the HH 

PPS, beginning in CY 2008, unspecified 

hypertension and benign hypertension 

were included as diagnoses in our HH 

PPS case mix system. Recent analysis of 

home health diagnosis coding shows a 

significant change in the frequency of 

assigning certain hypertension 

diagnoses during CY 2008. Specifically, 

our analysis of HH PPS claims from 

2001 to 2008 shows a sudden increase 

in the reporting of unspecified 

hypertension and benign hypertension 

on home health claims in CY 2008 (see 

Table 3: Percent of episodes reporting 

hypertension ICD–9–CM diagnosis 

codes: 2001–2008, of this proposed 

rule). 

Classification of blood pressure (BP) 

was revised in 2003 by the National 

Heart, Lung and Blood Institute (NHLBI) 

in their ‘‘Seventh Report of the Joint 

National Committee on Prevention, 

Detection, Evaluation, and Treatment of 

High Blood Pressure’’ (the JNC 7 report) 

and published in the May 21, 2003, 

Journal of the American Medical 

Association. These revisions provided 

specific clinical guidelines for 

prevention, detection, and treatment of 

high blood pressure. The guidelines, 

approved by the Coordinating 

Committee of the NHLBI’s National 

High Blood Pressure Education Program 

(NHBPEP), also streamlined the steps by 

which doctors diagnose and treat 

patients. A key aspect of the guidelines 

includes the introduction of a ‘‘prehypertension’’ level for individuals with 

a systolic blood pressure of 120–139 

mm Hg or a diastolic blood pressure of 

80–89 mm Hg. This recognition 

represented a change from traditional 

medical views on the implications of 

blood pressures slightly above 120/80. 

Traditionally, such low levels were not 

considered a significant clinical finding. 

No diagnosis was reportable. There was 

no medical treatment ordered; nor was 

a change of lifestyle recommended. 

Based upon our review of the revised 

clinical guidelines, and our review of 

the ICD–9–CM classification of essential 

hypertension, if the patient is 

considered ‘‘pre-hypertensive,’’ some 

may conclude that a diagnosis of benign 

hypertension may be assigned. If an 

individual is designated as prehypertensive, the guidelines stipulate 

that this individual will generally 

require health promoting lifestyle 

modifications to prevent cardiovascular 

disease. Additional treatments may or 

may not be appropriate. 

The impact of the new guidelines for 

hypertension is the reclassification of 

certain patients to a hypertension 

diagnosis, whereas prior to the 

guidelines, no hypertension diagnosis 

was indicated. Furthermore, under the 

guidelines, some of the patients deemed 

hypertensive may not need skilled 

services. Moreover, as we described 

above, we see a substantial increase in 

the reporting of unspecified 

hypertension, along with some evidence 

that home health patients with either 

unspecified or benign hypertension no 

longer require extra resources. Given the 

new guidelines for hypertension and 

their impact on coding, along with 

coding behavior changes in 2008, we 

believe including unspecified and 

benign hypertension in the HH PPS case 

mix model reduces the model’s 

accuracy. As such we do not believe 

that we should be including these 

diagnoses in our case-mix system. 

We also believe that the developments 

in clinical guidelines of recent years 

may have led to ambiguity in the 

definition of hypertension in the ICD–9– 

CM classification system. The ‘‘ICD–9– 

CM Official Guidelines for Coding and 

Reporting’’, and the alphabetic and 

tabular indexes of the ICD–9–CM 

published after May 2003 (effective date 

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of the ‘‘NHLBI Guidelines for 

Hypertension’’), fail to include the 

NHLBI Blood Pressure (BP) guidelines 

and classification terminology. The 

NHLBI specific BP mmHg 

measurements and BP terms are not 

included in the ICD–9–CM classification 

system. 

In the August 29, 2007, CY 2008 HH 

PPS final rule, we removed diagnosis 

codes proposed in the NPRM if the code 

was assigned to a minor condition or 

mild symptom that may be found in the 

elderly population; codes that are nonspecific or ambiguous; and codes that 

lack consensus for clear diagnostic 

criteria within the medical community. 

Due to their unclear relationship with 

NHLIB guidelines, the unspecified and 

benign hypertension codes fail to meet 

the criteria we laid out in 2007. 

In summary, continued inclusion of 

the unspecified and benign 

hypertension codes in the HH PPS case 

mix system threatens to move the HH 

PPS case-mix model away from a 

foundation of reliable and meaningful 

diagnosis codes that are appropriate for 

home care. Therefore, we are proposing 

to remove ICD–9–CM code 401.9, 

Unspecified Essential Hypertension, 

and ICD–9–CM code 401.1, Benign 

Essential Hypertension, from the HH 

PPS case mix model’s hypertension 

group, in order to correlate with the 

goals of our HH PPS case-mix system. 

C. Therapy Coverage Requirements 

With the inception of the HH PPS, as 

set forth in the July 3, 2000 final rule (65 

FR 41128), patients were grouped 

according to their therapy utilization 

status in order to ensure that patients 

who required therapy would maintain 

access to appropriate services. In the 

final rule, we described that we had 

performed research regarding how to 

use assessment information to predict 

how much therapy a patient would need 

over the course of a 60-day period. The 

research found that the assessment data 

could not predict the amount of 

required therapy with sufficient 

accuracy for use in the payment system. 

Knowing that under a PPS there is 

significant risk that providers might 

skimp on high-cost services such as 

therapy, we decided to establish a 

therapy threshold to ensure that therapy 

would not be under-provided. We used 

clinical judgment to determine what 

amount of therapy would need to be 

provided to ensure a meaningful 

amount of rehabilitation services to 

patients who could clearly benefit from 

it. We determined that this amount 

would be at least 8 hours of therapy 

services during the 60-day episode. 

Since the average therapy visit was 48 

minutes long, it would take 10 visits to 

provide at least 8 hours worth of 

therapy. Therefore, we established a 

corresponding 10-visit therapy 

threshold to identify ‘‘high’’ therapy 

cases, and paid home health agencies 

significantly more for patients receiving 

high therapy. 

In the years following the adoption of 

the HH PPS, we have continued to 

analyze the effectiveness of the 10-visit 

therapy threshold in ensuring that 

rehabilitation services were being 

provided to patients who could clearly 

benefit from them. Our analyses 

suggested that therapy was not being 

under-provided, but rather suggested 

that in many cases therapy was being 

over-provided. As described in the May 

4, 2007 HH PPS proposed rule (72 FR 

25356), our analysis of the evidence 

suggested that the single 10-visit 

threshold offered too strong a financial 

incentive to provide 10 therapy visits 

when a lower amount of therapy was 

more clinically appropriate. In other 

words, the data suggested that financial 

incentives to provide 10 therapy visits 

overpowered clinical considerations in 

therapy prescriptions. During this time 

we conducted further research to model 

therapy need, but it was again 

unsuccessful. We explained in our 

proposed rule in May 2007 that a return 

to per-visit payment for therapy visits 

did not meet our objectives for having 

a prospective payment system. 

Therefore, in the CY 2008 final rule, we 

established a system of three thresholds 

with graduated steps in between which 

met our objectives of retaining 

prospectivity in the payment system, 

reducing the strong incentive resulting 

from a single threshold, restoring 

clinical considerations in therapy 

provision, and paying more accurately 

for therapy utilization below the 

original 10-visit threshold. Those three 

thresholds are at 6 therapy visits, 14 

therapy visits, and 20 therapy visits. As 

a disincentive for agencies to deliver 

more than the appropriate, clinically 

determined number of therapy visits, 

payment for additional therapy visits 

between the three thresholds increases 

gradually, incorporating a declining 

rather than a constant payment amount 

per added therapy visit. In our May 4, 

2007 HH PPS proposed rule, at 72 FR 

25363, we provided further details 

explaining the selection of these 

thresholds. 

Analysis of CY 2008 data continues to 

suggest that some HHAs may be 

providing unnecessary therapy. The 

2008 data show a 30 percent increase in 

episodes with between 6–9 therapy 

visits, which suggests that the 2008 

changes may have been successful in 

improving clinical considerations in the 

volume of therapy provided. In their 

March 2010 report MedPAC states that 

2008 data also reveal a 26 percent 

increase of episodes with 14 or more 

therapy visits (MedPAC, Report to 

Congress: Medicare Payment Policy, 

Section B, Chapter 3, March 2010, p. 

203). The increase in episodes with 14 

or more therapy visits is especially 

evident in areas of the country where 

home health fraud is suspected, such as 

Miami-Dade, Florida. 

While this suggests that the therapy 

payment policies are vulnerable to fraud 

and abuse, the swift, across-the-board 

therapy utilization changes suggest 

another, more fundamental concern. 

MedPAC wrote that the magnitude of 

therapy utilization changes and their 

correlations with the payment threshold 

changes suggest that payment incentives 

continue to influence treatment patterns 

[MedPAC, 2010, p. 206]. The 

Commissioners believed that payment 

policy is such a significant factor in 

treatment patterns because the criteria 

for receipt of the home health benefit 

are ill-defined. They suggested that 

improved guidelines that more 

specifically identify patients who are 

most appropriate for HH care would 

facilitate more appropriate and uniform 

use of the benefit [MedPAC, 2010, p. 

203]. To address the concerns of 

MedPAC, we are proposing to clarify 

our policies regarding coverage of 

therapy services at 409.44(c) in order to 

assist HHAs, and to curb misuse of the 

benefit. 

We believe these clarifications also 

could slow the case-mix growth which 

is unrelated to real changes in patient 

acuity (nominal case-mix). As we 

described above in Section A (‘‘Case Mix 

Measurement’’), between 2007 and 2008 

we observed a case-mix increase of more 

than 4 percent. An analysis of this 

growth revealed that approximately 38 

percent of the total case mix change 

between 2007 and 2008 was due to the 

shift in distribution of therapy visits. By 

describing more clearly the therapy 

coverage criteria in the home health 

setting, thereby enabling providers to 

better understand when providing 

therapy to home health patients is 

appropriate, we believe that beginning 

in calendar year 2011, a slower rate of 

nominal case-mix growth may be 

achieved. 

Proposed Clarifications to 42 CFR 

409.44(c)(1) 

Regulations at § 409.44(c)(1) mandate 

that for physical therapy, speech 

language pathology, or occupational 

therapy to be covered under the home 

health benefit, therapy services must 

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relate directly and specifically to a 

treatment regimen, be established by the 

physician (after any needed 

consultation with a qualified therapist), 

that is designed to treat the beneficiary’s 

illness or injury. A qualified therapist is 

one who meets the personnel 

requirements in the CoPs at 42 CFR 

484.4. To ensure that therapy services 

relate directly and specifically to a 

treatment regimen designed to treat the 

beneficiary’s illness or injury, we are 

proposing to clarify our coverage 

requirements. Specifically, we are 

proposing to revise § 409.44(c)(1) so 

that, with respect to physical therapy, 

occupational therapy, and speech 

language pathology, we may clarify that: 

• The patient’s plan of care would 

include a course of therapy and therapy 

goals which would be consistent with 

the patient’s functional assessment, both 

of which are included in the patient’s 

clinical record. The patient’s clinical 

record would document the necessity 

for the course of therapy described in 

the plan of care. Specifically, the 

clinical record would document how 

the course of therapy for the 

beneficiary’s illness or injury is in 

accordance with accepted standards of 

clinical practice. 

• Therapy treatment goals would be 

described in the plan of care, and they 

would be measurable. Specifically, 

therapy treatment goals would be such 

that progress toward those goals could 

be objectively measured. The goals 

would also pertain directly to the 

patient’s illness or injury and the 

patient’s resultant functional 

impairments. 

• The patient’s clinical record would 

demonstrate that the method used to 

assess a patient’s function included the 

objective measurement of function in 

accordance with accepted standards of 

clinical practice. As such, successive 

functional assessments would enable 

comparison of successive 

measurements, thus enabling objective 

measurement of therapy progress. 

One example of objective measures is 

functional assessment individual item 

and summary findings (and 

comparisons to prior assessment results/ 

clinical findings) from OASIS functional 

items or other commercially available 

therapy outcomes instruments. 

Similarly, another example would be 

functional assessment findings (and 

comparisons to prior assessment results/ 

clinical findings) from tests and 

measurements validated in the 

professional literature, or used as part of 

accepted standards of clinical practice 

that are appropriate for the condition/ 

function being measured. 

Proposed Clarifications to 42 CFR 

409.44(c)(2)(i) 

Current regulations at § 409.44(c)(2)(i) 

mandate that for physical therapy, 

speech language pathology, or 

occupational therapy services to be 

covered in the home health setting, the 

services must be considered under 

accepted practices to be a specific, safe, 

and effective treatment for the 

beneficiary’s condition. 

To clarify what we mean by ‘‘accepted 

practice’’ and ‘‘effective treatment’’, we 

are proposing to clarify home health 

therapy coverage criteria at 

§ 409.44(c)(2)(i). These clarifications 

describe our expectations that HHAs 

would regularly reassess a therapy 

patient’s physical function, and would 

objectively measure a patient’s progress 

toward therapy goals to determine 

whether therapy services continued to 

be effective, or whether therapy ceased 

to be covered. These clarifications also 

describe clinical record documentation 

expectations associated with 

documenting effective therapy progress. 

We are proposing to revise 

§ 409.44(c)(2)(i) as follows: 

Functional Reassessment Expectations 

In order to ensure that a patient 

receiving home health therapy services 

appropriately remained eligible for the 

benefit in accordance with accepted 

practice, and that the services continued 

to be effective, the patient’s function 

would be periodically reassessed by a 

qualified therapist. As we described 

above, for therapy to be covered in the 

home health setting, the method used to 

assess a patient’s function would 

include objective measurement of 

function in accordance with accepted 

standards of clinical practice. As such, 

progress toward therapy goals would be 

objectively measurable by comparing 

measurements obtained at successive 

functional assessment time points. The 

objective measurements obtained from 

the periodic reassessment of function 

would reflect progress (or lack of 

progress) toward therapy goals, or 

achievement of therapy goals and the 

measurements would be documented in 

the clinical record. 

While a qualified therapist could 

include, as part of the functional 

assessment or reassessment, objective 

measurements or observations made by 

a PTA or OTA within their scope of 

practice, the qualified therapist would 

have to actively and personally 

participate in the functional assessment, 

and measure the patient’s progress. 

• For those patients requiring 13 or 

19 therapy visits, the patient would be 

functionally re-assessed by a qualified 

therapist, minimally, on the 13th and 

the 19th therapy visit (thus requiring 

reassessment prior to the HH PPS 

therapy thresholds of 14 and 20 therapy 

visits), and at least every 30 days. 

• No subsequent therapy visits would 

be covered until the qualified therapist 

has completed the reassessment, 

objectively measured progress (or lack 

of progress) toward goals, determine if 

goals have been achieved or require 

updating, and documented the therapy 

progress in the clinical record. If the 

objective measurements of the 

reassessment do not reveal progress 

toward goals, the qualified therapist, 

together with the physician, would 

determined whether the therapy is still 

effective or should be discontinued. If 

therapy is continued, the clinical record 

would be documented, as described 

below, with a clinically supportable 

statement of why there is an expectation 

that anticipated improvement is 

attainable in a reasonable and generally 

predictable period of time. 

These reassessments would ensure 

that the patient was receiving effective 

care while also ensuring that, except for 

covered maintenance therapy as 

described later in this section, patients 

were not remaining on the benefit and 

continuing to receive therapy services 

after the therapy goals were met, or after 

improvement could no longer be 

expected. 

Documenting ‘‘Effective’’ Therapy 

Progress 

Assistant’s Participation in 

Documenting ‘‘Effective’’ Therapy 

Progress 

We are proposing that physical 

therapist assistants or occupational 

therapy assistants could objectively 

document progress between the 

functional reassessments by a qualified 

therapist and/or physician. Clinical 

notes written by assistants are not 

complete functional assessments of 

progress. 

Only a qualified therapist would be 

able to document a patient’s progress 

towards goals as measured during a 

functional reassessment, regardless of 

whether the assistant wrote other 

clinical notes. However, notes written 

by assistants are part of the clinical 

record and need not be copied into the 

reassessment documentation. Clinical 

notes written by assistants would 

supplement the functional reassessment 

documentation of qualified therapist 

and would include: 

• The date that the clinical note was 

written; the assistant’s signature and job 

title, or for dictated documentation, the 

identification of the assistant who 

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composed the clinical note, and the date 

on which it was dictated; 

• Objective measurements (preferred) 

or description of changes in status 

relative to each goal currently being 

addressed in treatment, if they occurred. 

Note that assistants would not make 

clinical judgments about why progress 

was or was not made, but could report 

the progress objectively. 

Descriptions would make identifiable 

reference to the goals in the current plan 

of care. 

Qualified Therapist’s Responsibility in 

‘‘Effective’’ Progress Documentation 

In addition to the proposed 

requirements above for clinical 

documentation by assistants, we are also 

proposing in § 409.44(c)(2)(i) that the 

patient’s progress documentation by a 

qualified therapist would also include: 

• Documentation of objective 

measurement obtained during the 

functional assessment and extent of 

progress (or lack thereof) toward each 

therapy goal. 

• Plans for continuing or 

discontinuing treatment, with reference 

to evaluation results, and/or treatment 

plan revisions. 

• Changes to goals or an updated plan 

of care that is sent to the physician for 

signature or for discharge. 

• Documentation of objective 

evidence or a clinically supportable 

statement of expectation that: (1) The 

patient’s condition has the potential to 

improve or is improving in response to 

therapy; or (2) maximum improvement 

is yet to be attained, and there is an 

expectation that the anticipated 

improvement is attainable in a 

reasonable and generally predictable 

period of time. Objective evidence 

would consist of standardized patient 

assessments, outcome measurement 

tools, or measurable assessments of 

functional outcome. Use of objective 

measures at the beginning of treatment, 

and during and/or after treatment would 

be required to quantify progress and 

support justifications for continued 

treatment. 

Proposed Clarifications to 42 CFR 

409.44(c)(2)(iii) 

Regulations at § 409.44(c)(2)(iii) 

presently mandate that for therapy 

services to be covered in the home 

health setting, there must be an 

expectation that the beneficiary’s 

condition will improve materially in a 

reasonable (and generally predictable) 

period of time based on the physician’s 

assessment of the beneficiary’s 

restoration potential and unique 

medical condition, or the services must 

be necessary to establish a safe and 

effective maintenance program required 

in connection with a specific disease, or 

the skills of a therapist must be 

necessary to establish a safe and 

effective maintenance program in 

connection with a specific disease or the 

skills of a therapist must be necessary to 

perform a safe and effective 

maintenance program. We would clarify 

these requirements: 

• The first sentence currently states, 

‘‘There must be an expectation that the 

beneficiary’s condition will improve 

materially in a reasonable (and generally 

predictable) period of time based on the 

physician’s assessment of the 

beneficiary’s restoration potential and 

unique medical condition.’’ 

We propose clarifying the regulatory 

text to clarify that ‘‘material’’ 

improvement requires that the clinical 

record demonstrate that the patient is 

making functional improvements that 

are ongoing and of practical value, when 

measured against his or her condition at 

the start of treatment. 

We are proposing to clarify that the 

concept of rehabilitative therapy 

includes recovery or improvement in 

function and, when possible, restoration 

to a previous level of health and wellbeing. 

Covered therapy services under the 

home health benefit shall be 

rehabilitative therapy services unless 

they meet the criteria for maintenance 

therapy requiring the skills of a 

therapist as described below. 

We are proposing to clarify the 

regulatory text so that if an individual’s 

expected rehabilitation potential would 

be insignificant in relation to the extent 

and duration of therapy services 

required to achieve such potential, 

therapy would not be considered 

reasonable and necessary, and therefore 

would not be covered as rehabilitative 

therapy services. 

We are also proposing to clarify the 

regulatory text to describe that therapy 

is covered as rehabilitative therapy 

when the skills of a therapist are 

necessary to safely and effectively 

furnish or supervise a recognized 

therapy service whose goal is 

improvement of an impairment or 

functional limitation. 

We are proposing to clarify in 

regulatory text that therapy would not 

be covered to effect improvement or 

restoration of function where a patient 

suffered a transient and easily reversible 

loss or reduction of function (e.g., 

temporary weakness which may follow 

a brief period of bed rest following 

surgery) which could reasonably be 

expected to improve spontaneously as 

the patient gradually resumes normal 

activities. Therapy furnished in such 

situations would not be considered 

reasonable and necessary for the 

treatment of the individual’s illness or 

injury, and the services would not be 

covered. 

If at any point in the treatment of an 

illness, it was determined that the 

treatment was not rehabilitative and did 

not legitimately require the services of 

a qualified therapist for management of 

a maintenance program as described 

below, the services would no longer be 

considered reasonable and necessary 

and therapy would cease to be covered. 

• As currently stated, 

§ 409.44(c)(2)(iii) also covers 

occupational therapy, physical therapy, 

or speech language pathology if the 

services are ‘‘necessary to establish a 

safe and effective maintenance program 

required in connection with a specific 

disease.’’ 

We are proposing to clarify the 

existing regulatory text by adding that 

the specialized skill, knowledge and 

judgment of a therapist would be 

required in developing a maintenance 

program, and services would be covered 

to design or establish the plan, to ensure 

patient safety, to train the patient, 

family members and/or unskilled 

personnel in carrying out the 

maintenance plan, and to make periodic 

reevaluations of the plan. 

When indicated, during the last 

visit(s) for rehabilitative treatment, the 

clinician may develop a maintenance 

program for the patient. The goals of a 

maintenance program would be, for 

example, to maintain functional status 

or to prevent decline in function. 

We are also proposing to clarify that 

if a maintenance program was initiated 

after the rehabilitative therapy program 

had been completed (rather than by a 

clinician at the last rehabilitative 

therapy session), development of a 

maintenance program would not be 

considered reasonable and necessary for 

the treatment of the patient’s condition, 

with one exception. We propose that 

when a patient qualifies for Medicare’s 

home health benefit based on an 

intermittent skilled nursing need, a 

qualified therapist may develop a 

maintenance program to maintain 

functional status or to prevent decline 

in function, at any point in the episode. 

The services of a qualified therapist 

would not be necessary to carry out a 

maintenance program, and would not be 

covered under ordinary circumstances. 

The patient could perform such a 

program independently or with the 

assistance of unskilled personnel or 

family members. 

We also are proposing to clarify 

circumstances under which CMS would 

cover therapy services for carrying out 

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a maintenance program. If the clinical 

condition of the patient were such that 

the services required to maintain 

function involved the use of complex 

and sophisticated therapy procedures to 

be delivered by the therapist himself/ 

herself (and not an assistant) in order to 

provide both a safe and effective 

maintenance program and to ensure 

patient safety, those reasonable and 

necessary services would be covered, 

even if the skills of a therapist were not 

ordinarily needed to carry out the 

activities performed as part of the 

maintenance program. 

Clarifications to § 409.44(c)(2)(iv) 

In order to clarify § 409.44(c)(2)(iv), 

which mandates that for therapy to be 

covered in the home health setting, the 

amount, frequency, and duration of the 

services must be reasonable, we propose 

to revise § 409.44(c)(2)(iv) to require 

that: 

• The amount, frequency and 

duration of therapy services must be 

reasonable and necessary, as determined 

by a qualified therapist and/or 

physician, using accepted standards of 

clinical practice. 

• The plan of care or the functional 

assessment would include any variable 

factors that influence the patient’s 

condition or affect the patient’s 

response to treatment, especially those 

factors that influence the clinician’s 

decision to provide more services than 

are typical for the patient’s condition. 

• The clinical record documentation 

would have to include objective 

measurements that demonstrated that 

the patient was making progress toward 

goals. If progress could not be measured, 

and continued improvement cannot be 

expected, therapy services would cease 

to be covered, with two exceptions. 

First, therapy could still be considered 

reasonable and necessary (and thus 

covered) if therapy progress regressed or 

plateaued, if the reason(s) for lack of 

progress were documented, and the 

justification supporting the expectation 

that progress would be regained and 

maintained with continued therapy was 

also documented. Second, therapy 

could be considered reasonable and 

necessary (and thus covered) under 

specific circumstances when 

maintenance therapy is established or 

provided, as explained previously in 

this section. 

D. Collecting Additional Claims Data for 

Future HH PPS Enhancements and 

Soliciting Comments on HH PPS 

Improvements 

The 2009 MedPAC report 

recommended that CMS improve the 

HH PPS to mitigate vulnerabilities such 

as payment incentives to provide 

unnecessary services. We believe that 

we need more specific resource use data 

to fully address these vulnerabilities. 

Therefore, we are planning to require 

HHAs to report additional data on the 

HH claim beginning in CY 2011. Data 

collection requirements are handled via 

a separate administrative process, and 

are not part of this rulemaking. 

In their March 2010 report, MedPAC 

suggested that the HH PPS case-mix 

weights needed adjustment. Our current 

therapy weights are calibrated assuming 

that 79 percent of the time, HH therapy 

is provided by therapists. We believe 

that the current mix of therapy services 

may have changed. To ensure we 

accurately update the case-mix weights, 

we believe there is a need to collect 

additional data on the HH claim to 

differentiate between the therapy visits 

provided by therapy assistants versus 

therapists. 

We typically consider skilled nursing 

services to involve direct skilled nursing 

care to a patient, and therapy services to 

be restorative therapy. However, in 

limited situations, regulations deem a 

set of nursing services which are not 

direct care skilled nursing as skilled 

services and also deem a set of therapy 

services which are not restorative 

therapy as skilled therapy. Therefore, 

we are planning to require HHAs to 

report additional data on the HH claim 

to differentiate between these deemed 

skilled services and direct care skilled 

nursing or restorative therapy. We 

believe that these data will help us 

better understand services provided, 

enabling us to more accurately address 

overutilization vulnerabilities. 

Currently, we use the following Gcodes to define therapy services in the 

home health setting: 

• G0151 Services of physical 

therapist in home health setting, each 15 

minutes. 

• G0152 Services of an occupational 

therapist in home health setting, each 15 

minutes. 

• G0153 Services of a speechlanguage pathologist in home health 

setting, each 15 minutes. 

We are planning to revise the current 

definitions for existing G-codes for 

physical therapists (G0151), 

occupational therapists (G0152), and 

speech-language pathologists (G0153), 

to include in the descriptions that they 

are intended for the reporting of services 

provided by a qualified physical or 

occupational therapist or speechlanguage pathologist. A qualified 

therapist is one who meets the 

personnel requirements in the CoPs at 

42 CFR 484.4. Additionally, we are 

planning to require the reporting of two 

additional G-codes to report the delivery 

of therapy services by assistants. The 

following are draft descriptions for 

those revised and new G-codes, for the 

reporting of restorative therapy visits by 

qualified therapists and qualified 

assistants. Since these new G-codes do 

not yet exist, we have entitled all the 

new G-codes as G-CodeX, with the ‘X’ 

being a number to indicate which new 

code. 

• G0151 Services performed by a 

qualified physical therapist in the home 

health setting, each 15 minutes. 

• G0152 Services performed by a 

qualified occupational therapist in the 

home health setting, each 15 minutes. 

• G0153 Services performed by a 

qualified speech-language pathologist in 

the home health setting, each 15 

minutes. 

• G-Code1 Services performed by a 

qualified physical therapist assistant in 

the home health setting, each 15 

minutes. 

• G-Code2 Services performed by a 

qualified occupational therapist 

assistant in the home health setting, 

each 15 minutes. 

We are also planning to require new 

G-codes for the reporting of the 

establishment or delivery of therapy 

maintenance programs by qualified 

therapists. The following are draft 

descriptions for those new G-codes, for 

the reporting of the establishment or 

delivery of therapy maintenance 

programs by therapists: 

• G-Code3 Services performed by a 

qualified physical therapist, in the home 

health setting, in the establishment or 

delivery of a safe and effective therapy 

maintenance program, each 15 minutes. 

• G-Code4 Services performed by a 

qualified occupational therapist, in the 

home health setting, in the 

establishment or delivery of a safe and 

effective therapy maintenance program, 

each 15 minutes. 

• G-Code5 Services performed by a 

qualified speech-language pathologist, 

in the home health setting, in the 

establishment or deliver of a safe and 

effective therapy maintenance program, 

each 15 minutes. 

Currently we use the following Gcode for the reporting of skilled nursing 

services in the home: 

• G0154 Skilled services of a nurse 

in the home health setting, each 15 

minutes. 

We are planning to revise the current 

definition for the existing G-code for 

skilled nursing services (G0154), and 

require HHAs to use G0154 only for the 

reporting of direct skilled nursing care 

to the patient by a licensed nurse. 

Additionally, we are planning to require 

two new G-codes: One for the reporting 

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of the skilled services of a licensed 

nurse in the management and 

evaluation of the care plan or the 

observation and assessment of a 

patient’s conditions when only the 

specialized skills of a licensed nurse can 

determine the patient’s status until the 

treatment regimen is essentially 

stabilized; and another for the reporting 

of the training or education of a patient, 

a patient’s family, or caregiver: 

• G0154 Skilled services of a 

licensed nurse in the home health 

setting, each 15 minutes. 

• G-Code6 Skilled services by a 

licensed nurse, in the delivery of 

management & evaluation of the plan of 

care, or the observation and assessment 

of the patient’s condition while a 

patient’s treatment regime is stabilized, 

in the home health setting, each 15 

minutes. 

• G-Code7 Skilled services of a 

licensed nurse, in the training and/or 

education of a patient or family 

member, in the home health setting, 

each 15 minutes. 

In addition to our plans for collecting 

additional claims data for future HH 

PPS enhancements, we are considering 

other possible changes to the HH PPS. 

As such, we are also soliciting 

comments on options to restructure the 

HH PPS to mitigate the overutilization 

and up-coding risks that current data 

suggest. Specifically, we are soliciting 

comments on possible policy options 

such as using the new claims data to 

better account for therapy resource use 

and limiting the use of co-morbid 

conditions in payment algorithms. 

E. Outlier Policy 

1. Background 

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

for the provision of an addition or 

adjustment to the regular 60-day casemix and wage-adjusted episode 

payment amounts in the case of 

episodes that incur unusually high costs 

due to patient home health care needs. 

Prior to the enactment of The Affordable 

Care Act, this section stipulated that 

total outlier payments could not exceed 

5 percent of total projected or estimated 

HH payments in a given year. Under the 

HH PPS, outlier payments are made for 

episodes for which the estimated costs 

exceed a threshold amount. The wage 

adjusted fixed dollar loss (FDL) amount 

represents the amount of loss that an 

agency must absorb before an episode 

becomes eligible for outlier payments. 

As outlined in our FY 2000 HH PPS 

final rule (65 FR 41188–41190), we 

provided for outlier payments projected 

to not exceed 5 percent of total 

payments and we adjusted the payment 

rates accordingly. 

2. Regulatory Update 

In our November 10, 2009 HH PPS 

final rule for CY 2010 (74 FR 58080– 

58087), we explained that our analysis 

revealed excessive growth in outlier 

payments in a few discrete areas of the 

country. Despite program integrity 

efforts associated with excessive outlier 

payments in targeted areas of the 

country, we discovered that outlier 

expenditures exceeded the 5 percent 

statutory limit. Consequently, we 

assessed the appropriateness of taking 

action to curb outlier abuse. 

In order to mitigate possible billing 

vulnerabilities associated with excessive 

outlier payments, and to adhere to our 

statutory limit on outlier payments, we 

adopted an outlier policy that included 

a 10 percent agency level cap on outlier 

payments in concert with a reduced 

FDL ratio of 0.67. This resulted in a 

projected target outlier pool of 

approximately 2.5 percent (the previous 

outlier pool was 5 percent of total HH 

expenditures). For CY 2010, we first 

returned 5 percent back into the 

national standardized 60-day episode 

rates, the national per-visit rates, the 

LUPA add-on payment amount, and the 

NRS conversion factor. Then we 

reduced the CY 2010 rates by 2.5 

percent to account for the new outlier 

pool of 2.5 percent. This outlier policy 

was adopted for CY 2010 only. 

3. Statutory Update 

Section 3131(b)(1) of the The 

Affordable Care Act amended Section 

1895(b)(3)(C), ‘‘Adjustment for outliers’’; 

that subparagraph now reads, ‘‘The 

Secretary shall reduce the standard 

prospective payment amount (or 

amounts) under this paragraph 

applicable to home health services 

furnished during a period by such 

proportion as will result in an aggregate 

reduction in payments for the period 

equal to 5 percent of the total payments 

estimated to be made based on the 

prospective payment system under this 

subsection for the period.’’ In addition, 

Section 3131(b)(2) of The Affordable 

Care Act amends Section 1895(b)(5) of 

the Act by taking the existing language, 

re-designating it as 1895(b)(5)(A) of the 

Act, and revising it such that it states 

that the Secretary, ‘‘may provide for an 

addition or adjustment to the payment 

amount otherwise made in the case of 

outliers because of unusual variations in 

the type or amount of medically 

necessary care. The total amount of the 

additional payments or payment 

adjustments made under this paragraph 

with respect to a fiscal year or year may 

not exceed 2.5 percent of the total 

payments projected or estimated to be 

made based on the prospective payment 

system under this subsection in that 

year.’’ As such, we are required to 

implement a HH PPS outlier policy 

whereby we reduce the standard 

episode payment by 5 percent, and 

target up to 2.5 percent of total projected 

estimated HH PPS payments to be paid 

as outlier payments. We would first 

return the 2.5 percent that we took out 

of the national standardized 60-day 

episode rates, the national per-visit 

rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

for CY 2010 that paid for the CY 2010 

outlier pool of 2.5 percent. We will then 

reduce those rates by 5 percent as 

required by Section 1895(b)(3)(C) of the 

Act as amended by Section 3131(b)(1) of 

The Affordable Care Act. For CY 2011 

and subsequent calendar years, the total 

amount of the additional payments or 

payment adjustments made may not 

exceed 2.5 percent of the total payments 

projected or estimated to be made based 

on the prospective payment system in 

that year as required by Section 

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

Section 3131(b)(2)(B) of The Affordable 

Care Act. 

4. Outlier Cap 

As stated earlier, for CY 2010 only, we 

capped home health outlier payments at 

a maximum of 10 percent per agency (74 

FR 58080–58087). Section 3131(b)(2)(C) 

of The Affordable Care Act adds a 

paragraph, (B) ‘‘Program Specific Outlier 

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

The new paragraph states, ‘‘The 

estimated total amount of additional 

payments or payment adjustments made 

* * * with respect to a home health 

agency for a year (beginning with 2011) 

may not exceed an amount equal to 10 

percent of the estimated total amount of 

payments made under this section 

* * * with respect to the home health 

agency for the year.’’ Therefore, the 10 

percent per agency outlier cap would 

continue in CY 2011 and subsequent 

calendar years as required by section 

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

section 3131(b)(2)(C) of The Affordable 

Care Act. Section 3131(b) requires that 

we (1) Reduce the standard payment 

rates by 5 percent, (2) pay no more than 

2.5 percent of total estimated payments 

for outliers, and (3) apply a 10% agency 

aggregate outlier cap. 

5. Loss-Sharing Ratio and Fixed Dollar 

Loss Ratio 

The July 2000 final rule (65 FR 41189) 

described a methodology for 

determining outlier payments. Under 

this system, outlier payments are made 

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for episodes whose estimated cost 

exceeds a threshold amount. The 

episode’s estimated cost is the sum of 

the national wage-adjusted per-visit rate 

amounts for all visits delivered during 

the episode. The outlier threshold is 

defined as the national standardized 60- 

day episode payment rate for that casemix group plus a fixed dollar loss (FDL) 

amount. Both components of the outlier 

threshold are wage-adjusted. The wage 

adjusted FDL amount represents the 

amount of loss that an agency must 

experience before an episode becomes 

eligible for outlier payments. The wage 

adjusted FDL amount is computed by 

multiplying the national standardized 

60-day episode payment amount by the 

FDL ratio, and wage-adjusting that 

amount. That wage-adjusted FDL 

amount is added to the HH PPS 

payment amount to arrive at the wage 

adjusted outlier threshold amount. 

The outlier payment is defined to be 

a proportion of the wage-adjusted 

estimated costs beyond the wageadjusted outlier threshold amount. The 

proportion of additional costs paid as 

outlier payments is referred to as the 

loss-sharing ratio. The FDL ratio and the 

loss-sharing ratio were selected so that 

the estimated total outlier payments 

would not exceed the 5 percent level. 

We chose a value of 0.80 for the losssharing ratio, which is relatively high, 

but preserves incentives for agencies to 

attempt to provide care efficiently for 

outlier cases. With a loss-sharing ratio of 

0.80, Medicare pays 80 percent of the 

additional costs above the wageadjusted outlier threshold amount. A 

loss-sharing ratio of 0.80 is also 

consistent with the loss-sharing ratios 

used in other Medicare PPS outlier 

policies, such as inpatient hospital, 

inpatient rehabilitation, long-term 

hospital, and inpatient psychiatric 

payment systems. As discussed in the 

October 1999 proposed rule (64 FR 

58169) and the July 2000 final rule (65 

FR 41189), the percentage constraint on 

total outlier payments creates a tradeoff 

between the values selected for the FDL 

amount and the loss-sharing ratio. For a 

given level of outlier payments, a higher 

FDL amount reduces the number of 

cases that receive outlier payments, but 

makes it possible to select a higher losssharing ratio and therefore increase 

outlier payments per episode. 

Alternatively, a lower FDL amount 

means that more episodes qualify for 

outlier payments but outlier payments 

per episode must be lower. 

Therefore, setting these two 

parameters involves policy choices 

about the number of outlier cases and 

their rate of payment. In the CY 2010 

HH PPS final rule (74 FR 58086), we 

implemented a FDL ratio of 0.67. 

For this proposed rule, we have 

updated our analysis from the CY 2010 

HH PPS final rule and we estimate that 

maintaining a FDL ratio of 0.67, in 

conjunction with a 10 percent cap on 

outlier payments at the agency level, 

would pay no more than the 2.5 percent 

target of outlier payments as a 

percentage of total HH PPS payments as 

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

Act, as amended by section 

3131(b)(2)(B) of The Affordable Care 

Act. 

6. Solicitation of Comments Regarding 

Imputed Costs 

The Affordable Care Act requires CMS 

to conduct a study which includes 

analysis of ways outlier payments might 

be revised to reflect costs of treating 

Medicare beneficiaries. CMS will 

produce a Report to Congress containing 

this study’s recommendations no later 

than March 1, 2014. 

To consider outlier policy 

improvements in the nearer term we are 

soliciting comments regarding alternate 

policy options and the methodologies to 

better account for high cost patients. In 

particular, we would like the industry’s 

input on alternatives to how we impute 

costs in the calculation of the outlier 

payments. 

We have discussed and are exploring 

the possible use of visit intensity data in 

the imputing of costs as part of the 

outlier payment calculation and would 

be interested in the industry’s views on 

such an alternative. In addition, we 

would like to receive feedback 

concerning the use of diagnoses codes 

(for example, diabetes) as a factor to be 

used to calculate the imputed costs 

associated with outlier payments. We 

believe that to modifying the fixed 

dollar loss ratio or the loss sharing ratio, 

at this point in time, would not improve 

the current policy, but we solicit 

industry comments on this as well. 

F. Proposed CY 2011 Rate Update 

1. Home Health Market Basket Update 

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

requires for CY 2011 that the standard 

prospective payment amounts be 

increased by a factor equal to the 

applicable home health market basket 

update for those HHAs that submit 

quality data as required by the 

Secretary. Section 3401(e) of The 

Affordable Care Act amended section 

1895(b)(3)(B) of the Act by adding a new 

clause (vi) which states, ‘‘After 

determining the home health market 

basket percentage increase * * * the 

Secretary shall reduce such percentage 

* * * for each of 2011, 2012, and 2013, 

by 1 percentage point. The application 

of this clause may result in the home 

health market basket percentage 

increase under clause (iii) being less 

than 0.0 for a year, and may result in 

payment rates under the system under 

this subsection for a year being less than 

such payment rates for the preceding 

year.’’ 

The proposed HH PPS market basket 

update for CY 2011 is 2.4 percent. This 

is based on Global Insight Inc.’s first 

quarter 2010 forecast, utilizing historical 

data through the fourth quarter of 2009. 

A detailed description of how we derive 

the HHA market basket is available in 

the CY 2008 Home Health PPS proposed 

rule (72 FR 25356, 25435). Due to the 

new requirement at section 

1895(b)(3)(B)(vi) of the Act, the 

proposed CY 2011 market basket update 

of 2.4 percent must be reduced by 1 

percentage point to 1.4 percent. In 

effect, the proposed CY 2011 market 

basket update becomes 1.4 percent. The 

law does not permit us to exercise any 

discretion with respect to the 

application of this reduction. 

2. Home Health Care Quality 

Improvement 

a. OASIS 

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

requires that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ In addition, 

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

dictates that ‘‘for 2007 and each 

subsequent year, in the case of a home 

health agency that does not submit data 

to the Secretary in accordance with sub 

clause (II) with respect to such a year, 

the home health market basket 

percentage increase applicable under 

such clause for such year shall be 

reduced by 2 percentage points.’’ This 

requirement has been codified in 

regulations at § 484.225(i). 

Accordingly, for CY 2011, we propose 

to continue to use a HHA’s submission 

of OASIS data to meet the requirement 

that the HHA submit data appropriate 

for the measurement of health care 

quality. We are proposing for CY 2011 

to consider OASIS assessments 

submitted by HHAs to CMS in 

compliance with HHA Conditions of 

Participation for episodes beginning on 

or after July 1, 2009 and before July 1, 

2010 as fulfilling the quality reporting 

requirement for CY 2011. This time 

period would allow 12 full months of 

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data collection and would provide us 

the time necessary to analyze and make 

any necessary payment adjustments to 

the payment rates in CY 2011. We 

propose to reconcile the OASIS 

submissions with claims data in order to 

verify full compliance with the quality 

reporting requirements in CY 2011 and 

each year thereafter on an annual cycle 

July 1 through June 30 as described 

above. 

As set forth in the CY 2008 final rule, 

agencies do not need to submit quality 

data for those patients who are excluded 

from the OASIS submission 

requirements under the Home Health 

Conditions of Participation (CoP) (42 

CFR 484.200 through 484.265) as well as 

those excluded, as described at 70 FR 

76202: 

• Those patients receiving only nonskilled services, 

• Neither Medicare nor Medicaid is 

paying for home health care (patients 

receiving care under a Medicare or 

Medicaid Managed Care Plan are not 

excluded from the OASIS reporting 

requirement), 

• Those patients receiving pre- or 

post-partum services, or 

• Those patients under the age of 18 

years. 

As set forth in the CY 2008 final rule 

at 72 FR 49863, agencies that become 

Medicare certified on or after May 31 of 

the preceding year (2009 for payments 

in 2011) are excluded from any payment 

penalty for quality reporting purposes 

for the following CY. Therefore, HHAs 

that are certified on or after May 1, 2010 

are excluded from the quality reporting 

requirement for CY 2011 payments. 

These exclusions only affect quality 

reporting requirements and do not affect 

the HHA’s reporting responsibilities 

under the CoP. HHAs that meet the 

quality data reporting requirements 

would be eligible for the full home 

health market basket percentage 

increase. HHAs that do not meet the 

reporting requirements would be subject 

to a 2 percent reduction to the home 

health market basket increase in 

conjunction with applicable provisions 

of The Affordable Care Act, as discussed 

in the section ‘‘Proposed CY 2011 

Payment Update’’ of this rule. 

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

further requires that ‘‘[t]he Secretary 

shall establish procedures for making 

data submitted under sub clause (II) 

available to the public. Such procedures 

shall ensure that a home health agency 

has the opportunity to review the data 

that is to be made public with respect 

to the agency prior to such data being 

made public.’’ We propose to continue 

to use the subset of OASIS data that is 

utilized for quality measure 

development and publicly reported on 

Home Health Compare as the 

appropriate measure of home health 

quality. 

To meet the requirement for making 

such data public, we propose to 

continue using the Home Health 

Compare Web site, which lists HHAs 

geographically. Currently, the Home 

Health Compare Web site lists 12 

quality measures from the OASIS data 

set as described below. The Home 

Health Compare Web site, which will be 

redesigned by October 2010, is located 

at the following address: http:// 

www.medicare.gov/HHCompare/ 

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

contractor, to its own quality data that 

the contractor updates periodically. We 

propose to continue this process, to 

enable each agency to view its quality 

measures before public posting of data 

on Home Health Compare. 

The following twelve outcome 

measures are currently publicly 

reported: 

• Improvement in ambulation/ 

locomotion, 

• Improvement in bathing, 

• Improvement in transferring, 

• Improvement in management of 

oral medications, 

• Improvement in pain interfering 

with activity, 

• Acute care hospitalization, 

• Emergent care, 

• Discharge to community, 

• Improvement in dyspnea, 

• Improvement in urinary 

incontinence, 

• Improvement in status of surgical 

wounds, and 

• Emergent care for wound infections, 

deteriorating wound status. 

We propose to continue to use 

specified measures derived from the 

OASIS data for purposes of measuring 

home health care quality. This would 

also ensure that providers would not 

have an additional burden of reporting 

quality of care measures through a 

separate mechanism, and that the costs 

associated with the development and 

testing of a new reporting mechanism 

would be avoided. 

CMS proposes to change the set of 

OASIS outcome measures that will be 

publicly reported beginning in July 

2011. One new outcome measure will be 

added: 

• Increase in number of pressure 

ulcers. 

This outcome measure is the 

percentage of patient episodes in which 

there was an increase in the number of 

unhealed pressure ulcers. This measure 

is viewed as important because pressure 

ulcers are key indicators of the 

effectiveness of care and are among the 

most common causes of harm to 

patients. Though consensus 

endorsement is not a requirement for 

public reporting of home health quality 

measures, this measure is endorsed by 

the National Quality Forum. 

As previously stated, although NQF 

endorsement is not required for public 

reporting, CMS proposes to discontinue 

public reporting of certain outcome 

measures which were previously 

reported on Home Health Compare and 

are no longer endorsed by NQF. Those 

measures are— 

• Discharge to community, 

• Improvement in Urinary 

Incontinence, and 

• Emergent Care for Wound 

Infections, Deteriorating Wound Status. 

CMS welcomes comments regarding 

the public reporting of these measures. 

Additionally, the change to OASIS–C 

results in modifications to two of the 

outcome measures as shown below: 

• Improvement in bed transferring: 

This measure replaces the previously 

reported measure improvement in 

transferring. It provides a more focused 

measurement of the ability to turn and 

position oneself in bed and transfer to 

and from the bed. 

• Emergency Department Use 

Without Hospitalization: This measure 

replaces the previously reported 

measure: Emergent care. It excludes 

emergency department visits that result 

in a hospital admission because those 

visits are already captured in the acute 

care hospitalization measure. 

To summarize, we propose that the 

following outcome measures, which 

comprise measurement of home health 

care quality, would be publicly reported 

beginning in July 2011: 

• Improvement in ambulation/ 

locomotion, 

• Improvement in bathing, 

• Improvement in bed transferring, 

• Improvement in management of 

oral medications, 

• Improvement in pain interfering 

with activity, 

• Acute care hospitalization, 

• Emergency Department Use without 

Hospitalization, 

• Improvement in dyspnea, 

• Improvement in status of surgical 

wounds, 

• Increase in number of pressure 

ulcers. 

We implemented use of the OASIS–C 

(Form Number CMS–R–245 (OMB# 

0938–0760)) on January 1, 2010. This 

revision to OASIS was tested and has 

been distributed for public comment 

and other technical expert 

recommendations over the past few 

years. The OASIS–C can be found using 

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the following link: http:// 

www.cms.hhs.gov/

HomeHealthQualityInits/

12_HHQIOASIS

DataSet.asp#TopOfPage. 

As a result of changes to the OASIS 

data set, process of care measures will 

be available as additional measures of 

home health quality. CMS published 

information about new process 

measures in the Federal Register as a 

proposed rule on August 13, 2009 (74 

FR 40960) and as a final rule with 

comment period on November 10, 2009 

(74 FR 58096). We proposed and made 

final the decision to update Home 

Health Compare in October 2010 to 

reflect the addition of the following 13 

new process measures: 

• Timely initiation of care, 

• Influenza immunization received 

for current flu season, 

• Pneumococcal polysaccharide 

vaccine ever received, 

• Heart failure symptoms addressed 

during short-term episodes, 

• Diabetic foot care and patient 

education implemented during shortterm episodes of care, 

• Pain assessment conducted, 

• Pain interventions implemented 

during short-term episodes, 

• Depression assessment conducted, 

• Drug education on all medications 

provided to patient/caregiver during 

short-term episodes. 

• Falls risk assessment for patients 65 

and older, 

• Pressure ulcer prevention plans 

implemented, 

• Pressure ulcer risk assessment 

conducted, and 

• Pressure ulcer prevention included 

in the plan of care. 

The implementation of OASIS–C 

impacts the schedule of quality measure 

reporting for CY 2010 and CY 2011. 

While sufficient OASIS–C data are 

collected and risk models are 

developed, the outcome reports (found 

on Home Health Compare and the 

contractor outcome reports used for 

HHA’s performance improvement 

activities) will remain static with 

OASIS–B1 data. The last available 

OASIS B–1 reports will remain in the 

system and on the HHC site until they 

are replaced with OASIS–C reports. 

Sufficient numbers of patient episodes 

are needed in order to report measures 

based on new OASIS–C data. This is 

important because measures based on 

patient sample sizes taken over short 

periods of time can be inaccurate and 

misleading due to issues like seasonal 

variation and under-representation of 

long-stay home health patients. Once 

sufficient OASIS–C data have been 

collected and submitted to the national 

repository, CMS will begin producing 

new reports based on OASIS–C. 

December 2009 was the last month for 

which OBQI/M data was calculated for 

OASIS B1 data and OASIS B1 OBQI/M 

reports will continue to be available 

after March 2010. OASIS–C process 

measures will be available to preview in 

September 2010 and will be publicly 

reported in October 2010. OASIS–C 

outcome measures will be available to 

preview in May 2011 and will be 

publicly reported in July 2011. 

b. Home Health Care CAHPS Survey 

(HHCAHPS) 

In the Home Health Prospective 

Payment System (HH PPS) Rate Update 

for Calendar Year 2010 Final Rule, 

published on November 10, 2009, we 

expanded the home health quality 

measures reporting requirements for 

Medicare-certified agencies to include 

the CAHPS® Home Health Care 

(HHCAHPS) Survey for the CY 2012 

annual payment update. CMS is 

maintaining its existing policy as 

promulgated in the HH PPS Rate Update 

for Calendar Year 2010, and is moving 

forward with its plans for HHCAHPS 

linkage to the pay-for-reporting 

requirement affecting the HH PPS rate 

update for CY 2012. 

As part of the U.S. Department of 

Health and Human Services’ (DHHS) 

Transparency Initiative, CMS has 

implemented a process to measure and 

publicly report patient experiences with 

home health care using a survey 

developed by the Agency for Healthcare 

Research and Quality’s (AHRQ’s) 

Consumer Assessment of Healthcare 

Providers and Systems (CAHPS®) 

program. The HHCAHPS survey is part 

of a family of CAHPS® surveys that asks 

patients to report on and rate their 

experiences with health care. The 

HHCAHPS survey presents home health 

patients with a set of standardized 

questions about their home health care 

providers and about the quality of their 

home health care. Prior to this survey, 

there was no national standard for 

collecting information about patient 

experiences that would enable valid 

comparisons across all home health 

agencies (HHAs). 

Background and Description of the 

HHCAHPS 

AHRQ, in collaboration with its 

CAHPS grantees, developed the 

CAHPS® Home Health Care Survey with 

the assistance of many entities (for 

example, government agencies, 

professional stakeholders, consumer 

groups and other key individuals and 

organizations involved in home health 

care). The HHCAHPS survey was 

designed to measure and assess the 

experiences of those persons receiving 

home health care with the following 

three goals in mind: 

• To produce comparable data on 

patients’ perspectives of care that allow 

objective and meaningful comparisons 

between HHAs on domains that are 

important to consumers; 

• To create incentives for agencies to 

improve their quality of care through 

public reporting of survey results; and 

• To hold health care providers 

accountable by informing the public 

about the providers’ quality of care. 

The development process for the 

survey began in 2006 and included a 

public call for measures, review of the 

existing literature, consumer input, 

stakeholder input, public response to 

Federal Register notices, and a field test 

conducted by AHRQ. AHRQ conducted 

this field test to validate the length and 

content of the CAHPS® Home Health 

Care Survey. We submitted the survey 

to the National Quality Forum (NQF) for 

consideration and endorsement via their 

consensus process. NQF endorsement 

represents the consensus opinion of 

many healthcare providers, consumer 

groups, professional organizations, 

health care purchasers, Federal agencies 

and research and quality organizations. 

The survey received NQF endorsement 

on March 31, 2009. The HHCAHPS 

survey received clearance from OMB on 

July 18, 2009, and the OMB number is 

0938–1066. 

The HHCAHPS survey includes 34 

questions covering topics such as 

specific types of care provided by home 

health providers, communication with 

providers, interactions with the HHA, 

and global ratings of the agency. For 

public reporting purposes, we will 

utilize composite measures and global 

ratings of care. Each composite measure 

consists of four or more questions 

regarding one of the following related 

topics: 

1. Patient care; 

2. Communications between 

providers and patients; 

3. Specific care issues (medications, 

home safety and pain). 

There are also two global ratings; the 

first rating asks the patient to assess the 

care given by the HHA’s care providers; 

and the second asks the patient about 

his/her willingness to recommend the 

HHA to family and friends. 

The survey is currently available in 

five languages. At the time of the Final 

Rule for CY 2010, we only provided 

HHCAHPS in English and Spanish 

translations. In the proposed rule for CY 

2010, we proposed that CMS will 

provide additional translations of the 

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survey over time in response to 

suggestions for any additional language 

translations. We now offer HHCAHPS in 

English, Spanish, Chinese, Russian and 

Vietnamese languages. We will continue 

to consider additional translations of the 

HHCAHPS in response to the needs of 

the home health patient population. 

The following types of home health 

care patients are eligible to participate 

in the HHCAHPS survey: 

• Current or discharged Medicare 

and/or Medicaid patients who had at 

least one skilled home health visit at 

any time during the sample month; 

• Patients who were at least 18 years 

of age at any time during the sample 

period, and are believed to be alive; 

• Patients who received at least two 

skilled care visits from HHA personnel 

during a 2 month look-back period. 

(Note that the 2 month look-back period 

is defined as the 2 month period prior 

to and including the last day in the 

sample month); 

• Patients who have not been selected 

for the monthly sample during any 

month in the current quarter or during 

the 5 months immediately prior to the 

sample month; 

• Patients who are not currently 

receiving hospice care; 

• Patients who do not have 

‘‘maternity’’ as the primary reason for 

receiving home health care; and 

• Patients who have not requested 

‘‘no publicity status.’’ 

We are maintaining for the CY 2012 

annual payment update the existing 

requirements for Medicare-certified 

agencies to contract with an approved 

HHCAHPS survey vendor. Beginning in 

summer 2009, interested vendors 

applied to become approved HHCAHPS 

vendors. The application process is 

delineated online at https:// 

www.homehealthcahps.org. Vendors are 

required to attend introductory and all 

update trainings conducted by CMS and 

the HHCAHPS Survey Coordination 

Team, as well as to pass a post-training 

certification test. We now have 42 

approved HHCAHPS survey vendors. In 

this proposed rule, we propose to codify 

the requirements for HHCAHPS survey 

vendors for the CY 2013 annual 

payment update. 

HHAs started to participate in 

HHCAHPS on a voluntary basis 

beginning in October 2009. CMS defines 

‘‘voluntary participation’’ as meaning 

that HHCAHPS participation is not 

attached to the quality reporting 

requirement for the annual payment 

update. These agencies selected a 

vendor from the list of HHCAHPS 

approved survey vendors. This listing is 

on the Web site https:// 

www.homehealthcahps.org. 

Public Display of the Home Health Care 

CAHPS Survey Data 

The Home Health Care CAHPS data 

will be incorporated into the Home 

Health Compare Web site to 

complement the clinical measures. The 

HHCAHPS data displays will be very 

similar to those of the Hospital CAHPS 

(HCAHPS) data displays and 

presentations on Hospital Compare, 

where the patients’ perspectives of care 

data from HCAHPS are displayed along 

with the hospital clinical measures of 

quality. CMS believes that the 

HHCAHPS will enhance the information 

included in Home Health Compare by 

providing Medicare beneficiaries a 

greater ability to compare the quality of 

home health agencies. CMS anticipates 

that HHCAHPS data will first be 

reported sometime in spring/summer 

2011. The first reporting of HHCAHPS 

data will include data that were 

collected in the voluntary period of 

HHCAHPS data collection and 

reporting, prior to the period when the 

HHCAHPS data count toward the 2012 

APU. 

Participation Requirements for CY 2012: 

The Consumer Assessment of 

Healthcare Providers and Systems 

(CAHPS®) Home Health Care Survey 

In the HH PPS Final Rule for CY 2010, 

we stated that HHCAHPS would not be 

required for the annual payment update 

for CY 2011. However, we stated that 

data collection should take place 

beginning in CY 2010 in order to meet 

the HHCAHPS reporting requirement for 

the CY 2012 annual payment update as 

stated in the HH PPS Final Rule for CY 

2010 (58078, 58099, 58100, 58103, and 

58104). Medicare-certified agencies 

were asked to participate in a dry run 

for at least one month in third quarter 

of 2010, and begin continuous monthly 

data collection in October 2010 in 

accordance with the Protocols and 

Guidelines Manual located on the 

HHCAHPS Web site https:// 

www.homehealthcahps.org. 

The dry run data should be submitted 

to the Home Health CAHPS® Data 

Center by 11:59 p.m. EST on January 21, 

2011. The dry run data will not be 

publicly reported on the CMS Home 

Health Compare Web site. The purpose 

of the dry run is to provide an 

opportunity for vendors and HHAs to 

acquire first-hand experience with data 

collection, including sampling and data 

submission to the Home Health 

CAHPS® Data Center. We previously 

stated that all Medicare-certified HHAs 

should continuously collect HHCAHPS 

survey data for every month in every 

quarter beginning with the fourth 

quarter (October, November, and 

December) of 2010, and submit these 

data for the fourth quarter of 2010 to the 

Home Health CAHPS® Data Center by 

11:59 p.m. EST on April 21, 2011. These 

data submission deadlines are firm (that 

is, no late submissions will be 

accepted). 

The period of data collection for the 

CY 2012 annual payment update 

includes the dry run data in the third 

quarter 2010, the fourth quarter 2010 

(October, November and December 

2010), and the first quarter 2011 

(January, February and March 2011). 

The data from the three months of the 

first quarter 2011 should be submitted 

to the Home Health CAHPS® Data 

Center by 11:59 p.m. EST on July 21, 

2011. These periods (a dry run in third 

quarter 2010, and six months of data 

from October 2010 through March 2011) 

have been deliberately chosen to 

comprise the HHCAHPS reporting 

requirements for the CY 2012 APU 

because they coincide with the OASIS– 

C reporting requirements that are due by 

June 30, 2011 for the CY 2012 APU. In 

the previous rule, we stated that the 

HHCAHPS survey data would be 

submitted and analyzed quarterly, and 

that the sample selection and data 

collection would occur on a monthly 

basis. HHAs would target 300 

HHCAHPS survey completes annually. 

Smaller agencies that are unable to 

reach 300 survey completes by sampling 

would survey all HHCAHPS eligible 

patients. 

We stated that survey vendors initiate 

the survey for each monthly sample 

within 3 weeks after the end of the 

sample month. We wrote that all data 

collection for each monthly sample 

would have to be completed within 6 

weeks (42 calendar days) after data 

collection began. Three survey 

administration modes could be used: 

Mail only, telephone only, and mail 

with telephone follow-up (the ‘‘mixed 

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

collection for a monthly sample would 

have to end 6 weeks after the first 

questionnaire was mailed. We stated 

that for telephone-only surveys, data 

collection would have to end 6 weeks 

following the first telephone attempt. 

These criteria would remain the same 

for HHCAHPS to meet the CY 2012 

annual payment update requirements. 

As stated in the Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2010; final 

rule (74 FR 58078), we would exempt 

Medicare-certified HHAs certified on or 

after April 1, 2011 from the HHCAHPS 

reporting requirement for CY 2012 as 

data submission and analysis will not be 

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possible for an agency this late in the 

CY 2012 reporting period. 

We would also exempt Medicarecertified agencies from the HHCAHPS 

reporting requirements if they have 

fewer than 60 HHCAHPS eligible 

unique patients from April 1, 2009 

through March 31, 2010. In the CY 2010 

Final Rule, we stated that by June 16, 

2010, HHAs would need to provide 

CMS with patient counts for the period 

of April 1, 2009 through March 31, 

2010. We have posted a form that the 

HHAs need to use to submit their 

patient counts via the Web site 

https://www.homehealthcahps.org. This 

proposed requirement pertains only to 

Medicare-certified HHAs with fewer 

than 60 HHCAHPS eligible, 

unduplicated or unique patients for that 

time period. The aforementioned 

agencies would be exempt from 

conducting the HHCAHPS survey for 

the annual payment update in CY 2012. 

We propose to codify that if an HHA has 

less than 60 eligible unique HHCAHPS 

patients annually, then they must 

submit to CMS their total patient count 

in order to be exempt from the 

HHCAHPS reporting requirement. 

For CY 2012, we maintain our policy 

that all HHAs, unless covered by 

specific exclusions, meet the quality 

reporting requirements or be subject to 

a 2 percentage point reduction in the 

home health market basket percentage 

increase in accordance with section 

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

A reconsiderations and appeals 

process is being developed for HHAs 

that fail to meet the HHCAHPS 

reporting requirements. We proposed 

that these procedures will be detailed in 

the CY 2012 home health payment rule, 

the period for which HHCAHPS would 

be linked to the home health market 

basket percentage increase. We propose 

that in September through October 

2011, we would compile a list of HHAs 

that were not compliant with OASIS–C 

and/or HHCAHPS for the 2012 APU 

reporting requirements. These HHAs 

would receive explicit instructions 

about how to prepare a request for 

reconsideration of the CMS decision, 

and these HHAs would have 30 days to 

file their requests for reconsiderations to 

CMS. By December 31, 2011, we would 

provide our final determination for the 

quality reporting requirements for 

calendar year 2012 payment. HHAs 

have a right to appeal to the Prospective 

Reimbursement Review Board (PRRB) if 

they are not satisfied with the CMS 

determination. 

Oversight Activities for the Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS®) Home Health Care 

Survey 

We stated that vendors and HHAs 

would be required to participate in 

HHCAHPS oversight activities to ensure 

compliance with HHCAHPS protocols, 

guidelines and survey requirements. 

The purpose of the oversight activities 

is to ensure that HHAs and approved 

survey vendors follow the Protocols and 

Guidelines Manual. It was stated that all 

approved survey vendors develop a 

Quality Assurance Plan (QAP) for 

survey administration in accordance 

with the Protocols and Guidelines 

Manual. The QAP should include the 

following: 

• An organizational chart; 

• A work plan for survey 

implementation; 

• A description of survey procedures 

and quality controls; 

• Quality assurance oversight of onsite work and of all subcontractors’ 

work; and 

• Confidentiality/Privacy and 

Security procedures in accordance with 

the Health Insurance Portability and 

Accountability Act (HIPAA). 

As part of the oversight activities the 

HHCAHPS Survey Coordination Team 

would conduct on-site visits and/or 

conference calls. The HHCAHPS Survey 

Coordination Team would review the 

survey vendor’s survey systems, and 

would assess administration protocols 

based on the Protocols and Guidelines 

Manual posted on https:// 

www.homehealthcahps.org. We stated 

that all materials relevant to survey 

administration would be subject to 

review. The systems and program 

review would include, but not be 

limited to: (a) Survey management and 

data systems; (b) printing and mailing 

materials and facilities; (c) data receipt, 

entry and storage facilities; and (d) 

written documentation of survey 

processes. Organizations would be given 

a defined time period in which to 

correct any problems and provide 

follow-up documentation of corrections 

for review. Survey vendors would be 

subject to follow-up site visits as 

needed. 

HHCAHPS Requirements for CY 2013 

For the CY 2013 annual payment 

update, we propose to begin to require 

that four quarters of data be submitted 

for HHCAHPS. This would include 

second quarter 2011 through first 

quarter 2012. We propose that HHAs be 

required to submit data for the second 

quarter 2011 by 11:59 p.m. on October 

21, 2011 to the Home Health CAHPS 

Data Center. We also propose that HHAs 

submit data for the third quarter 2011 by 

11:59 p.m. EST January 21, 2012 to the 

Home Health CAHPS Data Center. We 

additionally propose that HHAs be 

required to submit data for the fourth 

quarter 2011 by 11:59 p.m. EST April 

21, 2012 to the Home Health CAHPS 

Data Center. Finally, we propose that 

HHAs be required to submit data for the 

first quarter 2012 by 11:59 p.m. EST July 

21, 2012 to the Home Health CAHPS 

Data Center. 

We propose to exempt Medicarecertified HHAs certified on or after 

April 1, 2012 from the HHCAHPS 

reporting requirement for CY 2013, as 

data submission and analysis would not 

be possible for an agency this late in the 

CY 2013 reporting period. For the CY 

2013 annual payment update, we 

propose that new Medicare-certified 

HHAs that open during the year begin 

HHCAHPS data collection the quarter 

following receipt of the CMS 

Certification Number (CCN). 

We propose that all HHAs that have 

fewer than 60 HHCAHPS-eligible 

unduplicated or unique patients in the 

period of April 1, 2010 through March 

31, 2011 be exempt from the HHCAHPS 

data collection requirements for the CY 

2013 annual payment update. Agencies 

with fewer than 60 HHCAHPS-eligible, 

unduplicated or unique patients would 

be required to submit their counts on 

the form posted on https:// 

www.homehealthcahps.org, the Web 

site of Home Health Care CAHPS by 

June 16, 2011. This would be a firm 

deadline as are all of the quarterly data 

submission deadlines. 

We are proposing to codify the 

HHCAHPS survey vendor requirements 

in the CY 2013 rule. In our regulation, 

we would revise § 484.250(c)(2) to 

codify that all applying survey vendors 

would have to have been in business for 

a minimum of three years and have 

conducted surveys of individuals for at 

least two years immediately preceding 

the application to CMS to become a 

survey vendor for HHCAHPS. For 

purposes of the HHCAHPS, a ‘‘survey of 

individuals’’ would be defined as the 

collection of data from individuals 

selected by statistical sampling methods 

and the data collected are used for 

statistical purposes. An applicant 

organization must: 

• Have conducted surveys of 

individuals responding about their own 

experiences, not of individuals 

responding on behalf of a business or 

organizations (establishment or 

institution surveys); 

• Be able to demonstrate that a 

statistical sampling process (that is, 

simple random sampling [SRS], 

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proportionate stratified random 

sampling [PSRS], or disproportionate 

stratified random sampling [DSRS]) was 

used in the conduct of previously or 

currently conducted survey(s); 

• Be able to demonstrate that it, as an 

organization, has conducted surveys 

where a sample of individuals was 

selected for at least two years. If staff 

within the applicant organization has 

relevant experience obtained while in 

the employment of a different 

organization, that experience may not be 

counted toward the 2 year minimum of 

survey experience; and 

• Currently possess all required 

facilities and systems to implement the 

HHCAHPS Survey. 

We are also proposing that the 

following examples of data collection 

activities would not satisfy the 

requirement of valid survey experience 

for vendors as defined for the 

HHCAHPS Survey, and these would not 

be considered as part of the experience 

that HHCAHPS will require: 

• Polling questions administered to 

trainees or participants of training 

sessions or educational courses, 

seminars, or workshops; 

• Focus groups, cognitive interviews, 

or any other qualitative data collection 

activities; 

• Surveys of fewer than 600 

individuals; 

• Surveys conducted that did not 

involve using statistical sampling 

methods; 

• Internet or Web-based surveys; and 

• Interactive Voice Recognition 

Surveys. 

We are proposing to codify the criteria 

about which organizations are ineligible 

to become HHCAHPS approved survey 

vendors. CMS is proposing that any 

organization that owns, operates, or 

provides staffing for a HHA not be 

permitted to administer its own Home 

Health Care CAHPS (HHCAHPS) Survey 

or administer the survey on behalf of 

any other HHA. CMS began the 

HHCAHPS with the belief, based on 

input from many stakeholders and the 

public, that an independent third party 

(such as a survey vendor) will be best 

able to solicit unbiased responses to the 

HHCAHPS Survey. Since home health 

patients receive care in their homes, this 

survey population is particularly 

vulnerable and dependent upon their 

HHA caregivers. Therefore, in 

§ 484.250(c)(2) we are proposing that 

HHAs be required to contract only with 

an independent, approved HHCAHPS 

vendor to administer the HHCAHPS 

survey on their behalf. 

Specifically, we are proposing that the 

following types of organizations would 

not be eligible to administer the 

HHCAHPS Survey as an approved 

HHCAHPS vendor: 

• Organizations or divisions within 

organizations that own or operate a 

HHA or provide home health services, 

even if the division is run as a separate 

entity to the HHA; 

• Organizations that provide 

telehealth, monitoring of home health 

patients, or teleprompting services for 

HHAs; and 

• Organizations that provide staffing 

to HHAs for providing care to home 

health patients, whether personal care 

aides or skilled services staff. 

For Further Information on the 

HHCAHPS Survey 

We encourage HHAs interested in 

learning about the survey to view the 

HHCAHPS survey web site, at https:// 

www.homehealthcahps.org. Agencies 

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

or send an e-mail to the HHCAHPS 

Survey Coordination Team at 

HHCAHPS@rti.org for more information. 

3. Home Health Wage Index 

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

of the Act require the Secretary to 

establish area wage adjustment factors 

that reflect the relative level of wages 

and wage-related costs applicable to the 

furnishing of home health services and 

to provide appropriate adjustments to 

the episode payment amounts under the 

HH PPS to account for area wage 

differences. We apply the appropriate 

wage index value to the labor portion of 

the HH PPS rates based on the site of 

service for the beneficiary (defined by 

section 1861(m) of the Act as the 

beneficiary’s place of residence). 

Generally, we determine each HHA’s 

labor market area based on definitions 

of Metropolitan Statistical Areas (MSAs) 

issued by the Office of Management and 

Budget (OMB). We have consistently 

used the pre-floor, pre-reclassified 

hospital wage index data to adjust the 

labor portion of the HH PPS rates. We 

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

results in the appropriate adjustment to 

the labor portion of the costs as required 

by statute. 

In the November 9, 2005 final rule for 

CY 2006 (70 FR 68132), we adopted 

revised labor market area definitions 

based on Core-Based Statistical Areas 

(CBSAs). At the time, we noted that 

these were the same labor market area 

definitions (based on OMB’s new CBSA 

designations) implemented under the 

Hospital Inpatient Prospective Payment 

System (IPPS). In adopting the CBSA 

designations, we identified some 

geographic areas where there are no 

hospitals and, thus, no hospital wage 

data on which to base the calculation of 

the home health wage index. We 

continue to use the methodology 

discussed in the November 9, 2006 final 

rule for CY 2007 (71 FR 65884) to 

address the geographic areas that lack 

hospital wage data on which to base the 

calculation of their home health wage 

index. For rural areas that do not have 

IPPS hospitals, we use the average wage 

index from all contiguous CBSAs as a 

reasonable proxy. This methodology is 

used to calculate the wage index for 

rural Massachusetts. However, we could 

not apply this methodology to rural 

Puerto Rico due to the distinct 

economic circumstances that exist there, 

but instead continue using the most 

recent wage index previously available 

for that area (from CY 2005). For urban 

areas without IPPS hospitals, we use the 

average wage index of all urban areas 

within the State as a reasonable proxy 

for the wage index for that CBSA. The 

only urban areas without IPPS hospital 

wage data are Anderson, South Carolina 

(CBSA 11340) and Hinesville-Fort 

Stewart, Georgia (CBSA 25980). 

On December 1, 2009, OMB issued 

Bulletin No. 10–02 located at Web 

address http://www.whitehouse.gov/ 

omb/assets/bulletins/b10-02.pdf. This 

bulletin highlights three geographic 

areas whose principal city has changed 

therefore causing the CBSA names to 

change and requiring new CBSA 

numbers. Bradenton-Sarasota-Venice, 

FL (CBSA 14600) is replaced by North 

Port-Bradenton-Sarasota, FL (CBSA 

35840). Fort Walton Beach-CrestviewDestin, FL (CBSA 23020) is replaced by 

Crestview-Fort Walton Beach-Destin, FL 

(CBSA 18880). Weirton-Steubenville, 

WV-OH Metropolitan Statistical Area 

(CBSA 48260) is replaced by 

Steubenville-Weirton, OH-WV (CBSA 

44600). The CBSAs and their associated 

wage index values are shown in 

Addendum B. The wage index values 

for rural areas are shown in Addendum 

A. 

4. Proposed CY 2011 Payment Update 

a. National Standardized 60-Day 

Episode Rate 

The Medicare HH PPS has been in 

effect since October 1, 2000. As set forth 

in the final rule published July 3, 2000 

in the Federal Register (65 FR 41128), 

the unit of payment under the Medicare 

HH PPS is a national standardized 60- 

day episode rate. As set forth in 

§ 484.220, we adjust the national 

standardized 60-day episode rate by a 

case-mix relative weight and a wage 

index value based on the site of service 

for the beneficiary. 

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In the CY 2008 HH PPS final rule with 

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

revised the home health market basket. 

The labor-related share of the case-mix 

adjusted 60-day episode rate is 77.082 

percent and the non-labor-related share 

is 22.918 percent. The proposed CY 

2011 HH PPS rates use the same casemix methodology and application of the 

wage index adjustment to the labor 

portion of the HH PPS rates as set forth 

in the CY 2008 HH PPS final rule with 

comment period. We multiply the 

national 60-day episode rate by the 

patient’s applicable case-mix weight. 

We divide the case-mix adjusted 

amount into a labor and non-labor 

portion. We multiply the labor portion 

by the applicable wage index based on 

the site of service of the beneficiary. We 

add the wage-adjusted portion to the 

non-labor portion, yielding the case-mix 

and wage adjusted 60-day episode rate, 

subject to any additional applicable 

adjustments. 

In accordance with section 

1895(b)(3)(B) of the Act, we update the 

HH PPS rates annually in a separate 

Federal Register document. The HH 

PPS regulations at 42 CFR 484.225 set 

forth the specific annual percentage 

update methodology. In accordance 

with § 484.225(i), in the case of a HHA 

that does not submit home health 

quality data, as specified by the 

Secretary, the unadjusted national 

prospective 60-day episode rate is equal 

to the rate for the previous calendar year 

increased by the applicable home health 

market basket index amount minus two 

percentage points. Any reduction of the 

percentage change will apply only to the 

calendar year involved and will not be 

taken into account in computing the 

prospective payment amount for a 

subsequent calendar year. 

For CY 2011, we are proposing to base 

the wage index adjustment to the labor 

portion of the HH PPS rates on the most 

recent pre-floor and pre-reclassified 

hospital wage index. As discussed in 

the July 3, 2000 HH PPS final rule, for 

episodes with four or fewer visits, 

Medicare pays the national per-visit 

amount by discipline, referred to as a 

LUPA. We propose to update the 

national per-visit rates by discipline 

annually by the applicable home health 

market basket percentage. We propose 

to adjust the national per-visit rate by 

the appropriate wage index based on the 

site of service for the beneficiary, as set 

forth in § 484.230. We propose to adjust 

the labor portion of the updated 

national per-visit rates used to calculate 

LUPAs by the most recent pre-floor and 

pre-reclassified hospital wage index. We 

are also proposing to update the LUPA 

add-on payment amount and the NRS 

conversion factor by the proposed 

applicable home health market basket 

update of 1.4 percent for CY 2011. 

Medicare pays the 60-day case-mix 

and wage-adjusted episode payment on 

a split percentage payment approach. 

The split percentage payment approach 

includes an initial percentage payment 

and a final percentage payment as set 

forth in § 484.205(b)(1) and 

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

percentage payment on the submission 

of a request for anticipated payment 

(RAP) and the final percentage payment 

on the submission of the claim for the 

episode, as discussed in § 409.43. The 

claim for the episode that the HHA 

submits for the final percentage 

payment determines the total payment 

amount for the episode and whether we 

make an applicable adjustment to the 

60-day case-mix and wage-adjusted 

episode payment. The end date of the 

60-day episode as reported on the claim 

determines which calendar year rates 

Medicare would use to pay the claim. 

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

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A partial episode payment 

adjustment as set forth in § 484.205(d) 

and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

b. Proposed Updated CY 2011 National 

Standardized 60-Day Episode Payment 

Rate 

In calculating the annual update for 

the CY 2011 national standardized 60- 

day episode payment rates, we first look 

at the CY 2010 rates as a starting point. 

The CY 2010 national standardized 60- 

day episode payment rate is $2,312.94. 

As previously discussed in section 

II.D. (‘‘Outlier Policy’’) of this proposed 

rule, in our proposed policy of targeting 

outlier payments to be approximately 

2.5 percent of total HH PPS payments in 

CY 2011, we are proposing to return 2.5 

percent back into the HH PPS rates, to 

include the national standardized 60- 

day episode payment rate. Therefore, to 

calculate the proposed CY 2011 national 

standardized 60-day episode payment 

rate, we first increase the CY 2010 

national standardized 60-day episode 

payment rate ($2,312.94) to adjust for 

the 2.5 percent set aside in CY 2010 for 

outlier payments. We then reduce that 

adjusted payment amount by 5 percent, 

for outlier payments as a percentage of 

total HH PPS payment as mandated by 

Section 3131 of The Affordable Care 

Act. Next, we update the payment 

amount by the current proposed CY 

2011 home health market basket update 

of 1.4 percent. 

As previously discussed in Section 

II.A. (‘‘Case-Mix Measurement 

Analysis’’) of this proposed rule, our 

updated analysis of the change in casemix that is not due to an underlying 

change in patient health status reveals 

additional increase in nominal change 

in case-mix. Therefore, we propose to 

reduce rates by 3.79 percent in CY 2011, 

resulting in a proposed updated CY 

2011 national standardized 60-day 

episode payment rate of $2,198.58. The 

proposed updated CY 2011 national 

standardized 60-day episode payment 

rate for an HHA that submits the 

required quality data is shown in Table 

4. The proposed updated CY 2011 

national standardized 60-day episode 

payment rate for an HHA that does not 

submit the required quality data (home 

health market basket update of 1.4 

percent is reduced by 2 percentage 

points) is shown in Table 5. 

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c. Proposed National Per-Visit Rates 

Used To Pay LUPAs and Compute 

Imputed Costs Used in Outlier 

Calculations 

In calculating the proposed CY 2011 

national per-visit rates used to calculate 

payments for LUPA episodes and to 

compute the imputed costs in outlier 

calculations, we start with the CY 2010 

national per-visit rates. We first adjust 

the CY 2010 national per-visit rates to 

adjust for the 2.5 percent set aside 

during CY 2011 for outlier payments. 

We then reduce those national per-visit 

rates by 5 percent as mandated by 

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

amended by Section 3131 of The 

Affordable Care Act. Next we update the 

national per-visit rates by the current 

proposed CY 2011 home health market 

basket update of 1.4 percent. National 

per-visit rates are not subject to the 3.79 

percent reduction related to the nominal 

increase in case-mix. The proposed CY 

2011 national per-visit rates per 

discipline are shown in Table 6. The six 

home health disciplines are Home 

Health Aide (HH aide), Medical Social 

Services (MSS), Occupational Therapy 

(OT), Physical Therapy (PT), Skilled 

Nursing (SN), and Speech Language 

Pathology Therapy (SLP). 

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d. Proposed LUPA Add-On Payment 

Amount Update 

Beginning in CY 2008, LUPA episodes 

that occur as the only episode or initial 

episode in a sequence of adjacent 

episodes are adjusted by adding an 

additional amount to the LUPA 

payment before adjusting for area wage 

differences. As previously discussed, we 

are returning 2.5 percent back into the 

LUPA add-on payment. We then reduce 

the LUPA add-on payment by 5 percent 

outlier adjustment as mandated by 

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

amended by Section 3131 of The 

Affordable Care Act. Next we update the 

LUPA payment amount by the current 

proposed CY 2011 home health market 

basket update percentage of 1.4 percent. 

The LUPA add-on payment amount is 

not subject to the 3.79 percent reduction 

related to the nominal increase in casemix. For CY 2011, we propose that the 

add-on to the LUPA payment to HHAs 

that submit the required quality data 

would be updated by the proposed 

home health market basket update of 1.4 

percent. The proposed CY 2011 LUPA 

add-on payment amount is shown in 

Table 7 below. We propose that the addon to the LUPA payment to HHAs that 

do not submit the required quality data 

would be updated by the home health 

market basket update (1.4 percent) 

minus two percentage points. 

e. Non-Routine Medical Supply 

Conversion Factor Update 

Payments for non-routine medical 

supplies (NRS) are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. We first adjust the CY 

2010 NRS conversion factor ($53.34) for 

the 2.5 percent set aside for outlier 

payments in CY 2010. We then reduce 

that amount by the 5 percent outlier 

adjustment as mandated by Section 

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

3131 of The Affordable Care Act. Next 

we update by the proposed market 

basket update of 1.4 percent. Finally, we 

then reduce that adjusted payment 

amount by 3.79 percent to account for 

the increase in nominal case-mix. The 

final updated CY 2011 NRS conversion 

factor for CY 2011 in Table 8a below. 

For CY 2011, the proposed NRS 

conversion factor is $50.70. 

Using the proposed NRS conversion 

factor ($50.70) for CY 2011, the payment 

amounts for the various severity levels 

are shown in Table 8b. 


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For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2010 NRS conversion 

factor. We first adjust the CY 2010 NRS 

conversion factor ($53.34) for the 2.5 

percent set aside for outlier payments in 

CY 2010. We then reduce that amount 

by the 5 percent outlier adjustment as 

mandated by Section 1895(b)(3)(C) of 

the Act, as amended by Section 3131 of 

The Affordable Care Act. Next we 

update the conversion factor by the 

proposed CY 2011 home health market 

basket update percentage of 1.4 percent 

minus 2 percentage points. Finally, we 

reduce that adjusted payment amount 

by 3.79 percent to account for the 

increase in nominal case-mix. The 

proposed CY 2011 NRS conversion 

factor for HHAs that do not submit 

quality data is shown in Table 9a below. 

The payment amounts for the various 

severity levels based on the updated 

conversion factor for HHAs that do not 

submit quality data are calculated in 

Table 9b below. 


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5. Rural Add-On 

Section 3131(c) of The Affordable 

Care Act amended section 421(a) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act 

(MMA) of 2003 (Pub. L. 108–173) as 

amended by section 5201(b) of the 

Deficit Reduction Act of 2005 (Pub. L. 

109–171). The amended section 421(a) 

of the MMA provides an increase of 3 

percent of the payment amount 

otherwise made under section 1895 of 

the Act for home health services 

furnished in a rural area (as defined in 

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

respect to episodes and visits ending on 

or after April 1, 2010 and before January 

1, 2016. The statute waives budget 

neutrality related to this provision as it 

specifically states that the Secretary 

shall not reduce the standard 

prospective payment amount (or 

amounts) under section 1895 of the Act 

applicable to home health services 

furnished during a period to offset the 

increase in payments resulting in the 

application of this section of the statute. 

The 3 percent rural add-on is applied to 

the national standardized 60-day 

episode rate, national per-visit rates, 

LUPA add-on payment, and NRS 

conversion factor when home health 

services are provided in rural (nonCBSA) areas. We implemented this 

provision for CY 2010, for episodes and 

visits ending on or after April 1, 2010 

and ending before January 1, 2011 

through Program Memorandum 

‘‘Temporary 3 Percent Rural Add-On for 

the Home Health Prospective payment 

System (HH PPS)’’ (Transmittal #674/ 

Change Request #6955, issued April 23, 

2010). Refer to Tables 10 thru 13b below 

for these payment rates. 


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G. Enrollment Provisions for HHAs 

1. HHA Capitalization 

On January 5, 1998, we published a 

final rule in the Federal Register (63 FR 

291) requiring newly-enrolling HHAs to 

submit proof that they have available 

sufficient funds—or ‘‘initial reserve 

operating funds’’ (IROF)—to operate the 

HHA for the three-month period after its 

provider agreement becomes effective 

(exclusive of actual or projected 

accounts receivable from Medicare and 

other health insurers). This rule, which 

added a new section 42 CFR 489.28, was 

prompted by our concerns about 

underfunded HHAs entering the 

Medicare program. We elaborated on 

this point in the preamble to the final 

rule (63 FR 291, at 295 (Jan. 5, 1998)): 

New HHAs generally are small businesses 

and have the same need for adequate 

capitalization as have other small businesses 

which are just starting. As with other small 

businesses, a lack of funds in reserve to 

operate the business until a stream of 

revenues can be established can seriously 

threaten the viability of the business. In 

addition, for new HHAs, which are in 

business to render patient care services, any 

condition threatening the viability of the new 

business can adversely affect the quality of 

care to their patients and, in turn, the health 

and safety of those patients. That is, if lack 

of funds forces an HHA to close its business, 

to reduce staff, or to skimp on patient care 

services because it lacks sufficient capital to 

pay for the services, the overall well-being of 

the HHA’s patients could be compromised. In 

fact, there could be the risk of serious ill 

effects as a result of patients not receiving 

adequate services. 

The level of services provided to an HHA’s 

patients is of serious concern to us for the 

following reason. The process by which an 

HHA participates in the Medicare program is 

one that involves a survey by us or an 

accrediting organization. This survey is 

essentially a snapshot of the agency’s 

activities. For a new agency that is 

undercapitalized, it may be unable to sustain 

the level of services it is able to provide at 

the time of the survey over the period of time 

necessary for it to begin receiving a steady 

stream of revenue from Medicare. The period 

in question could last as long as two or even 

three months. Since a survey has already 

been conducted, the new HHA’s services are 

not routinely inspected during this period 

and so there is increased danger that lack of 

operating funds could result in inadequate 

care that is not discovered. 

The preamble also cited a 1997 OIG 

report entitled: ‘‘Home Health: Problem 

Providers and their Impact on Medicare’’ 

(OEI–09–96–00110), in which the OIG 

expressed similar worries about 

undercapitalized HHAs. The OIG stated: 

If it were not for Medicare accounts 

receivable, problem agencies would have 

almost nothing to report as assets. Agencies 

tend to lease their office space, equipment, 

and vehicles. They are not required by 

Medicare to own anything, and they are 

almost always undercapitalized. On average, 

cash on hand and fixed assets amount to only 

one-fourth of total assets for HHAs, while 

Medicare accounts receivable frequently 

equal 100 percent of total assets. These 

agencies are almost totally dependent on 

Medicare to pay their salaries and other 

operating expenses. For a home health 

agency, there are virtually no startup or 

capitalization requirements. In many 

instances, the problem agencies lease 

everything without collateral. They do not 

even have enough cash on hand to meet their 

first payroll. 

Medicare contractors have been 

carrying out the provisions of 42 CFR 

489.28 since their enactment in 1998. 

Traditionally, the contractor has 

determined the provider’s compliance 

with 489.28 prior to making its 

recommendation for approval to the 

State Agency and the CMS Regional 

Office (RO), which can occur several 

months or more before the actual 

provider agreement is signed by a 

prospective home health agency. We 

have worked to ensure that our 

contractors are consistently applying its 

capitalization regulations found in 42 

CFR 489.28(a) which states, 

An HHA entering the Medicare program on 

or after January 1,1998, including a new HHA 

as a result of a change of ownership, if the 

change of ownership results in a new 

provider number being issued, must have 

available sufficient funds, which we term 

‘‘initial reserve operating funds,’’ to operate 

the HHA for the three month period after its 

Medicare provider agreement becomes 

effective, exclusive of actual or projected 

accounts receivable from Medicare or other 

health care insurers. 

Verifying the capitalization amount at 

various points in the enrollment process 


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can help CMS ensure that a prospective 

home health agency will have sufficient 

funds to operate prior to receiving 

approval from CMS that it is approved 

to participate in the Medicare program 

and has been conferred Medicare billing 

privileges. In addition, confirming 

capitalization more than one time 

during the process would address our 

concern that a provider that may have 

redirected these funds—which had 

originally been secured exclusively to 

meet the capitalization requirements— 

for a purpose other than to operate the 

business. Indeed, situations have arisen 

in which the HHA no longer has 

sufficient capitalization at the time it 

signs its Medicare provider agreement. 

This circumstance completely defeats 

the policy behind § 489.28 which is to 

ensure that an HHA is adequately 

capitalized when it becomes a Medicare 

provider. Accordingly, we believe that a 

prospective HHA must meet and 

maintain adequate capitalization during 

the entire period between when it first 

submits its enrollment application to 

the Medicare contractor and when the 

contractor conveys Medicare billing 

privileges to the HHA. This will ensure 

that the home health agency has 

sufficient operating funds at the time of 

application submission, during the 

period in which a State Agency or 

deemed accrediting organization is 

ensuring that the HHA meets the 

Conditions of Participation, prior to the 

issuance of a provider agreement and 

the conveyance of Medicare billing 

privileges. 

To that end, we propose to require a 

prospective HHA to meet the 

capitalization requirements from the 

time of application submission through 

three months past the conveyance of 

Medicare billing privileges by the 

Medicare contractor. Further, CMS and/ 

or its Medicare contractor must be able 

to verify an applicant’s capitalization 

data at any time prior to the point at 

which the Medicare contractor conveys 

billing privileges to the HHA as well as 

three months thereafter. Accordingly, 

we are proposing that a prospective 

HHA be required to submit verification 

of compliance with § 489.28: (1) At the 

time of application submission, 

(2) during the period in which a State 

Agency or CMS-approved accreditation 

organization is making a determination 

as to whether the provider is in 

compliance with the Conditions of 

Participation; and (3) within the three 

months immediately following the 

issuance of a Medicare billing 

privileges. And while we believe that a 

prospective HHA should submit 

verification of compliance with § 489.28 

within 30 days of a Medicare 

contractor’s request, we believe that the 

Medicare contractor should have the 

ability to request and verify that an 

HHA continues to meet the 

capitalization requirements. This final 

step is especially important, because it 

would allow CMS to verify that the 

HHA actually had—rather than simply 

projecting to have had—adequate funds 

during the three-month period following 

issuance of Medicare billing privileges. 

We believe that a Medicare contractor 

should verify that the prospective HHA 

is in compliance with all enrollment 

requirements when an enrollment 

application is submitted, during the 

period in which it is undergoing a State 

survey or accreditation review to 

determine compliance with the HHA 

Conditions of Participation, and before 

and after the issuance of Medicare 

billing privileges and within three 

months thereafter. Moreover, if a 

prospective HHA is determined to be 

out of compliance with Medicare 

enrollment requirements, including not 

meeting capitalization requirements at 

any time prior to the issuance of 

Medicare billing privileges, we believe 

that the Medicare contractor may deny 

such privileges using the specific denial 

reason for failing to meet this 

requirement which can be found in 42 

CFR 424.530(a)(8) and afford the HHA 

with applicable Medicare appeal rights 

pursuant to part 498. Finally, we believe 

if an enrolled HHA is determined to be 

out of compliance with the 

capitalization requirements within three 

months after we have conveyed 

Medicare billing privileges, then that 

the Medicare contractor can revoke 

Medicare billing privileges using the 

specific revocation reason for failing to 

meet this requirement which can be 

found in § 424.535(a)(11) and afford the 

HHA with applicable Medicare appeal 

rights. 

Accordingly, we are proposing to 

revise § 489.28(a) to include additional 

capitalization verification by us or its 

Medicare contractor during the 

enrollment process. Specifically, we are 

proposing to revise § 489.28(a) to read as 

set out in the regulatory text of this 

proposed rule. 

Since it is not possible for the 

Medicare program to assess whether a 

prospective HHA is receiving 

reimbursement for other health care 

insurers, we are proposing to remove, 

‘‘or other health care insurers.’’ from 

§ 489.28(a). In addition, we do not 

believe that it is necessary to require 

HHAs to project the number of visits 

within the initial three month operating 

period because there are incentives for 

prospective HHAs to under report the 

number of visits in order to reduce the 

capitalization amount. Accordingly, 

rather than accepting the number of site 

visits furnished by a prospective HHA 

as the basis for capitalization amount, 

we believe that it would be more 

appropriate to compare a prospective 

HHA with similarly situated HHAs that 

are already enrolled in the Medicare 

program. Sections § 1815(a), 1833(e), 

and 1861(v)(1)(A) of the Act require that 

providers of services participating in the 

Medicare program submit annual 

information to achieve settlement of 

costs for health care services rendered to 

Medicare beneficiaries. Also, 42 CFR 

413.20 requires cost reports from 

providers on an annual basis. In 

accordance with these provisions, all 

home health agencies (HHAs) must 

complete Form HCFA–1728–94, which 

provides data used by the fiscal 

intermediaries in determining program 

reimbursement. 

We believe that this change will deter 

or limit the number of undercapitalized 

individuals and organizations from 

seeking to enroll in the Medicare 

program. In addition, we believe that 

this change will help to ensure that 

prospective HHAs establish and 

maintain the amount of capital to 

furnish quality services to eligible 

beneficiaries without reimbursement 

from the Medicare program during the 

first three months of operations. 

In § 489.28(c), we propose to add a 

new paragraph (1) to emphasize that the 

Medicare contractor, in selecting 

comparative HHAs for the purpose of 

calculating the enrolling HHA’s 

required level of capitalization, shall 

only select HHAs that have submitted 

cost reports to Medicare. By reviewing 

the cost report, a Medicare contractor 

can audit costs and reimbursements. 

Medicare contractors have been 

selecting comparable HHAs using this 

methodology for purposes of the current 

requirement, but we believe that the 

current language in paragraph (c) should 

be clarified. 

In 489.28(g), we propose to amend 

this provision to establish that CMS will 

only convey Medicare billing privileges 

to an HHA that satisfies its initial 

reserve operating funds requirement. 

In 42 CFR 424.510, we propose to add 

meeting the initial reserve operating 

funds requirement found in § 489.28(a) 

as an enrollment requirement for 

prospective home health providers. 

In 42 CFR 424.530(a)(8), we propose 

to deny Medicare billing privileges to a 

prospective HHA if they cannot furnish 

supporting documentation within 30 

days of a contractor request that verifies 

that the HHA meets the initial reserve 

operating funds requirement found in 

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42 CFR 489.28(a). In addition, we 

propose to deny Medicare billing 

privileges to a prospective home health 

provider that fails to meet the initial 

reserve operating funds requirement 

found in 489.28(a). 

Similarly, at 42 CFR 424.535(a)(8), we 

propose to revoke Medicare billing 

privileges and the corresponding 

provider agreement if the enrolled HHA 

is not able to furnish supporting 

documentation within 30 days of a 

contractor request that verifies that the 

HHA meets the initial reserve operating 

funds requirement found in 42 CFR 

489.28(a). 

2. Change of Ownership 

In last year’s home health prospective 

payment system final rule titled, 

‘‘Medicare Program: Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2010,’’ we 

finalized several home health program 

integrity provisions. Specifically, we 

finalized a provision in 42 CFR 

424.550(b)(1) stating that if an owner of 

an HHA sells (including asset sales or 

stock transfers), transfers or relinquishes 

ownership of the HHA within 36 

months after the effective date of the 

HHA’s enrollment in Medicare, the 

provider agreement and Medicare 

billing privileges do not convey to the 

new owner. The prospective provider/ 

owner of the HHA must instead: (i) 

Enroll in the Medicare program as a new 

HHA under the provisions of § 424.510, 

and (ii) Obtain a State survey or an 

accreditation from an approved 

accreditation organization. 

We received several comments 

supporting the establishment of the 36- 

month provision and did not receive 

any specific recommendations that we 

establish exceptions to the 

implementation of this provision. 

However, since the implementation of 

42 CFR 424.550(b)(1) in January 2010, 

we have received a number of 

comments regarding the impact of this 

provision on bona fide ownership 

transactions. Accordingly, we are 

proposing exemptions to the 36-month 

provision for certain legitimate 

transactions related to HHAs. In 

particular, we are proposing to revise 42 

CFR 424.550(b) by adding subparagraph 

(2) as exemptions to 42 CFR 

424.550(b)(1): 

• A publicly-traded company is 

acquiring another HHA and both 

entities have submitted cost reports to 

Medicare for the previous five (5) years. 

• An HHA parent company is 

undergoing an internal corporate 

restructuring, such as a merger or 

consolidation, and the HHA has 

submitted a cost report to Medicare for 

the previous five (5) years. 

• The owners of an existing HHA 

decide to change the existing business 

structure (e.g., partnership to a limited 

liability corporation or sole 

proprietorship to subchapter S 

corporation), the individual owners 

remain the same, and there is no change 

in majority ownership (i.e., 50 percent 

or more ownership in the HHA.) 

• The death of an owner who owns 

49 percent or less (where several 

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

owners dies) interest in an HHA. 

It is important to note that while we 

are proposing the aforementioned 

exceptions, we remain concerned that a 

significant number of HHAs have—and 

will continue to attempt to—participate 

in a practice often referred to as a 

‘‘certificate mill.’’ Under this scenario, 

which we addressed in the 2010 HH 

PPS rule, entrepreneurs apply for 

Medicare certification, undergo a 

survey, and, become enrolled in 

Medicare, but then immediately sell the 

agency without having seen a single 

Medicare beneficiary or hired a single 

employee. These brokers, in other 

words, enroll in Medicare exclusively to 

sell the HHA, rather than to provide 

services to beneficiaries. This practice 

allows a purchaser of an HHA from the 

broker to enter the Medicare program 

without having to undergo a State 

survey, which, in turn, often leads to 

that owner selling the business very 

soon thereafter to someone else. The 

‘‘flipping’’ mechanism is used to 

circumvent the State survey process. It 

is for this reason, that we maintain that 

42 CFR 424.550(b)(1) is necessary to 

eliminate the ‘‘certificate mill’’ process. 

3. 

3. Change in Majority Ownership 

Within 36 Months of Initial Enrollment 

or Change in Ownership 

Section 1124 of the Social Security 

Act requires that: (1) All persons and 

organizations with a 5 percent or greater 

ownership interest in the provider, and 

(2) all partners in a partnership (if, of 

course, the provider is established as a 

partnership), be reported to us. 

Accordingly, we believe that HHAs and 

other provider organizations must report 

a change of ownership of 5 percent of 

more of the equity in the company. 

However, we recognize that in many 

cases a small change in ownership (e.g., 

5 percent) does not result in 

fundamental change of ownership by 

the majority owner or owner(s) and 

should not necessarily require a new 

enrollment and State survey or meet the 

deemed-accreditation status. However, 

we are concerned that prospective HHA 

owners can circumvent the spirit and 

intent of § 424.550(b)(1) by 

incrementally increasing their level of 

ownership to the point where they 

could effectively assume 51 percent or 

more ownership of an HHA without 

having to enroll as a new provider or 

undergo a State survey or obtain 

deemed accreditation status by a CMSapproved accreditation organization. 

For instance, an owner, with a 30 

percent ownership interest could 

purchase an additional 20 percent, plus 

one (1) share stake in the company by 

submitting four separate changes of 

information to the Medicare contractor. 

The end result is that the HHA would 

then be owned by an individual or 

organization for whom—because of his 

or her ability to avoid having to undergo 

a State survey or obtain accreditation 

due to his or her incremental 

purchases—we cannot determine their 

commitment to furnishing quality 

services to Medicare beneficiaries. 

Accordingly, in § 424.550(a)(1) we are 

proposing that any change in majority 

control and/or ownership during the 

first 36 months of when the HHA is 

initially conveyed Medicare billing 

privileges or the last change of 

ownership (including asset sale, stock 

transfer, merger or consolidation) would 

trigger the provisions of § 424.550(b)(1). 

We believe that this approach would 

allow individuals or organizations to 

purchase or sell an ownership interest 

in an HHA as long as it did not change 

majority ownership or control within 

the first 36 months of ownership. 

Consequently, we are proposing a 

definition of ‘‘Change in Majority 

Ownership’’ to mean an individual or 

organization acquires more than 50 

percent interest in an HHA during the 

36 following the initial enrollment into 

the Medicare program or a change of 

ownership (including asset sale, stock 

transfer, merger, or consolidation). This 

includes an individual or organization 

that acquires majority ownership in an 

HHA through the cumulative effect of 

asset sales, stock transfers, 

consolidations, and/or mergers during a 

36-month period. 

H. Home Health Face-to-Face Encounter 

Sections 1814(a)(2)(C) and 

1835(a)(2)(A) of the Act require a plan 

of care for furnishing home health 

services be established and periodically 

reviewed by a physician in order for 

Medicare payments for those services to 

be made. The physician is responsible 

for certifying that the individual is 

confined to his or her home and needs 

skilled nursing care on an intermittent 

basis or physical or speech therapy. The 

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plan for furnishing such services has to 

be established, and updated when 

appropriate, by the beneficiary’s 

physician. 

In recent years MedPAC has reported 

that the Medicare eligibility criteria for 

the home health benefit are broad and 

open to different interpretations by 

clinicians. See Report to the Congress: 

Medicare Payment Policy (March 2004). 

The 2010 MedPAC report continues to 

cite the complexity of Medicare’s 

requirements for home health eligibility, 

and recommends that physicians may 

benefit from the information gained by 

an in-person examination. MedPAC 

further states that ‘‘establishing clear 

expectations for the purpose of these 

examinations would be critical to 

ensuring their effectiveness’’ [MedPAC 

report dated March 2010, p. 216]. 

On March 23, 2010, the Patient 

Protection and Affordable Care Act (The 

Affordable Care Act) of 2010 (Pub. L. 

111–148) was enacted. Section 6407(a) 

(amended by section 10605) of The 

Affordable Care Act amends the 

requirements for physician certification 

of home health services contained in 

Sections 1814(a)(2)(C) and 1835(a)(2)(A) 

by requiring that, prior to making such 

certification, the physician must 

document that the physician himself or 

herself or specified non-physician 

practitioner has had a face-to-face 

encounter (including through the use of 

telehealth, subject to the requirements 

in section 1834(m) of the Act), with the 

patient incident to the services 

involved. 

The Affordable Care Act describes 

non-physician practitioners who may 

perform this face-to-face patient 

encounter as a nurse practitioner or 

clinical nurse specialist (as those terms 

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

Act), who is working in collaboration 

with the physician in accordance with 

State law, or a certified nurse-midwife 

(as defined in section 1861(gg) of the 

Act, as authorized by State law), or a 

physician assistant (as defined in 

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

accordance with State law and under 

the supervision of the physician. The 

Affordable Care Act provision does not 

amend the statutory requirement that a 

physician must certify a patient’s 

eligibility for Medicare’s home health 

benefit. Rather the provision allows for 

specific non-physician practitioners to 

perform the face-to-face encounter with 

the patient in lieu of the certifying 

physician, and inform the physician 

making the initial certification for 

eligibility for the Medicare home health 

benefit. The certifying physician must 

document the face-to-face encounter 

regardless of whether the physician 

himself or herself or one of the 

permitted non-physician practitioners 

perform the face-to-face encounter. The 

Affordable Care Act gives the Secretary 

the discretion to set a reasonable 

timeframe for this encounter. 

We believe that the face-to-face 

encounter statutory provision was 

enacted to strengthen physician 

accountability in certifying that home 

health patients meet home health 

eligibility requirements. We also believe 

that in order to achieve this goal, the 

encounter must occur close enough to 

the home health start of care to ensure 

that the clinical conditions exhibited by 

the patient during the encounter are 

related to the primary reason for the 

patient’s need for home health care. As 

such, we believe that encounters would 

need to occur closer to the start of home 

health care than the six month period 

prior to certification recommended, but 

not required by The Affordable Care Act 

for Part B services. Therefore we 

propose revising § 424.22(a)(1)(v) such 

that for initial certifications, prior to a 

physician signing that certification and 

thus certifying a patient’s eligibility for 

the Medicare home health benefit, the 

physician responsible for certifying the 

patient for home health services must 

document that a face-to-face patient 

encounter (including through the use of 

telehealth if appropriate) has occurred 

no more than 30 days prior to the home 

health start-of-care date by himself or 

herself, or by an authorized nonphysician practitioner (as specified in 

sections 1814(a)(2)(C) and 1835(a)(2)(A) 

of the Act) working in collaboration 

with or under the supervision of the 

certifying physician as described above. 

We believe that in many cases, a faceto-face encounter with a patient within 

the 30 days prior to the home health 

episode start of care will provide the 

certifying physician a current clinical 

presentation of the patient’s condition 

such that the physician can accurately 

certify home health eligibility, and in 

conjunction with the home health 

agency, can establish an effective care 

plan. We also believe that a face-to-face 

encounter which occurs within 30 days 

prior to the home health start of care 

would be generally relevant to the 

reason for the patient’s need for home 

health services, and therefore such a 

face-to-face would be sufficient to meet 

the goals of this statutory requirement. 

However, if a face-to-face encounter 

occurs within 30 days of the start of the 

home health episode, but the clinical 

condition of the patient changes 

significantly between the time of the 

face-to-face encounter and the home 

health episode of care such that the 

primary reason the patient requires 

home health care is unrelated to the 

patient’s condition at the time of the 

face-to-face encounter, this encounter 

would not satisfy the requirement. 

Rather, in this case, we propose revising 

§ 424.22(a)(1)(v)(B) such that the 

certifying physician, or authorized nonphysician practitioner, must have 

another face-to-face encounter (which 

may include the use of telehealth, 

subject to the requirements in section 

1834(m) of the Act and subject to the list 

of Medicare telehealth services 

established in the most recent year’s 

physician fee schedule regulations) with 

the patient within two weeks after the 

start of the home health episode. The 

certifying physician must document the 

face-to-face encounter, along with the 

clinical findings of that encounter as 

part of the signed and dated 

certification. This documentation must 

be clearly titled, dated, and signed by 

the certifying physician. Because the 

patient’s clinical condition significantly 

changed, we believe that a more 

contemporaneous visit is needed to 

ensure the certifying physician can 

accurately certify the patient’s eligibility 

for services, and effectively plan the 

patient’s care. 

Similarly, we propose to revise 

§ 424.22(a)(1)(v)(B) to reflect that if a 

home health patient has not seen the 

certifying physician or one of the 

specified non-physician practitioners as 

described above, in the 30 days prior to 

the home health episode start of care, 

the certifying physician or nonphysician practitioner, would be 

required to have a face-to-face encounter 

(including the use of telehealth, subject 

to the requirements in section 1834(m) 

of the Act and subject to the list of 

Medicare telehealth services established 

in the most recent year’s physician fee 

schedule regulations) with the patient 

within two weeks after the start of the 

home health episode to comply with the 

requirements for payment under the 

Medicare Program. 

We also propose to revise 

§ 424.22(a)(1)(v) so that the certifying 

physician’s documentation of the faceto-face encounter would clearly state 

that either the certifying physician 

himself or herself, or the applicable 

non-physician practitioner has had a 

face-to-face encounter with the patient 

and would include the date of that 

encounter. The documentation would 

also describe how the clinical findings 

of that encounter supported the 

patient’s eligibility for the Medicare 

home health benefit. Specifically, the 

physician would document how the 

clinical findings of the encounter 

supported findings that the patient was 

homebound and in need of intermittent 

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skilled nursing and/or therapy services, 

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

respectively. The certifying physician 

would be required to sign and date the 

documentation entry into the 

certification and document the face-toface encounter in his/her practice’s 

medical record. As such the physician’s 

medical keeping for that patient must be 

consistent with, and supportive of, the 

required documentation of the face-toface encounter as part of the 

certification. 

Again, the certifying physician’s 

documentation of the face-to-face 

patient encounter would be either a 

separate and distinct area on the 

certification or a separate and distinct 

addendum to the certification that was 

easily identifiable and clearly titled. 

If an allowed non-physician 

practitioner was conducting the face-toface visit, that practitioner would have 

to document the clinical findings of the 

face-to-face patient encounter and 

communicate those findings to the 

certifying physician, so that the 

certifying physician could document the 

face-to-face encounter accordingly, as 

part of the signed certification. Section 

409.41 of the CFR states that in order for 

home health services to qualify for 

payment under the Medicare program 

the physician certification requirements 

for home health services must be met in 

compliance with § 424.22. Therefore, if 

the patient’s certifying physician did 

not document that a face-to-face 

encounter occurred no more than 30 

days prior to the home health start of 

care date or two weeks after the start of 

care date, the services would not qualify 

for payment under the Medicare 

program. 

Additionally our regulations at 

§ 424.22 require a physician’s signature 

for certification and recertification of 

the need for home health care. To 

strengthen our regulations to mirror our 

longstanding manual policy and to 

achieve consistency with the proposed 

timing and documentation of the faceto-face encounter, we propose to revise 

our certification and recertification 

requirements at § 424.22 to require that 

these documents must include the date 

and signature of the physician. 

As defined in 42 CFR 411.354, 

certifying physicians are not permitted 

to have a financial relationship with the 

HHA, unless one of the exceptions in 

section 1877 of the Act is met. 

Similarly, we would preclude nonphysician practitioners from performing 

a face-to-face encounter for the purpose 

of informing the certifying physician, as 

described in sections 1814 and 1835 of 

the Act, if the non-physician 

practitioner was an employee of the 

HHA. We propose to apply this 

prohibition by revising § 424.22(d) to 

not allow non-physician practitioners to 

perform a face-to-face encounter, if 

employed by the HHA, as defined by 

Section 210(j) of the Act. 

When a physician is certifying a 

patient for home health services, the 

physician is certifying that the patient is 

confined to his home and in need of 

intermittent skilled nursing or therapy 

services. Therefore, physicians must 

utilize their intimate knowledge of the 

patient’s medical condition to 

determine the patient’s health care 

needs. We believe that physician 

involvement is very important in 

maintaining quality of care under the 

Medicare home health benefit and 

ensure appropriate use of the benefit. 

Thus, the fundamental goals of 

physician certification are strengthened 

by the new requirement for a face-toface patient encounter. 

As such, we are proposing to revise 42 

CFR 424.22(a)(1) by adding language to 

set timing requirements for the face-toface patient encounter, to ensure that 

the face-to-face patient encounter is 

related to the primary reason the patient 

requires home health services, and to set 

encounter documentation requirements. 

We are also proposing that nonphysician practitioners be precluded 

from performing a face-to-face 

encounter for the purpose of informing 

the certifying physician, as described in 

sections 1814 and 1835 of the Act, if the 

non-physician practitioner is an 

employee of the HHA, as defined by 

Section 210(j) of the Act. 

We propose implementing the above 

face-to-face patient encounters 

provisions as they relate to home health 

episodes beginning 1/1/2011 and later. 

I. Solicitation of Comments: Future 

Plans to Group HH PPS Claims 

Centrally During Claims Processing 

Generally speaking, Medicare makes 

payment under the HH PPS on the basis 

of a national standardized 60-day 

episode payment rate that is adjusted for 

case-mix and geographic wage 

variations. The national standardized 

60-day episode payment rate includes 

the six home health disciplines (skilled 

nursing, home health aide, physical 

therapy, speech language pathology, 

occupational therapy, and medical 

social services) and non-routine medical 

supplies. Durable medical equipment 

covered under home health is paid for 

outside the HH PPS payment. To adjust 

for case-mix, the HH PPS uses a 153- 

category case-mix classification to 

assign patients to a home health 

resource group (HHRG). Clinical needs, 

functional status, and service utilization 

are computed from responses to selected 

data elements in the Outcome & 

Assessment Information Set (OASIS) 

instrument. On Medicare claims, the 

HHRGs are represented as Health 

Insurance Prospective Payment System 

(HIPPS) codes. 

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

start of each subsequent 60 day episode, 

and when a patient’s condition changes 

significantly, the HHA is required to 

perform a comprehensive clinical 

assessment of the patient and complete 

the OASIS assessment instrument. The 

OASIS instrument collects data 

concerning 3 dimensions of the patient’s 

condition: (1) Clinical severity 

(orthopedic, neurological or diabetic 

conditions, etc.), (2) Functional status 

(comprised of 6 activities of daily living 

{ADL}), and (3) Service utilization 

(therapy visits provided during 

episode). HHAs enter data collected 

from their patients’ OASIS assessments 

into a data collection software tool. For 

Medicare patients, the data collection 

software invokes HH PPS Grouper 

software to assign a HIPPS code to the 

patient’s OASIS assessment. The HHA 

includes this HIPPS code on the 

Medicare HH PPS bill, ultimately 

enabling CMS’ claims processing system 

to reimburse the HHA for services 

provided to patients receiving 

Medicare’s home health benefit. 

Additionally, the HHA is required to 

electronically submit OASIS 

assessments for their Medicare and 

Medicaid patients to CMS via their State 

agency. On the HH PPS public Web site 

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

01_overview.asp, CMS provides a free 

OASIS assessment data collection tool 

(HAVEN) which includes the HH PPS 

grouper software, a separate HH PPS 

grouper program which can be 

incorporated into an HHA’s own data 

collection software, and HH PPS data 

specifications for use by HHAs or 

software vendors desiring to build their 

own HH PPS grouper. Most HHAs do 

not use the HAVEN freeware, instead 

preferring to employ software vendors 

to create and maintain a customized 

assessment data collection tool which 

can be integrated into the HHA’s billing 

software. Likewise, many vendors 

employed by HHAs do not utilize the 

HH PPS grouper freeware, instead 

preferring to build their own HH PPS 

grouper from the data specifications 

which CMS provides. 

In 2008, CMS deployed the first 

refinements to the HH PPS since its 

inception in 2000. Prior to the 2008 

refinements, CMS made infrequent, 

minor changes to the HH PPS grouper 

software. Effective with the refinements, 

the HH PPS grouper became more 

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complex and more sensitive to the 

yearly ICD–9–CM code changes. As a 

result, since 2008 HHAs have been 

required to update their HH PPS 

grouper software at least once each year. 

Most HHAs employ software vendors to 

effectuate these updates. HHAs have 

expressed concerns to CMS that the 

frequent grouper updates coupled with 

the additional complexity of the grouper 

has resulted in unexpected costs and an 

increased burden to them. 

Also, since the 2008 refinements were 

implemented, CMS has identified a 

significant increase in OASIS 

assessments submitted with erroneous 

HIPPS codes. These errors occur when 

HHAs and/or their software vendors 

inaccurately replicate the HH PPS 

grouper algorithm into the HHA’s 

customized software. The significant 

increase in these errors since 2008 

suggests that many HHA software 

vendors are struggling to accurately 

replicate the complex algorithms in the 

HH PPS grouper. CMS informs HHAs 

when the submitted HIPPS on the 

OASIS is inaccurate and provides HHAs 

with the correct HIPPS to enable the 

HHA to accurately bill Medicare. 

However, HHAs have expressed 

concerns that the HH PPS grouper 

complexities increase their vulnerability 

to submit an inaccurate HIPPS code on 

the Medicare bill. Further, some HHAs 

have expressed concern that this 

vulnerability will further increase when 

CMS begins requiring use of ICD–10– 

CM codes instead of ICD–9–CM codes 

because the ICD–10–CM migration will 

require major changes to an already 

complex HH PPS grouper. 

Because of these concerns, we have 

begun analyzing options to streamline 

the process which assigns HIPPS codes. 

We are analyzing options which would 

enable CMS to assign HIPPS codes to 

the HH PPS bills during claims 

processing. If we were successful in 

implementing this option, OASIS 

assessment data collection tools would 

no longer invoke HH PPS grouper 

software to assign HIPPS codes to the 

OASIS assessments. Further, HHAs 

would no longer be required to include 

HIPPS codes on HH PPS bills. Such a 

process would relieve the HHA of all 

responsibility associated with the HH 

PPS grouper. If we can centralize the 

assignment of the HIPPS code to the HH 

PPS bill during claims processing, we 

will achieve process efficiencies, 

improve payment accuracy by 

improving the accuracy of the bill’s 

HIPPS code, decrease costs and burden 

to HHAs, while also better position 

HHAs and CMS for an easier transition 

from ICD–9 to ICD–10 codes in the 

future. 

Several changes have occurred 

recently that allow us to consider this 

option. National claims coding 

standards have expanded the number of 

positions of data available in the 

treatment authorization field on the bill 

from 18 to 30. In addition, the National 

Uniform Billing Committee has created 

occurrence code 50 for assessment 

reference dates. This new code will 

allow a separate field for HHAs to report 

the M0090 assessment date currently 

carried in the treatment authorization 

field. These two changes provide 

enough space on the HH PPS bill for 

HHAs to encode all the OASIS payment 

items on the bill, potentially enabling 

CMS to compute the HIPPS code during 

claims processing. 

However, a major challenge exists 

with the feasibility of computing the HH 

PPS group during claims processing. A 

centralized HH PPS grouper would look 

to the diagnoses on the HH PPS bill for 

grouping. The Health Insurance 

Portability and Accountability Act 

(HIPAA) authorized us to require that 

all diagnoses on the bill comply with 

ICD–9–CM coding guidelines as set out 

at 45 CFR 162.1002 (65 FR 50370, 

August 17, 2000). Currently, when 

certain conditions apply, to prevent the 

loss of case mix points, the HH PPS 

grouper will award case-mix points to 

some diagnoses reported as a secondary 

diagnosis when the assignment is 

performed to comply with ICD–9–CM 

coding requirements. CMS currently 

instructs HHAs to report these 

diagnoses in M1024 (previously M0246) 

on the OASIS to prevent loss of case 

mix points. 

We provide detailed guidance on this 

topic in page 5 of Appendix D within 

the OASIS Implementation Manual, 

which can be accessed at http:// 

www.cms.gov/HomeHealthQualityInits/ 

downloads/HHQIAttachmentD.pdf. This 

coding guidance has been provided to 

prevent the loss of case mix points 

when an underlying case mix diagnosis 

is associated with the primary V-code 

diagnosis. 

As required by 45 CFR 162.1002, 

those diagnoses currently encoded in 

M1024 (formerly M0246) which should 

not be reported as primary or secondary 

diagnoses cannot be reported on the bill. 

In an attempt to solve this challenge, 

CMS is analyzing options to map 

diagnoses currently reported in M1024 

(formerly M0246) to diagnoses that are 

reportable as primary and secondary 

diagnoses in the home health setting, 

per ICD–9–CM coding guidelines. We 

have been encouraged with our ability 

to map some trauma codes reported in 

M1024 to after-care codes which are 

reportable as primary and secondary 

diagnoses in the home health setting. 

However, additional analysis and 

mapping are needed to fully resolve this 

challenge. 

We are soliciting public comment on 

this potential enhancement, described 

above, to assign the HIPPS code to the 

HH PPS bill during claim processing. 

This would require HHAs to report all 

the OASIS items necessary to group the 

episode on the HH PPS bill. As stated 

above, doing so would address the costs 

and burden HHAs currently experience 

with regards to frequent updates of a 

complex HH PPS grouper, address 

vulnerabilities that HHAs have 

associated with the possible submission 

of inaccurate HIPPS codes on the claim, 

while better positioning HHAs and CMS 

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

are in the early stages of assessing the 

feasibility of such changes, and wanted 

to seize the opportunity to solicit the 

public for their comments on this topic. 

J. Proposed New Requirements Affecting 

Hospice Certifications and 

Recertifications 

In its March 2009 Report to Congress, 

MedPAC wrote that additional controls 

are needed to ensure adequate 

accountability for the hospice benefit. 

MedPAC reported that greater physician 

engagement is needed in the process of 

certifying and recertifying patients’ 

eligibility for the Medicare hospice 

benefit. The Commission reported that 

measures to ensure accountability 

would also help ensure that hospice is 

used to provide the most appropriate 

care for eligible patients. They 

recommended these measures be 

directed at hospices that tend to enroll 

very long-stay patients. Specifically, 

MedPAC recommended that a hospice 

physician or advanced practice nurse 

visit the patient to determine continued 

eligibility prior to the 180-day 

recertification and each subsequent 

recertification, and attest that such visits 

took place. MedPAC, Report to the 

Congress: Medicare Payment Policy, 

Chapter 6, March 2009, pp. 365–371. 

Section 3132 of The Affordable Care 

Act requires hospices to adopt 

MedPAC’s hospice program eligibility 

recertification recommendations. 

Specifically, the bill amends section 

1814(a)(7) of the Social Security Act to 

require that on and after January 1, 

2011, a hospice physician or nurse 

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

patient to determine the continued 

eligibility of that patient prior to the 

180-day recertification, and prior to 

each subsequent recertification. 

Furthermore, the bill requires that the 

hospice physician or NP attest that such 

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a visit took place, in accordance with 

procedures established by the Secretary 

of the Department of Health and Human 

Services. The Affordable Care Act 

provision does not amend the statutory 

requirement that a physician must 

certify and recertify a patient’s terminal 

illness, and thus NPs continue to not be 

allowed to certify the terminal illness. 

Rather, the provision allows for a NP to 

furnish a face-to-face encounter; the NP 

would then provide the clinical findings 

from that encounter to the physician 

who is considering recertifying the 

patient. This new statutory requirement 

will better enable hospices to comply 

with hospice eligibility criteria, and to 

identify and discharge patients who do 

not meet those criteria. 

Hospices which admit a patient who 

received hospice services previously 

(from the admitting hospice or from 

another hospice) must consider the 

patient’s entire Medicare hospice stay to 

determine which benefit period the 

patient is in, and whether a face-to-face 

visit will be required for recertification. 

As required by the Affordable Care 

Act, we are making several proposals 

regarding 42 CFR 418.22(a)(3), (a)(4), 

(b)(3), (b)(4), and (b)(5) in order to 

implement this new statutory 

requirement. Required visits should be 

fairly close to the recertification date, so 

that the visit allows a current 

assessment of the patient’s continued 

eligibility for hospice services. These 

visits can be scheduled in advance, 

particularly for those patients with 

diagnoses where life expectancy is 

harder to predict. At § 418.22(a)(4) we 

propose that hospice physicians or NPs 

make these required visits no more than 

15 calendar days prior to the 180-day 

recertifications and subsequent 

recertifications, and that the visit 

findings be used by the certifying 

physician to determine continued 

eligibility for hospice care. This 15-day 

timeframe also aligns the timeframes for 

recertification visits with that required 

for the comprehensive assessment 

update, as specified in our Conditions of 

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

timeframe requirement is also consistent 

with the timeframe required for the 

review of the plan of care, as specified 

in our CoPs at § 418.56(d). The 15-day 

timeframe provides a balance between 

flexibility in scheduling the visit, and 

enabling a relatively current assessment 

of continued eligibility while also 

allowing efficiency in update and 

review processes as required by the 

hospice CoPs. 

As noted above, the statute requires 

that the face-to-face encounter be used 

to determine the patient’s continued 

eligibility for hospice services. We 

propose that the clinical findings 

gathered by the NP or by the physician 

during the face-to-face encounter with 

the patient be used in the physician 

narrative to justify why the physician 

believes that the patient has a life 

expectancy of 6 months or less. We 

propose to add this requirement to 

418.22(b)(3) as subparagraph(v). 

The statute also requires the hospice 

physician or NP to attest that the faceto-face encounter occurred. Again we 

reiterate that while NPs can make these 

visits and attest to them, by statute only 

a physician may certify the terminal 

illness. Therefore, at § 418.22(b)(4) we 

propose that the face-to-face attestation 

and signature be either a separate and 

distinct area on the recertification form, 

or a separate and distinct addendum to 

the recertification form, that is easily 

identifiable and clearly titled. We also 

propose that the attestation language be 

located directly above the physician or 

NP signature and date line. 

The attestation is a statement from the 

physician or NP which attests that he or 

she had a face-to-face encounter with 

the patient, and that the clinical 

findings of that encounter have been 

provided to the certifying physician for 

use in determining continued eligibility 

for hospice care. The attestation should 

include the name of the patient visited, 

the date of the visit, and be signed and 

dated by the NP or physician who made 

the visit. Hospices are free to use other 

attestation language, provided that it 

incorporates these required elements. 

These elements would be suitable 

whether the visit is made by an NP or 

a physician. It is possible that the 

certifying hospice physician is the same 

physician who made the visit. 

We propose revising our regulations 

at § 418.22 to incorporate these 

requirements. Specifically, we propose 

adding subsections (a)(4) and (b)(4) to 

implement the requirements for a faceto-face encounter with long-stay hospice 

patients and the attestation of that faceto-face encounter. 

In proposing a required timeframe in 

which the face-to-face encounter must 

occur, for consistency, we believe it is 

important to also propose to clarify 

required timeframes for all certifications 

and recertifications. Long-standing 

guidance in our Medicare Benefit Policy 

Manual’s chapter on hospice benefit 

policy allows the initial certification to 

be completed up to 14 days in advance 

of the election, but is silent on the 

timeframe for advance completion of 

recertifications (see CMS Pub. No. 100– 

02, chapter 9, section 20.1). To clarify 

our policy in the regulations, and to be 

consistent with the proposed timeframe 

for the newly legislated face-to-face 

encounter for recertifications, we 

propose that both certifications and 

recertifications must be completed no 

more than 15 calendar days prior to 

either the effective date of hospice 

election (for initial certifications), or the 

start date of a subsequent benefit period 

(for recertifications). This proposal is 

also in keeping with the CoP timeframe 

for updating the comprehensive 

assessment (418.56(d)), and with the 

CoP timeframe for reviewing the plan of 

care (418.54(d)). Finally, this proposed 

15-day advance certification or 

recertification timeframe would also 

help ensure that the decision to recertify 

is based on current clinical findings, 

enabling greater compliance with 

Medicare eligibility criteria. Congress’ 

desire for increased compliance with 

Medicare eligibility criteria is one factor 

which we believe led to the new 

statutory requirements. We propose to 

revise § 418.22(a)(3) to reflect the above 

proposals. 

Furthermore, longstanding manual 

guidance stipulates that the physician(s) 

must sign and date the certification or 

recertification. However, the HHS Office 

of Inspector General recently found that 

certifications for some hospice patients 

failed to meet Federal requirements, 

including those with no signatures 

[HHS OIG, ‘‘Medicare Hospice Care for 

Beneficiaries in Nursing Facilities: 

Compliance with Medicare Coverage 

Requirements, September 2009’’]. In 

keeping with Congress’s desire for 

increased compliance with Medicare 

eligibility criteria, and to achieve 

consistency with the proposed 180-day 

recertification attestation requirements, 

we propose to add language to the 

certification requirements in our 

regulations to clarify that these 

documents must include the 

signature(s) of the physician(s) and the 

date each physician signed. 

With the new statutory requirements 

for a face-to-face encounter prior to the 

180-day recertification, and for every 

recertification thereafter, it is important 

for hospices to easily identify which 

benefit periods require a recertification 

visit. Because hospice patients are 

allowed two 90-day benefit periods 

followed by an unlimited number of 

60-day benefit periods, every 60-day 

benefit period is by definition beyond 

the 180-day recertification. We do not 

currently require that certifications or 

recertifications show the dates of the 

benefit period to which they apply, so 

we propose to add language to our 

certification and recertification 

regulations to make this a requirement 

for all hospices. While many hospices 

already include this information, there 

are some that do not. Having the benefit 

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period dates on the certification makes 

it easier for the hospice to identify those 

benefit periods which require a face-toface encounter and will ease 

enforcement of this new statutory 

requirement. 

A valid certification or recertification 

is a requirement for Medicare coverage 

under the Social Security Act at section 

1814(a)(7)(A). Additionally, the Act at 

1814(a)(7)(D) now also requires a faceto-face encounter with patients who 

reach the 180-day recertification. 

Changing our regulations to require the 

physician’s signature(s), date signed, 

and benefit period dates on the 

certification or recertification is 

necessary to determine if these 

documents are valid, and to ease the 

implementation of the new statutory 

requirements. Because we believe these 

proposed requirements establish in 

regulation that which are current 

practice in the hospice industry, we do 

not believe that these proposals will be 

burdensome to hospices. As such, we 

propose adding § 418.22(b)(5) to our 

regulations to incorporate these 

signature and date requirements. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information (COI) 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. In order to fairly 

evaluate whether an information 

collection should be approved by OMB, 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

A. ICRs Regarding Therapy Coverage 

Requirements 

As described previously in this 

proposed rule, we are clarifying our 

coverage requirements for skilled 

services provided by therapists, which 

are described in 42 CFR 409.44(c). Our 

proposed clarifications include 

requirements to: document necessity for 

a course of therapy (§ 409.44(c)(1)); 

include clinic notes which reflect 

progress toward goals, which 

incorporate the functional assessment 

and reassessments, which justify 

medical necessity, which describe the 

content of progress notes, and which 

include objective evidence of the 

expectation that the patient’s condition 

will improve (§ 409.44(c)(2)(i)); 

document any variable factors that 

influence the patient’s condition or 

affect the patient’s response to 

treatment, and include objective 

measurements of progress toward goals 

in the clinical record (409.44(c)(2)(iv)). 

These proposed clarifications to our 

coverage requirements in § 409.44(c) are 

already part of our current Conditions of 

Participation (CoPs) and are approved 

under OMB# 0938–1083. The current 

CoPs at § 484.12 already require that the 

HHA and its staff comply with accepted 

professional standards and principles 

that apply to professionals furnishing 

services in an HHA. Those accepted 

professional standards include complete 

and effective documentation, such as we 

described in our proposals. 

Additionally, § 484.32 of the CoPs 

already requires in part that the 

therapist prepare clinical and progress 

notes. Section 484.55 of the CoPs 

already requires that HHAs provide a 

comprehensive assessment that 

‘‘accurately reflects the patient’s current 

health status and includes information 

that may be used to demonstrate 

progress toward achievement of desired 

outcomes’’. Because these proposed 

clarifications to our coverage 

requirements in § 409.44(c) reflect 

longstanding policy from our CoPs as 

well as from accepted standards of 

clinical practice, we believe that these 

proposed requirements will not create 

any additional burden on HHAs. 

Additionally, our coverage regulations 

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

for therapy services to be covered in the 

home health setting, the services must 

be considered under accepted practice 

to be a specific, safe, and effective 

treatment for the beneficiary’s 

condition. We proposed revising 

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

assessment on the 13th and 19th 

therapy visit, and at least every 30 days, 

to determine continued need for therapy 

services, and to ensure material progress 

toward goals. The functional assessment 

does not require a special visit to the 

patient, but is conducted as part of a 

regularly scheduled therapy visit. 

Functional assessments are necessary to 

demonstrate progress (or the lack 

thereof) toward therapy goals, and are 

already part of accepted standards of 

clinical practice, which include 

assessing a patient’s function on an 

ongoing basis as part of each visit. 

Our current CoPs at § 484.55 already 

require that HHAs ‘‘identify the patient’s 

continuing need for home care * * *’’. 

Functional assessments of therapy need 

guide HHAs in determining whether 

continued therapy is necessary. 

Therefore, we believe that the proposed 

requirement to perform a functional 

assessment at the 13th and 19th visits, 

and at least every 30 days, will also not 

create any burden on HHAs. Rather, we 

have clarified the minimum timeframes 

for functional assessments in the 

coverage regulations. Longstanding CoP 

policy at § 484.55 requires HHAs to 

document progress toward goals; 

therefore, we again do not believe that 

performing or documenting functional 

assessments at these 3 time-points 

would create a new burden. Both the 

functional assessment and its 

accompanying documentation are 

already part of existing HHA practices 

and accepted standards of clinical 

practice, and are approved under OMB# 

0938–1083. Therefore, we do not believe 

these proposed requirements place any 

new documentation requirements on 

HHAs. We also believe that a prudent 

home health agency would self-impose 

these requirements in the course of 

doing business. 

We are revising the currently 

approved PRA package (OMB #0938– 

1083) to describe these clarifications to 

the regulatory text. 

B. ICRs Regarding HHA Capitalization 

As stated above, we propose to revise 

§ 489.28(a) to clarify that a newly 

enrolling HHA must consistently 

maintain sufficient capitalization 

between the time it submits its 

enrollment application until three 

months after its provider agreement 

becomes effective. This means the HHA 

will be required to submit proof of 

capitalization at multiple points during 

this period. For purposes of these 

collection requirements only, we 

estimate that a newly enrolling HHA 

will be required to submit such proof 3 

times prior to receiving Medicare billing 

privileges, and that the burden involved 

in doing so will be 1.5 hours on each 

occasion. We further project that 500 

newly enrolling HHAs (of which 200 

will ultimately become enrolled) will be 

asked to provide this data. The total 

annual burden will therefore be 2,250 

hours (500 HHAs × 3 submissions × 1.5 

hours), as reflected in Table 14 below. 

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C. ICRs Regarding the Home Health 

Face-To-Face Encounter Requirement 

The Affordable Care Act of 2010 

amends the requirements for physician 

certification of home health services 

contained in sections 1814(a)(2)(C) and 

1835(a)(2)(A) by requiring that prior to 

certifying a patient as eligible for home 

health services, the physician must 

document that the physician himself or 

herself or specified non-physician 

practitioner has had a face-to-face 

encounter (including through the use of 

telehealth). The Affordable Care Act 

provision does not amend the statutory 

requirement that a physician must 

certify a patient’s eligibility for 

Medicare’s home health benefit (see 

sections 1814(a)(2)(C) and 1835(a)(2)(A) 

of the Act). In this proposed rule, we 

propose that § 424.22(a)(1)(v) require the 

certifying physician sign and date the 

documentation entry into the 

certification that the face-to-face patient 

encounter occurred no more than thirty 

days prior to the home health start of 

care date by himself or herself, or by an 

allowed non-physician practitioner for 

initial certifications. We are proposing 

that the certifying physician’s 

documentation of the face-to-face 

patient encounter be either a separate 

and distinct area on the certification, or 

a separate and distinct addendum to the 

certification, that is easily identifiable 

and clearly titled, dated, and signed by 

the certifying physician, and that it 

include the clinical findings of that 

encounter. 

The burden associated with the 

documentation requirement for the 

patient’s face-to-face encounter by the 

physician and certain allowed nonphysician practitioners includes the 

time for each home health agency to 

develop a revised certification form or 

certification addendum which the HHA 

provides to the physician. The revised 

certification form or addendum to the 

certification must allow the physician to 

record that a face-to-face patient 

encounter has occurred. The revised 

form or addendum must also include 

the patient’s name, a designated space 

for the physician to provide the date of 

the patient encounter, a designated 

space for the physician’s documentation 

of the face-to-face encounter, and a 

designated space for the physician to 

provide his/her signature and the date 

signed. 

There were 9,432 home health 

agencies that filed claims in CY 2008. 

We estimate it would take each HHA 15 

minutes of the home health 

administrator’s time to develop and 

review the above described form 

language and 15 minutes of clerical time 

for each HHA to revise their existing 

initial certification form or to create an 

addendum with that form language. The 

estimated total one-time burden for 

developing the patient encounter form 

would be 4,716 hours. 

The certifying physician’s burden for 

composing the face-to-face 

documentation which includes how the 

clinical findings of the encounter 

support eligibility; writing, typing, or 

dictating the face-to-face 

documentation; signing, and dating the 

patient’s face-to-face encounter is 

estimated at 5 minutes for each 

certification. We estimate that there 

would be 2,926,420 initial home health 

episodes in a year based on our 2008 

claims data. As such, the estimated 

burden for documenting, signing, and 

dating the patient’s face-to-face 

encounter would be 243,868 hours for 

CY 2011. 

We reiterate that our longstanding 

policy has been that physicians must 

sign and date the certification statement 

that the patient is in need of home 

health services and meets the eligibility 

requirements to receive the benefit. 

Therefore, our making this requirement 

explicit in the regulation poses no 

additional burden to home health 

agencies. 

Additionally, it has been our 

longstanding manual policy that 

physicians must sign and date the 

certification and any recertifications. 

Our current regulations only address the 

physician’s signing of the certification 

and recertification. In this rulemaking, 

we are proposing to strengthen our 

regulations at § 424.22 to achieve 

consistency with the proposed timing 

and documentation of the face-to-face 

encounter and to mirror our 

longstanding manual policy by revising 

our regulations to make it a requirement 

that physicians not only sign, but also 

date certifications and recertifications. 

Because it has been our longstanding 

manual policy that physicians sign and 

date certifications and recertifications, 

and we are merely making this 

requirement explicit in our regulations, 

there is no additional burden to 

physicians. 

Based on the criteria for payment of 

physician supervision of a patient 

receiving Medicare-covered services 

provided by a participating home health 

agency as stipulated in the description 

of HCPC code G0181, our making the 

patient encounter requirement explicit 

in the regulation poses no additional 

burden to physician offices. Table 15a 

and 16a below summarizes the burden 

estimate associated with these 

requirements. 


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Details of our burden estimates are 

available in the Paperwork Reduction 

Act (PRA) package approved under 

OMB# 0938–1083. We are revising this 

currently approved package to 

incorporate these requirements. 

D. ICRs Regarding the Requirements for 

Hospice Certification Changes 

As described previously in this 

proposed rule, as of January 1, 2011 the 

Affordable Care Act requires physicians 

or NPs to attest that they determined 

continued hospice eligibility through a 

face-to-face encounter with all hospice 

patients prior to the 180-day 

recertification. We proposed that 

§ 418.22(b)(4) require the physician or 

NP to sign and date an attestation 

statement that he or she had a face-toface encounter with the patient, and 

include the date of that visit. This 

attestation would be a separate and 

distinct part of the physician 

recertification, or an addendum to the 

physician recertification. 

The burden associated with this 

attestation requirement would be the 

time for each hospice to develop simple 

attestation language to attach as an 

addendum or include as part of the 

recertification document, and the time 

for the physician or NP to include the 

patient name, the date that the patient 

was visited, the visiting physician or NP 

signature, and the date signed. As of 

February 2010, there were 3,429 

hospices with claims filed in FY 2009. 

We estimate it would take each hospice 

15 minutes of administrative time to 

develop and review the attestation 

language, and 15 minutes of clerical 

time to revise their existing 

recertification form or to create an 

addendum. The estimated total one-time 

burden for developing the attestation 

form would be 1,714 hours. 

The burden for completing the 

attestation form is estimated at 30 

seconds for each recertification at 180 

days or beyond. We used the 

distribution of lengths of stay from 

hospice claims data to estimate the 

percentage of patients who required 

recertification at 180 days, and at 

subsequent 60-day benefit periods. We 

estimated that there would be 457,382 

recertifications at 180 days or beyond, 

each of which requires an attestation. 

We assume that ninety percent of the 

visits were performed by physicians and 

ten percent by nurse practitioners, based 

on our analysis of FY 2009 physician 

and NP hospice billing data, with 30 

seconds time allowed to sign and date 

the attestation statement, and to write in 

the name of the patient and the date of 

the visit, resulting in an estimated total 

burden to complete the attestation form 

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

2010 hospice rule (74 FR 39384) we 

finalized a requirement that the 

recertifying physician include a brief 

narrative explanation of the clinical 

findings which support continued 

hospice eligibility. Effective January 1, 

2011 we propose regulation text changes 

that this narrative would describe why 

the clinical findings of the face-to-face 

encounter, occurring at the 180-day 

recertification and all subsequent 

recertifications, continue to support 

hospice eligibility. However, these 

proposed regulation changes are for 

clarification. The narrative requirement 

finalized in FY 2010 requires that the 

narrative include why the clinical 

findings of any physician/NP/patient 

encounter support continued hospice 

eligibility. Therefore, the only 

documentation burden associated with 

this requirement is the signed and dated 

attestation that the encounter occurred. 

We reiterate that our longstanding 

policy has been that physicians must 

sign and date the certification and any 

recertifications. Therefore, our making 

this requirement explicit in the 

regulation poses no additional burden to 

hospices. We also proposed to clarify 

the timeframe which the certifications 

and recertifications cover by requiring 

physicians to include the dates of the 

benefit period to which the certification 

or recertification applies. We believe 

this is already standard practice at 

nearly all hospices, but are addressing it 

in regulation. Using the distribution of 

lengths of stay from 2007 and 2008 

claims data, we estimate that there 

would be 1,733,663 initial certifications 

and recertifications during the course of 

a year. We estimate that it would take 

a physician 30 seconds at most to 

include the benefit period dates. We 

estimate that the time to require 

physicians to include the benefit period 

dates on the certification or 

recertification would be 30 seconds per 

certification or recertification, for a total 

burden of 14,447 hours for CY 2011. 

Table 17 below summarizes the burden 

estimate associated with these 

requirements. 


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Details of our burden estimates are 

available in the PRA package approved 

under OMB# 0938–1067. We are 

revising this currently approved 

package to incorporate these 

requirements. 

E. ICRs Regarding the Home Health Care 

CAHPS Survey (HHCAHPS) 

As part of the DHHS Transparency 

Initiative on Quality Reporting, CMS is 

implementing a process to measure and 

publicly report patients’ experiences 

with home health care they receive from 

Medicare-certified home health agencies 

with the Home Health Care CAHPS 

(HHCAHPS) survey. The HHCAHPS was 

developed and tested by the Agency for 

Healthcare Research and Quality 

(AHRQ) and is part of the family of 

CAHPS surveys, is a standardized 

survey for home health patients to 

assess their home health care providers 

and the quality of the home health care 

they received. Prior to the HHCAHPS, 

there was no national standard for 

collecting data about home health care 

patients’ perspectives of their home 

health care. 

It is proposed that Section 484.250, 

Patient Assessment Data, will require an 

HHA to submit to CMS HHCAHPS data 

in order for CMS to administer the 

payment rate methodologies described 

in §§ 484.215, 484.230, and 484.235. 

The burden associated with this is the 

time and effort put forth by the HHA to 

submit the HHCAHPS data, the patient 

burden to respond to the survey, and the 

cost to the HHA to pay the survey 

vendor to collect the data on their 

behalf. This burden is currently 

accounted for under OMB# 0938–1066. 

The HHCAHPS survey received OMB 

clearance on July 18, 2009, and the 

number is 0938–1066. In that PRA 

package, we did not state the burden to 

the HHAs concerning the hours that 

they would need to secure an approved 

HHCAHPS vendor and to pay for that 

vendor. In this proposed rule, we have 

included the burden directly affecting 

HHAs, which is the burden to select a 

survey vendor from http:// 

www.homehealthcahps.org and to sign a 

contract with that survey vendor, that 

will conduct HHCAHPS on behalf of the 

HHA. We have determined that this 

would take 16.0 hours for each HHA. It 

is noted that 91% of all HHAs (9,890 

HHAs of a total of 10,998 HHAs) would 

be conducting HHCAHPS, since about 

9% of HHAs will be exempt from 

conducting HHCAHPS because they 

have less than 60 eligible patients in the 

year. In TABLE 18, we have listed this 

burden to the HHAs: 

OMB Number 0938–1066 will be 

revised to reflect the update concerning 

burden to the HHAs for vendor services 

for HHCAHPS. 

On February 8, 2006, the Deficit 

Reduction Act of 2005 (Pub. L. 109–171) 

(DRA) was enacted. Section 5201 of the 

DRA requires HHAs to submit data for 

purposes of measuring health care 

quality, and links the quality data 

submission to payment. This 

requirement is applicable for CY 2007 

and each subsequent year. If an HHA 

does not submit quality data, the home 

health market basket percentage 

increase will be reduced 2 percentage 

points. In accordance with the statute, 

we published a final rule (71 FR 65884, 

65935) in the Federal Register on 

November 9, 2006, to implement the 

pay-for-reporting requirement of the 

DRA, codified at 42 CFR 484.225(h) and 

(i). 

In the Home Health Prospective 

Payment System Rate Update for 

Calendar Year 2010 (August 13, 2009), 

we proposed to expand the home health 

quality measures reporting requirements 

to include the CAHPS® Home Health 

Care (HHCAHPS) Survey, as initially 

discussed in the May 4, 2007, proposed 

rule (72 FR 25356, 25452) and in the 

November 3, 2008, Notice (73 FR 65357, 

65358). As part of the DHHS 

Transparency Initiative, we proposed to 

implement a process to measure and 

publicly report patient experiences with 

home health care using a survey 

developed by AHRQ in its CAHPS®

program. In the Final Rule for CY 2010, 

published on November 10, 2009, we 

stated our intention to move forward 

with the HHCAHPS and link the survey 

to the CY 2012 annual payment update 

under the DRA ‘‘pay-for-reporting’’ 

requirement. 

As part of this requirement, each HHA 

sponsoring a HHCAHPS Survey must 


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prepare and submit to its survey vendor 

a file containing patient data on patients 

served the preceding month that will be 

used by the survey vendor to select the 

sample and field the survey. This file 

(essentially the sampling frame) for 

most home health agencies can be 

generated from existing databases with 

minimal effort. For some small HHAs, 

preparation of a monthly sample frame 

may require more time. However, data 

elements needed on the sample frame 

will be kept at a minimum to reduce the 

burden on all HHAs. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget. 

Attention: CMS Desk Officer [CMS– 

1510–P]; 

Fax: (202) 395–6974; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

IV. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), the 

Regulatory Flexibility Act (RFA) 

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

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). We estimate that this 

rulemaking is ‘‘economically significant’’ 

as measured by the $100 million 

threshold, and hence also a major rule 

under the Congressional Review Act. 

Accordingly, we have prepared a 

Regulatory Impact Analysis that to the 

best of our ability presents the costs and 

benefits of the rulemaking. 

1. CY 2011 Update 

The update set forth in this proposed 

rule applies to Medicare payments 

under HH PPS in CY 2011. Accordingly, 

the following analysis describes the 

impact in CY 2011 only. We estimate 

that the net impact of the proposals in 

this rule is approximately $900 million 

in CY 2011 savings. The $900 million 

impact to the proposed CY 2011 HH 

PPS reflects the distributional effects of 

an updated wage index ($20 million 

increase), the 1.4 percent home health 

market basket update ($270 million 

increase), the 3.79 percent case-mix 

adjustment applicable to the national 

standardized 60-day episode rates and 

the NRS conversion factor ($700 million 

decrease), as well as the 2.5 percent 

returned from the outlier provisions of 

the Affordable Care Act ($490 million 

decrease). The $900 million in savings 

is reflected in the first row of column 3 

of Table 15 below as a 4.63 percent 

decrease in expenditures when 

comparing the current CY 2010 HH PPS 

to the proposed CY 2011 HH PPS. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses, if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to $34.5 

million in any 1 year. The Secretary has 

determined that this proposed rule 

would not have 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 603. For 

purposes of section 1102(b) of the Act, 

we define a small rural hospital as a 

hospital that is located outside of a 

metropolitan statistical area and has 

fewer than 100 beds. This proposed rule 

applies to HHAs. Therefore, the 

Secretary has determined that this 

proposed rule would not have a 

significant economic impact on the 

operations of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2010, that 

threshold is approximately $135 

million. This proposed rule is not 

anticipated to have an effect on State, 

local, or Tribal governments in the 

aggregate, or by the private sector, of 

$135 million or more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We have reviewed this proposed rule 

under the threshold criteria of Executive 

Order 13132, Federalism, and have 

determined that it would not have 

substantial direct effects on the rights, 

roles, and responsibilities of States, 

local or Tribal governments. 

B. Anticipated Effects 

This proposed rule sets forth updates 

to the HH PPS rates contained in the CY 

2010 notice published on November 10, 

2009. The impact analysis of this 

proposed rule presents the estimated 

expenditure effects of policy changes 

proposed in this rule. We use the latest 

data and best analysis available, but we 

do not make adjustments for future 

changes in such variable as number of 

visits or case-mix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare home 

health benefit, based on Medicare 

claims from 2008. We note that certain 

events may combine to limit the scope 

or accuracy of our impact analysis, 

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

resulting from other changes in the 

impact time period assessed. Some 

examples of such possible events are 

newly-legislated general Medicare 

program funding changes made by the 

Congress, or changes specifically related 

to HHAs. In addition, changes to the 

Medicare program may continue to be 

made as a result of the BBA, the BBRA, 

the Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection 

Act of 2000, the MMA, the DRA, The 

Affordable Care Act of 2020, or new 

statutory provision. Although these 

changes may not be specific to the HH 

PPS, the nature of the Medicare program 

is such that the changes may interact, 

and the complexity of the interaction of 

these changes could make it difficult to 

predict accurately the full scope of the 

impact upon HHAs. 

Table 15 below represents how HHA 

revenues are likely to be affected by the 

policy changes proposed in this rule. 

For this analysis, we used linked home 

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health claims and OASIS assessments; 

the claims represented a 20-percent 

sample of 60-day episodes occurring in 

CY 2008. The first column of Table 15 

classifies HHAs according to a number 

of characteristics including provider 

type, geographic region, and urban and 

rural locations. The second column 

shows the payment effects of the wage 

index only. The third column shows the 

payment effects of all the proposed 

policies outlined earlier in this rule. For 

CY 2011, the average impact for all 

HHAs is a .11 percent increase in 

payments due to the effects of the wage 

index. The overall impact, for all HHAs, 

in estimated total payments from CY 

2010 to CY 2011, is a decrease of 

approximately 4.75 percent. 

Section 3131(c) of the Affordable Care 

Act amended section 421(a) of the MMA 

of 2003. The amended section 421(a) 

provides an increase of 3 percent of the 

payment amount otherwise made for 

home health services furnished in a 

rural area, with respect to episodes and 

visits ending on or after April 1, 2010 

and before January 1, 2016. Column 3 of 

Table 19 displays a comparison of 

estimated payments in CY 2010, 

including a 3 percent rural add-on for 

the last three quarters of CY 2010, to 

estimated payments in CY 2011, 

including a 3 percent rural add-on for 

all four quarters of CY 2011. 

BILLING CODE 4120–01–P 

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BILLING CODE 4120–01–C 


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C. Accounting Statement and Table 

Whenever a rule is considered a 

significant rule under Executive Order 

12866, we are required to develop an 

Accounting Statement showing the 

classification of the expenditures 

associated with the provisions of this 

proposed rule. 

Table 20 below provides our best 

estimate of the decrease in Medicare 

payments under the HH PPS as a result 

of the changes presented in this 

proposed rule based on the best 

available data. The expenditures are 

classified as a transfer to the Federal 

Government of $930 million. 

D. Conclusion 

In conclusion, we estimate that the 

net impact of the proposals in this rule 

is approximately $900 million in CY 

2011 savings. The $900 million impact 

to the proposed CY 2011 HH PPS 

reflects the distributional effects of an 

updated wage index ($20 million 

increase), the 1.4 percent home health 

market basket update ($270 million 

increase), the 3.79 percent case-mix 

adjustment applicable to the national 

standardized 60-day episode rates and 

the NRS conversion factor ($700 million 

decrease), as well as the 2.5 percent 

returned from the outlier provisions of 

The Affordable Care Act ($490 million 

decrease). This analysis above, together 

with the remainder of this preamble, 

provides a Regulatory Impact Analysis. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 409 

Health facilities, Medicare. 

42 CFR Part 418 

Health facilities, Hospice care, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 484 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 489 

Health facilities, Medicare, Reporting 

and recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 409—HOSPITAL INSURANCE 

BENEFITS: GENERAL PROVISIONS 

1. The authority citation for part 409 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

2. Amend § 409.44 by— 

A. Revising paragraph (c)(1). 

B. Republishing paragraph (c)(2) 

introductory text. 

C. Revising paragraph (c)(2)(i). 

D. Revising paragraph (c)(2)(iii). 

E. Revising paragraph (c)(2)(iv). 

The revisions read as follows: 

§ 409.44 Skilled services requirements. 

* * * * * 

(c) * * * 

(1) Speech-language pathology 

services and physical or occupational 

therapy services must relate directly and 

specifically to a treatment regimen 

(established by the physician, after any 

needed consultation with the qualified 

therapist) that is designed to treat the 

beneficiary’s illness or injury. Services 

related to activities for the general 

physical welfare of beneficiaries (for 

example, exercises to promote overall 

fitness) do not constitute physical 

therapy, occupational therapy, or 

speech-language pathology services for 

Medicare purposes. To be covered by 

Medicare, all of the requirements apply 

as follows: 

(i) The patient’s plan of care must 

describe a course of therapy treatment 

and therapy goals which are consistent 

with the evaluation of the patient’s 

function, and both must be included in 

the clinical record. 

(ii) The patient’s clinical record must 

include documentation describing how 

the course of therapy treatment for the 

patient’s illness or injury is in 

accordance with accepted standards of 

clinical practice. 

(iii) Therapy treatment goals 

described in the plan of care must be 

measurable, and must pertain directly to 

the patient’s illness or injury, and the 

patient’s resultant functional 

impairments. 

(iv) The patient’s clinical record must 

demonstrate that the method used to 

assess a patient’s function included 

objective measurements of function in 

accordance with accepted standards of 

clinical practice, enabling comparison 

of successive measurements to 

determine progress. 

(2) Physical and occupational therapy 

and speech-language pathology services 

must be reasonable and necessary. To be 

considered reasonable and necessary, 

the following conditions must be met: 

(i) The services must be considered 

under accepted standards of clinical 

practice to be a specific, safe, and 

effective treatment for the beneficiary’s 

condition. Each of the following 

requirements must also be met: 

(A) The patient’s function must be 

initially assessed and periodically 

reassessed by a qualified therapist, 

using a method which would include 

objective measurement of function and 

progress as described in paragraph 

(c)(1)(iv) of this section. The 

measurement results and corresponding 

progress, or lack of progress, must be 

documented in the clinical record. 

(B) If a patient requires 13 or 19 

therapy visits, at a minimum, the 

patient must be functionally reassessed 

by a qualified therapist on the 13th and 

19th therapy visits and at least every 30 

days. Subsequent therapy visits will not 

be covered until: 

(1) The qualified therapist has 

completed the reassessment and 


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objectively measured progress (or lack 

of progress), towards therapy goals. 

(2) The qualified therapist has 

determined if goals have been achieved 

or require updating. 

(3) The qualified therapist has 

documented measurement results and 

corresponding therapy progress in the 

clinical record in accordance with 

paragraph (c)(2)(i)(D) of this section. 

(4) If the objective measurements of 

the reassessment do not reveal progress 

toward goals, the qualified therapist 

together with the physician have 

determined whether the therapy is still 

effective or should be discontinued. If 

therapy is to be continued in accordance 

with paragraph (c)(2)(iv)(B)(1) of this 

section, the clinical record must 

document with a clinically supportable 

statement why there is an expectation 

that anticipated improvement is 

attainable in a reasonable and generally 

predictable period of time in accordance 

with paragraph (c)(2)(iii)(A) of this 

section. 

(C) Clinical notes written by therapy 

assistants may supplement the clinical 

record, and if included, must include 

the date written, the signature and job 

title of the writer, and objective 

measurements or description of changes 

in status (if any) relative to each goal 

being addressed by treatment. Assistants 

may not make clinical judgments about 

why progress was or was not made, but 

must report the progress (or lack 

thereof) objectively. 

(D) Progress documentation by a 

qualified therapist must include: 

(1) The therapist’s assessment of 

improvement and extent of progress (or 

lack thereof) toward each therapy goal; 

(2) Plans for continuing or 

discontinuing treatment with reference 

to evaluation results and or treatment 

plan revisions; 

(3) Changes to therapy goals or an 

updated plan of care that is sent to the 

physician for signature or discharge; 

(4) Documentation of objective 

evidence or a clinically supportable 

statement of expectation that the 

patient’s condition has the potential to 

improve or is improving in response to 

therapy or that maximum improvement 

is yet to be attained, and there is an 

expectation that the anticipated 

improvement is attainable in a 

reasonable and generally predictable 

period of time. 

* * * * * 

(iii) For therapy services to be covered 

in the home health setting, one of the 

following three criteria must be met: 

(A) There must be an expectation that 

the beneficiary’s condition will improve 

materially in a reasonable (and generally 

predictable) period of time based on the 

physician’s assessment of the 

beneficiary’s restoration potential and 

unique medical condition. 

(1) Material improvement requires 

that the clinical record demonstrate that 

the patient is making functional 

improvements that are ongoing, as well 

as of practical value, when measured 

against his or her condition at the start 

of treatment. 

(2) Covered therapy services under 

the home health benefit shall be 

rehabilitative therapy service unless 

they meet the criteria for maintenance 

therapy in paragraph (c)(2)(iii)(B) or 

(c)(2)(iii)(C) of this section. 

(3) Therapy is covered as 

rehabilitative therapy when the skills of 

a therapist are necessary to safely and 

effectively furnish or supervise a 

recognized therapy service whose goal 

is improvement of an impairment or 

functional limitation. Rehabilitative 

therapy includes recovery or 

improvement in function and, when 

possible, restoration to a previous level 

of health and well being. 

(4) If an individual’s expected 

rehabilitation potential would be 

insignificant in relation to the extent 

and duration of therapy services 

required to achieve such potential, 

therapy would not be considered 

reasonable and necessary, and thus 

would not be covered as rehabilitative 

therapy services. 

(5) Where a patient suffers a transient 

and easily reversible loss or reduction of 

function which could reasonably be 

expected to improve spontaneously as 

the patient gradually resumes normal 

activities, therapy would not be 

considered reasonable and necessary 

and the services would not be covered. 

(B) The specialized skills, knowledge, 

and judgment of a qualified therapist 

may be required to design or establish 

a safe and effective maintenance 

program required in connection with a 

specific disease, ensure patient safety, 

train the patient, family members and/ 

or unskilled personnel, and make 

periodic reevaluations of the 

maintenance program. 

(1) When indicated, the therapist may 

develop a maintenance program to 

maintain functional status or to prevent 

decline in function, during the last 

visit(s) for rehabilitative therapy. 

(2) When a patient qualifies for 

Medicare’s home health benefit based 

on an intermittent skilled nursing need, 

a qualified therapist may develop a 

maintenance program to maintain 

functional status or to prevent decline 

in function, at any point in the episode. 

(3) Where the establishment of a 

maintenance program is initiated after 

the rehabilitative therapy program has 

been completed, development of a 

maintenance program would not be 

considered reasonable and necessary for 

the treatment of the patient’s condition. 

(4) If the services are for the 

establishment of a maintenance 

program, they must include the design 

of the program, the instruction of the 

beneficiary, family, or home health 

aides, and the necessary periodic 

reevaluations of the beneficiary and the 

program to the degree that the 

specialized knowledge and judgment of 

a physical therapist, speech-language 

pathologist, or occupational therapist is 

required. 

(C) The skills of a therapist must be 

necessary to perform a safe and effective 

maintenance program required in 

connection with a specific disease. 

Where the clinical condition of the 

patient is such that the services required 

to maintain function involve the use of 

complex and sophisticated therapy 

procedures to be delivered by the 

therapist himself/herself (and not an 

assistant) in order to ensure the patient’s 

safety and to provide both a safe and 

effective maintenance program, then 

those reasonable and necessary services 

shall be covered. 

(iv) The amount, frequency, and 

duration of the services must be 

reasonable and necessary, as determined 

by a qualified therapist and/or 

physician, using accepted standards of 

clinical practice. 

(A) Where factors exist that would 

influence the amount, frequency or 

duration of therapy services, especially 

factors that influence the clinical 

decisions to provide more services than 

are typical for the patient’s condition, 

those factors must be included in the 

plan of care and/or functional 

assessment. 

(B) Clinical records must include 

documentation using objective measures 

that the patient continues to progress 

towards goals. If progress cannot be 

measured, and continued improvement 

cannot be expected, therapy services 

cease to be covered except when 

(1) Therapy progress regresses or 

plateaus, and the reasons for lack of 

progress are documented to include 

justification that continued therapy 

treatment will lead to resumption of 

progress toward goals; or 

(2) Therapy can be considered 

reasonable and necessary when 

maintenance therapy is established or 

provided, as described in paragraph 

(c)(2)(iii)(B) or (C) of this section. 

PART 418—HOSPICE CARE 

3. The authority citation for part 418 

continues to read as follows: 

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Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

4. Amend § 418.22 by— 

A. Revising paragraph (a)(3). 

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

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

The revisions and additions read as 

follows: 

§ 418.22 Certification of terminal illness. 

(a) * * * 

(3) Exceptions. (i) If the hospice 

cannot obtain the written certification 

within 2 calendar days, after a period 

begins, it must obtain an oral 

certification within 2 calendar days and 

the written certification before it 

submits a claim for payment. 

(ii) Certifications may be completed 

no more than 15 calendar days prior to 

the effective date of election. 

(iii) Recertifications may be 

completed no more than 15 calendar 

days prior to the start of the subsequent 

benefit period. 

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

January 1, 2011, a hospice physician or 

hospice nurse practitioner must visit 

each hospice patient, whose total stay 

across all hospices is anticipated to 

reach 180 days, no more than 15 

calendar days prior to the 180-day 

recertification, and must continue to 

visit that patient no more than 15 

calendar days prior to every 

recertification thereafter, to gather 

clinical findings to determine continued 

eligibility for hospice care. 

(b) * * * 

(3) * * * 

(v) The narrative associated with the 

180-day recertification and every 

subsequent recertification must include 

an explanation of why the clinical 

findings of the face-to-face encounter 

support a life expectancy of 6 months or 

less. 

(4) The physician or nurse 

practitioner who performs the face-toface encounter with the patient 

described in paragraph (a)(4) of this 

section, must attest in writing that he or 

she had a face-to-face encounter with 

the patient, including the date of that 

visit. The attestation of the nurse 

practitioner shall state that the clinical 

findings of that visit were provided to 

the certifying physician, for use in 

determining whether the patient 

continues to have a life expectancy of 6 

months or less, should the illness run its 

normal course. The attestation, its 

accompanying signature, and the date 

signed, must be a separate and distinct 

section of, or an addendum to, the 

recertification form, and must be clearly 

titled. 

(5) All certifications and 

recertifications must be signed and 

dated by the physician(s), and must 

include the benefit period dates to 

which the certification or recertification 

applies. 

* * * * * 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

5. The authority citation for part 424 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

6. Amend § 424.22 by— 

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

B. Revising paragraph (a)(2). 

C. Revising paragraph (b)(1) 

introductory text. 

D. Revising paragraph (d). 

The revisions and additions read as 

follows: 

§ 424.22 Requirements for home health 

services. 

* * * * * 

(a) * * * 

(1) * * * 

(v) The physician responsible for 

performing the initial certification must 

document that the face-to-face patient 

encounter, which is related to the 

primary reason the patient requires 

home health services, has occurred no 

more than thirty days prior to the home 

health start of care date or within two 

weeks of the start of the home health 

care by including the date of the 

encounter, and including an 

explanation of why the clinical findings 

of such encounter support that the 

patient is homebound and in need of 

either intermittent skilled nursing 

services or therapy services as defined 

in § 409.42(a) and (c) respectively. The 

physician’s documentation of the faceto-face encounter in his/her practice’s 

medical recordkeeping for that patient 

must be consistent with, and supportive 

of, the required documentation of the 

face-to-face encounter as part of the 

certification. Pursuant to sections 

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

Act, the face-to-face encounter must be 

performed by the certifying physician 

himself or herself or by a nurse 

practitioner, a clinical nurse specialist 

(as those terms are defined in section 

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

in collaboration with the physician in 

accordance with State law, a certified 

nurse midwife (as defined in section 

1861(gg)of the Act) as authorized by 

State law, or a physician assistant (as 

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

Act) under the supervision of the 

physician. The documentation of the 

face-to-face patient encounter must be a 

separate and distinct section of, or an 

addendum to, the certification, and 

must be clearly titled, dated and signed 

by the certifying physician. 

(A) The non-physician practitioner 

performing the face-to-face encounter 

must document the clinical findings of 

that face-to-face patient encounter and 

communicate those findings to the 

certifying physician. 

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

occurred within 30 days of the start of 

care but is not related to the primary 

reason the patient requires home health 

services, or the patient has not seen the 

certifying physician or allowed nonphysician practitioner within the 30 

days prior to the start of the home 

health episode, the certifying physician 

or non-physician practitioner must have 

a face to face encounter with the patient 

within two weeks of the start of the 

home health care. 

(C) The face-to-face patient encounter 

may occur through telehealth, in 

compliance with Section 1834(m) of the 

Act and subject to the list of payable 

Medicare telehealth services established 

by the applicable physician fee schedule 

regulation. 

(D) To assure clinical correlation 

between the face-to-face patient 

encounter and the associated home 

health episode of care, the physician 

responsible for certifying the patient for 

home care must document the face-toface encounter on the certification itself, 

or as an addendum to the certification 

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

this section), that the condition for 

which the patient was being treated in 

the face-to-face patient encounter is 

related to the primary reason the patient 

requires home health services, and why 

the clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

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

of this chapter respectively. The 

documentation must be clearly titled, 

dated and signed by the certifying 

physician. 

(2) Timing & signature. The 

certification of need for home health 

services must be obtained at the time 

the plan of care is established or as soon 

thereafter as possible and must be 

signed and dated by the physician who 

establishes the plan. 

(b) * * * 

(1) Timing and signature of 

recertification. Recertification is 

required at least every 60 days, 

preferably at the time the plan is 

reviewed, and must be signed and dated 

by the physician who reviews the plan 

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of care. The recertification is required at 

least every 60 days when there is a— 

* * * * * 

(d) Limitation of the performance of 

physician certification and plan of care 

functions. The need for home health 

services to be provided by an HHA may 

not be certified or recertified, and a plan 

of care may not be established and 

reviewed, by any physician who has a 

financial relationship as defined in 

§ 411.354 of this chapter, with that 

HHA, unless the physician’s 

relationship meets one of the exceptions 

in section 1877 of the Act, which sets 

forth general exceptions to the referral 

prohibition related to both ownership/ 

investment and compensation; 

exceptions to the referral prohibition 

related to ownership or investment 

interests; and exceptions to the referral 

prohibition related to compensation 

arrangements. Non-physician 

practitioners would be precluded from 

performing a face-to-face encounter for 

the purpose of informing the certifying 

physician, as described in sections 1814 

and 1835 of the Act, if the nonphysician practitioner is an employee of 

the HHA, as defined by Section 210(j) of 

the Act. 

7. Amend § 424.502 by adding the 

definition of ‘‘Change in majority 

ownership’’ to read as follows: 

§ 424.502 Definitions. 

* * * * * 

Change in majority ownership occurs 

when an individual or organization 

acquires more than 50 percent interest 

in an HHA during the 36 following the 

initial enrollment into the Medicare 

program or a change of ownership 

(including asset sale, stock transfer, 

merger, or consolidation). This includes 

an individual or organization that 

acquires majority ownership in an HHA 

through the cumulative effect of asset 

sales, stock transfers, consolidations, 

mergers during a 36 month period. 

* * * * * 

8. Section 424.510 is amended by 

adding paragraph (d)(9) to read as 

follows: 

§ 424.510 Requirements for enrolling in 

the Medicare program. 

* * * * * 

(d) * * * 

(9) In order to obtain enrollment and 

to maintain enrollment for the first three 

months after Medicare billing privileges 

are conveyed, a home health provider 

must satisfy the home health ‘‘initial 

reserve operating funds’’ requirement as 

set forth in § 489.28 of this chapter. 

* * * * * 

9. Section 424.530 is amended by 

adding paragraph (a)(8) to read as 

follows: 

§ 424.530 Denial of enrollment in the 

Medicare program. 

(a) * * * 

(8) Initial reserve operating funds. (i) 

CMS or its designated Medicare 

contractor may deny Medicare billing 

privileges if within 30 days of a CMS or 

Medicare contractor request, a home 

health agency cannot furnish supporting 

documentation which verifies that the 

HHA meets the initial reserve operating 

funds requirement found in 42 CFR 

489.28(a). 

(ii) CMS may deny Medicare billing 

privileges upon an HHA applicant’s 

failure to satisfy the initial reserve 

operating funds requirement found in 

42 CFR 489.28(a) 

* * * * * 

10. Section 424.535 is amended by 

adding paragraph (a)(11) to read as 

follows: 

§ 424.535 Revocation of enrollment and 

billing privileges in the Medicare program. 

(a) * * * 

(11) Initial reserve operating funds. 

CMS or its designated Medicare 

contractor may revoke the Medicare 

billing privileges of a home health 

agency (HHA) and the corresponding 

provider agreement if within 30 days of 

a CMS or Medicare contractor request, 

the HHA cannot furnish supporting 

documentation verifying that the HHA 

meets the initial reserve operating funds 

requirement found in 42 CFR 489.28(a). 

* * * * * 

11. Section 424.550 is amended by 

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

read as follows: 

§ 424.550 Prohibitions on the sale or 

transfer of billing privileges. 

(b) * * * 

(1) Unless an exception in paragraph 

(b)(2) of this section applies, if there is 

a change in majority ownership of a 

home health agency by sale (including 

asset sales, stock transfers, mergers, 

consolidations) within 36 months after 

the effective date of the HHA’s 

enrollment in Medicare, the provider 

agreement and Medicare billing 

privileges do not convey to the new 

owner. The prospective provider/owner 

of the HHA must instead: 

(i) Enroll in the Medicare program as 

a new HHA under the provisions of 

§ 424.510. 

(ii) Obtain a State survey or an 

accreditation from an approved 

accreditation organization. 

(2)(i) A publicly-traded company is 

acquiring another HHA and both 

entities have submitted cost reports to 

Medicare for the previous five (5) years. 

(ii) An HHA’s parent company is 

undergoing an internal corporate 

restructuring, such as a merger or 

consolidation, and the HHA has 

submitted a cost report to Medicare for 

the previous five (5) years. 

(iii) The owners of an existing HHA 

decide to change the existing business 

structure (for example, partnership to a 

limited liability corporation or sole 

proprietorship to subchapter S 

corporation), the individual owners 

remain the same, and there is no change 

in majority ownership. 

(iv) The death of an owner who owns 

49 percent or less interest in an HHA 

(where several individuals and/or 

organizations are co-owners of an HHA 

and one of the owners dies). 

* * * * * 

PART 484—HOME HEALTH SERVICES 

12. The authority citation for part 484 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395(hh)). 

Subpart E—Prospective Payment 

System for HHAs 

13. Revise § 484.250 to read as 

follows: 

§ 484.250 Patient assessment data. 

(a) An HHA must submit to CMS the 

OASIS–C data described at § 484.55 

(b)(1) and Home Health Care CAHPS 

data in order for CMS to administer the 

payment rate methodologies described 

in §§ 484.215, 484.230, and 484.235, 

and meet the quality reporting 

requirements of section 1895(b)(3)(B)(v) 

of the Act. 

(b) An HHA that has less than 60 

eligible unique HHCAHPS patients 

annually must submit to CMS their total 

HHCAHPS patient count to CMS in 

order to be exempt from the HHCAHPS 

reporting requirements. 

(c) An HHA must contract with an 

approved, independent HHCAHPS 

survey vendor to administer the 

HHCAHPS on its behalf. 

(1) CMS approves an HHCAHPS 

survey vendor if such applicant has 

been in business for a minimum of three 

years and has conducted surveys of 

individuals and samples for at least two 

years. For HHCAHPS, a ‘‘survey of 

individuals’’ is defined as the collection 

of data from at least 600 individuals 

selected by statistical sampling methods 

and the data collected are used for 

statistical purposes. All applicants that 

meet these requirements will be 

approved by CMS. 

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(2) No organization, firm, or business 

that owns, operates, or provides staffing 

for a HHA is permitted to administer its 

own Home Health Care CAHPS 

(HHCAHPS) Survey or administer the 

survey on behalf of any other HHA in 

the capacity as an HHCAHPS survey 

vendor. Such organizations will not be 

approved by CMS as HHCAHPS survey 

vendors. 

PART 489—PROVIDER AGREEMENTS 

AND SUPPLIER APPROVAL 

14. The authority citation for part 489 

continues to read as follows: 

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

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

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

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

15. Amend § 489.28 by— 

A. Revising paragraph (a). 

B. Adding paragraph (c)(1). 

B. Adding and reserving paragraph 

(c)(2). 

C. Revising paragraph (g). 

The addition and revisions read as 

follows: 

§ 489.28 Special capitalization 

requirements for HHAs. 

(a) Basic rule. An HHA entering the 

Medicare program on or after January 1, 

1998, including a new HHA as a result 

of a change of ownership, if the change 

of ownership results in a new provider 

number being issued, must have 

available sufficient funds, which we 

term ‘‘initial reserve operating funds,’’ at 

the time of application submission and 

at all times during the enrollment 

process to operate the HHA for the three 

month period after Medicare billing 

privileges are conveyed by the Medicare 

contractor, exclusive of actual or 

projected accounts receivable from 

Medicare. 

* * * * * 

(c) * * * 

(1) In selecting the comparative HHAs 

as described in this paragraph (c), the 

CMS contractor shall only select HHAs 

that have provided cost reports to 

Medicare. 

(2)[Reserved] 

* * * * * 

(g) Billing privileges. (1) CMS may 

deny Medicare billing privileges to an 

HHA unless the HHA meets the initial 

reserve operating funds requirement of 

this section. 

(2) CMS may revoke the Medicare 

billing privileges of an HHA that fails to 

meet the initial reserve operations funds 

requirements of this section within 

three months of receiving its billing 

privileges. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 

93.774, Medicare—Supplementary 

Medical Insurance Program) 

Dated: May 18, 2010. 

Marilyn Tavenner, 

Acting Administrator and Chief Operating 

Officer, Centers for Medicare & Medicaid 

Services. 

Approved: July 14, 2010. 

Kathleen Sebelius, 

Secretary. 

Note: The following addenda will not be 

published in the Code of Federal Regulations. 

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