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[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)]
[Proposed Rules]
[Pages 25831-25886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10422]

[[Page 25831]]

Vol. 80

Tuesday,

No. 86

May 5, 2015

Part III

 Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Part 418

Medicare Program; FY 2016 Hospice Wage Index and Payment Rate Update 
and Hospice Quality Reporting Requirements; Proposed Rule

Federal Register / Vol. 80 , No. 86 / Tuesday, May 5, 2015 / Proposed 
Rules

[[Page 25832]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 418

[CMS-1629-P]
RIN 0938-AS39

Medicare Program; FY 2016 Hospice Wage Index and Payment Rate 
Update and Hospice Quality Reporting Requirements

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the hospice payment rates and 
the wage index for fiscal year (FY) 2016, including implementing the 
last year of the phase-out of the wage index budget neutrality 
adjustment factor (BNAF). This proposed rule also discusses recent 
hospice payment reform research and analyses and proposes to 
differentiate payments for routine home care (RHC) based on the 
beneficiary's length of stay and to implement a service intensity add-
on (SIA) payment for services provided in the last 7 days of a 
beneficiary's life, if certain criteria are met. In addition, this rule 
would implement changes to the aggregate cap calculation mandated by 
the Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act), align the cap accounting year for both the inpatient cap 
and the hospice aggregate cap with the federal fiscal year starting in 
FY 2017, make changes to the hospice quality reporting program, and 
would include a clarification regarding diagnosis reporting on the 
hospice claim.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 29, 2015.

ADDRESSES: In commenting, please refer to file code CMS-1629-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 ``Submit a 
comment'' instructions.
    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-1629-P, P.O. Box 8010, Baltimore, MD 
21244-8010.
    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-1629-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.

    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    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, call 
telephone number (410) 786-9994 in advance to schedule your arrival 
with one of our staff members.

    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Debra Dean-Whittaker, (410) 786-0848 
for questions regarding the CAHPS[supreg] Hospice Survey. Michelle 
Brazil, (410) 786-1648 for questions regarding the hospice quality 
reporting program. For general questions about hospice payment policy 
please send your inquiry via email to: hospicepolicy@cms.hhs.gov.

SUPPLEMENTARY INFORMATION:
    Wage index addenda will be available only through the internet on 
the CMS Web site at: (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/index.html.)
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Costs, Benefits, and Transfers
II. Background
    A. Hospice Care
    B. History of the Medicare Hospice Benefit
    C. Services Covered by the Medicare Hospice Benefit
    D. Medicare Payment for Hospice Care
    1. Omnibus Budget Reconciliation Act of 1989
    2. Balanced Budget Act of 1997
    3. FY 1998 Hospice Wage Index Final Rule
    4. FY 2010 Hospice Wage Index Final Rule
    5. The Affordable Care Act
    6. FY 2012 Hospice Wage Index Final Rule
    7. FY 2015 Hospice Rate Update Final Rule
    8. Impact Act of 2014
    E. Trends in Medicare Hospice Utilization
III. Provisions of the Proposed Rule
    A. Hospice Payment Reform: Research and Analyses
    1. Pre-Hospice Spending
    2. Non-Hospice Spending for Hospice Beneficiaries During an 
Election
    3. Live Discharge Rates
    B. Proposed Routine Home Care Rates and Service Intensity Add-On 
(SIA) Payment
    1. Background and Statutory Authority
    a. U-Shaped Payment Model
    b. Tiered Payment Model
    c. Visits During the Beginning and End of a Hospice Election
    2. Proposed Routine Home Care Rates
    3. Proposed Service Intensity Add-on Payment

[[Page 25833]]

    C. Proposed FY 2016 Hospice Wage Index and Rates Update
    1. Proposed FY 2016 Hospice Wage Index
    a. Background
    b. Elimination of the Wage Index Budget Neutrality Factor (BNAF)
    c. Proposed Implementation of New Labor Market Delineations
    2. Proposed Hospice Payment Update Percentage
    3. Proposed FY 2016 Hospice Payment Rates
    4. Hospice Aggregate Cap and the IMPACT Act of 2014
    D. Proposed Alignment of the Inpatient and Aggregate Cap 
Accounting Year with the Federal Fiscal Year
    1. Streamlined Method and Patient-by-Patient Proportional Method 
for Counting Beneficiaries to Determine Each Hospice's Aggregate Cap 
Amount
    2. Proposed Inpatient and Aggregate Cap Accounting Year 
Timeframe
    E. Proposed Updates to the Hospice Quality Reporting Program
    1. Background and Statutory Authority
    2. General Considerations Used for Selection of Quality Measures 
for the HQRP
    3. Proposed Policy for Retention on HQRP Measures Adopted for 
Previous Payment Determination
    4. Previously Adopted Measures for FY 2016 and FY 2017 Payment 
Determination
    5. HQRP Quality Measures and Concepts Under Consideration for 
Future Years
    6. Form, Manner, and Timing of Quality Data Submission
    a. Background
    b. Proposed Policy for New Facilities to Begin Submitting 
Quality Data
    c. Previously Finalized Data Submission Mechanism, Collection 
Timelines, and Submission Deadlines for the FY 2017 Payment 
Determination
    d. Proposed Data Submission Timelines and Requirements for FY 
2018 Payment Determination and Subsequent Years
    e. Proposed HQRP Data Submission and Compliance Thresholds for 
the FY 2018 Payment Determination and Subsequent Years
    7. HQRP Submission Exception and Extension Requirements for the 
FY 2017 Payment Determination and Subsequent Years
    8. Adoption of the CAHPS Hospice Survey for the FY 2017 Payment 
Determination
    a. Background Description of the Survey
    b. Participation Requirements to Meet Quality Reporting 
Requirements for the FY 2017 APU
    c. Participation Requirements to Meet Quality Reporting 
Requirements for the FY 2018 APU
    d. Vendor Participation Requirements for the FY 2017 APU Annual 
Payment Update
    9. Previously Finalized HQRP Reconsideration and Appeals 
Procedures for the FY 2016 Payment Determination and Subsequent 
Years
    10. Public Display of Quality Measures Data for HQRP
    11. Public Display of other Hospice Information
    F. Clarification Regarding Diagnosis Reporting on Hospice Claims
    1. Background
    2. Current Discussions About Hospice Vulnerabilities
    3. Medicare Hospice Eligibility Requirements
    4. Assessment of Conditions and Comorbidities Required by 
Regulation
    5. Clarification Regarding Diagnosis Reporting on Hospice Claims
IV. Collection of Information Requirements
V. Regulatory Impact Analysis
    A. Statement of Need
    B. Introduction
    C. Overall Impact
    1. Detailed Economic Analysis
    a. Effects on Hospices
    b. Hospice Size
    c. Geographic Location
    d. Type of Ownership
    e. Hospice Base
    f. Effects on Other Providers
    g. Effects on the Medicare and Medicaid Programs
    h. Alternatives Considered
    i. Accounting Statement
    j. Conclusion
    2. Regulatory Flexibility Act Analysis
    3. Unfunded Mandates Reform Act Analysis
VI. Federalism Analysis and Regulations Text

Acronyms

    Because of the many terms to which we refer by acronym in this 
proposed rule, we are listing the acronyms used and their corresponding 
meanings in alphabetical order below:
APU Annual Payment Update
ASPE Assistant Secretary of Planning and Evaluation
BBA Balanced Budget Act of 1997
BETOS Berenson-Eggers Types of Service
BIPA Benefits Improvement and Protection Act of 2000
BNAF Budget Neutrality Adjustment Factor
BLS Bureau of Labor Statistics
CAHPS[supreg] Consumer Assessment of Healthcare Providers and 
Systems
CBSA Core-Based Statistical Area
CCN CMS Certification Number
CCW Chronic Conditions Data Warehouse
CFR Code of Federal Regulations
CHC Continuous Home Care
CHF Congestive Heart Failure
CMS Centers for Medicare & Medicaid Services
COPD Chronic Obstructive Pulmonary Disease
CoPs Conditions of Participation
CPI Center for Program Integrity
CPI-U Consumer Price Index-Urban Consumers
CR Change Request
CVA Cerebral Vascular Accident
CWF Common Working File
CY Calendar Year
DME Durable Medical Equipment
DRG Diagnostic Related Group
ER Emergency Room
FEHC Family Evaluation of Hospice Care
FR Federal Register
FY Fiscal Year
GAO Government Accountability Office
GIP General Inpatient Care
HCFA Healthcare Financing Administration
HHS Health and Human Services
HIPPA Health Insurance Portability and Accountability Act
HIS Hospice Item Set
HQRP Hospice Quality Reporting Program
IACS Individuals Authorized Access to CMS Computer Services
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision, 
Clinical Modification
ICR Information Collection Requirement
IDG Interdisciplinary Group
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 
2014
IOM Institute of Medicine
IPPS Inpatient Prospective Payment System
IRC Inpatient Respite Care
LCD Local Coverage Determination
MAC Medicare Administrative Contractor
MAP Measure Applications Partnership
MedPAC Medicare Payment Advisory Commission
MFP Multifactor Productivity
MSA Metropolitan Statistical Area
MSS Medical Social Services
NHPCO National Hospice and Palliative Care Organization
NF Long Term Care Nursing Facility
NOE Notice of Election
NOTR Notice of Termination/Revocation
NP Nurse Practitioner
NPI National Provider Identifier
NQF National Quality Forum
OIG Office of the Inspector General
OACT Office of the Actuary
OMB Office of Management and Budget
PRRB Provider Reimbursement Review Board
PS&R Provider Statistical and Reimbursement Report
Pub. L Public Law
QAPI Quality Assessment and Performance Improvement
RHC Routine Home Care
RN Registered Nurse
SBA Small Business Administration
SEC Securities and Exchange Commission
SIA Service Intensity Add-on
SNF Skilled Nursing Facility
TEFRA Tax Equity and Fiscal Responsibility Act of 1982
TEP Technical Expert Panel
UHDDS Uniform Hospital Discharge Data Set
U.S.C. United States Code

I. Executive Summary for This Proposed Rule

A. Purpose

    This rule proposes updates to the payment rates for hospices for 
fiscal year (FY) 2016, as required under section 1814(i) of the Social 
Security Act (the Act) and reflects the final year of the 7-year Budget 
Neutrality Adjustment Factor (BNAF) phase-out finalized in the FY 2010 
Hospice Wage Index final rule (74 FR 39407). Our proposed update to 
payment rates for hospices also includes a proposal to

[[Page 25834]]

change the hospice wage index by incorporating the new Office of 
Management and Budget (OMB) core-based statistical area (CBSA) 
definitions, changes to the aggregate cap calculation required by 
section 1814(i)(2)(B)(ii) of the Act, and includes a proposal to align 
the cap accounting year for both the inpatient cap and the hospice 
aggregate cap with the federal fiscal year starting in FY 2017. In 
addition, in accordance with section 1814(i)(6)(D)(i) of the Act, this 
rule proposes to create two different payment rates for routine home 
care (RHC) that would result in a higher base payment rate for the 
first 60 days of hospice care and a reduced base payment rate days 61 
or over of hospice care. Also, in accordance with section 
1814(i)(6)(d)(i) of the Act, this rule proposes a service intensity 
add-on (SIA) payment that would result in an add-on payment equal to 
the Continuous Home Care (CHC) hourly payment rate multiplied by the 
amount of direct patient care provided by a registered nurse (RN) or 
social worker provided during the last 7 days of a beneficiary's life, 
if certain criteria are met. In addition, section 3004(c) of the 
Affordable Care Act established a quality reporting program for 
hospices. In accordance with section 1814(i)(5)(A) of the Act, starting 
in FY 2014, hospices that have failed to meet quality reporting 
requirements receive a 2 percentage point reduction to their payment 
update percentage. Although this proposed rule does not propose new 
quality measures, it provides updates on the hospice quality reporting 
program. Finally, this proposed rule includes a clarification regarding 
diagnosis reporting on the hospice claim form.

B. Summary of the Major Provisions

    Section III.A of this proposed rule provides an update on hospice 
payment reform research and analysis. As a result of the hospice 
payment reform research and analysis conducted over the past several 
years, some of which is described in section III.A of this proposed 
rule and in various technical reports available on the CMS Hospice 
Center Web page (http://www.cms.gov/Center/Provider-Type/Hospice-Center.html). Section III.B proposes to create two different payment 
rates for RHC that would result in a higher base payment rate for the 
first 60 days of hospice care and a reduced base payment rate for days 
61 or over of hospice care. Section III.B also proposes SIA payment, in 
addition to the per diem rate for the RHC level of care, that would 
result in an add-on payment equal to the CHC hourly payment rate 
multiplied by the amount of direct patient care provided by a RN or 
social worker that occurred during the last 7 days of a beneficiary's 
life, if certain criteria were met.
    In section III.C.1 of this rule, we propose to update the hospice 
wage index using a 50/50 blend of the existing CBSA designations and 
the new CBSA designations outlined in a February 28, 2013, OMB 
bulletin. Section III.C.2 of this rule implements year 7 of the 7-year 
BNAF phase-out finalized in the FY 2010 Hospice Wage Index final rule 
(74 FR 39407). In section III.C.3, we propose to update the hospice 
payment rates for FY 2016 by 1.8 percent. Section III.C.4 would 
implement changes mandated by the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act), in which the aggregate cap for 
accounting years that end after September 30, 2016 and before October 
1, 2025, would be updated by the hospice payment update rather than 
using the CPI-U. Specifically, the 2016 cap year, starting on November 
1, 2015 and ending on October 31, 2016, would be updated by the FY 2016 
percentage update for hospice care. In addition, in section III.D, we 
are proposing to align the cap accounting year for both the inpatient 
cap and the hospice aggregate cap with the fiscal year for FY 2017 and 
later. We believe that this would allow for the timely implementation 
of the IMPACT Act changes while better aligning the cap accounting year 
with the timeframe described in the IMPACT Act.
    In section III.E of this rule, we discuss updates to the hospice 
quality reporting program, including participation requirements for 
current year (CY) 2015 regarding the Consumer Assessment of Healthcare 
Providers and Systems (CAHPS[supreg]) Hospice Survey, and remind the 
hospice industry that last year we set the July 1, 2014 implementation 
date for the Hospice Item Set (HIS) and the January 1, 2015 
implementation date for the CAHPS[supreg] Hospice Survey. More than 
seven new quality measures will be derived from these tools; therefore, 
no new measures were proposed this year. Also, Section III.E of this 
rule will make changes related to the reconsideration process, 
extraordinary circumstance extensions or exemptions, hospice quality 
reporting program (HQRP) eligibility requirements for newly certified 
hospices and new data submission timeliness requirements and compliance 
thresholds. Finally, in Section III.F, we clarify that hospices must 
report all diagnoses of the beneficiary on the hospice claim as a part 
of the ongoing data collection efforts for possible future hospice 
refinements. We believe that reporting of all diagnoses on the hospice 
claim aligns with current coding guidelines as well as admission 
requirements for hospice certifications.

C. Summary of Impacts

                      Table 1--Impact Summary Table
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         Provision description                      Transfers
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FY 2016 Hospice Wage Index and Payment   The overall economic impact of
 Rate Update.                             this proposed rule is
                                          estimated to be $200 million
                                          in increased payments to
                                          hospices during FY 2016.
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II. Background

A. Hospice Care

    Hospice care is an approach to treatment that recognizes that the 
impending death of an individual warrants a change in the focus from 
curative care to palliative care for relief of pain and for symptom 
management. The goal of hospice care is to help terminally ill 
individuals continue life with minimal disruption to normal activities 
while remaining primarily in the home environment. A hospice uses an 
interdisciplinary approach to deliver medical, nursing, social, 
psychological, emotional, and spiritual services through use of a broad 
spectrum of professionals and other caregivers, with the goal of making 
the individual as physically and emotionally comfortable as possible. 
Hospice is compassionate patient and family-centered care for those who 
are terminally ill. It is a comprehensive, holistic approach to 
treatment that recognizes that the impending death of an individual 
necessitates a change from curative to palliative care.
    Medicare regulations define ``palliative care'' as ``patient and 
family-centered care that optimizes quality of life by anticipating, 
preventing, and treating suffering. Palliative care throughout the 
continuum of illness involves addressing physical, intellectual, 
emotional, social, and spiritual needs and to facilitate patient 
autonomy, access to information, and choice.'' (42 CFR 418.3) 
Palliative care is at the core of hospice philosophy and care 
practices, and is a critical component of the Medicare hospice benefit. 
See also Hospice Conditions of Participation final rule (73 FR 32088) 
(2008). The goal of palliative care in hospice is to improve the 
quality of life of individuals, and their families, facing the issues 
associated with a life-threatening illness through the

[[Page 25835]]

prevention and relief of suffering by means of early identification, 
assessment and treatment of pain and other issues. This is achieved by 
the hospice interdisciplinary team working with the patient and family 
to develop a comprehensive care plan focused on coordinating care 
services, reducing unnecessary diagnostics or ineffective therapies, 
and offering ongoing conversations with individuals and their families 
about changes in their condition. It is expected that this 
comprehensive care plan will shift over time to meet the changing needs 
of the patient and family as the individual approaches the end of life.
    Medicare hospice care is palliative care for individuals with a 
prognosis of living 6 months or less if the terminal illness runs its 
normal course. When an individual is terminally ill, many health 
problems are brought on by underlying condition(s), as bodily systems 
are interdependent. In the June 5, 2008 Hospice Conditions of 
Participation final rule (73 FR 32088), we stated that ``the medical 
director must consider the primary terminal condition, related 
diagnoses, current subjective and objective medical findings, current 
medication and treatment orders, and information about unrelated 
conditions when considering the initial certification of the terminal 
illness.'' As referenced in our regulations at Sec.  418.22(b)(1), to 
be eligible for Medicare hospice services, the patient's attending 
physician (if any) and the hospice medical director must certify that 
the individual is ``terminally ill,'' as defined in section 
1861(dd)(3)(A) of the Social Security Act (the Act) and our regulations 
at Sec.  418.3 that is, the individual's prognosis is for a life 
expectancy of 6 months or less if the terminal illness runs its normal 
course. The certification of terminal illness must include a brief 
narrative explanation of the clinical findings that supports a life 
expectancy of 6 months or less as part of the certification and 
recertification forms, as set out at Sec.  418.22(b)(3).
    The goal of hospice care is to make the hospice patient as 
physically and emotionally comfortable as possible, with minimal 
disruption to normal activities, while remaining primarily in the home 
environment. Hospice care uses an interdisciplinary approach to deliver 
medical, nursing, social, psychological, emotional, and spiritual 
services through the use of a broad spectrum of professional and other 
caregivers and volunteers. While the goal of hospice care is to allow 
for the individual to remain in his or her home environment, 
circumstances during the end-of-life may necessitate short-term 
inpatient admission to a hospital, skilled nursing facility (SNF), or 
hospice facility for procedures necessary for pain control or acute or 
chronic symptom management that cannot be managed in any other setting. 
These acute hospice care services are to ensure that any new or 
worsening symptoms are intensively addressed so that the individual can 
return to his or her home environment at a home level of care. Short-
term, intermittent, inpatient respite services are also available to 
the family of the hospice patient when needed to relieve the family or 
other caregivers. Additionally, an individual can receive continuous 
home care during a period of crisis in which an individual requires 
primarily continuous nursing care to achieve palliation or management 
of acute medical symptoms so that the individual can remain at home. 
Continuous home care may be covered on a continuous basis for as much 
as 24 hours a day, and these periods must be predominantly nursing care 
in accordance with our regulations at Sec.  418.204. A minimum of 8 
hours of nursing, or nursing and aide, care must be furnished on a 
particular day to qualify for the continuous home care rate (Sec.  
418.302(e)(4)).
    Hospices are expected to comply with all civil rights laws, 
including the provision of auxiliary aids and services to ensure 
effective communication with patients or patient care representatives 
with disabilities consistent with Section 504 of the Rehabilitation Act 
of 1973 and the Americans with Disabilities Act, and to provide 
language access for such persons who are limited in English 
proficiency, consistent with Title VI of the Civil Rights Act of 1964. 
Further information about these requirements may be found at http://www.hhs.gov/ocr/civilrights.

B. History of the Medicare Hospice Benefit

    Before the creation of the Medicare hospice benefit, hospice 
programs were originally operated by volunteers who cared for the 
dying. During the early development stages of the Medicare hospice 
benefit, hospice advocates were clear that they wanted a Medicare 
benefit that provided all-inclusive care for terminally-ill 
individuals, provided pain relief and symptom management, and offered 
the opportunity to die with dignity in the comfort of one's home rather 
than in an institutional setting.\1\ As stated in the August 22, 1983 
proposed rule entitled ``Medicare Program; Hospice Care'' (48 FR 
38146), ``the hospice experience in the United States has placed 
emphasis on home care. It offers physician services, specialized 
nursing services, and other forms of care in the home to enable the 
terminally ill individual to remain at home in the company of family 
and friends as long as possible.'' The concept of a patient 
``electing'' the hospice benefit and being certified as terminally ill 
were two key components of the legislation responsible for the creation 
of the Medicare Hospice Benefit (section 122 of the Tax Equity and 
Fiscal Responsibility Act of 1982 (TEFRA), (Pub. L. 97-248)). Section 
122 of TEFRA created the Medicare Hospice benefit, which was 
implemented on November 1, 1983. Under sections 1812(d) and 1861(dd) of 
the Act, codified at 42 U.S.C. 1395d(d) and 1395x(dd), we provide 
coverage of hospice care for terminally ill Medicare beneficiaries who 
elect to receive care from a Medicare-certified hospice. Our 
regulations at Sec.  418.54(c) stipulate that the comprehensive hospice 
assessment must identify the patient's physical, psychosocial, 
emotional, and spiritual needs related to the terminal illness and 
related conditions, and address those needs in order to promote the 
hospice patient's well-being, comfort, and dignity throughout the dying 
process. The comprehensive assessment must take into consideration the 
following factors: The nature and condition causing admission 
(including the presence or lack of objective data and subjective 
complaints); complications and risk factors that affect care planning; 
functional status; imminence of death; and severity of symptoms (Sec.  
418.54(c)). The Medicare hospice benefit requires the hospice to cover 
all reasonable and necessary palliative care related to the terminal 
prognosis, as described in the patient's plan of care. The December 16, 
1983 Hospice final rule (48 FR 56008) requires hospices to cover care 
for interventions to manage pain and symptoms. Additionally, the 
hospice Conditions of Participation (CoP) at Sec.  418.56(c) require 
that the hospice must provide all reasonable and necessary services for 
the palliation and management of the terminal illness, related 
conditions and interventions to manage pain and symptoms. Therapy and 
interventions must be assessed and managed in terms of providing 
palliation and comfort without undue symptom burden for the hospice 
patient

[[Page 25836]]

or family.\2\ In the December 16, 1983 Hospice final rule (48 FR 56010 
through 56011), regarding what is related versus unrelated to the 
terminal illness, we stated: ``. . .we believe that the unique physical 
condition of each terminally ill individual makes it necessary for 
these decisions to be made on a case-by-case basis. It is our general 
view that hospices are required to provide virtually all the care that 
is needed by terminally ill patients.'' Therefore, unless there is 
clear evidence that a condition is unrelated to the terminal prognosis; 
all conditions are considered to be related to the terminal illness. It 
is also the responsibility of the hospice physician to document why a 
patient's medical needs will be unrelated to the terminal prognosis.
---------------------------------------------------------------------------

    \1\ Connor, Stephen. (2007). Development of Hospice and 
Palliative Care in the United States. OMEGA. 56(1), p89-99.
    \2\ Paolini, DO, Charlotte. (2001). Symptoms Management at End 
of Life. JAOA. 101(10). p609-615.
---------------------------------------------------------------------------

    As stated in the December 16,1983 Hospice final rule, the 
fundamental premise upon which the hospice benefit was designed was the 
``revocation'' of traditional curative care and the ``election'' of 
hospice care for end-of-life symptom management and maximization of 
quality of life (48 FR 56008). After electing hospice care, the patient 
typically returns to the home from an institutionalized setting or 
remains in the home, to be surrounded by family and friends, and to 
prepare emotionally and spiritually for death while receiving expert 
symptom management and other supportive services. Election of hospice 
care also includes waiving the right to Medicare payment for curative 
treatment for the terminal prognosis, and instead receiving palliative 
care to manage pain or symptoms.
    The benefit was originally designed to cover hospice care for a 
finite period of time that roughly corresponded to a life expectancy of 
6 months or less. Initially, beneficiaries could receive three election 
periods: Two 90-day periods and one 30-day period. Currently, Medicare 
beneficiaries can elect hospice care for two 90-day periods and an 
unlimited number of subsequent 60-day periods; however, the expectation 
remains that beneficiaries have a life expectancy of 6 months or less 
if the terminal illness runs its normal course.

C. Services Covered by the Medicare Hospice Benefit

    One requirement for coverage under the Medicare Hospice benefit is 
that hospice services must be reasonable and necessary for the 
palliation and management of the terminal illness and related 
conditions. Section 1861(dd)(1) of the Act establishes the services 
that are to be rendered by a Medicare certified hospice program. These 
covered services include: Nursing care; physical therapy; occupational 
therapy; speech-language pathology therapy; medical social services; 
home health aide services (now called hospice aide services); physician 
services; homemaker services; medical supplies (including drugs and 
biologics); medical appliances; counseling services (including dietary 
counseling); short-term inpatient care (including both respite care and 
procedures necessary for pain control and acute or chronic symptom 
management) in a hospital, nursing facility, or hospice inpatient 
facility; continuous home care during periods of crisis and only as 
necessary to maintain the terminally ill individual at home; and any 
other item or service which is specified in the plan of care and for 
which payment may otherwise be made under Medicare, in accordance with 
Title XVIII of the Act.
    Section 1814(a)(7)(B) of the Act requires that a written plan for 
providing hospice care to a beneficiary who is a hospice patient be 
established before care is provided by, or under arrangements made by, 
that hospice program and that the written plan be periodically reviewed 
by the beneficiary's attending physician (if any), the hospice medical 
director, and an interdisciplinary group (described in section 
1861(dd)(2)(B) of the Act). The services offered under the Medicare 
hospice benefit must be available, as needed, to beneficiaries 24 hours 
a day, 7 days a week (section 1861(dd)(2)(A)(i) of the Act). Upon the 
implementation of the hospice benefit, the Congress expected hospices 
to continue to use volunteer services, though these services are not 
reimbursed by Medicare (see Section 1861(dd)(2)(E) of the Act and (48 
FR 38149)). As stated in the August 22, 1983 Hospice proposed rule, the 
hospice interdisciplinary group should be comprised of paid hospice 
employees as well as hospice volunteers (48 FR 38149). This expectation 
supports the hospice philosophy of holistic, comprehensive, 
compassionate, end-of-life care.
    Before the Medicare hospice benefit was established, the Congress 
requested a demonstration project to test the feasibility of covering 
hospice care under Medicare. The National Hospice Study was initiated 
in 1980 through a grant sponsored by the Robert Wood Johnson and John 
A. Hartford Foundations and CMS (then, the Health Care Financing 
Administration (HCFA)). The demonstration project was conducted between 
October 1980 and March 1983. The project summarized the hospice care 
philosophy and principles as the following:
     Patient and family know of the terminal condition.
     Further medical treatment and intervention are indicated 
only on a supportive basis.
     Pain control should be available to patients as needed to 
prevent rather than to just ameliorate pain.
     Interdisciplinary teamwork is essential in caring for 
patient and family.
     Family members and friends should be active in providing 
support during the death and bereavement process.
     Trained volunteers should provide additional support as 
needed.
    The cost data and the findings on what services hospices provided 
in the demonstration project were used to design the Medicare hospice 
benefit. The identified hospice services were incorporated into the 
service requirements under the Medicare hospice benefit. Importantly, 
in the August 22, 1983 Hospice proposed rule, we stated ``the hospice 
benefit and the resulting Medicare reimbursement is not intended to 
diminish the voluntary spirit of hospices'' (48 FR 38149).

D. Medicare Payment for Hospice Care

    Sections 1812(d), 1813(a)(4), 1814(a)(7), 1814(i), and 1861(dd) of 
the Act, and our regulations in part 418, establish eligibility 
requirements, payment standards and procedures, define covered 
services, and delineate the conditions a hospice must meet to be 
approved for participation in the Medicare program. Part 418, subpart 
G, provides for a per diem payment in one of four prospectively-
determined rate categories of hospice care (RHC, CHC, inpatient respite 
care, and general inpatient care), based on each day a qualified 
Medicare beneficiary is under hospice care (once the individual has 
elected). This per diem payment is to include all of the hospice 
services needed to manage the beneficiaries' care, as required by 
section 1861(dd)(1) of the Act. There has been little change in the 
hospice payment structure since the benefit's inception. The per diem 
rate based on level of care was established in 1983, and this payment 
structure remains today with some adjustments, as noted below:
1. Omnibus Budget Reconciliation Act of 1989
    Section 6005(a) of the Omnibus Budget Reconciliation Act of 1989 
(Pub. L. 101-239) amended section 1814(i)(1)(C) of the Act and provided 
for the following two changes in the

[[Page 25837]]

methodology concerning updating the daily payment rates: (1) Effective 
January 1, 1990, the daily payment rates for RHC and other services 
included in hospice care were increased to equal 120 percent of the 
rates in effect on September 30, 1989; and (2) the daily payment rate 
for RHC and other services included in hospice care for fiscal years 
(FYs) beginning on or after October 1, 1990, were the payment rates in 
effect during the previous Federal fiscal year increased by the 
hospital market basket percentage increase.
2. Balanced Budget Act of 1997
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 
105-33) amended section 1814(i)(1)(C)(ii)(VI) of the Act to establish 
updates to hospice rates for FYs 1998 through 2002. Hospice rates were 
updated by a factor equal to the hospital market basket percentage 
increase, minus 1 percentage point. Payment rates for FYs from 2002 
have been updated according to section 1814(i)(1)(C)(ii)(VII) of the 
Act, which states that the update to the payment rates for subsequent 
FYs will be the hospital market basket percentage increase for the FY. 
The Act requires us to use the inpatient hospital market basket to 
determine hospice payment rates.
3. FY 1998 Hospice Wage Index Final Rule
    In the August 8, 1997 FY 1998 Hospice Wage Index final rule (62 FR 
42860), we implemented a new methodology for calculating the hospice 
wage index based on the recommendations of a negotiated rulemaking 
committee. The original hospice wage index was based on 1981 Bureau of 
Labor Statistics hospital data and had not been updated since 1983. In 
1994, because of disparity in wages from one geographical location to 
another, the Hospice Wage Index Negotiated Rulemaking Committee was 
formed to negotiate a new wage index methodology that could be accepted 
by the industry and the government. This Committee was comprised of 
representatives from national hospice associations; rural, urban, large 
and small hospices, and multi-site hospices; consumer groups; and a 
government representative. The Committee decided that in updating the 
hospice wage index, aggregate Medicare payments to hospices would 
remain budget neutral to payments calculated using the 1983 wage index, 
to cushion the impact of using a new wage index methodology. To 
implement this policy, a Budget Neutrality Adjustment Factor (BNAF) 
will be computed and applied annually to the pre-floor, pre-
reclassified hospital wage index when deriving the hospice wage index, 
subject to a wage index floor.
4. FY 2010 Hospice Wage Index Final Rule
    Inpatient hospital pre-floor and pre-reclassified wage index 
values, as described in the August 8, 1997 Hospice Wage Index final 
rule, are subject to either a budget neutrality adjustment or 
application of the wage index floor. Wage index values of 0.8 or 
greater are adjusted by the (BNAF). Starting in FY 2010, a 7-year 
phase-out of the BNAF began (August 6, 2009 FY 2010 Hospice Wage Index 
final rule, (74 FR 39384)), with a 10 percent reduction in FY 2010, an 
additional 15 percent reduction for a total of 25 percent in FY 2011, 
an additional 15 percent reduction for a total 40 percent reduction in 
FY 2012, an additional 15 percent reduction for a total of 55 percent 
in FY 2013, and an additional 15 percent reduction for a total 70 
percent reduction in FY 2014. The phase-out will continue with an 
additional 15 percent reduction for a total reduction of 85 percent in 
FY 2015, and an additional 15 percent reduction for complete 
elimination in FY 2016. We note that the BNAF is an adjustment which 
increases the hospice wage index value. Therefore, the BNAF reduction 
is a reduction in the amount of the BNAF increase applied to the 
hospice wage index value. It is not a reduction in the hospice wage 
index value or in the hospice payment rates.
5. The Affordable Care Act
    Starting with FY 2013 (and in subsequent FYs), the market basket 
percentage update under the hospice payment system referenced in 
sections 1814(i)(1)(C)(ii)(VII) and 1814(i)(1)(C)(iii) of the Act will 
be annually reduced by changes in economy-wide productivity, as 
specified in section 1886(b)(3)(B)(xi)(II) of the Act, as amended by 
section 3132(a) of the Patient Protection and Affordable Care Act (Pub. 
L. 111-148) as amended by the Health Care and Education Reconciliation 
Act (Pub. L. 111-152) (collectively referred to as the Affordable Care 
Act)). In FY 2013 through FY 2019, the market basket percentage update 
under the hospice payment system will be reduced by an additional 0.3 
percentage point (although for FY 2014 to FY 2019, the potential 0.3 
percentage point reduction is subject to suspension under conditions as 
specified in section 1814(i)(1)(C)(v) of the Act).
    In addition, sections 1814(i)(5)(A) through (C) of the Act, as 
amended by section 3132(a) of the Affordable Care Act, require hospices 
to begin submitting quality data, based on measures to be specified by 
the Secretary of the Department of Health and Human Services (the 
Secretary), for FY 2014 and subsequent FYs. Beginning in FY 2014, 
hospices which fail to report quality data will have their market 
basket update reduced by 2 percentage points.
    Section 1814(a)(7)(D)(i) of the Act was amended by section 
3132(b)(2)(D)(i) of the Affordable Care Act, and requires, effective 
January 1, 2011, that a hospice physician or nurse practitioner have a 
face-to-face encounter with the beneficiary to determine continued 
eligibility of the beneficiary's hospice care prior to the 180th-day 
recertification and each subsequent recertification, and to attest that 
such visit took place. When implementing this provision, we finalized 
in the CY 2011 Home Health Prospective Payment System final rule (75 FR 
70435) that the 180th-day recertification and subsequent 
recertification's corresponded to the beneficiary's third or subsequent 
benefit periods. Further, section 1814(i)(6) of the Act, as amended by 
section 3132(a)(1)(B) of the Affordable Care Act, authorizes the 
Secretary to collect additional data and information determined 
appropriate to revise payments for hospice care and other purposes. The 
types of data and information suggested in the Affordable Care Act 
would capture accurate resource utilization, which could be collected 
on claims, cost reports, and possibly other mechanisms, as the 
Secretary determines to be appropriate. The data collected may be used 
to revise the methodology for determining the payment rates for RHC and 
other services included in hospice care, no earlier than October 1, 
2013, as described in section 1814(i)(6)(D) of the Act. In addition, we 
are required to consult with hospice programs and the Medicare Payment 
Advisory Commission (MedPAC) regarding additional data collection and 
payment revision options.
6. FY 2012 Hospice Wage Index Final Rule
    When the Medicare Hospice benefit was implemented, the Congress 
included an aggregate cap on hospice payments, which limits the total 
aggregate payments any individual hospice can receive in a year. The 
Congress stipulated that a ``cap amount'' be computed each year. The 
cap amount was set at $6,500 per beneficiary when first enacted in 1983 
and is adjusted annually by the change in the medical

[[Page 25838]]

care expenditure category of the consumer price index for urban 
consumers from March 1984 to March of the cap year (section 
1814(i)(2)(B) of the Act). The cap year is defined as the period from 
November 1st to October 31st. As we stated in the August 4, 2011 FY 
2012 Hospice Wage Index final rule (76 FR 47308 through 47314) for the 
2012 cap year and subsequent cap years, the hospice aggregate cap will 
be calculated using the patient-by-patient proportional methodology, 
within certain limits. We will allow existing hospices the option of 
having their cap calculated via the original streamlined methodology, 
also within certain limits. New hospices will have their cap 
determinations calculated using the patient-by-patient proportional 
methodology. The patient-by-patient proportional methodology and the 
streamlined methodology are two different methodologies for counting 
beneficiaries when calculating the hospice aggregate cap. A detailed 
explanation of these methods is found in the August 4, 2011 FY 2012 
Hospice Wage Index final rule (76 FR 47308 through 47314). If a 
hospice's total Medicare reimbursement for the cap year exceeded the 
hospice aggregate cap, then the hospice must repay the excess back to 
Medicare.
7. FY 2015 Hospice Rate Update Final Rule
    When electing hospice, a beneficiary waives Medicare coverage for 
any care for the terminal illness and related conditions except for 
services provided by the designated hospice and attending physician. A 
hospice is to file a Notice of Election (NOE) as soon as possible to 
establish the hospice election within the claims processing system. 
Late filing of the NOE can result in inaccurate benefit period data and 
leaves Medicare vulnerable to paying non-hospice claims related to the 
terminal illness and related conditions and beneficiaries possibly 
liable for any cost-sharing associated costs. The FY 2015 Hospice Rate 
Update final rule (79 FR 50452) finalized a requirement that requires 
the NOE be filed within 5 calendar days after the effective date of 
hospice election. If the NOE is filed beyond this 5 day period, hospice 
providers are liable for the services furnished during the days from 
the effective date of hospice election to the date of NOE filing (79 FR 
50454, 50474). Similar to the NOE, the claims processing system must be 
notified of a beneficiary's discharge from hospice or hospice benefit 
revocation. This update to the beneficiary's status allows claims from 
non-hospice providers to process and be paid. Upon live discharge or 
revocation, the beneficiary immediately resumes the Medicare coverage 
that had been waived when he or she elected hospice. The FY 2015 
Hospice Rate Update final rule also finalized a requirement that 
requires hospices to file a notice of termination/revocation within 5 
calendar days of a beneficiary's live discharge or revocation, unless 
the hospices have already filed a final claim. This requirement helps 
to protect beneficiaries from delays in accessing needed care (79 FR 
50509).
    A hospice ``attending physician'' is described by the statutory and 
regulatory definitions as a medical doctor, osteopath, or nurse 
practitioner whom the patient identifies, at the time of hospice 
election, as having the most significant role in the determination and 
delivery of his or her medical care. We received reports of problems 
with the identification of the patient's designated attending physician 
and a third of hospice patients had multiple providers submit Part B 
claims as the ``attending physician'' using a modifier. The FY 2015 
Hospice Rate Update final rule finalized a requirement that the 
election form must include the beneficiary's choice of attending 
physician and that the beneficiary provide the hospice with a signed 
document when he or she chooses to change attending physicians (79 FR 
50479).
    Hospice providers are required to begin using a Hospice Experience 
of Care Survey for informal caregivers of hospice patients surveyed in 
2015. The FY 2015 Hospice Rate Update final rule provided background 
and a description of the development of the Hospice Experience of Care 
Survey, including the model of survey implementation, the survey 
respondents, eligibility criteria for the sample, and the languages in 
which the survey is offered. The FY 2015 Hospice Rate Update final rule 
also outlined participation requirements for CY 2015 and discussed 
vendor oversight activities and the reconsideration and appeals process 
(79 FR 50496).
    Finally, the FY 2015 Hospice Rate Update final rule requires 
providers to complete their aggregate cap determination within 5 months 
after the cap year, but not sooner than 3 months after the end of the 
cap year, and remit any overpayments. Those hospices that do not submit 
their aggregate cap determinations will have their payments suspended 
until the determination is completed and received by the Medicare 
Administrative Contractor (MAC) (79 FR 50503).
8. IMPACT Act of 2014
    The Improving Medicare Post-Acute Care Transformation Act (IMPACT 
Act) of 2014 became law on October 6, 2014 (Pub. L. 113-185). Section 
3(a) of the IMPACT Act mandates that all Medicare certified hospices be 
surveyed every 3 years beginning April 6, 2015 and ending September 30, 
2025, as it was found that surveys of hospices were being performed on 
an infrequent basis. In addition, the IMPACT Act also implements a 
provision set forth in the Affordable Care Act that requires medical 
review of hospice cases involving patients receiving more than 180 days 
care in select hospices that show a preponderance of such patients, and 
the IMPACT Act contains a new provision mandating that the aggregate 
cap amount for accounting years that end after September 30, 2016, and 
before October 1, 2025 be updated by the hospice payment update rather 
than using the consumer price index for urban consumers (CPI-U) for 
medical care expenditures. Specifically, the 2016 cap year, which 
starts on November 1, 2015 and ends on October 31, 2016, will be 
updated by the FY 2016 payment update percentage for hospice care. In 
accordance with the statute, we will continue to do this through any 
cap year ending before October 1, 2025 (that is, through cap year 
2025).

E. Trends in Medicare Hospice Utilization

    Since the implementation of the hospice benefit in 1983, and 
especially within the last decade, there has been substantial growth in 
hospice utilization. The number of Medicare beneficiaries receiving 
hospice services has grown from 513,000 in FY 2000 to over 1.3 million 
in FY 2013. Similarly, Medicare hospice expenditures have risen from 
$2.8 billion in FY 2000 to an estimated $15.3 billion in FY 2013. Our 
Office of the Actuary (OACT) projects that hospice expenditures are 
expected to continue to increase, by approximately 8 percent annually, 
reflecting an increase in the number of Medicare beneficiaries, more 
beneficiary awareness of the Medicare Hospice Benefit for end-of-life 
care, and a growing preference for care provided in home and community-
based settings. However, this increased spending is partly due to an 
increased average lifetime length of stay for beneficiaries, from 54 
days in 2000 to 98.5 days in FY 2013, an increase of 82 percent.
    There have also been changes in the diagnosis patterns among 
Medicare hospice enrollees. Specifically, there were notable increases 
between 2002

[[Page 25839]]

and 2007 in neurologically-based diagnoses, including various dementia 
diagnoses. Additionally, there have been significant increases in the 
use of non-specific, symptom-classified diagnoses, such as ``debility'' 
and ``adult failure to thrive.'' In FY 2013, ``debility'' and ``adult 
failure to thrive'' were the first and sixth most common hospice 
diagnoses, respectively, accounting for approximately 14 percent of all 
diagnoses. Effective October 1, 2014, hospice claims were returned to 
the provider if ``debility'' and ``adult failure to thrive'' were coded 
as the principal hospice diagnosis as well as other ICD-9-CM codes that 
are not permissible as principal diagnosis codes per ICD-9-CM coding 
guidelines. We reminded the hospice industry that this policy would go 
into effect and claims would start to be returned October 1, 2014 in 
the FY 2015 hospice rate update final rule. As a result of this, there 
has been a shift in coding patterns on hospice claims. For FY 2014, the 
most common hospice principal diagnoses were Alzheimer's disease, 
Congestive Heart Failure, Lung Cancer, Chronic Airway Obstruction and 
Senile Dementia which constituted approximately 32 percent of all 
claims-reported principal diagnosis codes reported in FY 2014 (see 
Table 2 below).

             Table 2--The Top Twenty Principal Hospice Diagnoses, FY 2002, FY 2007, FY 2013, FY 2014
----------------------------------------------------------------------------------------------------------------
                                     ICD-9/Reported Principal
               Rank                          Diagnosis                   Count                  Percentage
----------------------------------------------------------------------------------------------------------------
                                     Year: FY 2002
----------------------------------------------------------------------------------------------------------------
1.................................  162.9 Lung Cancer.........                   73,769                       11
2.................................  428.0 Congestive Heart                       45,951                        7
                                     Failure.
3.................................  799.3 Debility Unspecified                   36,999                        6
4.................................  496 COPD..................                   35,197                        5
5.................................  331.0 Alzheimer's Disease.                   28,787                        4
6.................................  436 CVA/Stroke............                   26,897                        4
7.................................  185 Prostate Cancer.......                   20,262                        3
8.................................  783.7 Adult Failure To                       18,304                        3
                                     Thrive.
9.................................  174.9 Breast Cancer.......                   17,812                        3
10................................  290.0 Senile Dementia,                       16,999                        3
                                     Uncomp.
11................................  153.0 Colon Cancer........                   16,379                        2
12................................  157.9 Pancreatic Cancer...                   15,427                        2
13................................  294.8 Organic Brain Synd                     10,394                        2
                                     Nec.
14................................  429.9 Heart Disease                          10,332                        2
                                     Unspecified.
15................................  154.0 Rectosigmoid Colon                      8,956                        1
                                     Cancer.
16................................  332.0 Parkinson's Disease.                    8,865                        1
17................................  586 Renal Failure                             8,764                        1
                                     Unspecified.
18................................  585 Chronic Renal Failure                     8,599                        1
                                     (End 2005).
19................................  183.0 Ovarian Cancer......                    7,432                        1
20................................  188.9 Bladder Cancer......                    6,916                        1
----------------------------------------------------------------------------------------------------------------
                                     Year: FY 2007
----------------------------------------------------------------------------------------------------------------
1.................................  799.3 Debility Unspecified                   90,150                        9
2.................................  162.9 Lung Cancer.........                   86,954                        8
3.................................  428.0 Congestive Heart                       77,836                        7
                                     Failure.
4.................................  496 COPD..................                   60,815                        6
5.................................  783.7 Adult Failure To                       58,303                        6
                                     Thrive.
6.................................  331.0 Alzheimer's Disease.                   58,200                        6
7.................................  290.0 Senile Dementia                        37,667                        4
                                     Uncomp.
8.................................  436 CVA/Stroke............                   31,800                        3
9.................................  429.9 Heart Disease                          22,170                        2
                                     Unspecified.
10................................  185 Prostate Cancer.......                   22,086                        2
11................................  174.9 Breast Cancer.......                   20,378                        2
12................................  157.9 Pancreas Unspecified                   19,082                        2
13................................  153.9 Colon Cancer........                   19,080                        2
14................................  294.8 Organic Brain                          17,697                        2
                                     Syndrome NEC.
15................................  332.0 Parkinson's Disease.                   16,524                        2
16................................  294.10 Dementia In Other                     15,777                        2
                                     Diseases w/o Behav. Dist.
17................................  586 Renal Failure                            12,188                        1
                                     Unspecified.
18................................  585.6 End Stage Renal                        11,196                        1
                                     Disease.
19................................  188.9 Bladder Cancer......                    8,806                        1
20................................  183.0 Ovarian Cancer......                    8,434                        1
----------------------------------------------------------------------------------------------------------------
                                     Year: FY 2013
----------------------------------------------------------------------------------------------------------------
1.................................  799.3 Debility Unspecified                  127,415                        9
2.................................  428.0 Congestive Heart                       96,171                        7
                                     Failure.
3.................................  162.9 Lung Cancer.........                   91,598                        6
4.................................  496 COPD..................                   82,184                        6
5.................................  331.0 Alzheimer's Disease.                   79,626                        6
6.................................  783.7 Adult Failure To                       71,122                        5
                                     Thrive.
7.................................  290.0 Senile Dementia,                       60,579                        4
                                     Uncomp.
8.................................  429.9 Heart Disease                          36,914                        3
                                     Unspecified.
9.................................  436 CVA/Stroke............                   34,459                        2
10................................  294.10 Dementia In Other                     30,963                        2
                                     Diseases w/o Behavioral
                                     Dist.
11................................  332.0 Parkinson's Disease.                   25,396                        2

[[Page 25840]]

 
12................................  153.9 Colon Cancer........                   23,228                        2
13................................  294.20 Dementia                              23,224                        2
                                     Unspecified w/o
                                     Behavioral Dist.
14................................  174.9 Breast Cancer.......                   23,059                        2
15................................  157.9 Pancreatic Cancer...                   22,341                        2
16................................  185 Prostate Cancer.......                   21,769                        2
17................................  585.6 End-Stage Renal                        19,309                        1
                                     Disease.
18................................  518.81 Acute Respiratory                     15,965                        1
                                     Failure.
19................................  294.8 Other Persistent                       14,372                        1
                                     Mental Dis.--classified
                                     elsewhere.
20................................  294.11 Dementia In Other                     13,687                        1
                                     Diseases w/Behavioral
                                     Dist.
----------------------------------------------------------------------------------------------------------------
                                     Year: FY 2014
----------------------------------------------------------------------------------------------------------------
1.................................  331.0 Alzheimer's disease.                  127,438                        9
2.................................  428.0 Congestive heart                      106,570                        8
                                     failure, unspecified.
3.................................  162.9 Lung Cancer.........                   89,726                        6
4.................................  496 COPD..................                   78,643                        6
5.................................  290.0 Senile dementia,                       40,120                        3
                                     uncomplicated.
6.................................  429.9 Heart disease,                         36,929                        3
                                     unspecified.
7.................................  436 CVA/Stroke............                   33,466                        2
8.................................  294.20 Dementia,                             33,119                        2
                                     unspecified, without
                                     behavioral disturbance.
9.................................  332.0 Parkinson's Disease.                   30,070                        2
10................................  153.9 Colon Cancer........                   23,385                        2
11................................  174.9 Breast Cancer.......                   23,343                        2
12................................  157.9 Pancreatic Cancer...                   22,521                        2
13................................  185 Prostate Cancer.......                   22,136                        2
14................................  585.6 End stage renal                        21,467                        2
                                     disease.
15................................  294.10 Dementia in                           19,523                        1
                                     conditions classified
                                     elsewhere w/o behav
                                     disturbance.
16................................  331.2 Senile degeneration                    18,660                        1
                                     of brain.
17................................  518.81 Acute respiratory                     17,347                        1
                                     failure.
18................................  290.40 Vascular dementia,                    17,220                        1
                                     uncomplicated.
19................................  491.21 Obstructive chronic                   15,985                        1
                                     bronchitis with (acute)
                                     exacerbation.
20................................  429.2 Cardiovascular                         14,186                        1
                                     disease, unspecified.
----------------------------------------------------------------------------------------------------------------
Note(s): The frequencies shown represent beneficiaries that had a least one claim with the specific ICD-9-CM
  code reported as the principal diagnosis. Beneficiaries could be represented multiple times in the results if
  they have multiple claims during that time period with different principal diagnoses.
Source: FY 2002 and 2007 hospice claims data from the Chronic Conditions Data Warehouse (CCW), accessed on
  February 14 and February 20, 2013. FY 2013 hospice claims data from the CCW, accessed on June 26, 2014 and
  preliminary FY 2014 hospice claims data from the CCW, accessed on January 26, 2015.

III. Provisions of the Proposed Rule

A. Hospice Payment Reform Research and Analyses

    In 2010, the Congress amended section 1814(i)(6) of the Act with 
section 3132(a) of the Affordable Care Act. The amendment authorizes 
the Secretary to collect additional data and information determined 
appropriate to revise payments for hospice care and for other purposes. 
The data collected may be used to revise the methodology for RHC and 
other hospice services (in a budget-neutral manner in the first year), 
no earlier than October 1, 2013, as described in section 1814(i)(6)(D) 
of the Act. The Secretary is required to consult with hospice programs 
and the MedPAC regarding additional data collection and payment reform 
options.
    Since 2010, we have undertaken efforts to collect the data needed 
to establish what revisions to the methodology for determining the 
hospice payment rates may be necessary. Effective April 1, 2014, we 
began requiring additional information on hospice claims regarding 
drugs and certain durable medical equipment and effective October 1, 
2014, we finalized changes to the hospice cost report to improve data 
collection on the costs of providing hospice care.\3\ In addition, our 
research contractor Abt Associates conducted a hospice literature 
review; held stakeholder meetings; and developed and maintained an 
analytic plan, which supports effort towards implementing hospice 
payment reform. During the stakeholder meetings, attendees articulated 
concerns of sweeping payment reform changes and encouraged us to 
consider incremental steps or to use existing regulatory authority to 
refine the hospice program. We also held five industry technical expert 
panels (TEPs) via webinar and in-person meetings; consulted with 
federal hospice experts; provided annual updates on findings from our 
research and analyses and reform options in the FY 2014 and FY 2015 
Hospice Wage Index and Payment Rate Update proposed and final rules (78 
FR 48234 and 79 FR 50452); and updated the hospice industry on reform 
work through Open Door Forums, industry conferences and academic 
conferences.\4\ We have taken into consideration the recommendations 
from MedPAC on reforming hospice payment, as articulated in the MedPAC 
Reports to Congress since 2009. The MedPAC recommendations and research 
provided a foundation for our development of an analytic plan and 
additional payment reform concepts. Furthermore, MedPAC participated in 
post-TEP meeting briefings with other federal hospice experts. These 
meetings provided valuable feedback regarding the TEP's comments and 
discussed

[[Page 25841]]

potential research and analyses to consider for hospice payment reform.
---------------------------------------------------------------------------

    \3\ CMS Transmittal 2864, ``Additional Data Reporting 
Requirements for Hospice claim''. Available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2864P.pdf.
    \4\ http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Downloads/Hospice-Project-Background.pdf.
---------------------------------------------------------------------------

    The FY 2012 Hospice Wage Index final rule (76 FR 47324) noted our 
collaboration with the Assistant Secretary of Planning and Evaluation 
(ASPE) to develop analyses that were used to inform our research 
efforts. The results from such analyses were used by Abt Associates to 
facilitate discussion, in 2012, of potential payment reform options and 
to guide the identification of topics for further analysis. In early 
2014, we began working with Acumen, LLC, using real-time claims data, 
to monitor the vulnerabilities identified in the 2013 and 2014 Abt 
Associates' Hospice Payment Reform Technical Reports. On September 18, 
2014, the IMPACT Act, mandated that the Centers for Medicare & Medicaid 
(CMS) undertake additional hospice monitoring and oversight activities. 
As noted previously, the IMPACT Act requires CMS to survey hospices at 
least as frequently as every 3 years for the next 10 years and review 
medical records of hospice beneficiaries on the hospice benefit for 180 
days or greater as specified by the Secretary. CMS is actively engaged 
in cross-agency collaboration to meet the intent of the IMPACT Act to 
increase monitoring and oversight of hospice providers.
    The majority of the research and analyses conducted by CMS and 
summarized in this rule were based on analyses of FY 2013 Medicare 
claims and cost report data conducted by our research contractor, Abt 
Associates, unless otherwise specified. In addition, we cite research 
and analyses, conducted by Acumen, LLC that are based on real-time 
claims data from the Integrated Data Repository (IDR). In the sections 
below, analysis conducted on pre-hospice spending, non-hospice spending 
for hospice beneficiaries during a hospice election, and live discharge 
rates highlight potential vulnerabilities of the Medicare hospice 
benefit.
1. Pre-Hospice Spending
    In 1982, the Congress introduced hospice into the Medicare program 
as an alternative to aggressive treatment at the end of life. During 
the development of the benefit, multiple testimonies from industry 
leaders and hospice families, it was reported that hospices provided 
high-quality, compassionate and humane care while also offering a 
reduction in Medicare costs.\5\ Additionally, a Congressional Budget 
Office (CBO) study asserted that hospice care would result in sizable 
savings over conventional hospital care.\6\ Those savings estimates 
were based on a comparison of spending in the last 6 months of life for 
a cancer patient not utilizing hospice care versus the cost of hospice 
care for the 6 months preceding death.\7\ The original language for 
section 1814(i) of the Act (prior to August 29, 1983) set the hospice 
aggregate cap amount at 40 percent of the average Medicare per capita 
expenditure amount for cancer patients in the last 6 months of life. 
When the hospice benefit was created, the average lifetime length of 
stay for a hospice patient was between 55 and 75 days. Since the 
implementation of the Medicare hospice benefit, the principal diagnosis 
for patients electing the hospice benefit has changed from primarily 
cancer diagnoses in 1983 to primarily non-cancer diagnoses in FY 
2014.\8\ Alzheimer's disease and Congestive Heart Failure (CHF) were 
the most reported principal diagnoses comprising 17 percent of all 
diagnoses reported (see Table 2 in section II.E) in FY 2014.
---------------------------------------------------------------------------

    \5\ Subcommittee of Health of the Committee of Ways and Means, 
House of Representatives, March 25, 1982.
    \6\ Mor V. Masterson-Allen S. (1987): Hospice care systems: 
Structure, process, costs and outcome. New York: Springer Publishing 
Company.
    \7\ Fogel, Richard. (1983): Comments on the Legislative Intent 
of Medicare's Hospice Benefit (GAO/HRD-83-72).
    \8\ Connor, S. (2007). Development of Hospice and Palliative 
Care in the Unites States. OMEGA. 56(1), 89-99. doi:102190/OM.5.1.h.
---------------------------------------------------------------------------

    Analysis was conducted to evaluate pre-hospice spending for 
beneficiaries who ever used hospice that died in FY 2013. To evaluate 
pre-hospice spending, we calculated the median daily Medicare payments 
for such beneficiaries for the 180 days, 90 days, and 30 days prior to 
electing hospice care. We then categorized patients according to the 
principal diagnosis reported on the hospice claim. The analysis 
revealed that for some patients, the Medicare payments in the 180 days 
prior to the hospice election were lower than Medicare payments 
associated with hospice care once the benefit was elected (see Table 3 
and Figure 1 below). Specifically, median Medicare spending for a 
beneficiary with a diagnosis of Alzheimer's disease, non-Alzheimer's 
dementia, or Parkinson's in the 180 days prior to hospice admission 
(about 20 percent of patients) was $66.84 per day compared to the RHC 
rate of $153.45 in FY 2013 during a hospice election (see Table 3 
below). Closer to the hospice admission, the median Medicare payments 
per day increase, as would be expected as the patient approaches the 
end of life and patient needs intensify. However, 30 days prior to a 
hospice election, median Medicare spending was $105.24 for patients 
with Alzheimer's disease, non-Alzheimer's dementia, or Parkinson's. In 
contrast, the median Medicare payments prior to hospice election for 
patients with a principal hospice diagnosis of cancer were $143.56 in 
the 180 days prior to hospice admission and increased to $289.85 in the 
30 days prior to hospice admission. The average length of stay for 
hospice elections where the principal diagnosis was reported as 
Alzheimer's disease, non-Alzheimer's Dementia, or Parkinson's is 
greater than patient's with other diagnoses, such as cancer, CVA/
stroke, chronic kidney disease, and Chronic Obstructive Pulmonary 
Disease (COPD). For example, the average lifetime length of stay for an 
Alzheimer's, non-Alzheimer's Dementia, or Parkinson's patient in FY 
2013 was 119 days compared to 47 days for patients with a principal 
diagnosis of cancer (or in other words, 150 percent longer).

  Table 3--Median Pre-Hospice Daily Spending Estimates and Interquartile Range Based on 180, 90, and 30 Day Look-Back Periods Prior to Initial Hospice
                  Admission With Estimates of Average Lifetime Length of Stay (LOS) by Primary Diagnosis at Hospice Admission, FY 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Estimates of daily non-hospice Medicare spending prior to first hospice admission
                                                     ------------------------------------------------------------------------------------------
                                                            180 day look-back             90 day look-back              30 day look-back          Mean
                                                     ------------------------------------------------------------------------------------------ lifetime
                                                        25th                75th      25th                75th      25th                75th       LOS
                                                        pct.     Median     pct.      pct.     Median     pct.      pct.     Median     pct.
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Diagnoses.......................................    $47.04   $117.73   $240.73    $55.75   $157.89   $337.97    $57.66   $266.84   $545.44      73.8
Alzheimer's, Dementia, and Parkinson's..............     23.39     66.84    162.60     23.06     82.00    220.12     21.02    105.24    368.30     119.3
CVA/Stroke..........................................     56.18    116.86    239.30     82.32    170.40    352.74    150.21    352.41    622.23      47.4

[[Page 25842]]

 
Cancers.............................................     62.81    143.56    265.58     78.30    188.08    360.92     81.52    289.85    569.67      47.1
Chronic Kidney Disease..............................     94.78    217.46    402.10    126.41    293.18    541.41    199.01    466.25    820.78      27.3
Heart (CHF and Other Heart Disease).................     61.28    135.48    255.53     80.62    186.52    364.24    101.80    325.15    588.50      77.2
Lung (COPD and Pneumonias)..........................     65.53    142.78    272.13     90.68    201.02    401.12    126.51    367.68    685.17      67.5
All Other Diagnoses.................................     36.00     99.80    222.25     39.45    132.88    316.15     38.96    213.84    504.57      85.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: All Medicare Parts A, B, and D claims for FY 2013 from the Chronic Conditions Data Warehouse (CCW) retrieved March, 2015.
Note(s): Estimates drawn from FY2013 hospice decedents who were first-time hospice admissions, ages 66+ at hospice admission, admitted since 2006, and
  not enrolled in Medicare Advantage prior to admission. All payments are inflation-adjusted to September 2013 dollars using the Consumer Price Index
  (Medical Care; All Urban Consumers).

  [GRAPHIC] [TIFF OMITTED] TP05MY15.000
  
    In the FY 2014 Hospice Wage Index and Payment Rate Update proposed 
and final rules (78 FR 27843 and 78 FR 48272), we discussed whether a 
case-mix system could be created in future refinements to differentiate 
hospice payments according to patient characteristics. While we do not 
have the necessary data on the hospice claim form at this time to 
conduct more thorough research to determine whether a case-mix system 
is appropriate, analyzing pre-hospice spending was undertaken as an 
initial step in determining whether patients required different 
resource needs prior to hospice based on the principal diagnosis 
reported on the hospice claim. Table 3 and Figure 1 above indicate that 
hospice patients with the longest length of stay had lower pre-hospice 
spending relative to hospice patients with shorter lengths of stay. 
These hospice patients tend to be those with neurological conditions,

[[Page 25843]]

including those with Alzheimer's disease, other related dementias and 
Parkinson's disease. Typically, these conditions are associated with 
longer disease trajectories, progressive loss of functional and 
cognitive abilities, and more difficult prognostication. Research has 
shown that the majority of dementia patients are cared for at home, 
thereby causing informal costs that put an economic burden on families 
rather than on healthcare systems.\9\ Additionally, research using the 
National Long-Term Care Survey (NLCS) merged with Medicare claims; 
researchers found that patients with Alzheimer's disease and related 
conditions do not have higher Medicare expenditures over the last 5 
years of their life than the non-demented elderly.\10\ Finally, 
research conducted by the RAND Corporation and published in the Annals 
of Internal Medicine in February of 2004 found that ``adjusted mean 
[Medicare] expenditures were 4.0 percent higher overall among hospice 
enrollees than among non-enrollees. Adjusted mean [Medicare] 
expenditures were 1 percent lower for hospice enrollees with cancer 
than for patients with cancer who did not use hospice. Savings were 
highest (7 percent to 17 percent) among enrollees with lung cancer and 
other very aggressive types of cancer diagnosed in the last year of 
life. [Medicare] Expenditures for hospice enrollees without cancer were 
11 percent higher than for non-enrollees, ranging from 20 percent to 44 
percent for patients with dementia and 0 percent to 16 percent for 
those with chronic heart failure or failure of most other organ 
systems''.\11\ While analysis examining pre-hospice spending for 
hospice patients according to their diagnosis reported on the hospice 
claim has some limitations, it does show that, depending on the type of 
research study design selected, different conclusions can be drawn 
regarding the effect of Alzheimer's disease and dementia on medical 
care costs.\12\
---------------------------------------------------------------------------

    \9\ Schaller, S., Mauskopf, J., Kriza, C., Wahlster, P., 
Kolominsky-Rabas, P. (2015). The main cost drivers in dementia: a 
systematic review. International Journal of Geriatric Psychiatry. 
15, 111-129. doi: 10.1002/gps.4198.
    \10\ Ayyagari, P., M. Salm, and F. Sloan. 2008. ``Effects of 
Diagnosed Dementia on Medicare and Medicaid Program Costs.'' Inquiry 
44 (Winter 2007/2008): 481-94. Lamb, V., F. Sloan, and A. Nathan. 
2008. ``Dementia and Medicare at Life's End.'' Health Services 
Research 43 (2): 714-32.
    \11\ http://www.rand.org/pubs/external_publications/EP20040207.html. Accessed on April 23, 2015.
    \12\ Yang, Z., Zhang, K., Lin, P., Clevenger, C., & Atherly, A. 
(2012). A Longitudinal Analysis of the Lifetime Cost of Dementia. 
Health Services Research, 47(4), 1660-1678. doi:10.1111/j.1475-
6773.2011.01365.x.
---------------------------------------------------------------------------

2. Non-Hospice Spending for Hospice Beneficiaries During an Election
    When a beneficiary elects the Medicare hospice benefit, he or she 
waives the right to Medicare payment for services related to the 
terminal illness and related conditions, except for services provided 
by the designated hospice and the attending physician as described in 
section II.D.7. However, Medicare payment is allowed for covered 
Medicare items or services that are unrelated to the terminal illness 
and related conditions (that is, the terminal prognosis). When a 
hospice beneficiary receives items or services unrelated to the 
terminal illness and related conditions from a non-hospice provider, 
that provider can bill Medicare for the items or services, but must 
include on the claim a GW (service not related to the hospice patient's 
terminal condition) modifier (if billed on a professional claim),\13\ 
or condition code 07 (if billed on an institutional claim).\14\ 
Prescription Drug Events (PDEs) unrelated to the terminal prognosis for 
which hospice beneficiaries are receiving hospice care are billed to 
Part D and do not require a modifier or a condition code. We reported 
initial findings on CY 2012 non-hospice spending during a hospice 
election in the FY 2015 Hospice Wage Index and Payment Rate Update 
final rule (79 FR 50452). This section updates our analysis of non-
hospice spending during a hospice election using FY 2013 data.
---------------------------------------------------------------------------

    \13\ Medicare Claims Processing Manual, Chapter 11-Processing 
Hospice Claims, Section 30.4-Claims from Medicare Advantage 
Organizations, B-Billing of Covered Services. http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c11.pdf.
    \14\ Medicare Claims Processing Manual, Chapter 11-Processing 
Hospice Claims, Section 30.3-Data Required on the Institutional 
Claim to Medicare Contractors, Conditions Codes. http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c11.pdf.
---------------------------------------------------------------------------

    For FY 2013, we found that Medicare paid $694.1 million for Part A 
and Part B items or services while a beneficiary was receiving hospice 
care. The $694.1 million paid for Part A and Part B items or services 
was for durable medical equipment (6.4 percent), inpatient care (care 
in long- term care hospitals, inpatient rehabilitation facilities, 
acute care hospitals; 28.6 percent), outpatient Part B services (16.6 
percent), other Part B services (also known as physician, practitioner 
and supplier claims, such as labs and diagnostic tests, ambulance 
transports, and physician office visits; 38.8 percent), skilled nursing 
facility care (5.3 percent), and home health care (4.3 percent). Part A 
and Part B non-hospice spending occurred mostly for hospice 
beneficiaries who were at home (56.0 percent). We also found that on 
hospice service days in which non-hospice spending occurred, 25.7 
percent of hospice beneficiaries were in a nursing facility, 1.9 
percent were in an inpatient setting, 15.1 percent were in an assisted 
living facility, and 1.3 percent were in other settings. Although the 
average daily rate of expenditures outside the hospice benefit was 
$7.65, we found geographic differences where beneficiaries receive 
care. The highest rates per day occurred for hospice beneficiaries 
residing in West Virginia ($13.74), Delaware ($12.76), Mississippi 
($12.31), South Florida ($12.24), and Texas ($12.10)
    Table 4 below details the various components of Part D spending for 
patients receiving hospice care. The portion of the $439.5 million 
total Part D spending which was paid by Medicare is the sum of the Low 
Income Cost-Sharing Subsidy and the Covered Drug Plan Paid Amount, or 
$347.1 million.

   Table 4--Drug Cost Sources for Hospice Beneficiaries' FY 2013 Drugs
                         Received Through Part D
------------------------------------------------------------------------
                   Component                       FY 2013 expenditures
------------------------------------------------------------------------
(Patient Pay Amount)...........................              $50,871,517
(Low Income Cost-Sharing Subsidy)..............              116,890,745
(Other True Out-of Pocket Amount)..............                2,125,071
(Patient Liability Reduction due to Other Payer                6,678,561
 Amount).......................................
(Covered Drug Plan Paid Amount)................              230,216,153
(Non-Covered Plan Paid Amount..................               28,733,518
(Six Payment Amount Totals)....................              435,515,566
(Unknown/Unreconciled).........................                3,945,667
(Gross Total Drug Costs, Reported).............              439,461,233
------------------------------------------------------------------------
Source: Abt Associates analysis of 100% FY 2013 Medicare Claim Files.
  For more information on the components above and on Part D data, go to
  the Research Data Assistance Center's (ResDAC's) Web site at: http://www.resdac.org/.

    Non-hospice Medicare expenditures occurring during a hospice 
election in FY 2013 were $694.1 million for Parts A and B spending plus 
$347.1 million for Part D spending, or approximately $1 billion dollars 
total. This figure is comparable to the estimated $1 billion MedPAC 
reported during its December

[[Page 25844]]

2013 public meeting.\15\ Associated with this $1 billion in Medicare 
spending were cost sharing liabilities such as co-payments and 
deductibles that beneficiaries incurred. Hospice beneficiaries had 
$132.5 million in cost-sharing for items and services that were billed 
to Medicare Parts A and B, and $50.9 million in cost-sharing for drugs 
that were billed to Medicare Part D, while they were in a hospice 
election. In total, this represents an FY 2013 beneficiary liability of 
$183.4 million for Parts A, B, and D items or services provided to 
hospice beneficiaries during a hospice election. Therefore, the total 
non-hospice costs paid by Medicare or beneficiaries for items or 
services provided to hospice beneficiaries during a hospice election 
were over $1.2 billion in FY 2013.
---------------------------------------------------------------------------

    \15\ MedPAC, ``Assessing payment adequacy and updating payments: 
hospice services'', December 13 2013. Available at: http://www.medpac.gov/documents/december-2013-meeting-transcript.pdf.
---------------------------------------------------------------------------

    In a recent report, the HHS Office of Inspector General (OIG) 
identified instances where Medicare may be paying under Part D for 
drugs that should be provided by the hospice as part of the plan of 
care.\16\ To assist CMS in identifying and evaluating instances where 
drugs, supplies, durable medical equipment (DME), and Part B services 
provided to hospice patients appear to be related to the principal 
diagnosis reported on the hospice claim, but were billed separately to 
other parts of the Medicare program, Acumen, LLC developed case studies 
that were reviewed and evaluated by CMS clinical staff.\17\ Although 
hospice beneficiaries are allowed to continue receiving care outside 
the hospice benefit for conditions that are unrelated to the terminal 
illness and related conditions (that is, unrelated to the terminal 
prognosis), Sec.  418.56(c) requires hospices to provide all services 
necessary for the palliation and management of the terminal illness and 
related conditions.
---------------------------------------------------------------------------

    \16\ oig.hhs.gov/oas/region6/61000059.pdf ``Medicare Could Be 
Paying Twice for Prescriptions For Beneficiaries in Hospice''.
    \17\ The case studies were developed using CY 2013 claims data 
for only those beneficiaries with Parts A, B and D coverage 
throughout their hospice. In identifying services that overlapped 
with a hospice election, we used two methods. The first method 
identified a match between the first three diagnosis codes of the 
hospice claim and the diagnosis codes of the overlapping services in 
the Part A, Part B, and Part D claim for the same beneficiary. The 
second method identified a match between the hospice diagnoses and 
the diagnosis codes of the overlapping services in the Part A, Part 
B and Part D based on a diagnosis code on the overlapping claim and 
any diagnosis on the hospice claim mapping to the same Healthcare 
Cost and Utilization Project (HCUP).
---------------------------------------------------------------------------

Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Across 
Terminal Conditions
    Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) products whose use was initiated during a hospice stay are 
likely related to the terminal prognosis. Table 5 and 6 below 
summarizes total concurrent billing for DMEPOS products by Berenson-
Eggers Types of Service (BETOS) categories and concurrent Durable 
Medical Equipment (DME) billing by the top 20 principal diagnoses as 
reported on hospice claims in CY 2013.\18\ These diagnoses comprised 
2.3 million hospice stays, and accounted for $27.1 million in total 
concurrent spending for DME products. This amount does not include 
spending for DME rental products that beneficiaries began using prior 
to a hospice stay.
---------------------------------------------------------------------------

    \18\ DMEPOS HCPCS codes are summarized by Berenson-Eggers Types 
of Service (BETOS) categories. BETOS categories were developed by 
the American Medical Association (AMA) and aggregate HCPCS codes 
into clinically coherent groups.

 Table 5--Concurrent Payments for All DME Use Initiated During a Hospice
                     Stay by BETOS Category, CY 2013
------------------------------------------------------------------------
                                                    Total payment for
             DMEPOS BETOS category                     related DME
------------------------------------------------------------------------
Hospital Beds..................................                 $943,731
Wheelchairs....................................                2,295,038
Oxygen and Supplies............................                2,412,281
Orthotics and Prosthetics......................                4,400,353
Medical/Surgical Supplies......................                7,467,616
Other DME......................................                9,585,003
                                                ------------------------
    Total......................................               27,104,022
------------------------------------------------------------------------

 Table 6--Concurrent Payments for All DME Use Initiated During a Hospice
  Stay by Top 20 Principal Diagnosis Reported on Hospice Claim, CY 2013
------------------------------------------------------------------------
                                                    Total payment for
              Principal diagnosis                      related DME
------------------------------------------------------------------------
Heart failure..................................               $3,365,348
Malignant neoplasm of trachea, bronchus, and                   1,519,514
 lung..........................................
Other cerebral degenerations...................                2,979,399
Other organic psychotic conditions (chronic)...                2,540,146
Chronic airways obstruction, not elsewhere                     2,610,628
 classified....................................
Senile and presenile organic psychotic                         2,868,760
 conditions....................................
Other ill-defined and unknown causes of                        2,349,855
 morbidity and mortality.......................
Ill-defined descriptions and complications of                  1,584,522
 heart disease.................................
Acute but ill-defined cerebrovascular disease..                1,092,772
Other diseases of lung.........................                  412,501
Chronic renal failure..........................                  415,800
Symptoms concerning nutrition, metabolism, and                 1,390,685
 development...................................
Malignant neoplasm of pancreas.................                  297,573
Malignant neoplasm of female breast............                  486,019
Malignant neoplasm of colon....................                  521,690
Parkinson's disease............................                  955,390
Malignant neoplasm of prostate.................                  312,754
Late effects of cerebrovascular disease........                  559,253
Other forms of chronic ischemic heart disease..                  670,947
Malignant neoplasm of liver and intrahepatic                     170,470
 bile ducts....................................
------------------------------------------------------------------------

    We noted that hospice beneficiaries with hospice claims-reported 
principal diagnoses of chronic airway obstruction, congestive heart 
failure, cerebral degeneration and lung cancer were receiving services 
clinically indicated and recommended for these conditions outside of 
the hospice benefit, which is in violation of requirements regarding 
the Medicare hospice benefit. This could be attributed to hospices

[[Page 25845]]

incorrectly classifying conditions as unrelated and referring patients 
to non-hospice providers, not communicating and coordinating the care 
and services needed to manage the needs of the hospice beneficiary, or 
deliberately, to avoid costs. The case studies below are focused on 
four of the most commonly reported principal hospice diagnoses on 
hospice claims (see Table 2 in section II.E) based on evidence based 
clinical guidelines as described for each principal hospice diagnosis.
Malignant Neoplasm of the Trachea, Bronchus, and Lung
    Malignant neoplasm of the trachea, bronchus, and lung (or lung 
cancer) is defined by ICD-9 diagnosis codes beginning with 162 and 
describes malignant cancers affecting various part of the pulmonary 
system. Symptoms for this class of conditions may include chronic and 
worsening cough, shortness of breath, chest pain, metastatic bone pain, 
and anorexia and weight loss. Clinical practice guidelines for end-
stage cancer recommend treatment and management of refractory symptoms 
including pain, mucositis, dyspnea, fatigue, depression and anorexia 
through the use of pharmacological interventions including nonsteroidal 
anti-inflammatories, corticosteroids, opioids and antidepressants.\19\ 
Additionally, evidence shows that palliative chemotherapy and 
radiotherapy can provide symptom relief from bone and brain 
metastasis.\20\ Recommended interventions for dyspnea include treatment 
of the underlying reason such as, thoracentesis for pleural effusion, 
bronchodilators and systemic corticosteroids for inflammation and 
secretions, and supportive measures such supplemental oxygen, opioids 
and anxiolytics to decrease the sensation of breathlessness.\21\
---------------------------------------------------------------------------

    \19\ Qaseem A, Snow V, Shekelle P, Casey DE, Cross JT, Owens DK, 
et al. Evidence-Based Interventions to Improve the Palliative Care 
of Pain, Dyspnea, and Depression at the End of Life: A Clinical 
Practice Guideline from the American College of Physicians. Ann 
Intern Med. 2008;148:141-146. doi:10.7326/0003-4819-148-2-200801150-
00009
    \20\ Palliative care in lung cancer*: accp evidence-based 
clinical practice guidelines (2nd edition) Kvale PA, Selecky PA, 
Prakash US. Chest. 2007;132(3_suppl):368S-403S.
    \21\ ibid.
---------------------------------------------------------------------------

    Our assessment of concurrently billed Part D drugs included 89,925 
stays for beneficiaries with ICD-9 code 162 listed as a primary 
diagnosis on the hospice claim. Our assessment of concurrently billed 
Part B services included 153,199 stays. In CY 2013, concurrent billing 
for all services related this terminal condition comprised $3.4 
million. Table 7 below summarizes concurrent payments for services that 
were potentially related to this class of conditions. Part D drugs that 
should have been covered under the hospice benefit for the treatment of 
this condition accounted for $2.1 million. DME services that were 
billed during hospice stays related to this condition during the same 
time cost $640,166. Concurrent services provided in Part B 
institutional settings accounted for $591,772.

      Table 7--Concurrent Payments for Services Provided to Hospice
   Beneficiaries With Malignant Neoplasm of the Trachea, Bronchus, and
                              Lung, CY 2013
------------------------------------------------------------------------
       Type of service            Description         Total payment
------------------------------------------------------------------------
Drugs/Part D.................  Common                           $851,639
                                Palliative
                                Drugs.
Drugs/Part D.................  Anti-neoplastics                1,321,507
                                (chemotherapy).
DME..........................  Oxygen Equipment                  454,068
                                and Supplies.
DME..........................  Hospital Beds...                   47,781
DME..........................  Wheelchairs.....                  138,316
Part B Inst..................  Diagnostic                        341,601
                                Imaging.
Part B Inst..................  Radiation.......                  250,171
                                                ------------------------
    Total....................  ................                3,405,083
------------------------------------------------------------------------

Chronic Airway Obstruction
    Chronic airway obstruction is defined by ICD-9 diagnosis codes 
beginning with 496 and includes chronic lung disease with unspecified 
cause, and is characterized by inflammation of the lungs and airways. 
Typical symptoms of these pulmonary diseases include increasing and 
disabling shortness of breath, labored breathing, increased coughing, 
increased heart rate, decreased functional reserve, increased 
infections and unintentional, progressive weight loss. Evidence-based 
practice supports the benefits of oral opioids, neuromuscular 
electrical stimulation, chest wall vibration, walking aids, respiratory 
assist devices and pursed-lip breathing in the management of dyspnea in 
the individual patient with advanced COPD.\22\ Oxygen is recommended 
for COPD patients with resting hypoxemia for symptomatic benefit.\23\ 
Additionally, clinical practice guidelines recommend inhaled 
bronchodilators, systemic corticosteroids, and pulmonary physiotherapy 
for the management of COPD exacerbations.\24\ Analysis conducted by 
Acumen, LLC, shows concurrently billed Part D drugs included 130,283 
stays for beneficiaries with ICD-9 code 469 listed as a primary 
diagnosis on the hospice claim. Additionally, concurrently billed Part 
B services included 198,098 such stays. Table 8 below summarizes 
concurrent payments for services that are potentially related to this 
class of conditions. In CY 2013, concurrent billing for all services 
related this terminal condition comprised $10.4 million. Part D drugs 
that should have been covered under the hospice benefit for the 
treatment of this condition accounted for $8.6 million. DME services 
that were billed during hospice stays related to this condition during 
the same time amounted to $1.2 million dollars.\25\ Finally, concurrent 
services provided in Part B institutional settings accounted for 
$605,110.
---------------------------------------------------------------------------

    \22\ DD Marciniuk, D Goodridge, P Hernandez, et al. (2011). 
Canadian Thoracic Society COPD Committee Dyspnea Expert Working 
Group. Managing dyspnea in patients with advanced chronic 
obstructive pulmonary disease: A Canadian Thoracic Society clinical 
practice guideline. Canadian Respiratory Journal. 18(2), 1-10.
    \23\ ibid
    \24\ National Clinical Guideline Centre for Acute and Chronic 
Conditions. Chronic obstructive pulmonary disease. Management of 
chronic obstructive pulmonary disease in adults in primary and 
secondary care. London (UK): National Institute for Health and 
Clinical Excellence (NICE); 2010 Jun. 61 p. (Clinical guideline; no. 
101). Retrieved from the National Guideline Clearinghouse on 
February 19, 2015. http://www.guideline.gov/
    \25\ DMEPOS HCPCS codes are summarized by Berenson-Eggers Types 
of Service (BETOS) categories. BETOS categories were developed by 
the American Medical Association (AMA) and aggregate HCPCS codes 
into clinically coherent groups.

[[Page 25846]]

      Table 8--Concurrent Payments for Services Provided to Hospice
         Beneficiaries With Chronic Airway Obstruction, CY 2013
------------------------------------------------------------------------
       Type of service            Description         Total payment
------------------------------------------------------------------------
Drugs/Part D.................  Common                         $1,757,326
                                Palliative
                                Drugs \26\.
Drugs/Part D.................  Antiasthmatics &                6,545,089
                                Bronchodilators.
Drugs/Part D.................  Corticosteroids.                  141,179
Drugs/Part D.................  Respiratory                       148,793
                                Agents.
DME..........................  Oxygen Equipment                  525,276
                                and Supplies
                                \27\.
DME..........................  Hospital Beds...                  480,854
DME..........................  Wheelchairs.....                  196,692
Part B Institutional.........  Diagnostic                        605,110
                                Imaging.
                                                ------------------------
    Total....................  ................               10,400,319
------------------------------------------------------------------------

Cerebral Degeneration
    Cerebral degeneration is defined by ICD-9 diagnosis codes beginning 
with 331, and includes conditions such as Alzheimer's disease and 
Reye's syndrome. These conditions are typically characterized by a 
progressive loss of cognitive function with symptoms including the loss 
of memory and changes in language ability, behavior, and personality. 
Additionally, as these cerebral degenerations progress, other clinical 
manifestations occur such as dysphagia, motor dysfunction, impaired 
mobility, increased need for activities of daily living assistance, 
urinary and fecal incontinence, weight loss and muscle wasting. 
Individuals with these conditions are also at increased risk for 
aspiration, falls, pneumonias, decubitus ulcers and urinary tract 
infections. Clinical practice guidelines for the treatment of cerebral 
degenerative conditions includes pharmacological interventions 
including Angiotensin Converting Enzyme inhibitors, memantine or 
combination therapy depending on severity of disease, as well as 
antidepressants, antipsychotics, psychostimulants, mood stabilizers, 
benzodiazepines and neuroleptics, depending on behavioral 
manifestations. Non-pharmacological interventions recommended include 
mental, behavioral and cognitive therapy, speech language pathology to 
address swallowing issues, and other interventions to treat and manage 
manifestations including pressure ulcers, cachexia and infections.\28\
---------------------------------------------------------------------------

    \26\ Includes all analgesics, anxiolytics, antiemetics, and 
laxatives. These four drug types are considered ``nearly always 
covered under the hospice benefit'' and as such are rarely expected 
to be billed separately during a hospice stay.
    \27\ For COPD, we also include respiratory assist devices (RADs) 
in this category.
    \28\ Development Group of the Clinical Practice Guideline 
[trunc]. Clinical practice guideline on the comprehensive care of 
people with Alzheimer's disease and other dementias. Barcelona 
(Spain): Agency for Health Quality and Assessment of Catalonia 
(AQuAS); 2010. 499 p. Retrieved from the National Guideline 
Clearinghouse on February 19, 2015. http://www.guideline.gov/.
---------------------------------------------------------------------------

    Our assessment of concurrently billed Part D drugs included 208,346 
stays for beneficiaries with ICD-9 code 331 listed as a primary 
diagnosis on the hospice claim. Our assessment of concurrently billed 
Part B services included 318,044 stays. In CY 2013, concurrent billing 
for all services related to this principal diagnosis comprised $11.2 
million. Table 9 below summarizes concurrent payments for services that 
are potentially related to this class of conditions. Part D drugs that 
should have been covered under the hospice benefit for the treatment of 
this condition accounted for $10.3 million. Concurrently billed DME 
products that were related this condition cost Medicare an additional 
$390,476. Concurrent services provided in Part B institutional settings 
accounted for $496,790.

      Table 9--Concurrent Payments for Services Provided to Hospice
            Beneficiaries With Cerebral Degeneration, CY 2013
------------------------------------------------------------------------
       Type of service            Description         Total payment
------------------------------------------------------------------------
Drugs/Part D.................  Common                         $1,184,005
                                Palliative
                                Drugs.
Drugs/Part D.................  Antipsychotic/                  2,336,504
                                Antimanic
                                Agents.
Drugs/Part D.................  Psychotherapeuti                6,752,270
                                c &
                                Neurological
                                Agents.
DME..........................  Hospital Beds...                  138,249
DME..........................  Wheelchairs.....                  252,228
Part B Inst..................  Diagnostic                        496,790
                                Imaging.
                                                ------------------------
    Total....................  ................               11,160,046
------------------------------------------------------------------------

Congestive Heart Failure
    Congestive heart failure (CHF) is defined by ICD-9 diagnosis codes 
beginning with 428. CHF is characterized by symptoms such as shortness 
of breath, edema, diminished endurance, angina, productive cough and 
fatigue. For the management of congestive heart failure, clinical 
practice guidelines recommend pharmacological interventions including 
beta blockers, angiotensin converting enzyme inhibitors, angiotensin 
receptor blockers, diuretics, anti-platelets, anti-coagulants and 
digoxin, depending on symptomology and response or nonresponse to other 
treatments.\29\ Nonpharmacological interventions recommended include 
continuous positive airway pressure and

[[Page 25847]]

supplemental oxygen for those with coexisting pulmonary disease.\30\
---------------------------------------------------------------------------

    \29\ Scottish Intercollegiate Guidelines Network (SIGN). 
Management of chronic heart failure. A national clinical guideline. 
Edinburgh (Scotland): Scottish Intercollegiate Guidelines Network 
(SIGN); 2007 Feb. 53 p. (SIGN publication; no. 95).
    \30\ Lindenfeld J, Albert NM, Boehmer JP, Collins SP, Ezekowitz 
JA, Givertz MM, Klapholz M, Moser DK, Rogers JG, Starling RC, 
Stevenson WG, Tang WHW, Teerlink JR, Walsh MN. Executive Summary: 
HFSA 2010 Comprehensive Heart Failure Practice Guideline. J Card 
Fail 2010;16:475e539.
---------------------------------------------------------------------------

    Our assessment of concurrently billed Part D drugs included 158,220 
stays for beneficiaries with ICD-9 code 428 listed as a primary 
diagnosis on the hospice claim. Our assessment of concurrently billed 
Part B services included 256,236 stays. In CY 2013, concurrent billing 
for all services related this terminal condition comprised $5.8 
million. Table 10 below summarizes concurrent payments for services 
that are potentially related to this class of conditions. Part D drugs 
that should have been covered under the hospice benefit for the 
treatment of this condition accounted for $3.8 million. DME services 
that were billed during hospice stays related to this condition during 
this time cost $843,534. Concurrent services provided in Part B 
institutional settings accounted for $1.2 million.

     Table 10--Concurrent Payments for Services Provided to Hospice
          Beneficiaries With Congestive Health Failure, CY 2013
------------------------------------------------------------------------
       Type of service            Description         Total payment
------------------------------------------------------------------------
Drugs/Part D.................  Common                         $1,229,748
                                Palliative
                                Drugs.
Drugs/Part D.................  Diuretics.......                  334,700
Drugs/Part D.................  Beta Blockers...                  363,480
Drugs/Part D.................  Anti-                             584,799
                                hypertensives.
Drugs/Part D.................  Anti-anginal                      468,333
                                Agents.
Drugs/Part D.................  Cardiovascular                    799,605
                                Agents--Misc.
Drugs/Part D.................  Vasopressors....                   43,496
DME..........................  Oxygen Equipment                  471,376
                                and Supplies.
DME..........................  Hospital Beds...                   96,219
DME..........................  Wheelchairs.....                  275,940
Part B Inst..................  Diagnostic                        690,726
                                Imaging.
Part B Inst..................  EKGs............                   72,933
Part B Inst..................  Cardiac Devices.                  242,819
Part B Inst..................  Diagnostic                         79,999
                                Clinical Labs.
Part B Prof..................  Diagnostic                         64,698
                                Clinical Labs.
                                                ------------------------
    Total....................  ................                5,818,871
------------------------------------------------------------------------

    Our regulations at Sec.  418.56(c) require that hospices provide 
all services necessary for the palliation and management of the 
terminal illness and related conditions. We have discussed recommended 
evidence-based practice clinical guidelines for the hospice claims-
reported principal diagnoses mentioned in this section. However, this 
analysis reveals that these recommended practices are not being covered 
under the Medicare hospice benefit. We believe the case studies in this 
section highlight the potential systematic unbundling of the Medicare 
hospice benefit and may be valuable analysis to inform policy 
stakeholders.
3. Live Discharge Rates
    Currently, federal regulations allow a patient who has elected to 
receive Medicare hospice services to revoke their hospice election at 
any time and for any reason. Specifically, the regulations state that 
if the hospice patient (or his/her representative) revokes the hospice 
election, Medicare coverage of hospice care for the remainder of that 
period is forfeited. The patient may, at any time, re-elect to receive 
hospice coverage for any other hospice election period that he or she 
is eligible to receive (Sec.  418.28(c)(3) and Sec.  418.24(e)). During 
the time period between revocation/discharge and the re-election of the 
hospice benefit, Medicare coverage would resume for those Medicare 
benefits previously waived. A revocation can only be made by the 
beneficiary, in writing, that he or she is revoking the hospice 
election and the effective date of the revocation. A hospice cannot 
``revoke'' a beneficiary's hospice election, nor is it appropriate for 
hospices to encourage, request or demand that the beneficiary revoke 
his or her hospice election. Like the hospice election, a hospice 
revocation is to be an informed choice based on the beneficiary's 
goals, values and preferences for the services they wish to receive.
    Federal regulations only provide limited opportunity for a Medicare 
hospice provider to discharge a patient from its care. In accordance 
with Sec.  418.26, discharge from hospice care is permissible when the 
patient moves out of the provider's service area, is determined to be 
no longer terminally ill, or for cause. Hospices may not automatically 
or routinely discharge the patient at its discretion, even if the care 
may be costly or inconvenient. As we indicated in the FY 2015 Hospice 
Wage Index and Payment Rate Update proposed and final rules, we 
understand that the rate of live discharges should not be zero, given 
the uncertainties of prognostication and the ability of patients and 
their families to revoke the hospice election at any time. On July 1, 
2012, we began collecting discharge information on the claim to capture 
the reason for all types of discharges which includes, death, 
revocation, transfer to another hospice, moving out of the hospice's 
service area, discharge for cause, or due to the patient no longer 
being considered terminally ill (that is, no longer qualifying for 
hospice services). Based upon the additional discharge information, Abt 
Associates, our research contractor performed analysis on FY 2013 
claims to identify those beneficiaries who were discharged alive. The 
details of this analysis will be reported in the 2015 technical report 
and will be made available on the Hospice Center Web page. In order to 
better understand the characteristics of hospices with high live 
discharge rates, we examined the aggregate cap status, skilled visit 
intensity; average lengths of stay; and non-hospice spending rates per 
beneficiary.
    Between 2000 and 2013, the overall rate of live discharges 
increased from 13.2 percent in 2000 to 18.3 percent in 2013. Among 
hospices with 50 or more discharges (discharged alive or deceased), 
there is significant variation

[[Page 25848]]

in the rate of live discharge between the 10th and 90th percentiles 
(see Table 11 below). Most notably, hospices at the 95th percentile 
discharged 50 percent or more of their patients alive.

 Table 11--Distribution of Live Discharge Rates in FY 2013 for Hospices
                     With 50 or More Live Discharges
------------------------------------------------------------------------
                                                                 Live
                         Statistic                            discharge
                                                               rate (%)
------------------------------------------------------------------------
5th Percentile.............................................          8.1
10th Percentile............................................          9.5
25th Percentile............................................         12.9
Median.....................................................         18.3
75th Percentile............................................         26.6
90th Percentile............................................         39.1
95th Percentile............................................         50.0
------------------------------------------------------------------------
Note: n=3,096

    We analyzed hospices' aggregate cap status to determine whether 
there is a relationship between live discharge rates and their 
aggregate cap status. As described in section III.4.C and section 
III.D, when the Medicare Hospice Benefit was implemented, the Congress 
included an aggregate cap on hospice payments, which limits the total 
aggregate payments any individual hospice can receive in a year. Our FY 
2013 analytic file contained 3,061 hospices with aggregate cap 
information and with more than 50 discharges in FY 2013. We found that 
40.3 percent of hospices above the 90th percentile were also above the 
aggregate cap for the 2013 cap year. Conversely, only 3.8 percent of 
hospices below the 90th percentile were above the aggregate cap. As 
illustrated by the box plot below, the vertical axis represents the 
hospices' live discharge rates in FY 2013 and the horizontal axis 
represents the total payments hospices received at the end of the cap 
year of November 2012 through October 2013 relative to the total cap 
amount. Hospices under 100 percent on the X-axis are below the cap and 
those 100 percent or higher on the X-axis are above the cap. Our 
analysis found that hospices with higher live discharge rates are also 
above the cap. Specifically, the top of the rectangle represents the 
75th percentile of live discharge rates, the middle line represents the 
median for that group, and the bottom of the rectangle is the 25th 
percentile of live discharge rates among all hospices ending the year 
within the range of cap percentages of live discharge rates as 
indicated by the horizontal axis (see Figure 2 below). We found that 
there appears to be a relationship with hospices with high live 
discharge rates and those that are above the aggregate cap.
[GRAPHIC] [TIFF OMITTED] TP05MY15.001

    In FY 2013, we found that hospices with high live discharge rates 
also, on average, provide fewer visits per week. Those hospices with 
live discharge rates at or above the 90th percentile provide, on 
average, 3.97 visits per week. Hospices with live discharge rates below 
the 90th percentile provide, on average, 4.48 visits per week. We also 
found in FY 2013 that, when focusing on visits classified as skilled 
nursing or medical social services, hospices with

[[Page 25849]]

live discharge rates at or above the 90th percentile provide, on 
average, 1.91 visits per week versus hospices with live discharge rates 
below the 90th percentile that provide, on average, 2.35 visits per 
week.
    We examined whether there was a relationship between hospices with 
high live discharge rates, average lengths of stay, and non-hospice 
spending per beneficiary per day (see Table 12 and Figure 3 below). As 
described above in section III.A.2, we identified instances, in the 
aggregate and illustrated by case studies, where Medicare appeared to 
be paying for services twice because we would expect them to be covered 
by the hospice base payment rate. Hospices with patients that, on 
average, accounted for $30 per day in non-hospice spending while in 
hospice (decile 10 in Table 12 and Figure 3 below) had live discharge 
rates that were, on average, about 33.8 percent and had an average 
lifetime length of stay of 156 days. In contrast, hospices with 
patients that, on average, accounted for $4 per day in non-hospice 
spending while in a hospice election (decile 1 in Table 12 and Figure 3 
below) had live discharge rates that were, on average, about 19.2 
percent and an average lifetime length of stay of 103 days. In other 
words, hospices in the highest decile, according to their level of non-
hospice spending for patients in a hospice election, had live discharge 
rates and average lifetime lengths of stay that averaged 76 percent and 
52 percent higher, respectively, than the hospices in lowest decile.
[GRAPHIC] [TIFF OMITTED] TP05MY15.002

[[Page 25850]]

[GRAPHIC] [TIFF OMITTED] TP05MY15.003

    The analytic findings presented above suggests that some hospices 
may consider the Medicare Hospice program as a long-term custodial 
benefit rather than an end of life benefit for beneficiaries with a 
medical prognosis of 6 months or less if the illness runs its normal 
course. As previously discussed in reports by MedPAC and the OIG, there 
is a concern that hospices may be admitting individuals who do not meet 
hospice eligibility criteria. We continue to communicate and 
collaborate across CMS to improve monitoring and oversight activities. 
We expect to analyze the additional claims and cost report data 
reported by hospices in the future to determine whether additional 
regulatory proposals to reform and strengthen the Medicare Hospice 
benefit are warranted.

B. Proposed Routine Home Care Rates and Service Intensity Add-On 
Payment

1. Statutory Authority and Background
    Section 3132(a) of the Affordable Care Act amended 1814(i) of the 
Act by adding paragraph (6)(D), that instructs the Secretary, no 
earlier than October 1, 2013, to implement revisions to the methodology 
for determining the payment rates for RHC and other services included 
in hospice care as the Secretary determines to be appropriate. The 
revisions may be based on an analysis of new data and information 
collected and such revisions may include adjustments to per diem 
payments that reflect changes in resource intensity in providing such 
care and services during the course of the entire episode of hospice 
care. In addition, we are required to consult with hospice programs and 
MedPAC on the revised hospice payment methodology.
    This legislation emerged largely in response to MedPAC's March 2009 
Report to Congress, which cited rapid growth of for-profit hospices and 
longer lengths of stay that raised concerns regarding a per diem 
payment structure that encouraged inappropriate utilization of the 
benefit.\31\ MedPAC stated that a revised payment system would 
encourage hospice stays consistent with meeting the eligibility 
requirements of a medical prognosis of 6 months or less if the illness 
runs its normal course and increase greater provider accountability to 
monitor patients' conditions. In that same report, MedPAC stated that 
their goal was to ``strengthen the hospice payment system and not 
discourage enrollment in hospice, while deterring program abuse.''
---------------------------------------------------------------------------

    \31\ Medicare Payment Advisory Commission (MedPAC). ``Reforming 
Medicare's Hospice Benefit.'' Report to the Congress: Medicare 
Payment Policy. March, 2009. Web. 18 Feb. 2015. http://medpac.gov/documents/reports/Mar09_Ch06.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    As described in section III.A, CMS has transparently conducted 
payment reform activities and released research findings to the public 
since 2010. At that time, Abt Associates conducted a literature review 
and carried out original research to provide background on the current 
state of the Medicare

[[Page 25851]]

hospice benefit. The initial contract also included several technical 
expert panel meetings with national hospice association 
representatives, academic researchers, and a cross-section of hospice 
programs that provided valuable insights and feedback on baseline 
empirical analyses provided by the ASPE. A subsequent award to Abt 
Associates continues to support the dissemination of research analyses 
and findings, which are located in the ``Research and Analyses'' 
section of the Hospice Center Web page (http://cms.hhs.gov/Center/Provider-Type/Hospice-Center.html). In addition, research findings and 
payment reform concepts were set out in a 2013 technical report and a 
2014 technical report, as well as in the FY 2014 Hospice Wage Index and 
Payment Rate Update final rule (78 FR 48234) and in the FY 2015 Hospice 
Wage Index and Payment Rate Update final rule (79 FR 50452). These 
research findings and concepts provide a basis for an important initial 
step toward payment reform outlined in section III.B.2 below.
    Over the past several years, MedPAC, the Government Accountability 
Office (GAO), and OIG, have all recommended that CMS collect more 
comprehensive data to better evaluate trends in utilization of the 
Medicare hospice benefit. Furthermore, section 3132(a)(1)(C) of the 
Affordable Care Act specifies that the Secretary may collect additional 
data and information on cost reports, claims, or other mechanisms as 
the Secretary determines to be appropriate. We have received many 
suggestions for ways to improve data collection to support larger 
payment reform efforts in the future. Based on those suggestions and 
industry feedback, we began collecting additional information on the 
hospice claim form as of April 1, 2014.\32\ Additionally, revisions to 
the cost report form for freestanding hospices became effective for 
cost reporting periods beginning on or after October 1, 2014. The 
instructions for completing the revised freestanding hospice cost 
report form are found in the Medicare Provider Reimbursement Manual-
Part 2, chapter 43.\33\ Once available, we expect the data from hospice 
claims and cost reports to provide more comprehensive information on 
the costs associated with the services provided by hospices to Medicare 
beneficiaries by level of care.
---------------------------------------------------------------------------

    \32\ CMS Transmittal 2864. ``Additional Data Reporting 
Requirements for Hospice Claims''. Available at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2864CP.pdf.
    \33\ http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html?DLPage=1&DLSort=0&DLSortDir=ascending.
---------------------------------------------------------------------------

a. U-Shaped Payment Model
    For over a decade, MedPAC and other organizations have reported 
findings that suggest that the hospice benefit's fixed per-diem payment 
system is inconsistent with the true variance of service costs over the 
course of an episode. Specifically, MedPAC cited both academic and non-
academic studies, as well as its own analyses (as summarized and 
articulated in MedPAC's 2002,\34\ 2004,\35\ 2006,\36\ 2008,\37\ and 
2009 \38\ Reports to Congress), demonstrating that the intensity of 
services over the duration of a hospice stay manifests in a `U-Shaped' 
pattern (that is, the intensity of services provided is higher both at 
admission and near death and, conversely, is relatively lower during 
the middle period of the hospice episode). According to MedPAC's 2008 
Report to Congress, after the high costs at admission, the `turning 
point' or `break-even' point of profitability was found to be about 3 
weeks (21 days).\39\ Beyond 21 days, the magnitude of profitability 
deficits or `marginal costs' declined and the lengths of stay became 
profitable--and more so--with longer stays.\40\ Since hospice care is 
most profitable during the long, low-cost middle portions of an 
episode, longer episodes would potentially have very profitable, long 
middle segments. This financial incentive appears to have resulted in 
hospices enrolling beneficiaries that are not truly eligible for the 
benefit (that is, do not have a life expectancy of 6 months or less) 
and ``may lead some patients, families, and providers to implicitly 
regard hospice as a source of basic health care for failing patients 
who did not qualify for skilled nursing facility or home health care 
and did not qualify for Medicaid or otherwise could not afford other 
sources of long-term custodial care'',\41\ rather than the end-of-life 
care for which the benefit was originally designed.
---------------------------------------------------------------------------

    \34\ http://www.medpac.gov/documents/contractor-reports/report-to-the-congress-medicare-beneficiaries'-access-to-hospice-(may-
2002).pdf.
    \35\ http://www.medpac.gov/documents/reports/June04_ch6.pdf.
    \36\ http://www.medpac.gov/documents/reports/Jun06_Ch03.pdf.
    \37\ http://www.medpac.gov/documents/reports/Jun08_Ch08.pdf.
    \38\ http://www.medpac.gov/documents/reports/Mar09_Ch06.pdf.
    \39\ http://www.medpac.gov/documents/reports/Jun08_Ch08.pdf.
    \40\ Cheung, L., K. Fitch, and B. Pyenson. 2001. The costs of 
hospice care: An actuarial evaluation of the Medicare hospice 
benefit. Report by Milliman USA for the National Hospice and 
Palliative Care Organization, August 1. New York: Milliman USA.
    \41\ http://www.medpac.gov/documents/reports/Mar09_Ch06.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    In its March 2009 report, ``Reforming Medicare's Hospice Benefit,'' 
MedPAC recommended that the Congress require CMS to implement a payment 
system that would adjust per-diem hospice rates based on the day's 
timing within the hospice episode, with the express goal of mitigating 
the apparent inconsistency between payments and resource utilization 
(that is, costs) in hospice episodes.\42\ Specifically, MedPAC 
recommended that payments near the beginning and ending of a stay be 
set at higher levels (weighted upwards) and payments during the middle 
portion of care be set at lower levels (weighted downwards) to better 
mirror documented variation in cost over an episode's duration. Two 
primary weighting schemes were outlined in MedPAC's 2009 Report: A 
``larger intensity adjustment'' (essentially a deeper U-shaped payment 
model, paying twice the base rate in the first 30/last 7 days and just 
a quarter of the daily rate in days 181+) and a ``smaller intensity 
adjustment'' (a relatively shallower U-shaped model, paying 1.5 times 
the base rate in the first 30/last 7 days and 0.375 times the daily 
rate in days 181+).
---------------------------------------------------------------------------

    \42\ Medicare Payment Advisory Commission (MedPAC). ``Reforming 
Medicare's Hospice Benefit.'' Report to the Congress: Medicare 
Payment Policy. March, 2009. Web. 18 Feb. 2015. http://medpac.gov/documents/reports/Mar09_Ch06.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    In its March 2015 Report to the Congress,\43\ MedPAC reiterated its 
continued concerns regarding the ``mismatch between payments and 
hospice service intensity'' in the current hospice system and the 
ongoing need for payment reform. The Commission stated that 
``Medicare's hospice payment system is not well aligned with the costs 
of providing care throughout a hospice episode. As a result, long 
hospice stays are generally more profitable than short stays.'' The 
Commission previously ``recommended that the hospice payment system be 
reformed to better match service intensity throughout a hospice episode 
of care (higher per diem payments at the beginning of the episode and 
at the end of the episode near the time of death and lower payments in 
the middle)''.
---------------------------------------------------------------------------

    \43\ http://medpac.gov/documents/reports/chapter-12-hospice-services-(march-2015-report).pdf?sfvrsn=0.
---------------------------------------------------------------------------

    Other organizations have also explored the concept of a U-shaped 
payment model. The ASPE, in conjunction with its contractor, Acumen 
LLC, analyzed hospice enrollment and utilization data. ASPE's research

[[Page 25852]]

demonstrated that the resource use curve becomes more pronounced as 
episode lengths increase for hospice users, indicating that this effect 
occurs because resource use declines more substantially for the middle 
days relative to beginning and ending days in longer episodes of 
hospice care than it does for shorter episodes. The decline in the 
center of the `U' is deeper for those users who receive RHC only during 
their hospice episode, which is the case for the majority of hospice 
patients. Recently, CMS's contracting partner, Abt Associates, 
conducted analysis of FY 2013 hospice claims data, showing that of the 
approximately 92 million hospice days billed, 97.45 percent are 
categorized as RHC.
b. Tiered Payment Model
    As required under section 3132(a) of the Affordable Care Act, CMS 
also explored other options for hospice payment reform. Taking into 
consideration the research and analysis performed by MedPAC, ASPE, and 
others, our payment reform contractor, Abt Associates, examined hospice 
utilization data and modeled a hypothetical ``tiered'' payment system 
similar to MedPAC's U-shaped payment model by paying different per-diem 
rates for RHC according to the timing of the RHC day in the patient's 
episode of care. However, because analysis of hospice claims data found 
that a relatively high percentage of patients were not receiving 
skilled visits during the last days of life, the ``tiered payment 
model'' made the increased payments at end of life contingent on 
whether skilled services were provided. As reported in the FY 2015 
Hospice Payment Rate Update final rule, in CY 2012, approximately 14 
percent beneficiaries did not receive any skilled visits in the last 2 
days of life (79 FR 50461). While this could be explained, in part, by 
sudden or unexpected death, the high percentage of beneficiaries with 
no skilled visits in the last 2 days of life causes concern as to 
whether beneficiaries and their families are not receiving needed 
hospice care and support at the very end of life. If hospices are 
actively engaging with the beneficiary and the family throughout the 
election, we would expect to see skilled visits during those last days 
of life. Therefore, in the tiered payment model, making the increased 
payment at the end of life contingent on whether skilled visits 
occurred in the last 2 days of life was thought of as one way to 
provide additional incentive for care to be provided when the patient 
needs it most.
    The groupings in the tiered payment model, presented in Table13 
below, were developed through Abt Associates' analyses of resource 
utilization over the hospice episode and clinical input. Using a sample 
of 100 percent RHC hospice service days from 2011, Abt then developed 
payment weights for each grouping by calculating its relative resource 
utilization rate compared to the overall estimate of resource use 
across all RHC days (see Table 13 below).

  Table 13--Average Daily Resource Use by Payment Groups in the Tiered
                         Payment Model, CY 2011
------------------------------------------------------------------------
               Group                 Days of hospice     Implied weight
------------------------------------------------------------------------
Group 1: RHC Days 1-5.............          2,800,144                2.3
Group 2: RHC Days 6-10............          2,493,004               1.11
Group 3: RHC Days 11-30...........          7,767,918               0.97
Group 4: RHC Days 31+.............         65,958,740               0.86
Group 5: RHC During Last Seven              2,832,620               2.44
 Days, Skilled Visits During Last
 2 Days...........................
Group 6: RHC During Last Seven                476,809               0.91
 Days, No Skilled Visits During
 Last 2 Days......................
Group 7: RHC When Hospice Length              510,787               3.64
 of Stay is 5 Days or Less,
 Patient Discharged as
 ``Expired''......................
                                   -------------------------------------
    Total.........................         82,840,022                1.0
------------------------------------------------------------------------

    The payment weighting scheme in this system, derived from observed 
resource utilization across the entire episode, would produce higher 
payments during times when service is more intensive (the beginning of 
a stay or the end of life) and produce lower payments during times when 
service is less intensive (such as the ``middle period'' of the stay). 
The tiered payment model was discussed in more detail in the FY2014 
Hospice Wage Index final rule (78 FR 48271) and in the Hospice Study 
Technical Report issued in April of 2013.\44\
---------------------------------------------------------------------------

    \44\ http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Downloads/Hospice-Study-Technical-Report.pdf.
---------------------------------------------------------------------------

c. Visits During the Beginning and End of a Hospice Election
    Updated analysis of FY 2013 hospice claims data continues to 
demonstrate a U-Shaped pattern in of resource use. Increased 
utilization at both the beginning and end of a stay is demonstrated in 
Figure 4 below, where FY 2013 resource costs (as captured by wage-
weighted minutes) are markedly higher in the first two days of a 
hospice election and once again in the six days preceding the date of 
death and on the date of death itself.

[[Page 25853]]

[GRAPHIC] [TIFF OMITTED] TP05MY15.004

    Analysis of skilled nursing and social work visits provided on the 
first day of a hospice election shows that nearly 89 percent of 
patients received a visit totaling 15 minutes or more, while 11 percent 
did not receive a skilled nursing visit or social work visit on the 
first day of a hospice election (see Table 14 below). The percentage of 
patients that did not receive a skilled nursing or social work visit on 
a given day increased to nearly 38 percent on the second day of a 
hospice election. In accordance with the hospice CoPs at Sec.  
418.54(a), hospices are required to have a RN complete an initial 
assessment of the hospice patient within 48 hours of election; 
therefore, we would expect to see a nursing visit occurring within the 
first 2 days of an election in order to be in compliance with the CoPs. 
We found that, in FY 2013, 96 percent of hospice patients did receive a 
skilled visit in the first 2 days of a hospice election. The percentage 
of patients that did not receive a skilled nursing or social work visit 
on any given day increased to about 65 percent by the sixth day of a 
hospice election. Overall, on any given day during the first 7 days of 
a hospice election, nearly 50 percent of the time the patient is not 
receiving a skilled visit (skilled nursing or social worker visit).

     Table 14--Frequency and Length of Skilled Nursing and Social Work Visits (Combined) During the First Seven Days of a Hospice Election, FY 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                First
                                                   First day    Second day   Third day    Fourth day   Fifth day    Sixth day   Seventh day    through
                  Visit length                     (percent)    (percent)    (percent)    (percent)    (percent)    (percent)    (percent)   seventh day
                                                                                                                                              (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
No Visit........................................         11.0         37.7         56.0         59.1         62.0         65.6         64.2         49.3
15mins to 1 hr..................................         12.8         27.1         22.2         20.6         20.4         20.1         22.3         20.7
1hr15m to 2 hrs.................................         32.0         21.4         14.3         13.4         12.2         10.4         10.2         16.9
2hrs15m to 3 hrs................................         22.8          8.6          4.8          4.5          3.6          2.5          2.2          7.5
3hrs15m to 3hrs45m..............................          8.5          2.6          1.3          1.2          0.9          0.6          0.5          2.4
4 or more hrs...................................         13.0          2.6          1.3          1.2          0.9          0.7          0.6          3.2
                                                 -------------------------------------------------------------------------------------------------------
    Total.......................................        100.0        100.0        100.0        100.0        100.0        100.0        100.0        100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FY 2013 hospice claims data from the Standard Analytic Files for CY 2012 (as of June 30, 2013) and CY 2014 (as of December 31, 2013).

    As we noted above, we are concerned that many beneficiaries are not 
receiving skilled visits during the last few days of life. At the end 
of life, patient needs typically surge and more intensive services are 
warranted. However, analysis of FY 2013 claims data shows that on any 
given day during the last 7 days of a hospice election, nearly 50 
percent of the time the patient is not receiving a skilled visit 
(skilled nursing or social worker visit) (see table 15 below). 
Moreover, on the day of death nearly 30 percent of beneficiaries did 
not receive a skilled visit (skilled nursing or social work visit).

[[Page 25854]]

      Table 15--Frequency and Length of Skilled Nursing and Social Work Visits (Combined) During the Last Seven Days of a Hospice Election, FY 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 One day      Two days    Three days   Four days    Five days     Six days    Last seven
                                                     Day of       before       before       before       before       before       before        days
             Visit length (percent)                  death        death        death        death        death        death        death       combined
                                                   (percent)    (percent)    (percent)    (percent)    (percent)    (percent)    (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
No Visit........................................         27.8         38.7         45.2         49.8         53.2         55.8         58.0         46.3
15mins to 1 hr..................................         23.9         27.9         26.5         25.1         24.2         23.5         22.8         24.9
1hr15m to 2 hrs.................................         24.2         19.3         17.4         15.9         14.5         13.6         12.7         17.1
2hrs15m to 3 hrs................................         12.3          7.2          5.9          5.1          4.5          4.1          3.8          6.3
3hrs15m to 3hrs45m..............................          4.4          2.4          1.9          1.6          1.4          1.2          1.1          2.1
4 or more hrs...................................          7.4          4.3          3.0          2.4          2.1          1.9          1.6          3.4
                                                 -------------------------------------------------------------------------------------------------------
    Total.......................................        100.0        100.0        100.0        100.0        100.0        100.0        100.0        100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FY 2013 hospice claims data from the Standard Analytic Files for CY 2012 (as of June 30, 2013) and CY 2014 (as of December 31, 2013).

    We would expect that skilled visits are provided to the patient and 
family at end of life as the changing condition of the individual and 
the imminence of death often warrants frequent changes to care to 
alleviate and minimize symptoms and to provide support for the family. 
Although previous public comments stated that patients and families 
sometimes request no visits at the end of life, and there are rare 
instances where a patient passes away unexpectedly, we would expect 
that these instances would be rare and represent a small proportion of 
the noted days without visits at the end of life. However, the data 
presented in Table 15 above suggests that it is not rare for patients 
and families to have not received skilled visits (skilled nursing or 
social work visits) at the end of life. In the FY 2015 Hospice Wage 
Index and Payment Rate Update final rule, we noted that nearly 5 
percent of hospices did not provide any skilled visits in the last 2 
days of life to more than 50 percent of their decedents receiving 
routine home care on those last 2 days and 34 hospices did not make any 
skilled visits in the last 2 days of life to any of their decedents who 
died while receiving routine home care (79 FR 50462).
2. Proposed Routine Home Care Rates
    RHC is the basic level of care under the Hospice benefit, where a 
beneficiary receives hospice care, but remains at home. With this level 
of care, hospice providers are currently reimbursed per day regardless 
of the volume or intensity of services provided to a beneficiary on any 
given day. As stated in the FY 2014 Hospice Wage Index and Payment Rate 
Update final rule (78 FR 48234), ``it is CMS' intent to ensure that 
reimbursement rates under the Hospice benefit align as closely as 
possible with the average costs hospices incur when efficiently 
providing covered services to beneficiaries.'' However, as discussed in 
section III.B.1 above, there is evidence of a misalignment between the 
current RHC per diem payment rate and the cost of providing RHC. In 
order to help ensure that hospices are paid adequately for providing 
care to patients regardless of their palliative care needs during the 
stay, while at the same time encouraging hospices to more carefully 
determine patient eligibility relative to the statutory requirement 
that the patients' life expectancy be 6 months or less, we are using 
the authority under section 1814(i)(6)(D) of the Act, as amended by 
section 3132(a) of the Affordable Care Act to propose a revision to the 
current RHC per diem payment rate to more accurately align the per diem 
payments with visit intensity (that is, the cost of providing care for 
the clinical service (labor) components of the RHC rate). We are 
proposing, in conjunction with a SIA payment discussed in section 
III.B.3 below, two different RHC rates that would result in a higher 
base payment rate for the first 60 days of hospice care and a reduced 
base payment rate for days 61 or over of hospice care.
    The two proposed rates for RHC are based on an extensive body of 
research concerning visit intensity during a hospice episode as cited 
throughout this section. We consider a hospice ``episode'' of care to 
be a hospice election period or series of election periods. Visit 
intensity is commonly measured in terms of wage-weighted minutes and 
reflects variation in the provision of care for the clinical service 
(labor) components of the RHC rate. The labor components of the RHC 
rate comprise nearly 70 percent of the RHC rate (78 FR 48272). 
Therefore, visit intensity is a close proxy for the reasonable cost of 
providing hospice care absent data on the non-labor components of the 
RHC rate, such as drugs and DME. As shown in Figures 5 and 6 below, the 
daily cost of care, as measured wage-weighted minutes, declines quickly 
for individual patients during their hospice episodes, and for long 
episode patients, remains low for a significant portion of the episode. 
Thus, long episode patients are potentially more profitable than 
shorter episode patients under the current per diem payments system in 
which the payment rate is the same for the entire episode. At the same 
time, the percent of beneficiaries that enter hospice less than 7 days 
prior to death has remained relatively constant (approximately 30 
percent) over this time period, meaning the increase in the average 
episode length can be attributed to an increasing number of long stay 
patients. We found that the percent of episodes that are more than 6 
months in length has nearly doubled from about 7 percent in 1999 to 13 
percent in 2013.
    Figure 5 displays the pattern of wage-weighted minutes by time 
period within beneficiary episodes, but excluding the last 7 days of 
the episode for decedents. The wage-weighted minutes for the last 7 
days are displayed separately by the bar furthest to the right of the 
Figure 5. The visit intensity curve declines rapidly after 7 days and 
then at a slower rate until 60 days when the curve becomes flat 
throughout the remainder of episodes (excluding the last 7 days prior 
to death). It is for this reason we are proposing to pay the higher 
rate for the first 60 days and a lower rate thereafter. It is clear 
from the figure that visit utilization is constant from day 61 on, 
until the last 7 days for decedents. We believe the most important 
reason for proposing a different RHC rate for the first 60 days versus 
days 61 and beyond is that we must account for differences in average 
visit intensity between episodes that will end within 60 days and those 
that will go on for longer episodes.

[[Page 25855]]

[GRAPHIC] [TIFF OMITTED] TP05MY15.005

    As Figure 6 demonstrates, beneficiaries whose entire episode is 
between 8 and 60 days do have higher wage-weighted minute usage than 
those with longer stays. Using 60 days for the high RHC rate as opposed 
to an earlier time assured that hospices would have sufficient 
resources for providing high quality care to patients (for example, 1 
through 60 days) whose average daily visit intensity is higher than for 
longer stay patients.
[GRAPHIC] [TIFF OMITTED] TP05MY15.006

    The SIA payments based on actual visits provided would be added to 
the applicable rate during the last 7 days to reflect the rapid 
increase in visit intensity during that time period.
    Table 16 below describes the average wage-weighted minutes for RHC 
days in FY 2014, calculated both in specific phases within an episode 
as well as overall.

[[Page 25856]]

                          Table 16--Average Wage Weighted Minutes per RHC Day, FY 2014
----------------------------------------------------------------------------------------------------------------
                                                                                                 Ratio of wage
                                                                                                weighted minutes
                                                           Average wage-                          for each row
                Phase of days in episode                  weighted minutes       RHC Days       divided by wage
                                                                                                weighted minutes
                                                                                                  for days 1-7
----------------------------------------------------------------------------------------------------------------
1-7 Days...............................................              39.32          5,401,497             1.0000
8-14 Days..............................................              20.12          4,276,570             0.5118
15-30 Days.............................................              17.96          7,693,966             0.4567
31-60 Days.............................................              16.10         10,679,971             0.4095
61-90 Days.............................................              15.44          8,061,934             0.3927
91-180 Days............................................              14.93         16,156,969             0.3797
181-272 Days...........................................              14.79         10,056,928             0.3762
273-365 Days...........................................              14.91          6,844,692             0.3791
365 up Days............................................              15.05         15,962,038             0.3828
                                                        --------------------------------------------------------
    Total RHC Days.....................................              17.21         85,134,565             0.4377
----------------------------------------------------------------------------------------------------------------

    In Table 16, the average wage-weighted minutes per day for days 1 
through 7 describe the baseline for the other phases of care, set at a 
value of one. Given the demands of the initial care in an episode, 
resource intensity is highest during this first week of an episode, and 
resource needs decline steadily over the course of an episode. The 
overall average wage-weighted minutes per day across all RHC days 
equals $17.21 as described in the last row in table 16 above. We then 
calculated the average wage-weighted minute costs for the two groups of 
days (Days 1 through 60 and Days 61+) utilizing FY 2014 RHC days 
multiplied by the 2013 Bureau of Labor Statistics (BLS) average hourly 
wage values for the relevant disciplines, as follows: Skilled Nursing: 
$40.07; Physical Therapy: $55.93; Occupational Therapy: $55.57; Speech 
Language Pathology: $60.21; Medical Social Services: $38.25; and Aide: 
$14.28. The average wage-weighted minute cost for days 1 through 60 
equals to $21.69 while the average wage weighted minutes for days 61 or 
more equals $15.01.
    To calculate the RHC payment rate for days 1 through 60, we compare 
the average wage-weighted minutes per day for days 1 through 60 to the 
overall average wage-weighted minutes per day multiplied by the labor 
portion of the FY 2015 RHC rate (column 4 in Table 17 below), which 
equals ($21.69/$17.21)*$109.48 = $137.98. Similarly, the RHC payment 
rate for days 61+ equals the average wage-weighted minutes per day for 
days 61+ divided by the overall average wage-weighted minutes per day 
multiplied by the labor portion of the FY 2015 RHC rate (column 4 in 
Table 17 below), which equals ($15.01/$17.21)*$109.48 = $95.48.

                          Table 17--FY 2015 RHC Rate Revised Labor Portion Calculation
----------------------------------------------------------------------------------------------------------------
                (1)                      (2)          (3)          (4)                (5)                (6)
----------------------------------------------------------------------------------------------------------------
                                                                             Average wage weighted
                                     FY 2015 RHC   RHC Labor-  FY 2015 RHC      minutes for RHC       Revised FY
                                       payment      related      payment       differential rate/     2015 labor
                                         rate        share     rate--labor    overall RHC average      portion
                                                                 portion     wage weighted minutes
----------------------------------------------------------------------------------------------------------------
Days 1-60..........................      $159.34     x 0.6871      $109.48                 x 1.2603      $137.98
                                                                                    ($21.69/$17.21)
Days 61+...........................       159.34     x 0.6871       109.48                 x 0.8722        95.48
                                                                                    ($15.01/$17.21)
----------------------------------------------------------------------------------------------------------------

    As discussed in section III.C of this rule, currently, the labor-
related share of the hospice payment rate for RHC is 68.71 percent. The 
non-labor share is equal to 100 percent minus the labor-related share, 
or 31.29 percent. Given the current base rate for RHC for FY 2015 of 
$159.34, the labor and non-labor components are as follows: for the 
labor-share portion, $159.34 multiplied by 68.71 percent equals 
$109.48; for the non-labor share portion, $159.34 multiplied by 31.29 
percent equals $49.86. After determining the labor portion for the RHC 
rate for the first 60 days and the labor portion for the RHC rate for 
days 61 and over, we add the non-labor portion ($49.86) to the revised 
labor portions as described in column 6 in Table 17 above and in column 
2 in Table 18 below. In order to maintain budget neutrality, as 
required under section 1814(i)(6)(D)(ii) of the Act, the proposed RHC 
rates would need to be adjusted by a ratio of the total labor payments 
for RHC under using the current single rate for RHC to the estimated 
total labor payments for RHC using the two proposed rates for RHC. This 
ratio results in a budget neutrality adjustment of 0.9985 as shown in 
column 3 in Table 18 below. Finally, adding the revised labor portion 
with budget neutrality to the non-labor portion results in revised FY 
2015 RHC payment rates of $187.63 for days 1 through 60 and $145.21 for 
days 61 and over.

[[Page 25857]]

                                                Table 18--RHC Budget Neutrality Adjustment for RHC Rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           (1)                                    (2)                (3)                (4)                (5)                (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Revised FY 2015
                                                            Revised FY 2015   Budget neutrality    labor portion    FY 2015 Non-labor   FY 2015 Revised
                                                             labor portion        factor \1\        with budget          portion       RHC payment rates
                                                                                                     neutrality
--------------------------------------------------------------------------------------------------------------------------------------------------------
Days 1-60................................................            $137.98           x 0.9985            $137.77             $49.86            $187.63
Days 61+.................................................              95.49           x 0.9985              95.35              49.86             145.21
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The budget neutrality adjustment is required due to differences in the average wage index for days 1-60 compared to days 61 and over.

    The proposed RHC rates for days 1 through 60 and days 61 and over 
(column 6 of Table 18 above) would replace the current single RHC per 
diem payment rate with two new RHC per diem rates for patients who 
require RHC level of care during a hospice election. In order to 
mitigate potential high rates of discharge and readmissions, we further 
propose that the count of days follow the patient. For hospice patients 
who are discharged and readmitted to hospice within 60 days of that 
discharge, his or her prior hospice days will continue to follow the 
patient and count toward his or her patient days for the receiving 
hospice upon hospice election. The hospice days would continue to 
follow the patient solely to determine whether the receiving hospice 
may bill at the 1 through 60 or 61+ RHC rate. The proposed policy does 
not preclude the receiving hospice (same or different hospice) from 
billing for a per diem payment for each hospice day. Therefore, we 
consider an ``episode'' of care to be a hospice election period or 
series of election periods separated by no more than a 60 day gap. We 
will monitor this proposal and trends in discharges and revocations for 
potential future refinements to address perverse incentives. This 
policy proposal attempts to better align RHC payment rates with 
resource use and is not intended to place an arbitrary limit on hospice 
services. We continue to expect hospices to adhere to the long-standing 
policy to provide ``virtually all'' care during a hospice election as 
articulated in the 1983 Hospice Care proposed and final rules as well 
as most recently in FY 2015 Hospice Wage Index and Payment Rate Update 
final rule. Furthermore, program integrity and oversight efforts 
including but not limited to, medical review, MAC audits, Zone Program 
Integrity Contractor actions, Recovery Auditor activities, or 
suspension of provider billing privileges, are being considered to 
address fraud and abuse. We are soliciting public comment on all 
aspects of the proposed RHC payment rates as articulated in this 
section as well as this policy in conjunction with the proposed SIA 
payment described in section III.B.3 below.
3. Proposed Service Intensity Add-On (SIA) Payment
    Section 1814(i)(1)(A) of the Act states that payment for hospice 
services must be equal to the costs which are reasonable and related to 
the cost of providing hospice care or which are based on such other 
tests of reasonableness as the Secretary may prescribe in regulations. 
In addition, section 1814(i)(6)(D) of the Act, as amended by section 
3132(a) of the Affordable Care Act, requires the Secretary to implement 
revisions to the methodology for determining the payment rates for RHCs 
and other services included in hospice care under Medicare Part A as 
the Secretary determines to be appropriate as described in section 
III.B.1 above. Given that independent analyses demonstrate a U-shaped 
cost pattern across hospice episodes, CMS believes that implementing 
revisions to the payment system that align with this concept supports 
the requirements of reasonable cost in section 1814(i)(A) of the Act. 
As articulated above, CMS considered implementing a tiered payment 
model as described in the FY 2014 Hospice Wage Index final rule (78 FR 
48271) and in the Hospice Study Technical Report issued in April of 
2013,\45\ in order to better align payments with observed resource use 
over the length of a hospice stay. However, operational concerns and 
programmatic complexity led us to explore the concept of a SAI that 
could be implemented with minimal systems changes that limit 
reprocessing of hospice claims due to sequential billing requirements. 
In addition, while the tiered model represented a move toward better 
aligning payments with resource use, it only accounted for whether 
skilled services were provided in the last 2 days of life (Groups 5 and 
6 in Table 13 above). Section III.B.1.c, above notes that on any given 
day during the first 7 days of a hospice election and last 7 days of 
life, only about 50 percent of the time are visits being made. In our 
view, increasing payments at the beginning of a hospice election and at 
the end of life for days where visits are not occurring does not align 
with the requirements of reasonable cost articulated in statute in 
section 1814(i)(A) of the Act. Therefore, as one of the first steps in 
addressing the observed misalignment between resource use and 
associated Medicare payments and in improving patient care through the 
promotion of skilled visits at end of life with minimal claims 
processing systems changes, CMS proposes to implement a SIA payment if 
the criteria outlined below are met
---------------------------------------------------------------------------

    \45\ http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Downloads/Hospice-Study-Technical-Report.pdf.
---------------------------------------------------------------------------

    To qualify for the SIA payment, we propose that the following 
criteria must be met: (1) The day is billed as a RHC level of care day; 
(2) the day occurs during the last 7 days of life (and the beneficiary 
is discharged dead); (3) direct patient care is provided by a RN or a 
social worker (as defined by Sec.  418.114(c) and Sec.  418.114(b)(3), 
respectively) that day; and (4) the service is not provided in a 
skilled nursing facility/nursing facility (SNF/NF). The proposed SIA 
payment would be equal to the CHC) hourly payment rate (the current FY 
2015 CHC rate is $38.75 per hour), multiplied by the amount of direct 
patient care provided by a RN or social worker for up to 4 hours total, 
per day, as long as the four criteria listed above are met. The 
proposed SIA payment would be paid in addition to the current per diem 
rate for the RHC level of care.
    CMS would create two separate G-codes for use when billing skilled 
nursing visits (revenue center 055x), one for a RN and one for a 
Licensed Practical Nurse (LPN). During periods of crisis, such as the 
precipitous decline before death, RNs are more highly trained 
clinicians with commensurately higher payment rates. Moreover, our 
rules at Sec.  418.56(a)(1) require the RN member of the hospice 
interdisciplinary group to be responsible for ensuring that the needs 
of the patient and family are continually assessed. We would expect 
that at end of life the needs of the

[[Page 25858]]

patient and family would need to be frequently assessed; thus the 
skills of the interdisciplinary group RN are required. We note that 
social workers also often play a crucial role in providing support for 
the patient and family when a patient is at end of life. While the 
nature of the role of the social worker does facilitate interaction via 
the telephone, CMS proposes to only pay an SIA for those social work 
services provided by means of in-person visits. Analysis conducted by 
Abt Associates on the FY 2013 hospice claims data shows that in the 
last 7 days of life only approximately 10 percent of beneficiaries 
received social work visits of any kind. Moreover, we also found that 
only about 13 percent of social work ``visits'' are provided via 
telephone; therefore, the proportion of social work calls likely 
represents a very small fraction of visits overall in the last few days 
of life. The SIA payment would be in addition to the RHC payment amount 
and the costs associated with social work phone conversations; visits 
by LPNs, aides, and therapists; counseling; drugs; medical supplies; 
DME; and any other item or service usually covered by Medicare would 
still be covered by the existing RHC payment amount in accordance with 
section 1861(dd)(1) of the Act.
    In 2011, the OIG published a report that focused specifically on 
Medicare payments to hospices who served a high percentage of nursing 
facility residents. The OIG found that from 2005 to 2009, the total 
Medicare spending for hospice care for nursing facility residents 
increased from $2.55 billion to $4.31 billion, an increase of almost 70 
percent (OIG, 2011). When looking at hospices that had more than two-
thirds of their beneficiaries in nursing facilities, the OIG found that 
72 percent of these facilities were for-profit and received, on 
average, $3,182 more per beneficiary in Medicare payments than hospices 
overall. High-percentage hospices were found to serve beneficiaries who 
spent more days in hospice care, to the magnitude of 3 weeks longer 
than the average beneficiary. In addition, when looking at 
distributions in diagnoses, OIG found that high-percentage hospices 
enrolled beneficiaries who required less skilled care. In response to 
these findings, OIG recommended that CMS modify the current hospice 
reimbursement system to reduce the incentive for hospices to seek out 
beneficiaries in nursing facilities, who often receive longer but less 
complex and costly care.\46\ Per the OIG recommendation, we are 
proposing to exclude SNF/NF sites of service from eligibility for the 
SIA payment.
---------------------------------------------------------------------------

    \46\ http://oig.hhs.gov/oei/reports/oei-02-10-00070.pdf.
---------------------------------------------------------------------------

    The for-profit provider community has frequently highlighted its 
concerns regarding the lack of adequate reimbursement for hospice short 
stays in its public filings with the Securities and Exchange Commission 
(SEC) as described in MedPAC's 2008 Report to Congress.\47\ 
Specifically, MedPAC cited records from the SEC for publicly traded 
for-profit hospice chains as evidence of a general acknowledgement of 
the nonlinear cost function of resource use within hospice episodes. 
For instance:
---------------------------------------------------------------------------

    \47\ http://www.medpac.gov/documents/reports/Jun08_Ch08.pdf.
---------------------------------------------------------------------------

     VistaCare: ``Our profitability is largely dependent on our 
ability to manage costs of providing services and to maintain a patient 
base with a sufficiently long length of stay to attain profitability,'' 
and that ``cost pressures resulting from shorter patient lengths of 
stay . . . could negatively impact our profitability.'' \48\
---------------------------------------------------------------------------

    \48\ Health Care Strategic Management. 2004. Hospice companies 
benefit from favorable Medicare rates. Health Care Strategic 
Management 22, no. 1: 13-14.
---------------------------------------------------------------------------

     Odyssey HealthCare: ``Length of stay impacts our direct 
hospice care expenses as a percentage of net patient service revenue 
because, if lengths of stay decline, direct hospice care expenses, 
which are often highest during the earliest and latter days of care for 
a patient, are spread against fewer days of care.'' \49\
---------------------------------------------------------------------------

    \49\ Odyssey HealthCare, Inc. 2004. Annual report to 
shareholders, form 10-K. Filed with the Securities and Exchange 
Commission, Washington, DC, March 11. Dallas, TX: Odyssey 
HealthCare, Inc.
---------------------------------------------------------------------------

    Short lengths of stay were also cited as a source of financial 
difficulties for small rural hospices (implying that longer stays were 
more profitable).\50\ In the FY 2014 Hospice Wage Index and Payment 
Rate Update proposed rule, we stated that ``analysis conducted by Abt 
Associates found that very short hospice stays have a flatter curve 
than the U-shaped curve seen for longer stays, and that average hospice 
costs are much higher. These short stays are less U-shaped because 
there is not a lower-cost middle period between the time of admission 
and the time of death.'' The FY 2014 Hospice Wage Index and Payment 
Rate Update proposed rule went on to note that a ``short stay add-on'' 
was under consideration as a possible reform option (78 FR 27843). 
Public comments received in response to the proposed rule were 
favorable regarding a possible short stay add-on payment. Since the 
proposed SIA payment would be applicable to any 7-day period of time 
ending in the patient's death, hospice elections with short lengths of 
stay would receive an additional payment that would help mitigate the 
marginally higher costs associated with short lengths of stay, 
consistent with the `reasonable cost' structure of the hospice payment 
system. For FY 2013, 32 percent of hospice stays were 7 days or less 
with 60 percent of stays lasting 30 days or less. The median length of 
stay in FY 2013 was 17 days.
---------------------------------------------------------------------------

    \50\ Virnig, B. A., I. S. Moscovice, S. B. Durham, et al. 2004. 
Do rural elders have limited access to Medicare hospice services? 
Journal of the American Geriatrics Society 52, no. 5: 731-735.
---------------------------------------------------------------------------

    Although Figure 4 above demonstrates that there is increased 
resource use during the first 2 days of an election, we are not 
proposing an additional SIA payment for the first or second day of a 
hospice election when the length of stay is beyond 7 days. According to 
MedPAC, the breakeven point for a hospice election is about three weeks 
after admission.\51\ The proposed SIA payment for the last 7 days of 
life would provide additional reimbursement to help to mitigate the 
higher costs for stays lasting 3 weeks or less where spreading out the 
initial costs in the first 2 days of the election over a smaller number 
of days is not enough to make the overall stay profitable. Once a 
hospice stay reaches 3 weeks or more, the initial costs associated with 
the first 2 days of a hospice election can be spread out over a larger 
number of days, making the overall stay profitable. A stay of 7 days or 
less before death would be eligible for SIA payment on all days.
---------------------------------------------------------------------------

    \51\ http://www.medpac.gov/documents/reports/Jun08_Ch08.pdf.
---------------------------------------------------------------------------

    We believe that the proposed SIA payment helps to address MedPAC 
and industry concerns regarding the visit intensity at end of life and 
the concerns associated with the profitability of hospice short stays. 
The proposed RHC rates described in section III.B2 and SIA payment 
would advance hospice payment reform incrementally, as mandated by the 
Affordable Care Act while simultaneously maintaining flexibility for 
future refinements. Since this approach would be implemented within the 
current constructs of the hospice payment system, no major overhaul of 
the claims processing system or related claims/cost report forms would 
be required, minimizing burden for hospices as well as for Medicare. 
CMS needs to further assess whether the four levels of care and the 
current payment amounts, as well as the amounts after implementation of 
the SIA, will align with the actual cost of

[[Page 25859]]

providing hospice services. The hospice cost report was redesigned, 
effective for cost reporting periods beginning on October 1, 2014, and 
additional data are now being collected on the hospice claim form, 
effective April 1, 2014. Once additional data is available, CMS will 
continue to assess additional refinements that may inform more 
extensive policy and payment approaches, in accordance with the payment 
methodology reform required by the Affordable Care Act.
    As required by section 1814(i)(6)(D)(ii) of the Act, any changes to 
the hospice payment system must be made in a budget neutral manner in 
the first year of implementation. Based on the desire to improve 
patient care through the promotion of skilled visits at end of life, 
regardless of the patient's lifetime length of stay, we are proposing 
to make the SIA payments budget neutral through a reduction to the 
overall RHC rate. The SIA payment budget neutrality factor (SBNF) used 
to reduce the overall RHC rate is outlined in section III.C.3 and is 
reflected in the proposed RHC payment rate tables.
    We also propose to continue to make the SIA payments budget neutral 
through an annual determination of the SBNF, which will then be applied 
to the RHC payment rate. The SBNF for the SIA payments would be 
calculated for each FY using the most current and complete fiscal year 
utilization data available at the time of rulemaking. Finally, we are 
soliciting public comment on all aspects of the proposed SIA payment as 
articulated in this section as well as the corresponding proposed 
changes to the regulations at Sec.  418.302 in section VI. We are also 
proposing to change the word ``Intermediary'' to ``Medicare 
Administrative Contractor'' in the regulations text at Sec.  418.302 
and proposing technical regulations text changes to Sec.  418.306 as 
described in section VI. As more data become available, CMS will 
continue to analyze hospice payments, costs, and utilization and will 
consider refining the SIA payment criteria if needed.

C. Proposed FY 2016 Hospice Wage Index and Rate Update

1. Proposed FY 2016 Hospice Wage Index
a. Background
    The hospice wage index is used to adjust payment rates for hospice 
agencies under the Medicare program to reflect local differences in 
area wage levels based on the location where services are furnished. 
The hospice wage index utilizes the wage adjustment factors used by the 
Secretary for purposes of section 1886(d)(3)(E) of the Act for hospital 
wage adjustments. Our regulations at Sec.  418.306(c) require each 
labor market to be established using the most current hospital wage 
data available, including any changes made by OMB to the Metropolitan 
Statistical Areas (MSAs) definitions.
    We use the previous fiscal year's hospital wage index data to 
calculate the hospice wage index values. For FY 2016, the hospice wage 
index will be based on the FY 2015 hospital pre-floor, pre-reclassified 
wage index. This means that the hospital wage data used for the hospice 
wage index is not adjusted to take into account any geographic 
reclassification of hospitals including those in accordance with 
section 1886(d)(8)(B) or 1886(d)(10) of the Act. The appropriate wage 
index value is applied to the labor portion of the payment rate based 
on the geographic area in which the beneficiary resides when receiving 
RHC or CHC. The appropriate wage index value is applied to the labor 
portion of the payment rate based on the geographic location of the 
facility for beneficiaries receiving General Inpatient care (GIP) or 
Inpatient Respite Care (IRC).
    In the FY 2006 Hospice Wage Index final rule (70 FR 45130), we 
adopted the changes discussed in the OMB Bulletin No. 03-04 (June 6, 
2003). This bulletin announced revised definitions for MSAs and the 
creation of micropolitan statistical areas and combined statistical 
areas. The bulletin is available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In adopting the CBSA geographic designations 
for FY 2006, we provided for a 1-year transition with a blended wage 
index for all providers. For FY 2006, the wage index for each 
geographic area consisted of a blend of 50 percent of the FY 2006 MSA-
based wage index and 50 percent of the FY 2006 CBSA-based wage index. 
As discussed in the Hospice Wage Index final rule for FY 2006 (70 FR 
45138), since the expiration of this 1-year transition on September 30, 
2006, we have used the full CBSA-based wage index values.
    When adopting OMB's new labor market designations in FY 2006, we 
identified some geographic areas where there were no hospitals, and 
thus, no hospital wage index data, which to base the calculation of the 
hospice wage index. In the FY 2010 Hospice Wage Index final rule (74 FR 
39386), we also adopted the policy that for urban labor markets without 
a hospital from which hospital wage index data could be derived, all of 
the CBSAs within the state would be used to calculate a statewide urban 
average pre-floor, pre-reclassified hospital wage index value to use as 
a reasonable proxy for these areas. In FY 2016, the only CBSA without a 
hospital from which hospital wage data could be derived is 25980, 
Hinesville-Fort Stewart, Georgia.
    In the FY 2008 Hospice Wage Index final rule (72 FR 50214), we 
implemented a new methodology to update the hospice wage index for 
rural areas without a hospital, and thus no hospital wage data. In 
cases where there was a rural area without rural hospital wage data, we 
used the average pre-floor, pre-reclassified hospital wage index data 
from all contiguous CBSAs to represent a reasonable proxy for the rural 
area. The term ``contiguous'' means sharing a border (72 FR 50217). 
Currently, the only rural area without a hospital from which hospital 
wage data could be derived is Puerto Rico. However, our policy of 
imputing a rural pre-floor, pre-reclassified hospital wage index based 
on the pre-floor, pre-reclassified hospital wage index (or indices) of 
CBSAs contiguous to a rural area without a hospital from which hospital 
wage data could be derived does not recognize the unique circumstances 
of Puerto Rico. In this proposed rule, for FY 2016, we propose to 
continue to use the most recent pre-floor, pre-reclassified hospital 
wage index value available for Puerto Rico, which is 0.4047.
b. Elimination of the Wage Index Budget Neutrality Factor (BNAF)
    This proposed rule would update the hospice wage index values for 
FY 2016 using the FY 2015 pre-floor, pre-reclassified hospital wage 
index. As described in the August 8, 1997 Hospice Wage Index final rule 
(62 FR 42860), the pre-floor and pre-reclassified hospital wage index 
is used as the raw wage index for the hospice benefit. These raw wage 
index values were then subject to either a budget neutrality adjustment 
or application of the hospice floor to compute the hospice wage index 
used to determine payments to hospices. Pre-floor, pre-reclassified 
hospital wage index values below 0.8 were adjusted by either: (1) The 
hospice BNAF; or (2) the hospice floor--a 15 percent increase subject 
to a maximum wage index value of 0.8; whichever results in the greater 
value.
    The FY 2010 Hospice Wage Index rule finalized a provision to phase-
out the BNAF over 7 years, with a 10 percent reduction in the BNAF in 
FY 2010, and an additional 15 percent reduction in each of the next 6 
years, with complete phase out in FY 2016 (74 FR 39384). The 10 percent 
reduced BNAF for FY

[[Page 25860]]

2010 was 0.055598, based on a full BNAF of 0.061775; the additional 15 
percent reduced BNAF for FY 2011 (for a cumulative reduction of 25 
percent) was 0.045422, based on a full BNAF of 0.060562; the additional 
15 percent reduced BNAF for FY 2012 (for a cumulative reduction of 40 
percent) was 0.035156, based on a full BNAF of 0.058593; the additional 
15 percent reduced BNAF for FY 2013 (for a cumulative reduction of 55 
percent) was 0.027197, based on a full BNAF of 0.060438; the additional 
15 percent BNAF for FY 2014 (for a cumulative reduction of 70 percent) 
was 0.018461, based on a full BNAF of 0.061538 and the additional 15 
percent reduced BNAF for FY 2015 (for a cumulative reduction of 85 
percent) is 0.009313, based on a full BNAF of 0.062804. For FY 2016, 
the BNAF is reduced by an additional and final 15 percent for a 
cumulative reduction of 100 percent. Therefore, for FY 2016, the BNAF 
is completely phased-out and eliminated.
    Hospital wage index values which are less than 0.8 are still 
subject to the hospice floor calculation. The hospice floor equates to 
a 15 percent increase, subject to a maximum wage index value of 0.8. 
For example, if County A has a pre-floor, pre-reclassified hospital 
wage index value of 0.3994, we would multiply 0.3994 by 1.15, which 
equals 0.4593. Since 0.4593 is not greater than 0.8, then County A's 
hospice wage index would be 0.4593. In another example, if County B has 
a pre-floor, pre-reclassified hospital wage index value of 0.7440, we 
would multiply 0.7440 by 1.15 which equals 0.8556. Because 0.8556 is 
greater than 0.8, County B's hospice wage index would be 0.8.
c. Proposed Implementation of New Labor Market Delineations
    OMB has published subsequent bulletins regarding CBSA changes. On 
February 28, 2013, OMB issued OMB Bulletin No. 13-01, announcing 
revisions to the delineation of MSAs, Micropolitan Statistical Areas, 
and Combines Statistical Areas, and guidance on uses of the delineation 
in these areas. A copy of this bulletin is available online at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. 
This bulletin states that it ``provides the delineations of all 
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan 
Statistical Areas, Combined Statistical Areas, and New England City and 
Town Areas in the United States and Puerto Rico based on the standards 
published on June 28, 2010, in the Federal Register (75 FR 37246-37252) 
and Census Bureau data.'' In the FY 2015 Hospice Wage Index final rule 
(79 FR 50483), we stated that if CMS incorporates OMB's new area 
delineations, based on the 2010 Census, in the FY 2015 hospital wage 
index, those changes would also be reflected in the FY 2016 hospice 
wage index. In the FY 2015 Inpatient Prospective Payment System (IPPS) 
final rule (79 FR 49951), we finalized the proposal to use OMB's new 
area delineations, based on the 2010 Census, in the FY 2015 hospital 
wage index. In addition, the new area delineations have been 
incorporated into the FY 2015 SNF PPS (79 FR 45628) and the CY 2015 
Home Health (HH) PPS (79 FR 66032) using a 1-year transition with a 
blended wage index.
    While the revisions OMB published on February 28, 2013, are not as 
sweeping as the changes made when we adopted the CBSA geographic 
designations for FY 2006, the February 28, 2013 bulletin does contain a 
number of significant changes. For example, there are new CBSAs, urban 
counties that have become rural, rural counties that have become urban, 
and existing CBSAs that have been split apart. We believe it is 
important for the hospice wage index to use the latest OMB delineations 
available in order to maintain a more accurate and up-to-date payment 
system that reflects the reality of population shifts and labor market 
conditions. While CMS and other stakeholders have explored potential 
alternatives to the current CBSA-based labor market system (we refer 
readers to the CMS Web site at: www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html), no consensus 
has been achieved regarding how best to implement a replacement system. 
As discussed in the FY 2005 IPPS final rule (69 FR 49027), ``While we 
recognize that MSAs are not designed specifically to define labor 
market areas, we believe they do represent a useful proxy for this 
purpose.'' We further believe that using the most current OMB 
delineations would increase the integrity of the hospice wage index by 
creating a more accurate representation of geographic variation in wage 
levels. We have reviewed our findings and impacts relating to the new 
OMB delineations, and have concluded that there is no compelling reason 
to further delay implementation. We are proposing to implement the new 
OMB delineations as described in the February 28, 2013 OMB Bulletin No. 
13-01 for the hospice wage index effective beginning in FY 2016.
i. Micropolitan Statistical Areas
    As discussed in the FY 2006 Hospice Wage Index proposed rule (70 FR 
22397) and final rule (70 FR 45132), CMS considered how to use the 
Micropolitan Statistical Area definitions in the calculation of the 
wage index. OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
``associated with at least one urban cluster that has a population of 
at least 10,000, but less than 50,000 (75 FR 37252). We refer to these 
as Micropolitan Areas. After extensive impact analysis, consistent with 
the treatment of these areas under the IPPS as discussed in the FY 2005 
IPPS final rule (69 FR 49029 through 49032), CMS determined the best 
course of action would be to treat Micropolitan Areas as ``rural'' and 
include them in the calculation of each state's Hospice rural wage 
index (see 70 FR 22397 and 70 FR 45132). Thus, the hospice statewide 
rural wage index is determined using IPPS hospital data from hospitals 
located in non-MSA areas.
    Based upon the 2010 Decennial Census data, a number of urban 
counties have switched status and have joined or became Micropolitan 
Areas, and some counties that once were part of a Micropolitan Area, 
have become urban. Overall, there are fewer Micropolitan Areas (541) 
under the new OMB delineations based on the 2010 Census than existed 
under the latest data from the 2000 Census (581). We believe that the 
best course of action would be to continue the policy established in 
the FY 2006 Hospice Wage Index final rule and include Micropolitan 
Areas in each state's rural wage index. These areas continue to be 
defined as having relatively small urban cores (populations of 10,000 
to 49,999). Therefore, in conjunction with our proposal to implement 
the new OMB labor market delineations beginning in FY 2016 and 
consistent with the treatment of Micropolitan Areas under the IPPS, we 
are proposing to continue to treat Micropolitan Areas as ``rural'' and 
to include Micropolitan Areas in the calculation of each state's rural 
wage index.
ii. Urban Counties Becoming Rural
    If we adopt the new OMB delineations (based upon the 2010 decennial 
Census data), a total of 37 counties (and county equivalents) that are 
currently considered urban would be considered rural beginning in FY 
2016. Table 19 below lists the 37 counties that would change to rural 
status if we finalize our proposal to implement the new OMB 
delineations.

[[Page 25861]]

                              Table 19--Counties That Would Change to Rural Status
----------------------------------------------------------------------------------------------------------------
                                                                  CBSA number
                                                                 from FY 2015
                 County                           State          hospice wage               CBSA name
                                                                     index
----------------------------------------------------------------------------------------------------------------
Greene County...........................  IN..................           14020  Bloomington, IN.
Anson County............................  NC..................           16740  Charlotte-Gastonia-Rock Hill, NC-
                                                                                 SC.
Franklin County.........................  IN..................           17140  Cincinnati-Middletown, OH-KY-IN.
Stewart County..........................  TN..................           17300  Clarksville, TN-KY.
Howard County...........................  MO..................           17860  Columbia, MO.
Delta County............................  TX..................           19124  Dallas-Fort Worth-Arlington, TX.
Pittsylvania County.....................  VA..................           19260  Danville, VA.
Danville City...........................  VA..................           19260  Danville, VA.
Preble County...........................  OH..................           19380  Dayton, OH.
Gibson County...........................  IN..................           21780  Evansville, IN-KY.
Webster County..........................  KY..................           21780  Evansville, IN-KY.
Franklin County.........................  AR..................           22900  Fort Smith, AR-OK.
Ionia County............................  MI..................           24340  Grand Rapids-Wyoming, MI.
Newaygo County..........................  MI..................           24340  Grand Rapids-Wyoming, MI.
Greene County...........................  NC..................           24780  Greenville, NC.
Stone County............................  MS..................           25060  Gulfport-Biloxi, MS.
Morgan County...........................  WV..................           25180  Hagerstown-Martinsburg, MD-WV.
San Jacinto County......................  TX..................           26420  Houston-Sugar Land-Baytown, TX.
Franklin County.........................  KS..................           28140  Kansas City, MO-KS.
Tipton County...........................  IN..................           29020  Kokomo, IN.
Nelson County...........................  KY..................           31140  Louisville/Jefferson County, KY-
                                                                                 IN.
Geary County............................  KS..................           31740  Manhattan, KS.
Washington County.......................  OH..................           37620  Parkersburg-Marietta-Vienna, WV-
                                                                                 OH.
Pleasants County........................  WV..................           37620  Parkersburg-Marietta-Vienna, WV-
                                                                                 OH.
George County...........................  MS..................           37700  Pascagoula, MS.
Power County............................  ID..................           38540  Pocatello, ID.
Cumberland County.......................  VA..................           40060  Richmond, VA.
King and Queen County...................  VA..................           40060  Richmond, VA.
Louisa County...........................  VA..................           40060  Richmond, VA.
Washington County.......................  MO..................           41180  St. Louis, MO-IL.
Summit County...........................  UT..................           41620  Salt Lake City, UT.
Erie County.............................  OH..................           41780  Sandusky, OH.
Franklin County.........................  MA..................           44140  Springfield, MA.
Ottawa County...........................  OH..................           45780  Toledo, OH.
Greene County...........................  AL..................           46220  Tuscaloosa, AL.
Calhoun County..........................  TX..................           47020  Victoria, TX.
Surry County............................  VA..................           47260  Virginia Beach-Norfolk-Newport
                                                                                 News, VA-NC.
----------------------------------------------------------------------------------------------------------------

iii. Rural Counties Becoming Urban
    If we finalize our proposal to implement the new OMB delineations 
(based upon the 2010 decennial Census data), a total of 105 counties 
(and county equivalents) that are currently designated rural would be 
considered urban beginning in FY 2016. Table 20 below lists the 105 
counties that would change to urban status.

                              Table 20--Counties That Would Change to Urban Status
----------------------------------------------------------------------------------------------------------------
                 County                           State           CBSA number               CBSA name
----------------------------------------------------------------------------------------------------------------
Utuado Municipio........................  PR..................           10380  Aguadilla-Isabela, PR.
Linn County.............................  OR..................           10540  Albany, OR.
Oldham County...........................  TX..................           11100  Amarillo, TX.
Morgan County...........................  GA..................           12060  Atlanta-Sandy Springs-Roswell,
                                                                                 GA.
Lincoln County..........................  GA..................           12260  Augusta-Richmond County, GA-SC.
Newton County...........................  TX..................           13140  Beaumont-Port Arthur, TX.
Fayette County..........................  WV..................           13220  Beckley, WV.
Raleigh County..........................  WV..................           13220  Beckley, WV.
Golden Valley County....................  MT..................           13740  Billings, MT.
Oliver County...........................  ND..................           13900  Bismarck, ND.
Sioux County............................  ND..................           13900  Bismarck, ND.
Floyd County............................  VI..................           13980  Blacksburg-Christiansburg-
                                                                                 Radford, VA.
De Witt County..........................  IL..................           14010  Bloomington, IL.
Columbia County.........................  PA..................           14100  Bloomsburg-Berwick, PA.
Montour County..........................  PA..................           14100  Bloomsburg-Berwick, PA.
Allen County............................  KY..................           14540  Bowling Green, KY.
Butler County...........................  KY..................           14540  Bowling Green, KY.
St. Mary's County.......................  MD..................           15680  California-Lexington Park, MD.
Jackson County..........................  IL..................           16060  Carbondale-Marion, IL.
Williamson County.......................  IL..................           16060  Carbondale-Marion, IL.

[[Page 25862]]

 
Franklin County.........................  PA..................           16540  Chambersburg-Waynesboro, PA.
Iredell County..........................  NC..................           16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Lincoln County..........................  NC..................           16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Rowan County............................  NC..................           16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Chester County..........................  SC..................           16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Lancaster County........................  SC..................           16740  Charlotte-Concord-Gastonia, NC-
                                                                                 SC.
Buckingham County.......................  VA..................           16820  Charlottesville, VA.
Union County............................  IN..................           17140  Cincinnati, OH-KY-IN.
Hocking County..........................  OH..................           18140  Columbus, OH.
Perry County............................  OH..................           18140  Columbus, OH.
Walton County...........................  FL..................           18880  Crestview-Fort Walton Beach-
                                                                                 Destin, FL.
Hood County.............................  TX..................           23104  Dallas-Fort Worth-Arlington, TX.
Somervell County........................  TX..................           23104  Dallas-Fort Worth-Arlington, TX.
Baldwin County..........................  AL..................           19300  Daphne-Fairhope-Foley, AL.
Monroe County...........................  PA..................           20700  East Stroudsburg, PA.
Hudspeth County.........................  TX..................           21340  El Paso, TX.
Adams County............................  PA..................           23900  Gettysburg, PA.
Hall County.............................  NE..................           24260  Grand Island, NE.
Hamilton County.........................  NE..................           24260  Grand Island, NE.
Howard County...........................  NE..................           24260  Grand Island, NE.
Merrick County..........................  NE..................           24260  Grand Island, NE.
Montcalm County.........................  MI..................           24340  Grand Rapids-Wyoming, MI.
Josephine County........................  OR..................           24420  Grants Pass, OR.
Tangipahoa Parish.......................  LA..................           25220  Hammond, LA.
Beaufort County.........................  SC..................           25940  Hilton Head Island-Bluffton-
                                                                                 Beaufort, SC.
Jasper County...........................  SC..................           25940  Hilton Head Island-Bluffton-
                                                                                 Beaufort, SC.
Citrus County...........................  FL..................           26140  Homosassa Springs, FL.
Butte County............................  ID..................           26820  Idaho Falls, ID.
Yazoo County............................  MS..................           27140  Jackson, MS.
Crockett County.........................  TN..................           27180  Jackson, TN.
Kalawao County..........................  HI..................           27980  Kahului-Wailuku-Lahaina, HI.
Maui County.............................  HI..................           27980  Kahului-Wailuku-Lahaina, HI.
Campbell County.........................  TN..................           28940  Knoxville, TN.
Morgan County...........................  TN..................           28940  Knoxville, TN.
Roane County............................  TN..................           28940  Knoxville, TN.
Acadia Parish...........................  LA..................           29180  Lafayette, LA.
Iberia Parish...........................  LA..................           29180  Lafayette, LA.
Vermilion Parish........................  LA..................           29180  Lafayette, LA.
Cotton County...........................  OK..................           30020  Lawton, OK.
Scott County............................  IN..................           31140  Louisville/Jefferson County, KY-
                                                                                 IN.
Lynn County.............................  TX..................           31180  Lubbock, TX.
Green County............................  WI..................           31540  Madison, WI.
Benton County...........................  MS..................           32820  Memphis, TN-MS-AR.
Midland County..........................  MI..................           33220  Midland, MI.
Martin County...........................  TX..................           33260  Midland, TX.
Le Sueur County.........................  MN..................           33460  Minneapolis-St. Paul-
                                                                                 Bloomington, MN-WI.
Mille Lacs County.......................  MN..................           33460  Minneapolis-St. Paul-
                                                                                 Bloomington, MN-WI.
Sibley County...........................  MN..................           33460  Minneapolis-St. Paul-
                                                                                 Bloomington, MN-WI.
Maury County............................  TN..................           34980  Nashville-Davidson-Murfreesboro-
                                                                                 Franklin, TN.
Craven County...........................  NC..................           35100  New Bern, NC.
Jones County............................  NC..................           35100  New Bern, NC.
Pamlico County..........................  NC..................           35100  New Bern, NC.
St. James Parish........................  LA..................           35380  New Orleans-Metairie, LA.
Box Elder County........................  UT..................           36260  Ogden-Clearfield, UT.
Gulf County.............................  FL..................           37460  Panama City, FL.
Custer County...........................  SD..................           39660  Rapid City, SD.
Fillmore County.........................  MN..................           40340  Rochester, MN.
Yates County............................  NY..................           40380  Rochester, NY.
Sussex County...........................  DE..................           41540  Salisbury, MD-DE.
Worcester County........................  MA..................           41540  Salisbury, MD-DE.
Highlands County........................  FL..................           42700  Sebring, FL.
Webster Parish..........................  LA..................           43340  Shreveport-Bossier City, LA.
Cochise County..........................  AZ..................           43420  Sierra Vista-Douglas, AZ.
Plymouth County.........................  IA..................           43580  Sioux City, IA-NE-SD.
Union County............................  SC..................           43900  Spartanburg, SC.
Pend Oreille County.....................  WA..................           44060  Spokane-Spokane Valley, WA.
Stevens County..........................  WA..................           44060  Spokane-Spokane Valley, WA.
Augusta County..........................  VA..................           44420  Staunton-Waynesboro, VA.
Staunton City...........................  VA..................           44420  Staunton-Waynesboro, VA.
Waynesboro City.........................  VA..................           44420  Staunton-Waynesboro, VA.
Little River County.....................  AR..................           45500  Texarkana, TX-AR.
Sumter County...........................  FL..................           45540  The Villages, FL.

[[Page 25863]]

 
Pickens County..........................  AL..................           46220  Tuscaloosa, AL.
Gates County............................  NC..................           47260  Virginia Beach-Norfolk-Newport
                                                                                 News, VA-NC.
Falls County............................  TX..................           47380  Waco, TX.
Columbia County.........................  WA..................           47460  Walla Walla, WA.
Walla Walla County......................  WA..................           47460  Walla Walla, WA.
Peach County............................  GA..................           47580  Warner Robins, GA.
Pulaski County..........................  GA..................           47580  Warner Robins, GA.
Culpeper County.........................  VA..................           47894  Washington-Arlington-Alexandria,
                                                                                 DC-VA-MD-WV.
Rappahannock County.....................  VA..................           47894  Washington-Arlington-Alexandria,
                                                                                 DC-VA-MD-WV.
Jefferson County........................  NY..................           48060  Watertown-Fort Drum, NY.
Kingman County..........................  KS..................           48620  Wichita, KS.
Davidson County.........................  NC..................           49180  Winston-Salem, NC.
Windham County..........................  CT..................           49340  Worcester, MA-CT.
----------------------------------------------------------------------------------------------------------------

iv. Urban Counties Moving to a Different Urban CBSA
    In addition to rural counties becoming urban and urban counties 
becoming rural, several urban counties would shift from one urban CBSA 
to another urban CBSA under our proposal to adopt the new OMB 
delineations. In other cases, applying the new OMB delineations would 
involve a change only in CBSA name or number, while the CBSA continues 
to encompass the same constituent counties. For example, CBSA 29140 
(Lafayette, IN), would experience both a change to its number and its 
name, and would become CBSA 29200 (Lafayette-West Lafayette, IN), while 
all of its three constituent counties would remain the same. We are not 
discussing these proposed changes in this section because they are 
inconsequential changes with respect to the hospice wage index. 
However, in other cases, if we adopt the new OMB delineations, counties 
would shift between existing and new CBSAs, changing the constituent 
makeup of the CBSAs. In one type of change, an entire CBSA would be 
subsumed by another CBSA. For example, CBSA 37380 (Palm Coast, FL) 
currently is a single county (Flagler, FL) CBSA. Flagler County would 
be a part of CBSA 19660 (Deltona-Daytona Beach-Ormond Beach, FL) under 
the new OMB delineations. In another type of change, some CBSAs have 
counties that would split off to become part of or to form entirely new 
labor market areas. For example, CBSA 37964 (Philadelphia Metropolitan 
Division of MSA 37980) currently is comprised of 5 Pennsylvania 
counties (Bucks, Chester, Delaware, Montgomery, and Philadelphia). If 
we adopt the new OMB delineations, Montgomery, Bucks, and Chester 
counties would split off and form the new CBSA 33874 (Montgomery 
County-Bucks County-Chester County, PA Metropolitan Division of MSA 
37980), while Delaware and Philadelphia counties would remain in CBSA 
37964. Finally, in some cases, a CBSA would lose counties to another 
existing CBSA if we adopt the new OMB delineations. For example, 
Lincoln County and Putnam County, WV would move from CBSA 16620 
(Charleston, WV) to CBSA 26580 (Huntington-Ashland, WV KY OH). CBSA 
16620 would still exist in the new labor market delineations with fewer 
constituent counties. Table 21 lists the urban counties that would move 
from one urban CBSA to another urban CBSA if we adopt the new OMB 
delineations.

        Table 21--Counties That Would Change to a Different CBSA
------------------------------------------------------------------------
        Previous CBSA             New CBSA          County        State
------------------------------------------------------------------------
11300........................           26900  Madison County.  IN.
11340........................           24860  Anderson County  SC.
14060........................           14010  McLean County..  IL.
37764........................           15764  Essex County...  MA.
16620........................           26580  Lincoln County.  WV.
16620........................           26580  Putnam County..  WV.
16974........................           20994  DeKalb County..  IL.
16974........................           20994  Kane County....  IL.
21940........................           41980  Ceiba Municipio  PR.
21940........................           41980  Fajardo          PR.
                                                Municipio.
21940........................           41980  Luquillo         PR.
                                                Municipio.
26100........................           24340  Ottawa County..  MI.
31140........................           21060  Meade County...  KY.
34100........................           28940  Grainger County  TN.
35644........................           35614  Bergen County..  NJ.
35644........................           35614  Hudson County..  NJ.
20764........................           35614  Middlesex        NJ.
                                                County.
20764........................           35614  Monmouth County  NJ.
20764........................           35614  Ocean County...  NJ.
35644........................           35614  Passaic County.  NJ.
20764........................           35084  Somerset County  NJ.
35644........................           35614  Bronx County...  NY.
35644........................           35614  Kings County...  NY.
35644........................           35614  New York County  NY.
35644........................           20524  Putnam County..  NY.
35644........................           35614  Queens County..  NY.
35644........................           35614  Richmond County  NY.

[[Page 25864]]

 
35644........................           35614  Rockland County  NY.
35644........................           35614  Westchester      NY.
                                                County.
37380........................           19660  Flagler County.  FL.
37700........................           25060  Jackson County.  MS.
37964........................           33874  Bucks County...  PA.
37964........................           33874  Chester County.  PA.
37964........................           33874  Montgomery       PA.
                                                County.
39100........................           20524  Dutchess County  NY.
39100........................           35614  Orange County..  NY.
41884........................           42034  Marin County...  CA.
41980........................           11640  Arecibo          PR.
                                                Municipio.
41980........................           11640  Camuy Municipio  PR.
41980........................           11640  Hatillo          PR.
                                                Municipio.
41980........................           11640  Quebradillas     PR.
                                                Municipio.
48900........................           34820  Brunswick        NC.
                                                County.
49500........................           38660  Gu[aacute]nica   PR.
                                                Municipio.
49500........................           38660  Guayanilla       PR.
                                                Municipio.
49500........................           38660  Pe[ntilde]uelas  PR.
                                                Municipio.
49500........................           38660  Yauco Municipio  PR.
------------------------------------------------------------------------

v. Transition Period
    Overall, we believe that implementing the new OMB delineations 
would result in wage index values being more representative of the 
actual costs of labor in a given area. Among the 458 total CBSA and 
statewide rural areas, 20 (4 percent) would have a higher wage index 
using the newer delineations. However, 34 (7.4 percent) would have a 
lower wage index using the newer delineations. Therefore, to remain 
consistent with the manner in which we ultimately adopted the revised 
OMB delineations for FY 2006 (70 FR 45138), we are proposing to 
implement a 1-year transition to the new OMB delineations. 
Specifically, we propose to apply a blended wage index for one year (FY 
2016) for all geographic areas that would consist of a 50/50 blend of 
the wage index values using OMB's old area delineations and the wage 
index values using OMB's new area delineations. That is, for each 
county, a blended wage index would be calculated equal to 50 percent of 
the FY 2016 wage index using the old labor market area delineation and 
50 percent of the FY 2016 wage index using the new labor market area 
delineation. This results in an average of the two values. We refer to 
this blended wage index as the FY 2016 hospice transition wage index.
    This proposed 1-year transition policy is also consistent with the 
transition policies adopted by both the FY 2015 SNF PPS (79 FR 25767) 
and the CY 2015 HH PPS (79 FR 66032). This transition policy would be 
for a 1-year period, going into effect on October 1, 2015, and 
continuing through September 30, 2016. Thus, beginning October 1, 2016, 
the wage index for all hospice payments would be fully based on the new 
OMB delineations. We invite comments on our proposed transition 
methodology.
    The proposed wage index applicable to FY 2016 is set forth in 
Addendum A available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/index.html. Addendum 
A will not be published in the Federal Register. The proposed hospice 
wage index for FY 2016 would be effective October 1, 2015 through 
September 30, 2016.
    Addendum A provides a crosswalk between the FY 2016 wage index 
using the current OMB delineations in effect in FY 2015 and the FY 2016 
wage index using the proposed revised OMB delineations, as well as the 
proposed transition wage index values that would be in effect in FY 
2016 if these proposed changes are finalized. Addendum A shows each 
state and county and its corresponding proposed transition wage index 
along with the previous CBSA number, the new CBSA number, and the new 
CBSA name.
    Due to the way that the transition wage index is calculated, some 
CBSAs and statewide rural areas may have more than one transition wage 
index value associated with that CBSA or rural area. However, each 
county will have only one transition wage index. For counties located 
in CBSAs and rural areas that correspond to more than one transition 
wage index value, the CBSA number will not be able to be used for FY 
2016 claims. In these cases, a number other than the CBSA number would 
be necessary to identify the appropriate wage index value on claims for 
hospice care provided in FY 2016. These numbers are five digits in 
length and begin with ``50.'' These codes are shown in the last column 
of Addendum A in place of the CBSA number where appropriate. For 
counties located in CBSAs and rural areas that still correspond to only 
one wage index value, the CBSA number would still be used.
2. Proposed Hospice Payment Update Percentage
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended 
section 1814(i)(1)(C)(ii)(VI) of the Act to establish updates to 
hospice rates for FYs 1998 through 2002. Hospice rates were to be 
updated by a factor equal to the market basket index, minus 1 
percentage point. Payment rates for FYs since 2002 have been updated 
according to section 1814(i)(1)(C)(ii)(VII) of the Act, which states 
that the update to the payment rates for subsequent FYs must be the 
market basket percentage for that FY. The Act requires us to use the 
inpatient hospital market basket to determine the hospice payment rate 
update. In addition, section 3401(g) of the Affordable Care Act 
mandates that, starting with FY 2013 (and in subsequent FYs), the 
hospice payment update percentage will be annually reduced by changes 
in economy-wide productivity as specified in section 
1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity 
adjustment to be equal to the 10-year moving average of changes in 
annual economy-wide private nonfarm business multifactor productivity 
(MFP) (as projected by the Secretary for the 10-year period ending with 
the applicable FY, year, cost reporting period, or other annual period) 
(the ``MFP adjustment''). A complete description of the MFP projection 
methodology is available on our Web site at http://www.cms.gov/

[[Page 25865]]

Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
MedicareProgramRatesStats/MarketBasketResearch.html.
    In addition to the MFP adjustment, section 3401(g) of the 
Affordable Care Act also mandates that in FY 2013 through FY 2019, the 
hospice payment update percentage will be reduced by an additional 0.3 
percentage point (although for FY 2014 to FY 2019, the potential 0.3 
percentage point reduction is subject to suspension under conditions 
specified in section 1814(i)(1)(C)(v) of the Act). The proposed hospice 
payment update percentage for FY 2016 is based on the estimated 
inpatient hospital market basket update of 2.7 percent (based on IHS 
Global Insight, Inc.'s first quarter 2015 forecast with historical data 
through the fourth quarter of 2014). Due to the requirements at 
1886(b)(3)(B)(xi)(II) and 1814(i)(1)(C)(v) of the Act, the estimated 
inpatient hospital market basket update for FY 2016 of 2.7 percent must 
be reduced by a MFP adjustment as mandated by Affordable Care Act 
(currently estimated to be 0.6 percentage point for FY 2016). The 
estimated inpatient hospital market basket update for FY 2016 is 
reduced further by a 0.3 percentage point, as mandated by the 
Affordable Care Act. In effect, the proposed hospice payment update 
percentage for FY 2016 is 1.8 percent. We are also proposing that if 
more recent data are subsequently available (for example, a more recent 
estimate of the inpatient hospital market basket update and MFP 
adjustment), we would use such data, if appropriate, to determine the 
FY 2016 market basket update and the MFP adjustment in the FY 2016 
Hospice Rate Update final rule.
    Currently, the labor portion of the hospice payment rates is as 
follows: For RHC, 68.71 percent; for CHC, 68.71 percent; for General 
Inpatient Care, 64.01 percent; and for Respite Care, 54.13 percent. The 
non-labor portion is equal to 100 percent minus the labor portion for 
each level of care. Therefore, the non-labor portion of the payment 
rates is as follows: For RHC, 31.29 percent; for CHC, 31.29 percent; 
for General Inpatient Care, 35.99 percent; and for Respite Care, 45.87 
percent.
3. Proposed FY 2016 Hospice Payment Rates
    Historically, the hospice rate update has been published through a 
separate administrative instruction issued annually in the summer to 
provide adequate time to implement system change requirements; however, 
beginning in FY 2014 and for subsequent FY, we are using rulemaking as 
the means to update payment rates. This change was proposed in the FY 
2014 Hospice Wage Index and Payment Rate Update proposed rule and 
finalized in the FY 2014 Hospice Wage Index and Payment Rate Update 
final rule (78 FR 48270). It is consistent with the rate update process 
in other Medicare benefits, and provides rate information to hospices 
as quickly as, or earlier than, when rates are published in an 
administrative instruction.
    There are four payment categories that are distinguished by the 
location and intensity of the services provided. The base payments are 
adjusted for geographic differences in wages by multiplying the labor 
share, which varies by category, of each base rate by the applicable 
hospice wage index. A hospice is paid the RHC rate for each day the 
beneficiary is enrolled in hospice, unless the hospice provides 
continuous home care, IRC, or general inpatient care. CHC is provided 
during a period of patient crisis to maintain the patient at home; IRC 
is short-term care to allow the usual caregiver to rest; and GIP is to 
treat symptoms that cannot be managed in another setting.
    As discussed in section III.B.2, of this proposed rule, we are 
proposing two different RHC payment rates, one RHC rate for the first 
60 days and a second RHC rate for days 60 and beyond. As discussed in 
section III.B.3, we are proposing to make a SIA payment, in addition to 
the daily RHC payment, when direct patient care is provided by a RN or 
social worker during the last 7 days of the patient's life. The SIA 
payment would be equal to the CHC hourly rate multiplied by the hours 
of nursing or social work provided (up to 4 hours total) that occurred 
on the day of service. The SIA payment would also be adjusted by the 
appropriate wage index. In order to maintain budget neutrality, as 
required under section 1814(i)(6)(D)(ii) of the Act, for the proposed 
SIA payment, the proposed RHC rates would need to be adjusted by a 
budget neutrality factor. The budget neutrality adjustment that would 
apply to days 1 through 60 is equal to 1 minus the ratio of SIA 
payments for days 1 through 60 to the total payments for days 1 through 
60 and is calculated to be 0.9853. The budget neutrality adjustment 
that would apply to days 61 and beyond is equal to 1 minus the ratio of 
SIA payments for days 61 and beyond to the total payments for days 61 
and beyond and is calculated to be 0.9967. Lastly, the RHC rates would 
be increased by the proposed FY 2016 hospice payment update percentage 
of 1.8 percent as discussed in section III.C.3. The proposed FY 2016 
RHC rates are shown in Table 22. The proposed FY 2016 payment rates for 
CHC, IRC, and GIP would be the FY 2015 payment rates increased by 1.8 
percent. The proposed rates for these three levels of care are shown in 
Table 23. The proposed FY 2016 rates for hospices that do not submit 
the required quality data are shown in Tables 24 and 25. The proposed 
FY 2016 hospice payment rates would be effective for care and services 
furnished on or after October 1, 2015, through September 30, 2016.

                            Table 22--Proposed FY 2016 Hospice Payment Rates for RHC
----------------------------------------------------------------------------------------------------------------
                                                                   Proposed SIA
                                                                      budget        Proposed FY
                                                  Proposed rates    neutrality     2016 hospice     Proposed FY
             Code                  Description          \1\           factor          payment      2016 payment
                                                                  adjustment (1-      update           rates
                                                                      0.0081)       percentage
----------------------------------------------------------------------------------------------------------------
651...........................  Routine Home             $187.63        x 0.9853         x 1.018         $188.20
                                 Care (days 1-
                                 60).
651...........................  Routine Home              145.21          0.9967         x 1.018          147.34
                                 Care (days 61+).
----------------------------------------------------------------------------------------------------------------
\1\ See section III.B.2 for the proposed RHC rates for days 1-60, and days 61 and beyond before accounting for
  the proposed Service Intensity Add-on (SIA) payment budget neutrality factor and the proposed FY 2016 hospice
  payment update percentage of 1.8 percent as required by section 1814(i)(1)(C) of the Act.

[[Page 25866]]

                     Table 23--Proposed FY 2016 Hospice Payment Rates for CHC, IRC, and GIP
----------------------------------------------------------------------------------------------------------------
                                                                                    Proposed FY
                                                                                   2016 hospice     Proposed FY
                 Code                          Description            FY 2015         payment      2016 payment
                                                                   payment rates   update of 1.8       rate
                                                                                      percent
----------------------------------------------------------------------------------------------------------------
652...................................  Continuous Home Care....         $929.91         x 1.018         $946.65
                                        Full Rate = 24 hours of
                                         care.
                                        $=39.44 FY 2016 hourly
                                         rate.
655...................................  Inpatient Respite Care..          164.81         x 1.018          167.78
656...................................  General Inpatient Care..          708.77         x 1.018          721.53
----------------------------------------------------------------------------------------------------------------

    We reiterate in this proposed rule, that the Congress required in 
sections 1814(i)(5)(A) through (C) of the Act that hospices begin 
submitting quality data, based on measures to be specified by the 
Secretary. In the FY 2012 Hospice Wage Index final rule (76 FR 47320 
through 47324), we implemented a Hospice Quality Reporting Program 
(HQRP) as required by section 3004 of the Affordable Care Act. Hospices 
were required to begin collecting quality data in October 2012, and 
submit that quality data in 2013. Section 1814(i)(5)(A)(i) of the Act 
requires that beginning with FY 2014 and each subsequent FY, the 
Secretary shall reduce the market basket update by 2 percentage points 
for any hospice that does not comply with the quality data submission 
requirements with respect to that FY. We remind hospices that this 
applies to payments in FY 2016 (See Tables 24 and 25 below). For more 
information on the HQRP requirements please see section III.E. in this 
proposed rule.

  Table 24--Proposed FY 2016 Hospice Payment Rates for RHC for Hospices That DO NOT Submit the Required Quality
                                                      Data
----------------------------------------------------------------------------------------------------------------
                                                                                    Proposed FY
                                                                   Proposed SIA    2016 hospice
                                                                      budget          payment
                                                   Proposed RHC     neutrality     update of 1.8    Proposed FY
             Code                  Description       rates \1\        factor       percent minus   2016 payment
                                                                  adjustment (1-   2 percentage        rates
                                                                      0.0081)      points = -0.2
                                                                                      percent
----------------------------------------------------------------------------------------------------------------
651...........................  Routine Home             $187.63        x 0.9853         x 0.998         $184.50
                                 Care (days 1-
                                 60).
651...........................  Routine Home              145.21          0.9967         x 0.998          144.44
                                 Care (days 61+).
----------------------------------------------------------------------------------------------------------------
\1\ See section III.B.2 for the proposed RHC rates for days 1-60, and days 61 and beyond before accounting for
  the proposed Service Intensity Add-on (SIA) payment budget neutrality factor and the proposed FY 2016 hospice
  payment update percentage of 1.8 percent as required by section 1814(i)(1)(C) of the Act.

   Table 25--Proposed FY 2016 Hospice Payment Rates for CHC, IRC, and GIP for Hospices That DO NOT Submit the
                                              Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                                    Proposed FY
                                                                                   2016 hospice
                                                                                      payment
                                                                      FY 2015      update of 1.8    Proposed FY
                 Code                          Description         payment rates   percent minus   2016 payment
                                                                                   2 percentage        rate
                                                                                   points = -0.2
                                                                                      percent
----------------------------------------------------------------------------------------------------------------
652...................................  Continuous Home Care             $929.91         x 0.998         $928.05
                                         Full Rate= 24 hours of
                                         care $=38.67 hourly
                                         rate.
655...................................  Inpatient Respite Care..          164.81         x 0.998          164.48
656...................................  General Inpatient Care..          708.77         x 0.998          707.35
----------------------------------------------------------------------------------------------------------------

4. Hospice Aggregate Cap and the IMPACT Act of 2014
    When the Medicare hospice benefit was implemented, the Congress 
included 2 limits on payments to hospices: An inpatient cap and an 
aggregate cap. As set out in sections 1861(dd)(2)(A)(iii) and 
1814(i)(2)(A) through (C) of the Act, respectively, the hospice 
inpatient cap limits the total number of Medicare inpatient days 
(general inpatient care and respite care) to no more than 20 percent of 
a hospice's total Medicare hospice days. The intent of the inpatient 
cap was to ensure that hospice remained a home-based benefit. The 
hospice aggregate cap limits the total aggregate payment any individual 
hospice can receive in a year. The intent of the hospice aggregate cap 
was to protect Medicare from spending more for hospice care than it 
would for conventional care at the end of life.
    The aggregate cap amount was set at $6,500 per beneficiary when 
first enacted in 1983; this was an amount hospice advocates agreed was 
well above the average cost of caring for a hospice patient.\52\ Since 
1983, the

[[Page 25867]]

$6,500 amount has been adjusted annually by the change in the medical 
care expenditure category of the consumer price index for urban 
consumers (CPI-U) from March 1984 to March of the cap year, as required 
by section 1814(i)(2)(B) of the Act. The cap amount is multiplied by 
the number of Medicare beneficiaries who received hospice care from a 
particular hospice during the year, resulting in its hospice aggregate 
cap, which is the allowable amount of total Medicare payments that 
hospice can receive for that cap year. The cap year is currently 
November 1 to October 31, and was set in place in the December 16, 1983 
Hospice final rule (48 FR 56022).
---------------------------------------------------------------------------

    \52\ National Hospice and Palliative Care Organization (NHPCO), 
``A Short History of the Medicare Hospice Cap on Total 
Expenditures.'' Web 19 Feb. 2014. http://www.nhpco.org/sites/default/files/public/regulatory/History_of_Hospice_Cap.pdf.
---------------------------------------------------------------------------

    Section 1814(i)(2)(B)(i) and (ii) of the Act, as added by section 
3(b) of the IMPACT Act requires, effective for the 2016 cap year 
(November 1, 2015 through October 31, 2016), that the cap amount for 
the previous year to be updated by the hospice payment update 
percentage, rather than the original $6,500 being annually adjusted by 
the change in the CPI-U for medical care expenditures since 1984. This 
new provision will sunset for cap years ending after September 30, 
2025, at which time the annual update to the cap amount will revert 
back to the original methodology. This provision is estimated to result 
in $540 million in savings over 10 years starting in 2017.
    As a result, we are proposing to update Sec.  418.309 to reflect 
the new language added to section 1814(i)(2)(B) of the Act.
    In accordance with section 1814(i)(2)(B)(i) of the Act, the hospice 
aggregate cap amount for the 2015 cap year, starting on November 1, 
2014 and ending on October 31, 2015, will be $27,135.96. This amount 
was calculated by multiplying the original cap amount of $6,500 by the 
change in the CPI-U medical care expenditure category, from the fifth 
month of the 1984 accounting year (March 1984) to the fifth month the 
current accounting year (in this case, March 2015). The CPI-U for 
medical care expenditures for 1984 to present is available from the 
Bureau of Labor Statistics (BLS) Web site at: http://www.bls.gov/cpi/home.htm.
    Step 1: From the BLS Web site given above, the March 2015 CPI-U for 
medical care expenditures is 444.020 and the 1984 CPI-U for medical 
care expenditures was 105.4.
    Step 2: Divide the March 2015 CPI-U for medical care expenditures 
by the 1984 CPI-U for medical care expenditures to compute the change.

440.020/105.4 = 4.174763

    Step 3: Multiply the original cap base amount ($6,500) by the 
result from step 2) to get the updated aggregate cap amount for the 
2015 cap year.

    $6,500 x 4.174763 = $27,135.96

    As required by section 1814(i)(2)(B)(ii) of the Act, the hospice 
aggregate cap amount for the 2016 cap year, starting on November 1, 
2015 and ending on October 31, 2016, will be the 2015 cap amount 
updated by the FY 2016 hospice payment update percentage (see section 
III.C.2 above). As such, the 2016 cap amount will be $27,624.41 
($27,135.96 * 1.018 = $27,624.41). A Change Request with the finalized 
hospice payment rates, a finalized hospice wage index, the Pricer for 
FY 2016, and the hospice cap amount for the cap year ending October 31, 
2015 will be issued in the summer.

D. Proposed Alignment of the Inpatient and Aggregate Cap Accounting 
Year With the Federal Fiscal Year

    As noted in section III.C.4, when the Medicare hospice benefit was 
implemented, the Congress included 2 limits on payments to hospices: an 
aggregate cap and an inpatient cap. The intent of the hospice aggregate 
cap was to protect Medicare from spending more for hospice care than it 
would for conventional care at the end-of-life. If a hospice's total 
Medicare payments for the cap year exceed such hospice's aggregate cap 
amount, then the hospice must repay the excess back to Medicare. The 
intent of the inpatient cap was to ensure that hospice remained a home-
based benefit. If a hospice's inpatient days (GIP and respite) exceed 
20 percent of all hospice days then, for inpatient care, the hospice is 
paid: (1) the sum of the total reimbursement for inpatient care 
multiplied by the ratio of the maximum number of allowable inpatient 
days to actual number of all inpatient days; and (2) the sum of the 
actual number of inpatient days in excess of the limitation by the 
routine home care rate.
1. Streamlined Method and Patient-by-Patient Proportional Method for 
Counting Beneficiaries To Determine Each Hospice's Aggregate Cap Amount
    The aggregate cap amount for any given hospice is established by 
multiplying the cap amount by the number of Medicare beneficiaries who 
received hospice services during the year. Originally, the number of 
Medicare beneficiaries who received hospice services during the year 
was determined using a ``streamlined'' methodology whereby each 
beneficiary is counted as ``1'' in the initial cap year of the hospice 
election and is not counted in subsequent cap years. Specifically, the 
hospice includes in its number of Medicare beneficiaries those Medicare 
beneficiaries who have not previously been included in the calculation 
of any hospice cap, and who have filed an election to receive hospice 
care in accordance with Sec.  418.24 during the period beginning on 
September 28th (34 days before the beginning of the cap year) and 
ending on September 27th (35 days before the end of the cap year), 
using the best data available at the time of the calculation. This is 
applicable for cases in which a beneficiary received care from only one 
hospice. If a beneficiary received care from more than one hospice, 
each hospice includes in its number of Medicare beneficiaries only that 
fraction which represents the portion of a patient's total days of care 
with that hospice in that cap year, using the best data available at 
the time of the calculation. Using the streamlined method, a different 
timeframe from the cap year is used to count the number of Medicare 
beneficiaries because it allows those beneficiaries who elected hospice 
near the end of the cap year to be counted in the year when most of the 
services were provided (48 FR 38158).
    During FY 2012 rulemaking, in addition to the streamlined method, 
CMS added a ``patient-by-patient proportional'' method as a way of 
calculating the number of Medicare beneficiaries who received hospice 
services during the year in determining the aggregate cap amount for 
any given hospice (76 FR 47309). This method specifies that a hospice 
should include in its number of Medicare beneficiaries only that 
fraction which represents the portion of a patient's total days of care 
in all hospices and all years that was spent in that hospice in that 
cap year, using the best data available at the time of the calculation. 
The total number of Medicare beneficiaries for a given hospice's cap 
year is determined by summing the whole or fractional share of each 
Medicare beneficiary that received hospice care during the cap year, 
from that hospice. Under the patient-by-patient proportional 
methodology, the timeframe for counting the number of Medicare 
beneficiaries is the same as the cap accounting year (November 1 
through October 31). The aggregate cap amount for each hospice is now 
calculated using the patient-by-patient proportional method, except for 
those hospices that had their cap determination calculated under the 
streamlined method prior to the 2012 cap year, did not appeal the 
streamlined method used to determine

[[Page 25868]]

the number of Medicare beneficiaries used in the aggregate cap 
calculation, and opted to continue to have their hospice aggregate cap 
calculated using the streamlined method no later than 60 days after 
receipt of its 2012 cap determination
2. Proposed Inpatient and Aggregate Cap Accounting Year Timeframe
    As stated in section III.C.4, the cap accounting year is currently 
November 1 to October 31. In the past, CMS has considered changing the 
cap accounting year to coincide with the hospice rate update year, 
which is the federal fiscal year (October 1 through September 30). In 
the FY 2011 Hospice Wage Index notice (75 FR 42951), CMS solicited 
comments on aligning the cap accounting year for both the inpatient and 
aggregate hospice cap to coincide with the FY. In the FY 2012 Hospice 
Wage Index proposed rule, we summarized the comments we received, 
stating that ``several commenters supported the idea of our aligning 
the cap year with the federal fiscal year; with some noting that the 
change would be appropriate for a multi-year apportioning approach (the 
patient-by-patient proportional method).'' Other commenters stated that 
we should not change the cap year at this time, and recommended that we 
wait for this to be accomplished as part of hospice payment reform (76 
FR 26812).
    In FY 2012, we decided not to finalize changing the cap accounting 
year to the FY, partly because of a concern that a large portion of 
providers could still be using the streamlined method. As stated 
earlier, the streamlined method has a different timeframe for counting 
the number of beneficiaries than the cap accounting year, allowing 
those beneficiaries who elected hospice near the end of the cap year to 
be counted in the year when most of the services were provided. 
However, for the 2013 cap year, only 486 hospices used the streamlined 
method to calculate the number of Medicare hospice patients and the 
remaining providers used the patient-by-patient proportional method. 
Since the majority of providers now use the patient-by-patient 
proportional method, we believe there is no longer an advantage to 
defining the cap accounting year differently from the hospice rate 
update year and maintaining a cap accounting year (as well as the 
period for counting beneficiaries under the streamlined method) that is 
different from the federal fiscal year creates an added layer of 
complexity that can lead to hospices unintentionally calculating their 
aggregate cap determinations incorrectly. In addition, shifting the cap 
accounting year timeframes to coincide with the hospice rate update 
year (the federal fiscal year) would better align with the intent of 
the new cap calculation methodology required by the IMPACT Act of 2014, 
as discussed in section III.C.4. Therefore, we are proposing to align 
the cap accounting year for both the inpatient cap and the hospice 
aggregate cap with the federal fiscal year for FYs 2017 and later. 
Under this proposal, in addition to aligning the cap accounting year 
with the federal fiscal year, we would also align the timeframe for 
counting the number of beneficiaries with the federal fiscal year. This 
proposal would eliminate timeframe complexities associating with 
counting payments and beneficiaries differently from the federal fiscal 
year and would help hospices avoid mistakes in calculating their 
aggregate cap determinations.
    In shifting the cap accounting year to match the federal fiscal 
year, we note that new section 1814(i)(2)(B)(ii) of the Act, as added 
by section 3(b) of the IMPACT Act, requires the cap amount for 2016 to 
be updated by the hospice payment update percentage in effect ``during 
the FY beginning on the October 1 preceding the beginning of the 
accounting year''. In other words, we interpret this to mean that the 
statute requires the 2016 cap amount to be updated using the most 
current hospice payment update percentage in effect at the start of 
that cap year. For the 2016 cap year, the 2015 cap amount would be 
updated by the FY 2016 hospice payment update percentage outlined in 
section III.C.2. For the 2017 cap year through the 2025 cap year, we 
would update the previous year's cap amount by the hospice payment 
update percentage for that current federal fiscal year. For the 2026 
cap year and beyond, changing the cap accounting year to coincide with 
the federal fiscal year will require us to use the CPI-U for February 
when updating the cap amount, instead of the current process which uses 
the March CPI-U to update the cap amount. Section 1814(i)(2)(B) of the 
Act requires us to update the cap amount by the same percentage as the 
percentage increase or decrease in the medical care expenditure 
category of the CPI-U from March 1984 to the ``fifth month of the 
accounting year '' for all years except those accounting years that end 
after September 30, 2016 and before October 1, 2025.
    In shifting the cap year to match the federal fiscal year, we are 
proposing to also align the timeframes in which beneficiaries and 
payments are counted for the purposes of determining each individual 
hospice's aggregate cap amount (see table 26 below) as well as the 
timeframes in which days of hospice care are counted for the purposes 
determining whether a given hospice exceeded the inpatient cap. In the 
year of transition (2017 cap year), for the inpatient cap, we propose 
to calculate the percentage of all hospice days of care that were 
provided as inpatient days (GIP care and respite care) from November 1, 
2016 through September 30, 2017 (11 months). For those hospices using 
the patient-by-patient proportional method for their aggregate cap 
determinations, for the 2017 cap year, we would count beneficiaries 
from November 1, 2016 to September 30, 2017. For those hospices using 
the streamlined method for their aggregate cap determinations, we 
propose to allow 3 extra days to count beneficiaries in the year of 
transition. Specifically, for the 2017 cap year (October 1, 2016 to 
September 30, 2017), we would count beneficiaries from September 28, 
2016 to September 30, 2017, which is 12 months plus 3 days, in that cap 
year's calculation. For hospices using either the streamlined method or 
the patient-by-patient proportional method, we propose to count 11 
months of payments from November 1, 2016 to September 30, 2017 for the 
2017 cap year. For the 2018 cap year (October 1, 2017 to September 30, 
2018), we would count both beneficiaries and payments for hospices 
using the streamlined or the patient-by-patient proportional methods 
from October 1, 2017 to September 30, 2018. Likewise, for the 2018 cap 
year would calculate the percentage of all hospice days of care that 
were provided as inpatient days (GIP care or respite care) from October 
1, 2017 to September 30, 2018. Because of the non-discretionary 
language used by Congress in determining the cap for a year, the actual 
cap amount for the adjustment year would not be prorated for a shorter 
time frame. We are soliciting public comment on all aspects of the 
proposed alignment of the cap accounting year with the federal fiscal 
year, as articulated in this section, as well as the corresponding 
proposed changes to the regulations at Sec.  418.308(c) in section VI.

[[Page 25869]]

    Table 26--Hospice Aggregate Cap Timeframes for Counting Beneficiaries and Payments for the Proposed Alignment of the Cap Accounting Year With the
                                                                   Federal Fiscal Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Beneficiaries                                       Payments
                                                     ---------------------------------------------------------------------------------------------------
                      Cap year                                                    Patient-by-patient                                Patient-by-patient
                                                         Streamlined method      proportional method       Streamlined method      proportional method
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016................................................          9/28/15-9/27/16         11/1/15-10/31/16         11/1/15-10/31/16         11/1/15-10/31/16
Proposed 2017 (Transition Year).....................          9/28/16-9/30/17          11/1/16-9/30/17          11/1/16-9/30/17          11/1/16-9/30/17
Proposed 2018.......................................          10/1/17-9/30/18          10/1/17-9/30/18          10/1/17-9/30/18          10/1/17-9/30/18
--------------------------------------------------------------------------------------------------------------------------------------------------------

E. Proposed Updates to the Hospice Quality Reporting Program (HQRP)

1. Background and Statutory Authority
    Section 3004(c) of the Affordable Care Act amended section 
1814(i)(5) of the Act to authorize a quality reporting program for 
hospices. Section 1814(i)(5)(A)(i) of the Act requires that beginning 
with FY 2014 and each subsequent FY, the Secretary shall reduce the 
market basket update by 2 percentage points for any hospice that does 
not comply with the quality data submission requirements with respect 
to that FY. Depending on the amount of the annual update for a 
particular year, a reduction of 2 percentage points could result in the 
annual market basket update being less than 0.0 percent for a FY and 
may result in payment rates that are less than payment rates for the 
preceding FY. Any reduction based on failure to comply with the 
reporting requirements, as required by section 1814(i)(5)(B) of the 
Act, would apply only for the particular FY involved. Any such 
reduction would not be cumulative or be taken into account in computing 
the payment amount for subsequent FYs. Section 1814(i)(5)(C) of the Act 
requires that each hospice submit data to the Secretary on quality 
measures specified by the Secretary. The data must be submitted in a 
form, manner, and at a time specified by the Secretary.
2. General Considerations Used for Selection of Quality Measures for 
the HQRP
    Any measures selected by the Secretary must be endorsed by the 
consensus-based entity, which holds a contract regarding performance 
measurement with the Secretary under section 1890(a) of the Act. This 
contract is currently held by the National Quality Forum (NQF). 
However, section 1814(i)(5)(D)(ii) of the Act provides that in the case 
of a specified area or medical topic determined appropriate by the 
Secretary for which a feasible and practical measure has not been 
endorsed by the consensus-based entity, the Secretary may specify 
measures that are not so endorsed as long as due consideration is given 
to measures that have been endorsed or adopted by a consensus-based 
organization identified by the Secretary. Our paramount concern is the 
successful development of a Hospice Quality Reporting Program (HQRP) 
that promotes the delivery of high quality healthcare services. We seek 
to adopt measures for the HQRP that promote patient-centered, high 
quality, and safe care. Our measure selection activities for the HQRP 
take into consideration input from the Measure Applications Partnership 
(MAP), convened by the NQF, as part of the established CMS pre-
rulemaking process required under section 1890A of the Act. The MAP is 
a public-private partnership comprised of multi-stakeholder groups 
convened by the NQF for the primary purpose of providing input to CMS 
on the selection of certain categories of quality and efficiency 
measures, as required by section 1890A(a)(3) of the Act. By February 
1st of each year, the NQF must provide that input to CMS. Input from 
the MAP is located at: (http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx. We also take into 
account national priorities, such as those established by the National 
Priorities Partnership at (http://www.qualityforum.org/npp/), the HHS 
Strategic Plan http://www.hhs.gov/secretary/about/priorities/priorities.html), the National Strategy for Quality Improvement in 
Healthcare, (http://www.ahrq.gov/workingforquality/nqs/nqs2013annlrpt.htm) and the CMS Quality Strategy (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html). To the extent 
practicable, we have sought to adopt measures endorsed by member 
organizations of the National Consensus Project recommended by multi-
stakeholder organizations, and developed with the input of providers, 
purchasers/payers, and other stakeholders.
3. Proposed Policy for Retention of HQRP Measures Adopted for Previous 
Payment Determinations
    Beginning with the FY 2018 payment determination, for the purpose 
of streamlining the rulemaking process, we propose that when we adopt 
measures for the HQRP beginning with a payment determination year, 
these measures are automatically adopted for all subsequent years' 
payment determinations, unless we propose to remove, suspend, or 
replace the measures.
    Quality measures may be considered for removal by CMS if:
     Measure performance among hospices is so high and 
unvarying that meaningful distinctions in improvements in performance 
can be no longer be made;
     Performance or improvement on a measure does not result in 
better patient outcomes;
     A measure does not align with current clinical guidelines 
or practice;
     A more broadly applicable measure (across settings, 
populations, or conditions) for the particular topic is available;
     A measure that is more proximal in time to desired patient 
outcomes for the particular topic is available;
     A measure that is more strongly associated with desired 
patient outcomes for the particular topic is available; or
     Collection or public reporting of a measure leads to 
negative unintended consequences.
    For any such removal, the public will be given an opportunity to 
comment through the annual rulemaking process. However, if there is 
reason to believe continued collection of a measure raises potential 
safety concerns, we will take immediate action to remove the measure 
from the HQRP and will not wait for the annual rulemaking cycle. The 
measures will be promptly removed and we will immediately notify 
hospices and the public of such a decision through the usual HQRP 
communication channels, including listening sessions, memos, email 
notification, and Web postings. In such instances, the removal of a

[[Page 25870]]

measure will be formally announced in the next annual rulemaking cycle.
    CMS is not proposing to remove any measures for the FY 2017 
reporting cycle. We invite public comment on our proposal that once a 
quality measure is adopted, it be retained for use in the subsequent 
fiscal year payment determinations unless otherwise stated.
4. Previously Adopted Quality Measures for FY 2016 and FY 2017 Payment 
Determination
    As stated in the CY 2013 HH PPS final rule (77 FR 67068, 67133), 
CMS expanded the set of required measures to include additional 
measures endorsed by NQF. We also stated that to support the 
standardized collection and calculation of quality measures by CMS, 
collection of the needed data elements would require a standardized 
data collection instrument. In response, CMS developed and tested a 
hospice patient-level item set, the HIS. Hospices are required to 
submit an HIS-Admission record and an HIS-Discharge record for each 
patient admission to hospice on or after July 1, 2014. In developing 
the standardized HIS, we considered comments offered in response to the 
CY 2013 HH PPS proposed rule (77 FR 41548, 41573). In the FY 2014 
Hospice Wage Index final rule (78 FR 48257), and in compliance with 
section 1814(i)(5)(C) of the Act, we finalized the specific collection 
of data items that support the following six NQF endorsed measures and 
one modified measure for hospice:
     NQF #1617 Patients Treated with an Opioid who are Given a 
Bowel Regimen,
     NQF #1634 Pain Screening,
     NQF #1637 Pain Assessment,
     NQF #1638 Dyspnea Treatment,
     NQF #1639 Dyspnea Screening,
     NQF #1641 Treatment Preferences,
     NQF #1647 Beliefs/Values Addressed (if desired by the 
patient) (modified).
    To achieve a comprehensive set of hospice quality measures 
available for widespread use for quality improvement and informed 
decision making, and to carry out our commitment to develop a quality 
reporting program for hospices that uses standardized methods to 
collect data needed to calculate quality measures, we finalized the HIS 
effective July 1, 2014 (78 FR 48258). To meet the quality reporting 
requirements for hospices for the FY 2016 payment determination and 
each subsequent year, we require regular and ongoing electronic 
submission of the HIS data for each patient admission to hospice on or 
after July 1, 2014, regardless of payer or patient age (78 FR 48234, 
48258). Collecting data on all patients provides CMS with the most 
robust, accurate reflection of the quality of care delivered to 
Medicare beneficiaries as compared with non-Medicare patients. 
Therefore, to measure the quality of care delivered to Medicare 
beneficiaries in the hospice setting, we collect quality data necessary 
to calculate the adopted measures on all patients. We finalized in the 
FY 2014 Hospice Wage Index (78 FR 48258) that hospice providers collect 
data on all patients in order to ensure that all patients regardless of 
payer or patient age are receiving the same care and that provider 
metrics measure performance across the spectrum of patients.
    Hospices are required to complete and submit an HIS-Admission and 
an HIS-Discharge record for each patient admission. Hospices failing to 
report quality data via the HIS in FY 2015 will have their market 
basket update reduced by 2 percentage points in FY 2017 beginning in 
October 1, 2016. In the FY 2015 Hospice Wage Index final rule (79 FR 
50485, 50487), we finalized the proposal to codify the HIS submission 
requirement at Sec.  418.312. The System of Record (SOR) Notice titled 
``Hospice Item Set (HIS) System,'' SOR number 09-70-0548, was published 
in the Federal Register on April 8, 2014 (79 FR 19341).
5. HQRP Quality Measures and Concepts Under Consideration for Future 
Years
    We are not currently proposing any new measures for FY 2017. 
However, we are working with our measure development and maintenance 
contractor to identify measure concepts for future implementation in 
the HQRP. In identifying priority areas for future measure enhancement 
and development, CMS takes into consideration input from numerous 
stakeholders, including the Measures Application Partnership (MAP), the 
Medicare Payment Advisory Commission (MedPAC), Technical Expert Panels, 
and national priorities, such as those established by the National 
Priorities Partnership, the HHS Strategic Plan, the National Strategy 
for Quality Improvement in Healthcare, and the CMS Quality Strategy. In 
addition, CMS takes into consideration vital feedback and input from 
research published by our payment reform contractor as well as from the 
Institute of Medicine (IOM) report, titled ``Dying in America,'' 
released in September 2014.\53\ Finally, the current HQRP measure set 
is also an important consideration for future measure development 
areas; future measure development areas should complement the current 
HQRP measure set, which includes HIS measures and CAHPS[supreg] Hospice 
Survey measures. Based on input from stakeholders, CMS has identified 
several high priority concept areas for future measure development:
---------------------------------------------------------------------------

    \53\ IOM (Institute of Medicine). 2014. Dying in America: 
Improving quality and honoring individual preferences near the end 
of life. Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

     Patient reported pain outcome measure that incorporates 
patient and/or proxy report regarding pain management;
     Claims-based measures focused on care practice patterns 
including skilled visits in the last days of life, burdensome 
transitions of care for patients in and out of the hospice benefit, and 
rates of live discharges from hospice;
     Responsiveness of hospice to patient and family care 
needs;
     Hospice team communication and care coordination.
    These measure concepts are under development, and details regarding 
measure definitions, data sources, data collection approaches, and 
timeline for implementation will be communicated in future rulemaking. 
CMS invites comments about these four high priority concept areas for 
future measure development.
6. Form, Manner, and Timing of Quality Data Submission
a. Background
    Section 1814(i)(5)(C) of the Act requires that each hospice submit 
data to the Secretary on quality measures specified by the Secretary. 
Such data must be submitted in a form and manner, and at a time 
specified by the Secretary. Section 1814(i)(5)(A)(i) of the Act 
requires that beginning with the FY 2014 and for each subsequent FY, 
the Secretary shall reduce the market basket update by 2 percentage 
points for any hospice that does not comply with the quality data 
submission requirements with respect to that FY.
b. Proposed Policy for New Facilities To Begin Submitting Quality Data
    In the FY 2015 Hospice Wage Index and Payment Rate Update final 
rule (79 FR 50488) we finalized a policy stating that any hospice that 
receives its CCN notification letter on or after November 1 of the 
preceding year involved is excluded from any payment penalty for 
quality reporting purposes for the following FY. For example, if a 
hospice provider receives their CCN notification letter on November 2, 
2015 they would

[[Page 25871]]

not be required to submit quality data for the current reporting period 
ending December 31, 2015 (which would affect the FY 2017 APU). In this 
instance, the hospice would begin with the next reporting period 
beginning January 1, 2016 and all subsequent years. However, if a 
hospice provider receives their CCN notification letter on October 31, 
2015, they would be required to submit quality data for the current 
reporting period ending December 31, 2015 (which would affect the FY 
2017 APU) and all subsequent years. This requirement was codified at 
Sec.  418.312.
    We are proposing to modify our policies for the timing of new 
providers to begin reporting to CMS. Beginning with the FY 2018 payment 
determination and for each subsequent payment determination, we propose 
that a new hospice be responsible for HQRP quality data reporting 
beginning on the date they receive their Certification Number (CCN) 
(also known as the Medicare Provider Number) notification letter from 
CMS. Under this proposal, hospices would be responsible for reporting 
quality data on patient admissions beginning on the date they receive 
their CCN notification.
    Currently, new hospices may experience a lag between Medicare 
certification and receipt of their actual CCN Number. Since hospices 
cannot submit data to the Quality Improvement and Evaluation System 
(QIES) Assessment Submission and Processing (ASAP) system without a 
valid CCN Number, CMS proposes new hospices begin collecting HIS 
quality data beginning on the date they receive their CCN notification 
letter by CMS. We believe this policy will provide sufficient time for 
new hospices to establish appropriate collection and reporting 
mechanisms to submit the required quality data to CMS. We invite public 
comment on this proposal that a new hospice be required to begin 
reporting quality data under HQRP beginning on the date they receive 
their CCN notification letter from CMS.
c. Previously Finalized Data Submission Mechanism, Collection Timelines 
and Submission Deadlines for the FY 2017 Payment Determination
    In the FY 15 Hospice Wage Index final rule (79 FR 50486) we 
finalized our policy requiring that, for the FY 2017 reporting 
requirements, hospices must complete and submit HIS records for all 
patient admissions to hospice on or after July 1, 2014. Electronic 
submission is required for all HIS records. Although electronic 
submission of HIS records is required, hospices do not need to have an 
electronic medical record to complete or submit HIS data. In the FY 14 
Hospice Wage Index (78 FR 48258) we finalized that, to complete HIS 
records, providers can use either the Hospice Abstraction Reporting 
Tool (HART) software, which is free to download and use, or a vendor-
designed software. HART provides an alternative option for hospice 
providers to collect and maintain facility, patient, and HIS Record 
information for subsequent submission to the QIES ASAP system. Once HIS 
records are complete, electronic HIS files must be submitted to CMS via 
the QIES ASAP system. Electronic data submission via the QIES ASAP 
system is required for all HIS submissions; there are no other data 
submission methods available. Hospices have 30 days from a patient 
admission or discharge to submit the appropriate HIS record for that 
patient through the QIES ASAP system. CMS will continue to make HIS 
completion and submission software available to hospices at no cost. We 
provided details on data collection and submission timing at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting/Hospice-Item-Set-HIS.html.
    The QIES ASAP system provides reports upon successful submission 
and processing of the HIS records. The final validation report may 
serve as evidence of submission. This is the same data submission 
system used by nursing homes, inpatient rehabilitation facilities, home 
health agencies, and long-term care hospitals for the submission of 
Minimum Data Set Version 3.0 (MDS 3.0), Inpatient Rehabilitation 
Facility--Patient Assessment Instrument (IRF-PAI), Outcome Assessment 
Information Set (OASIS), and Long-Term Care Hospital Continuity 
Assessment Record & Evaluation Data Set (LTCH CARE), respectively. We 
have provided hospices with information and details about use of the 
HIS through postings on the HQRP Web page, Open Door Forums, 
announcements in the CMS MLN Connects Provider e-News (E-News), and 
provider training.
d. Proposed Data Submission Timelines and Requirements for FY 2018 
Payment Determination and Subsequent Years
    Hospices are evaluated for purposes of the quality reporting 
program based on whether or not they submit data, not on their 
substantive performance level with respect to the required quality 
measures. In order for CMS to appropriately evaluate the quality 
reporting data received by hospice providers, it is essential HIS data 
be received in a timely manner.
    The submission date for any given HIS record is defined as the date 
on which a provider submits the completed record. The submission date 
is the date on which the completed record is submitted and accepted by 
the QIES ASAP system. Beginning with the FY 2018 payment determination, 
we propose that hospices must submit all HIS records within 30 days of 
the Event Date, which is the patient's admission date for HIS-Admission 
records or discharge date for HIS-Discharge records.
     For HIS-Admission records, the submission date should be 
no later than the admission date plus 30 calendar days. The submission 
date can be equal to the admission date, or no greater than 30 days 
later. The QIES ASAP system will issue a warning on the Final 
Validation Report if the submission date is more than 30 days after the 
patient's admission date.
     For HIS-Discharge records, the submission date should be 
no later than the discharge date plus 30 calendar days. The submission 
date can be equal to the discharge date, or no greater than 30 days 
later. The QIES ASAP system will issue a warning on the Final 
Validation Report if the submission date is more than 30 days after the 
patient's discharge date.
    The QIES ASAP system validation edits are designed to monitor the 
timeliness and ensure that providers submitted records conform to the 
HIS data submission specifications. Providers are notified when timing 
criteria have not been met by warnings that appear on their Final 
Validation Reports. A standardized data collection approach that 
coincides with timely submission of data is essential in order to 
establish a robust quality reporting program and ensure the scientific 
reliability of the data received. We invite comments on the proposal 
that hospices must submit all HIS records within 30 days of the Event 
Date, which is the patient's admission date for HIS-Admission records 
or discharge date for HIS-Discharge records.
e. Proposed HQRP Data Submission and Compliance Thresholds for the FY 
2018 Payment Determination and Subsequent Years
    In order to accurately analyze quality reporting data received by 
hospice providers, it is imperative we receive ongoing and timely 
submission of all HIS-Admission and HIS-Discharge records. To date, the 
timeliness criteria for submission of HIS Admission and HIS-Discharge 
records has never been proposed and finalized through rulemaking 
process. We believe this

[[Page 25872]]

matter should be addressed by defining a clear standard for timeliness 
and compliance at this time. In response to input from our stakeholders 
seeking additional specificity related to HQRP compliance affecting FY 
payment determinations and, due to the importance of ensuring the 
integrity of quality data submitted to CMS, we are proposing to set 
specific HQRP thresholds for timeliness of submission of hospice 
quality data beginning with data affecting the FY 2018 payment 
determination and subsequent years.
    Beginning with the FY 2018 payment determination and subsequent FY 
payment determinations, we propose that all HIS records must be 
submitted within 30 days of the Event Date, which is the patient's 
admission date or discharge date. To coincide with this requirement, we 
propose to establish an incremental threshold for compliance with this 
timeliness requirement; the proposed threshold would be implemented 
over a 3 year period. To be compliant with timeliness requirements, we 
propose that hospices would have to submit no less than 70 percent of 
their total number of HIS-Admission and HIS-Discharge records by no 
later than 30 days from the Event Date for the FY 2018 APU 
determination. The timeliness threshold would be set at 80 percent for 
FY 2019 and at 90 percent for FY 2020 and subsequent years. The 
threshold corresponds with the overall amount of HIS records received 
from each provider that fall within the established 30 day submission 
timeframes. Our ultimate goal is to require all hospices to achieve a 
timeliness requirement compliance rate of 90 percent or more.
    For example, beginning in FY 2018, hospices will have met the 
timeliness requirement threshold if at the end of the reporting period 
70 percent of all their HIS reporting data for the year has been 
received within the 30 day submission timeframe.
    To summarize, we propose to implement the timeliness threshold 
requirement beginning with all HIS admission and discharge records that 
occur on or after January 1, 2016, in accordance with the following 
schedule.
     Beginning on or after January 1, 2016 to December 31, 
2016, hospices must submit at least 70 percent for all required HIS 
records within the 30 day submission timeframe for the year or be 
subject to a 2 percentage point reduction to their market basket update 
for FY 2018.
     Beginning on or after January 1, 2017 to December 31, 
2017, hospices must score at least 80 percent for all HIS records 
received within the 30 day submission timeframe for the year or be 
subject to a 2 percentage point reduction to their market basket update 
for FY 2019.
     Beginning on or after January 1, 2018 to December 31, 
2018, hospices must score at least 90 percent for all HIS records 
received within the 30 day submission timeframe for the year or be 
subject to a 2 percentage point reduction to their market basket update 
for FY 2020.
    We invite public comment on our proposal to implement the new data 
submission and compliance threshold requirement, as described 
previously, for the HQRP.
7. HQRP Submission Exception and Extension Requirements for the FY 2017 
Payment Determination and Subsequent Years
    In the FY 2015 Hospice Wage Index and Payment Rate Update final 
rule (79 FR 50488), we finalized our proposal to allow hospices to 
request and for CMS to grant exemptions/extensions with respect to the 
reporting of required quality data when there are extraordinary 
circumstances beyond the control of the provider. When an extension/
exception is granted, a hospice will not incur payment reduction 
penalties for failure to comply with the requirements of the HQRP. For 
the FY 2016 payment determination and subsequent payment 
determinations, a hospice may request an extension/exception of the 
requirement to submit quality data for a specified time period. In the 
event that a hospice requests an extension/exception for quality 
reporting purposes, the hospice would submit a written request to CMS. 
In general, exceptions and extensions will not be granted for hospice 
vendor issues, fatal error messages preventing record submission, or 
staff error.
    In the event that a hospice seeks to request an exception or 
extension for quality reporting purposes, the hospice must request an 
exception or extension within 30 days of the date that the 
extraordinary circumstances occurred by submitting the request to CMS 
via email to the HQRP mailbox at HQRPReconsiderations@cms.hhs.gov. 
Exception or extension requests sent to CMS through any other channel 
would not be considered as a valid request for an exception or 
extension from the HQRP's reporting requirements for any payment 
determination. In order to be considered, a request for an exception or 
extension must contain all of the finalized requirements as outlined on 
our Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospiceQuality-Reporting/index.html.
    If a provider is granted an exception or extension, timeframes for 
which an exception or extension is granted will be applied to the new 
timeliness requirement so providers are not penalized. If a hospice is 
granted an exception, we will not require that the hospice submit any 
quality data for a given period of time. If we grant an extension to a 
hospice, the hospice will still remain responsible for submitting 
quality data collected during the timeframe in question, although we 
will specify a revised deadline by which the hospice must submit this 
quality data.
    This process does not preclude us from granting extensions/
exceptions to hospices that have not requested them when we determine 
that an extraordinary circumstance, such as an act of nature, affects 
an entire region or locale. We may grant an extension/exception to a 
hospice if we determine that a systemic problem with our data 
collection systems directly affected the ability of the hospice to 
submit data. If we make the determination to grant an extension/
exception to hospices in a region or locale, we will communicate this 
decision through routine communication channels to hospices and 
vendors, including, but not limited to, Open Door Forums, ENews and 
notices on https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting/. We propose to codify 
the HQRP Submission Exception and Extension Requirements at Sec.  
418.312.
8. Hospice CAHPS Participation Requirements for the 2018 APU and 2019 
APU
    In the FY 2015 Hospice Wage Index and Payment Rate Update final 
rule (79 FR 50452), we stated that CMS would start national 
implementation of the CAHPS[supreg] Hospice Survey as of January 1, 
2015. We started national implementation of this survey as planned. The 
CAHPS[supreg] Hospice Survey is a component of CMS' Hospice Quality 
Reporting Program that emphasizes the experiences of hospice patients 
and their primary caregivers listed in the hospice patients' records. 
Measures from the survey will be submitted to the National Quality 
Forum (NQF) for endorsement as hospice quality measures. We refer 
readers to our extensive discussion of the Hospice Experience of Care 
Survey in the Hospice Wage Index FY 2015 final rule for a description 
of the measurements involved and their relationship to the statutory 
requirement for hospice

[[Page 25873]]

quality reporting (79 FR 50450 also refer to 78 FR 48261).
a. Background and Description of the Survey
    The CAHPS[supreg] Hospice Survey is the first national hospice 
experience of care survey that includes standard survey administration 
protocols that allow for fair comparisons across hospices.
    CMS developed the CAHPS[supreg] Hospice Survey with input from many 
stakeholders, including other government agencies, industry 
stakeholders, consumer groups and other key individuals and 
organizations involved in hospice care. The Survey was designed to 
measure and assess the experiences of patients who died while receiving 
hospice care as well as the experiences of their informal caregivers. 
The goals of the survey are to--
     Produce comparable data on patients' and caregivers' 
perspectives of care that allow objective and meaningful comparisons 
between hospices on domains that are important to consumers;
     Create incentives for hospices to improve their quality of 
care through public reporting of survey results; and
     Hold hospice care providers accountable by informing the 
public about the providers' quality of care.
    The development process for the survey began in 2012 and included a 
public request for information about publicly available measures and 
important topics to measure (78 FR 5458, January 25, 2013); a review of 
the existing literature on tools that measure experiences with end-of-
life care; exploratory interviews with caregivers of hospice patients; 
a technical expert panel attended by survey development and hospice 
care quality experts; cognitive interviews to test draft survey 
content; incorporation of public responses to Federal Register notices 
(78 FR 48234, August 7, 2013) and a field test conducted by CMS in 
November and December 2013.
    The CAHPS[supreg] Hospice Survey treats the dying patient and his 
or her informal caregivers (family members or friends) as the unit of 
care. The Survey seeks information from the informal caregivers of 
patients who died while enrolled in hospices. Survey-eligible patients 
and caregivers are identified using hospice records. Fielding timelines 
give the respondent some recovery time (2 to 3 months), while 
simultaneously not delaying so long that the respondent is likely to 
forget details of the hospice experience. The survey focuses on topics 
that are important to hospice users and for which informal caregivers 
are the best source for gathering this information. Caregivers are 
presented with a set of standardized questions about their own 
experiences and the experiences of the patient in hospice care. During 
national implementation of this survey, hospices are required to 
conduct the survey to meet the Hospice Quality Reporting requirements, 
but individual caregivers will respond only if they voluntarily choose 
to do so. A survey Web site is the primary information resource for 
hospices and vendors (www.hospicecahpssurvey.org). The CAHPS[supreg] 
Hospice Survey is currently available in English, Spanish, Traditional 
Chinese, and Simplified Chinese. CMS will provide additional 
translations of the survey over time in response to suggestions for any 
additional language translations. Requests for additional language 
translations should be made to the CMS Hospice CAHPS[supreg] Project 
Team at hospicesurvey@cms.hhs.gov.
    In general, hospice patients and their caregivers are eligible for 
inclusion in the survey sample with the exception of the following 
ineligible groups: primary caregivers of patients under the age of 18 
at the time of death; primary caregivers of patients who died within 48 
hours of admission to hospice care; patients for whom no caregiver is 
listed or available, or for whom caregiver contact information is not 
known; patients whose primary caregiver is a legal guardian unlikely to 
be familiar with care experiences; patients for whom the primary 
caregiver has a foreign (Non-US or US Territory address) home address; 
patients or caregivers of patients who request that they not be 
contacted (those who sign ``no publicity'' requests while under the 
care of hospice or otherwise directly request not to be contacted). 
Identification of patients and caregivers for exclusion will be based 
on hospice administrative data. Additionally, caregivers under 18 are 
excluded.
    Hospices with fewer than 50 survey-eligible decedents/caregivers 
during the prior calendar year are exempt from the CAHPS[supreg] 
Hospice Survey data collection and reporting requirements for payment 
determination. Hospices with 50 to 699 survey-eligible decedents/
caregivers in the prior year will be required to survey all cases. For 
hospices with 700 or more survey-eligible decedents/caregivers in the 
prior year, a sample of 700 will be drawn under an equal-probability 
design. Survey-eligible decedents/caregivers are defined as that group 
of decedent and caregiver pairs that meet all the criteria for 
inclusion in the survey sample.
    We moved forward with a model of national survey implementation, 
which is similar to that of other CMS patient experience of care 
surveys. Medicare-certified hospices are required to contract with a 
third-party vendor that is CMS-trained and approved to administer the 
survey on their behalf. A list of approved vendors can be found at this 
Web site: www.hospicecahpssurvey.org. Hospices are required to contract 
with independent survey vendors to ensure that the data are unbiased 
and collected by an organization that is trained to collect this type 
of data. It is important that survey respondents feel comfortable 
sharing their experiences with an interviewer not directly involved in 
providing the care. We have successfully used this mode of data 
collection in other settings, including for Medicare-certified home 
health agencies. The goal is to ensure that we have comparable data 
across all hospices.
    Consistent with many other CMS CAHPS[supreg] surveys that are 
publicly reported on CMS Web sites, CMS will publicly report hospice 
data when at least 12 months of data are available, so that valid 
comparisons can be made across hospice providers in the United States, 
to help patients, family and friends choose a hospice program for 
themselves or their loved ones.
b. Participation Requirements To Meet Quality Reporting Requirements 
for the FY 2018 APU
    In section 3004(c) of the Affordable Care Act, the Secretary is 
directed to establish quality reporting requirements for Hospice 
Programs. The CAHPS[supreg] Hospice Survey is a component of the CMS 
Hospice Quality Reporting Requirements for the FY 2018 APU and 
subsequent years.
    The CAHPS[supreg] Hospice Survey includes the measures detailed in 
Table 27. The individual survey questions that comprise each measure 
are listed under the measure. These measures are in the process of 
being submitted to the National Quality Forum (NQF).

[[Page 25874]]

------------------------------------------------------------------------
  Table 27--Hospice Experience of Care Survey Quality Measures   Composite
                     and Constituent Items                        Measures
---------------------------------------------------------------------------
Hospice team communication
     While your family member was in hospice care, how
     often did the hospice team keep you informed about when
     they would arrive to care for your family member?
     While your family member was in hospice care, how
     often did the hospice team explain things in a way that
     was easy to understand?
     How often did the hospice team listen carefully to
     you when you talked with them about problems with your
     family member's hospice care?
     While your family member was in hospice care, how
     often did the hospice team keep you informed about your
     family member's condition?
     While your family member was in hospice care, how
     often did the hospice team listen carefully to you?
Getting timely care
     While your family member was in hospice care, when
     you or your family member asked for help from the hospice
     team, how often did you get help as soon as you needed it?
     How often did you get the help you needed from the
     hospice team during evenings, weekends, or holidays?
Treating family member with respect
     While your family member was in hospice care, how
     often did the hospice team treat your family member with
     dignity and respect?
     While your family member was in hospice care, how
     often did you feel that the hospice team really cared
     about your family member?
Providing emotional support
     While your family member was in hospice care, how
     much emotional support did you get from the hospice team?
     In the weeks after your family member died, how
     much emotional support did you get from the hospice team?
Getting help for symptoms
     Did your family member get as much help with pain
     as he or she needed?
     How often did your family member get the help he
     or she needed for trouble breathing?
     How often did your family member get the help he
     or she needed for trouble with constipation?
     How often did your family member get the help he
     or she needed from the hospice team for feelings of
     anxiety or sadness?
Getting hospice care training
     Did the hospice team give you the training you
     needed about what side effects to watch for from pain
     medicine?
     Did the hospice team give you the training you
     needed about if and when to give more pain medicine to
     your family member?
     Did the hospice team give you the training you
     needed about how to help your family member if he or she
     had trouble breathing?
     Did the hospice team give you the training you
     needed about what to do if your family member became
     restless or agitated?
------------------------------------------------------------------------
                      Single Item Measures
------------------------------------------------------------------------
Providing support for religious and spiritual beliefs
     (Support for religious or spiritual beliefs
     includes talking, praying, quiet time, or other ways of
     meeting your religious or spiritual needs.) While your
     family member was in hospice care, how much support for
     your religious and spiritual beliefs did you get from the
     hospice team?
Information continuity
     While your family member was in hospice care, how
     often did anyone from the hospice team give you confusing
     or contradictory information about your family member's
     condition or care?
Understanding the side effects of pain medication
     Side effects of pain medicine include things like
     sleepiness. Did any member of the hospice team discuss
     side effects of pain medicine with you or your family
     member?
------------------------------------------------------------------------
                        Global Measures
------------------------------------------------------------------------
Overall rating of hospice
     Using any number from 0 to 10, where 0 is the
     worst hospice care possible and 10 is the best hospice
     care possible, what number would you use to rate your
     family member's hospice care?
Recommend hospice
     Would you recommend this hospice to your friends
     and family?
------------------------------------------------------------------------

    To comply with CMS's quality reporting requirements for the FY 2018 
APU, hospices will be required to collect data using the CAHPS[supreg] 
Hospice Survey. Hospices would be able to comply by utilizing only CMS-
approved third party vendors that are in compliance with the provisions 
at Sec.  418.312(e). Ongoing monthly participation in the survey is 
required January 1, 2016 through December 31, 2016 for compliance with 
the FY 2018 APU.
    Approved CAHPS[supreg] Hospice Survey vendors will submit data on 
the hospice's behalf to the CAHPS[supreg] Hospice Survey Data Center. 
The deadlines for data submission occur quarterly and are shown in 
Table 28 below. Deadlines are the second Wednesday of the submission 
months, which are August, November, February, and May. Deadlines are 
final; no late submissions will be accepted. However, in the event of 
extraordinary circumstances beyond the control of the provider, the 
provider will be able to request an exemption as previously noted in 
the Quality Measures for Hospice Quality Reporting Program and Data 
Submission Requirements for Payment Year FY 2016 and Beyond section. 
Hospice providers are responsible for making sure that their vendors 
are submitting data in a timely manner.

[[Page 25875]]

Table 28--CAHPS[supreg] Hospice Survey Data Submission Dates FY2017 APU,
                       FY2018 APU, and FY2019 APU
------------------------------------------------------------------------
  Sample months (that is, month of         Quarterly data submission
             death) \1\                          deadlines \2\
------------------------------------------------------------------------
                               FY2017 APU
------------------------------------------------------------------------
Dry Run January-March 2015 (Q1).....  August 12, 2015.
April-June 2015 (Q2)................  November 11, 2015.\3\
July-September 2015 (Q3)............  February 10, 2016.
October-December 2015 (Q4)..........  May 11, 2016.
------------------------------------------------------------------------
                               FY2018 APU
------------------------------------------------------------------------
January-March 2016 (Q1).............  August 10, 2016.
April-June 2016 (Q2)................  November 9, 2016.
July-September 2016 (Q3)............  February 8, 2017.
October-December 2016 (Q4)..........  May 10, 2017.
------------------------------------------------------------------------
                               FY2019 APU
------------------------------------------------------------------------
January-March 2017 (Q1).............  August 9, 2017.
April-June 2017 (Q2)................  November 8, 2017.
July-September 2017 (Q3)............  February, 14, 2018.
October-December 2017 (Q4)..........  May 9, 2018.
------------------------------------------------------------------------
\1\ Data collection for each sample month initiates two months following
  the month of patient death (for example, in April for deaths occurring
  in January).
\2\ Data submission deadlines are the second Wednesday of the submission
  month.
\2\ Corrected from the Final Rule published August 22, 2014, 79 FR
  50493.

    In the FY 2014 Hospice Wage Index and Rate Update final rule, we 
stated that we would exempt very small hospices from CAHPS[supreg] 
Hospice Survey requirements. We propose to continue that exemption: 
Hospices that have fewer than 50 survey-eligible decedents/caregivers 
in the period from January 1, 2015 through December 31, 2015 are exempt 
from CAHPS[supreg] Hospice Survey data collection and reporting 
requirements for the 2018 APU. To qualify for the survey exemption for 
the FY 2018 APU, hospices must submit an exemption request form. This 
form will be available on the CAHPS[supreg] Hospice Survey Web site 
http://www.hospicecahpssurvey.org. Hospices are required to submit to 
CMS their total unique patient count for the period of January 1, 2015 
through December 31, 2015. The due date for submitting the exemption 
request form for the FY 2018 APU is August 10, 2016.
c. Participation Requirements To Meet Quality Reporting Requirements 
for the FY 2019 APU
    To meet participation requirements for the FY 2019 APU, we proposed 
that hospices collect data on an ongoing monthly basis from January 
2017 through December 2017 (inclusive). Data submission deadlines for 
the 2019 APU will be announced in future rulemaking.
    Hospices that have fewer than 50 survey-eligible decedents/
caregivers in the period from January 1, 2016 through December 31, 2016 
are exempt from CAHPS[supreg] Hospice Survey data collection and 
reporting requirements for the FY 2019 payment determination. To 
qualify, hospices must submit an exemption request form. This form will 
be available in first quarter 2017 on the CAHPS[supreg] Hospice Survey 
Web site http://www.hospicecahpssurvey.org.
    Hospices are required to submit to CMS their total unique patient 
count for the period of January 1, 2016 through December 31, 2016. The 
due date for submitting the exemption request form for the FY 2018 APU 
is August 10, 2016.
d. Annual Payment Update
    The Affordable Care Act requires that beginning with FY 2014 and 
each subsequent fiscal year, the Secretary shall reduce the market 
basket update by 2 percentage points for any hospice that does not 
comply with the quality data submission requirements with respect to 
that fiscal year, unless covered by specific exemptions. Any such 
reduction will not be cumulative and will not be taken into account in 
computing the payment amount for subsequent fiscal years. In the FY 
2015 Hospice Wage Index we added the CAHPS[supreg] Hospice Survey to 
the Hospice Quality Reporting Program requirements for the FY 2017 
payment determination and determinations for subsequent years.
     To meet the HQRP requirements for the FY 2018 payment 
determination, hospices would collect survey data on a monthly basis 
for the months of January 1, 2016 through December 31, 2016 to qualify 
for the full APU.
     To meet the HQRP requirements for the FY 2019 payment 
determination, hospices would collect survey data on a monthly basis 
for the months of January 1, 2017 through December 31, 2017 to qualify 
for the full APU.
e. CAHPS[supreg] Hospice Survey Oversight Activities
    We propose to continue a requirement that vendors and hospice 
providers participate in CAHPS[supreg] Hospice Survey oversight 
activities to ensure compliance with Hospice CAHPS[supreg] technical 
specifications and survey requirements. The purpose of the oversight 
activities is to ensure that hospices and approved survey vendors 
follow the CAHPS[supreg] Hospice Survey technical specifications and 
thereby ensure the comparability of CAHPS[supreg] Hospice Survey data 
across hospices.
    We propose that the reconsiderations and appeals process for 
hospices failing to meet the Hospice CAHPS[supreg] data collection 
requirements will be part of the Reconsideration and Appeals process 
already developed for the Hospice Quality Reporting program. We 
encourage hospices interested in learning more about the CAHPS[supreg] 
Hospice Survey to visit the CAHPS[supreg] Hospice Survey Web site: 
http://www.hospicecahpssurvey.org.

[[Page 25876]]

9. HQRP Reconsideration and Appeals Procedures for the FY 2016 Payment 
Determination and Subsequent Years
    In the FY 2015 Hospice Wage Index and Payment Rate Update final 
rule (79 FR 50496), we notified hospice providers on how to seek 
reconsideration if they received a noncompliance decision for the FY 
2016 payment determination and subsequent years. A hospice may request 
reconsideration of a decision by CMS that the hospice has not met the 
requirements of the Hospice Quality Reporting Program for a particular 
period. Reporting compliance is determined by successfully fulfilling 
both the Hospice CAHPS[supreg] Survey requirements and the HIS data 
submission requirements.
    We wish to clarify that any hospice that wishes to submit a 
reconsideration request must do so by submitting an email to CMS 
containing all of the requirements listed on the HQRP Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting/Reconsideration-Requests.html. 
Electronic email sent to HQRPReconsiderations@cms.hhs.gov is the only 
form of submission that will be accepted. Any reconsideration requests 
received through any other channel including U.S. postal service or 
phone will not be considered as a valid reconsideration request. We 
codified this process at Sec.  418.312. In addition, we codified at 
Sec.  418.306 that beginning with FY 2014 and each subsequent FY, the 
Secretary shall reduce the market basket update by 2 percentage points 
for any hospice that does not comply with the quality data submission 
requirements with respect to that FY and solicited comments on all of 
the proposals and the associated regulations text at Sec.  418.312 and 
in Sec.  418.306 in section VI.
    In the past, only hospices found to be non-compliant with the 
reporting requirements set forth for a given payment determination 
received a notification of this finding along with instructions for 
requesting reconsideration in the form of a certified United States 
Postal Service (USPS) letter. In an effort to communicate as quickly, 
efficiently, and broadly as possible with hospices regarding annual 
compliance, we are proposing additions to our communications method 
regarding annual notification of reporting compliance in the HQRP. In 
addition to sending a letter via regular USPS mail, beginning with the 
FY 2017 payment determination and for subsequent fiscal years, we 
propose to use the Quality Improvement and Evaluation System (QIES) 
National System for Certification and Survey Provider Enhanced Reports 
(CASPER) Reporting as an additional mechanism to communicate to 
hospices regarding their compliance with the reporting requirements for 
the given reporting cycle. The electronic APU letters would be accessed 
using the CASPER Reporting Application. Requesting access to the CMS 
systems is performed in two steps. Details are provided on the QIES 
Technical Support Office Web site (direct link), https://www.qtso.com/hospice.html. Once successfully registered, access the CMS QIES to 
Success Welcome page https://web.qiesnet.org/qiestosuccess/index.html 
and select the ``CASPER Reporting'' link. Additional information about 
how to access the letters will be provided prior to the release of the 
letters.
    We propose to disseminate communications regarding the availability 
of hospice compliance reports in CASPER files through routine channels 
to hospices and vendors, including, but not limited to issuing memos, 
emails, Medicare Learning Network (MLN) announcements, and notices on 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting/Reconsideration-Requests.html.
    We further propose to publish a list of hospices who successfully 
meet the reporting requirements for the applicable payment 
determination on the HQRP Web site http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting.html. We propose updating the list after reconsideration 
requests are processed on an annual basis.
    We invite comment on the proposals to add CASPER Reporting as an 
additional communication mechanism for the dissemination of compliance 
notifications and to publish a list of compliant hospices on the HQRP 
Web site.
10. Public Display of Quality Measures and Other Hospice Data for the 
HQRP
    Under section 1814(i)(5)(E) of the Act, the Secretary is required 
to establish procedures for making any quality data submitted by 
hospices available to the public. The procedures must ensure that a 
hospice would have the opportunity to review the data regarding the 
hospice's respective program before it is made public.
    We recognize that public reporting of quality data is a vital 
component of a robust quality reporting program and are fully committed 
to developing the necessary systems for public reporting of hospice 
quality data. We also recognize that it is essential that the data made 
available to the public be meaningful and that comparing performance 
between hospices requires that measures be constructed from data 
collected in a standardized and uniform manner. Hospices have been 
required to use a standardized data collection approach (HIS) since 
July 1, 2014. Data from July 1, 2014 onward is currently being used to 
establish the scientific soundness of the quality measures prior to the 
onset of public reporting of the seven quality measures implemented in 
the HQRP. We believe it is critical to establish the reliability and 
validity of the quality measures prior to public reporting in order to 
demonstrate the ability of the quality measures to distinguish the 
quality of services provided. To establish reliability and validity of 
the quality measures, at least four quarters of data will be analyzed. 
Typically, the first one or two quarters of data reflect the learning 
curve of the facilities as they adopt standardized data collection 
procedures; these data often are not used to establish reliability and 
validity. We began data collection in CY 2014; the data from CY 2014 
for Quarter 3 (Q3) will not be used for assessing validity and 
reliability of the quality measures. We are analyzing data collected by 
hospices during Quarter 4 (Q4) CY 2014 and Q1-Q3 CY 2015. Decisions 
about whether to report some or all of the quality measures publicly 
will be based on the findings of analysis of the CY 2015 data.
    In addition, the Affordable Care Act requires that reporting be 
made public on a CMS Web site and that providers have an opportunity to 
review their data prior to public reporting. CMS will develop the 
infrastructure for public reporting, and provide hospices an 
opportunity to review their quality measure data prior to publicly 
reporting information about the quality of care provided by ``Medicare-
certified'' hospice agencies throughout the nation. CMS also plans to 
make available provider-level feedback reports in the Certification and 
Survey Provider Enhances Reports (CASPER) system. These provider-level 
feedback reports or ``quality reports'' will be separate from public 
reporting and will be for provider viewing only, for the purposes of 
internal provider quality improvement. As is common in other quality 
reporting programs, quality reports would contain feedback on facility-
level performance on quality metrics, as well as

[[Page 25877]]

benchmarks and thresholds. For the CY 2014 Reporting Cycle, there were 
no quality reports available in CASPER; however, CMS anticipates that 
provider-level quality reports will begin to be available sometime in 
CY 2015. CMS anticipates that providers would use the quality reports 
as part of their Quality Assessment and Performance Improvement (QAPI) 
efforts.
    As part of our ongoing efforts to make healthcare more transparent, 
affordable, and accountable, the HQRP is prepared to post hospice data 
on a public data set, the Medicare Provider Utilization and Payment 
Data: Physician and Other Supplier Public Use File located at https://data.cms.hhs.gov. This site includes information on services and 
procedures provided to Medicare beneficiaries by physicians and other 
healthcare professionals and serves as a helpful resource to the 
healthcare community. A timeline for posting hospice data on a public 
data set has not been determined by CMS. Should a timeline become 
available prior to the next annual rulemaking cycle, details would be 
announced via regular HQRP communication channels, including listening 
sessions, memos, email notification, and Web postings.
    Furthermore, to meet the requirement for making such data public, 
we will develop a CMS Compare Web site for hospice, which will list 
hospice providers geographically. Consumers can search for all Medicare 
approved hospice providers that serve their city or zip code (which 
would include the quality measures and CAHPS[supreg] Hospice Survey 
results) and then find the agencies offering the types of services they 
need. Like other CMS Compare Web sites, the Hospice Compare Web site 
will feature a quality rating system that gives each hospice a rating 
of between one (1) and five (5) stars. Hospices will have 
prepublication access to their own agency's quality data, which enables 
each agency to know how it is performing before public posting of data 
on the Compare Web site. Decisions regarding how the rating system will 
determine a providers star rating and methods used for calculations, as 
well as a proposed timeline for implementation will be announced via 
regular HQRP communication channels, including listening sessions, 
memos, email notification, provider association calls, Open Door 
Forums, and Web postings. We will announce the timeline for public 
reporting of quality measure data in future rulemaking.

F. Clarification Regarding Diagnosis Reporting on Hospice Claims

1. Background
    During the grass roots movement of hospice growth in the United 
States in the 1970s, healthcare providers recognized the need for a 
care delivery model to address the needs of those individuals who no 
longer wanted to seek out the curative care for advancing illnesses and 
injuries. In the early stages of development, hospice leaders worked 
with key legislative leaders to develop a system to reimburse hospice 
care in the United States.\54\ However, it was evident that before 
governmental reimbursement could occur, data had to be collected and 
analyzed to demonstrate what hospices actually provided and what costs 
were involved in rendering hospice care. The Health Care Financing 
Administration (HCFA)--now known as the Centers for Medicare & Medicaid 
Services (CMS)--conducted a demonstration that included 26 hospices 
located throughout the country to study the effect of Medicare-
reimbursed hospice care. The results of this demonstration, as well as 
those sponsored by the private health insurance sector and private 
foundations, along with the testimony of multiple hospice industry 
leaders, legislators, and hospice families, helped to form the 
structure of the Medicare hospice benefit. Stakeholders agreed that a 
Medicare hospice benefit needed to be structured to promote cost 
control and appropriate service provision, while discouraging providers 
from entering the hospice market with the intent of maximizing 
reimbursement from Medicare.
---------------------------------------------------------------------------

    \54\ Connor, S. (2007). Development of Hospice and Palliative 
Care in the United States. OMEGA. 56 (1); 89-99.
---------------------------------------------------------------------------

    Both the Congress and the hospice industry wanted the Medicare 
hospice benefit to provide a coordinated range of services to ensure 
that terminally ill individuals would have access to comprehensive care 
aimed at addressing their physical, emotional, psychosocial and 
spiritual needs as they approached the end of life. As stated in the 
1983 hospice final rule, and reiterated throughout hospice rules since 
implementation of the benefit, it is our general view that the waiver 
required by the law is a broad one and that hospices are required to 
provide virtually all the care that is needed by terminally ill 
patients (48 FR 56010). Therefore, hospices are to provide pain and 
symptom management, as an alternative to the curative model of care, 
focused on the ``total person'' as opposed to individual disease or 
injury states. The goal of hospice care is to help terminally ill 
individuals continue life with minimal disruption to normal activities 
while remaining primarily in the home environment. We continue to 
support the philosophy of holistic, comprehensive, virtually all-
inclusive hospice care and seek to protect beneficiary access and 
coverage under the Medicare hospice benefit.
2. Current Discussions About Hospice Vulnerabilities
    The Institute of Medicine (IOM) recently released the report, Dying 
in America: Improving Quality and Honoring Individual Preferences Near 
the End of Life. This report discussed vulnerabilities in the current 
health care system, especially as it relates to those who are 
approaching the end of life, and stated that one of the largest 
barriers in providing efficient, quality end-of-life care is the lack 
of coordination and communication among different components of the 
health care system.\55\ The report states that better coordination of 
care is essential in improving patient outcomes and that end-of-life 
care should be individualized based on patient values, goals, needs, 
and informed preferences with a recognition that individual service 
needs and intensity will change over time.\56\
---------------------------------------------------------------------------

    \55\ Institute of Medicine (IOM), ``Dying in America: Improving 
Quality and Honoring Individual Preferences Near End-of-Life,'' 
2014, p.5-10.
    \56\ Institute of Medicine (IOM), ``Dying in America: Improving 
Quality and Honoring Individual Preferences Near End-of-Life,'' 
2014, p.5-52.
---------------------------------------------------------------------------

    Recent news articles on hospice care highlight the same concerns 
expressed in the IOM report regarding vulnerabilities in the current 
health care system. While recent news articles agree that hospice care 
is a valuable and needed service for patients who are near death, the 
articles identified issues with hospice quality of care, the lack of 
services provided, conflicts of interest, and the current Medicare 
payment structure that may incentivize the provision of fewer 
services.\57\ Overall, the IOM report and recent news articles raise 
concerns regarding fragmented and uncoordinated care for those who are 
terminally ill.
---------------------------------------------------------------------------

    \57\ http://www.washingtonpost.com/sf/business/collection/business-of-dying/
---------------------------------------------------------------------------

    As mentioned in previous rules, and in section III.A of this 
proposed rule, there is data suggesting a significant amount of 
``unbundling'' is occurring for services that should be included in the 
hospice bundled payment. As

[[Page 25878]]

discussed previously above, our data analysis shows that $1.3 billion 
is being paid outside of the Medicare hospice benefit for those under 
an active hospice election. With such a significant amount of services 
being provided outside of the Medicare hospice benefit, it raises 
questions whether hospices are providing full disclosure of the nature 
of hospice care, which focuses on improving quality of life as one is 
approaching the end of life while eliminating the need for unnecessary, 
futile and possibly harmful diagnostics, treatments, and therapies. 
Additionally, we have received anecdotal reports from non-hospice 
providers who have rendered care and services to hospice beneficiaries 
in which the non-hospice provider states that the care given was 
related to the terminal prognosis of the individual. These reports go 
on to say that they have contacted hospices to coordinate the care of 
the hospice beneficiary only to be told by those hospices that they 
disagreed with the non-hospice providers' clinical judgment that the 
care was related to the terminal prognosis. We have been told that 
hospices are refusing to reimburse the non-hospice provider for care 
related to the terminal prognosis. These non-hospice providers also 
informed us that the hospices told them to code the claim with a 
different diagnosis or to code condition code 07 (treatment of Non-
terminal Condition for Hospice) or the modifier ``GW'' (service not 
related to the hospice patient's terminal condition) on their claims to 
ensure that the non-hospice provider would consequently get paid 
through Medicare. These non-hospice providers stated that they 
disagreed with this practice, and considered it fraudulent. As such, 
they were unable to be reimbursed by the hospice or by Medicare for 
services provided that they felt were the responsibility of hospice. We 
have also received anecdotal reports from hospice beneficiaries and 
their families that they have been told by the hospice to revoke their 
hospice election to receive high-cost services that should be covered 
by the hospice, such as palliative chemotherapy and radiation.
    Given the legislative history, the statements provided by hospices 
during the development of the benefit, and anecdotal reports from non-
hospice providers and hospice beneficiaries, we are concerned that some 
hospices are making determinations of hospice coverage based solely on 
cost and reimbursement as opposed to being based on patient-centered 
needs, preferences and goals for those approaching the end of life. We 
believe this to be counter to the holistic, comprehensive, and 
coordinated hospice care model promoted during the development of the 
Medicare hospice benefit.\58\ It was very clear throughout the 
development, and years after the implementation, of the Medicare 
hospice benefit that hospices were expected to make good on their 
promise to do a better job in the provision and coordination of care 
than conventional Medicare services for those who were at the end of 
life.\59\ However, if hospices are not making good on that promise, it 
results in increased burden on hospice beneficiaries and their 
families--both clinically and financially--and is not in keeping with 
the intent of the Medicare hospice benefit as originally developed and 
implemented in 1983.
---------------------------------------------------------------------------

    \58\ ``Background Materials on Medicare Hospice Benefit 
Including Description of Proposed Implementing Regulations,'' 
September 9, 1983. Committee on Finance, United States Senate, S. 
Prt. 98-88, p. 1.
    \59\ Hoyer, T. (1998). A History of the Medicare Hospice 
Benefit. The Hospice Journal, 13(1-2), 61-69.
---------------------------------------------------------------------------

3. Medicare Hospice Eligibility Requirements
    The Medicare hospice regulations at Sec.  418.25(b) state that in 
reaching a decision to certify that a patient is terminally ill, 
meaning that the patient has a medical prognosis of a life expectancy 
of 6 months or less, the certifying physician(s) must consider at least 
the following information:
     Diagnosis of the terminal condition of the patient.
     Other health conditions, whether related or unrelated to 
the terminal condition.
     Current clinically relevant information supporting all 
diagnoses.
    Eligibility for the Medicare hospice benefit has always been based 
on the prognosis of the individual. As we have mentioned in previous 
rules, prognosis is not necessarily established through just a single 
diagnosis or even multiple diagnoses; rather, it is based on the 
totality of the individual and everything that affects their life 
expectancy. In the FY 2015 Hospice Payment Rate Update final rule (79 
FR 50471), we reminded providers that there are multiple public sources 
available to assist in determining whether a patient meets Medicare 
hospice prognosis eligibility criteria (that is, industry-specific 
clinical and functional assessment tools and information on MAC Web 
sites, including Local Coverage Determinations (LCDs)). We have 
mentioned that there are prognostication tools available for hospices 
to assist in thoughtful evaluation of Medicare beneficiaries for 
determining eligibility for the Medicare hospice benefit. We expect 
hospice providers to use the full range of tools available, including 
guidelines, comprehensive assessments, and the complete medical record, 
as necessary, to make responsible and thoughtful clinical 
determinations regarding prognosis eligibility.
    As mentioned earlier in this section, the hospice industry has come 
under increased media scrutiny, much of it related to hospices 
enrolling patients who may not be eligible for the benefit because they 
are not terminally ill and enrolling patients with certain diagnoses 
that typically have a longer length of stay, mainly non-cancer 
diagnoses. In the December 26, 2013 Washington Post article, ``Hospice 
firms draining billions from Medicare'', the author discusses the 
incentives for hospices to recruit patients who are not yet terminally 
ill or not yet ready to elect the hospice benefit. This article also 
goes on to describe allegations from former hospice employees who say 
that some hospices knowingly admitted patients who were not declining 
in health.\60\ To address some of these noted hospice vulnerabilities, 
the recent IMPACT Act legislation, as summarized in Section II.D.8. of 
this proposed rule, requires increased hospice program oversight 
through more frequent hospice surveys and medical review efforts. All 
of these efforts seek to protect the Medicare hospice beneficiaries, as 
well as, the integrity of the Medicare hospice benefit.
---------------------------------------------------------------------------

    \60\ http://www.washingtonpost.com/business/economy/medicare-rules-create-a-booming-business-in-hospice-care-for-people-who-arent-dying/2013/12/26/4ff75bbe-68c9-11e3-ae56-22de072140a2_story.html.
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4. Assessment of Conditions and Comorbidities Required by Regulation
    We have recognized throughout the federal regulations at part 418 
that the total person is to be assessed, including acute and chronic 
conditions, as well as, controlled and uncontrolled conditions, and 
comorbidities, in order to determine an individual's terminal 
prognosis. We have also been clear that the original intent of the 
Medicare hospice benefit is to provide comprehensive, integrated and 
holistic care for those who have a terminal prognosis. While hospices 
are responsible for the palliation and management of the terminal 
illness and related conditions, in the 1983 hospice proposed rule (48 
FR 38147) we stated that upon hospice election, the individual waives 
payment for certain other benefits except in ``exceptional and unusual 
circumstances.'' In that

[[Page 25879]]

proposed rule, we did not specify these ``exceptional and unusual 
circumstances'' because we did not yet know what specific types of 
circumstances would warrant the use of this exception and invited 
comments on this point. In the 1983 hospice final rule (48 FR 56010 
through 56011), we stated that we did not receive any suggestions for 
identifying exceptional and unusual circumstances that warranted the 
inclusion of a specific provision in the regulations to accommodate 
them. We stated this because most of the comments that were made 
attempted to suggest this exception as a means of routinely providing 
non-hospice Medicare financing for the expense of costly services 
needed by hospice patients and we do not view this as an appropriate 
interpretation of the law (48 FR 56011). We reiterated that we believe 
that the unique physical condition of each terminally ill individual 
makes it necessary for these decisions to be made on a case by case 
basis and that it is our general rule that the waiver required by law 
is a broad one.
    Since the implementation of the Medicare hospice benefit, there 
have been many questions and requests for CMS to provide those 
``exceptional and unusual'' circumstances for which a condition would 
be unrelated to the prognosis of the terminally ill individual. We 
continue to state that those circumstances would be ``exceptional and 
unusual'' and that hospices continue to be required to provide 
virtually all the care that is needed by terminally ill patients. To 
respond to the many requests for greater clarification, in the Medicare 
Program; FY 2015 Payment Rate Update proposed rule (79 FR 26554 through 
26555), we solicited comments on definitions we provided for ``terminal 
illness'' and ``related conditions.'' Based on comments received in 
response to those definitions and from comments received in prior 
year's proposed rules, it appears that there continues to be widely 
varying interpretation as to what constitutes ``terminal illness'' and 
``related conditions'' and hence the services that should be provided 
and covered by hospices. Similar to the 1983 hospice final rule, some 
commenters appear to have a very broad interpretation stating that all 
conditions are related to the terminal prognosis. Other commenters have 
a very narrow interpretation as to what illnesses and conditions would 
be and would not be the responsibility of hospice, and felt that those 
conditions are limited to a single diagnosis. Additionally, some 
comments previously received stated that longstanding, preexisting, 
chronic, stable and controlled conditions and disease states as well as 
comorbidities, should not be considered related to a patient's terminal 
illness or related conditions. Some commenters went on to say that not 
all pain and symptoms are related to a patient's terminal prognosis. 
Many commenters stated that determining ``related conditions'' was 
often very difficult, while others reported that it wasn't difficult at 
all. Many commenters felt that the management and maintenance of 
comorbidities is not the responsibility of hospice as they felt that 
these comorbidities are not related to the reason why an individual is 
terminally ill. These commenters believed that these types of 
conditions should not be included in the bundle of services covered 
under the Medicare hospice benefit. As we have previously stated in 
response to those comments, we believe these conditions are included in 
the bundle of hospice services as hospices are required to provide 
reasonable and necessary services for both palliation and management of 
all conditions that contribute to a terminal prognosis. Conversely, 
several commenters were in agreement that all medical problems will 
affect a person's prognosis and will relate, in some way, to the 
disease that will ultimately end that person's life.
    Defined at Sec.  418.3, ``terminally ill'' means that the 
individual has a medical prognosis that his or her life expectancy is 6 
months or less if the illness runs its normal course. The original 
implementing regulations of the Medicare hospice benefit, beginning 
with the 1983 hospice propose and final rules (48 FR 318146 and 48 FR 
56008), articulate a set of requirements that do not delineate between 
preexisting, chronic, controlled or comorbid conditions. The presence 
of comorbidities is recognized as an important factor contributing to 
the overall status of an individual and should be considered when 
determining terminal prognosis. Mental health comorbidities must also 
be considered as it is not uncommon for terminally ill individuals to 
have underlying mental health conditions that could contribute to their 
prognosis and/or affect the plan of care. Health care researchers agree 
the importance of comorbidity is clear, due to its high prevalence in 
older populations and its impact on health and health care.\61\ It is 
also well-documented that comorbidities affect overall general health, 
treatment choice, prognosis, and is a predictor of poor survival.\62\ A 
study of U.S. hospice patients also showed that hospice patients with 
higher comorbidity index scores were more likely to--
---------------------------------------------------------------------------

    \61\ Gijsen, R., Hoeymans, N., Schellevis, F., Ruwaard, 
Satariano, W., van den Bos, G., (2001). Causes and consequences of 
comorbidity: A review. Journal of Clinical Epidemiology, 54(2001), 
661.
    \62\ Yancik, R., Ganz, P, Varricchio, C., Conley, B. (2001). 
Perspectives on Comorbidity and Cancer in Older Patients: Approaches 
to Expand the Knowledge Base. American Society of Clinical Oncology. 
PAGE #.
     Repetto, L., Comandini, D., Mammoliti, S. (2001). Life 
expectancy, comorbidity and quality of life: The treatment equation 
in the older cancer patients. Critical Reviews in Oncology/
Hematology, 37(2001), 148.
     Escarrabill, J., Cataluna, J., Hernandez, C., Servera, E. 
(2009). Recommendations for End-of-Life Care in Patients with 
Chronic Obstructive Pulmonary Disease. Archivos de Bronconeumologia, 
45(6), 297-303.
---------------------------------------------------------------------------

     Be admitted to the ER and hospital;
     Die in the hospital;
     Be discharged from hospice.\63\
---------------------------------------------------------------------------

    \63\ Legler et al. (2011). The effect of comorbidity burden on 
health care utilization for patients with cancer using hospice. 
Journal of Palliative Care Medicine. 14(6), 751-756.
---------------------------------------------------------------------------

    It is not an uncommon clinical practice for some clinicians to stop 
drugs for comorbid conditions arbitrarily because the person has a 
progressive life-limiting illness; however, withdrawing long term drugs 
from comorbidities without considering the natural course of the 
illness can lead to serious problems, such as rebound hypertension, 
tachycardia, depression and death.\64\ It is imperative for hospice 
patients with comorbidities to have careful management and for 
clinicians to consider both the physical and psychological effects of 
treatment.\65\
---------------------------------------------------------------------------

    \64\ Stevenson, J., Abernethy, A., Miller, C, Currow, D. (2004). 
Managing comorbidities in patients at the end of life. British 
Medical Journal. 324(2004), 909-912.
    \65\ Stevenson, J., Abernethy, A., Miller, C, Currow, D. (2004). 
Managing comorbidities in patients at the end of life. British 
Medical Journal. 324(2004), 909-912.
---------------------------------------------------------------------------

    The National Hospice and Palliative Care Organization (NHPCO) 
recognizes the importance of comorbidities. They define ``comorbidity'' 
as known factors or pathological disease impacting on the primary 
health problem and generally attributed to contributing to increased 
risk for poor health status outcomes \66\ This aligns with the Medicare 
hospice benefit requirements in which the physical, psychosocial, 
emotional and spiritual needs of the individual and his or her family 
must be assessed to develop the hospice plan of care. The 
individualized plan of care is developed and refined, as necessary, 
through the course of an individual's hospice election and is based on 
the initial and ongoing comprehensive assessments.

[[Page 25880]]

Our regulations at Sec.  418.54(c) require that the comprehensive 
assessment must take into consideration the following factors:
---------------------------------------------------------------------------

    \66\ National Hospice and Palliative Care Organization. (2010). 
Standards of Practice for Hospice Programs.
---------------------------------------------------------------------------

     The nature and condition causing admission (including the 
presence or lack of objective data and subjective complaints).
     Complications and risk factors that affect care planning.
     Functional status, including the patient's ability to 
understand and participate in his or her own care.
     Imminence of death.
     Severity of symptoms.
     Drug profile. A review of all of the patient's 
prescription and over-the-counter drugs, herbal remedies and other 
alternative treatments that could affect drug therapy.
     Bereavement. An initial bereavement assessment of the 
needs of the patient's family and other individuals focusing on the 
social, spiritual, and cultural factors that may impact their ability 
to cope with the patient's death. Information gathered from the initial 
bereavement assessment must be incorporated into the plan of care and 
considered in the bereavement plan of care.
     The need for referrals and further evaluation by 
appropriate health professionals.
    The hospice CoPs at Sec.  418.56(c) require that the hospice plan 
of care reflect patient and family goals and have measurable outcomes. 
Furthermore, the plan of care is a dynamic and fluid document that will 
change as the individual's condition changes throughout the course of a 
hospice election. A comprehensive, holistic, integrated and coordinated 
approach to service delivery is the hallmark of hospice care and a 
valued service for Medicare beneficiaries and families as the 
individual approaches the end-of-life. We believe that many hospices 
practice this comprehensive approach as they recognize that it is the 
hospices' responsibility to provide all medical, emotional, 
psychosocial and spiritual services for all component conditions of the 
terminal prognosis along the continuum of care.
5. Clarification Regarding Diagnosis Reporting on Hospice Claims
    International Classification of Diseases, Tenth Revision, Clinical 
Modification (ICD-10-CM) Coding Guidelines state the following 
regarding the selection of the principal diagnosis: The principal 
diagnosis is defined in the Uniform Hospital Discharge Data Set (UHDDS) 
as that condition established after study to be chiefly responsible for 
occasioning the admission of the patient to the hospital for care. In 
the case of selection of a principal diagnosis for hospice care, this 
would mean the diagnosis most contributory to the terminal prognosis of 
the individual. In the instance where two or more diagnoses equally 
meet the criteria for principal diagnosis, ICD-10-CM coding guidelines 
do not provide sequencing direction, and thus, any one of the diagnoses 
may be sequenced first, meaning to report all of those diagnoses 
meeting the criteria as a principal diagnosis. Per ICD-10-CM Coding 
Guidelines, for diagnosis reporting purposes, the definition for 
``other diagnoses'' is interpreted as additional conditions that affect 
patient care in terms of requiring:
     Clinical evaluation; or
     therapeutic treatment; or
     diagnostic procedures; or
     extended length of hospital stay; or
     increased nursing care and/or monitoring.
    The UHDDS item #11-b defines Other Diagnoses as all conditions that 
coexist at the time of admission, that develop subsequently, or that 
affect the treatment received and/or the length of stay. ICD-10-CM 
coding guidelines are clear that all diagnoses affecting the management 
and treatment of the individual within the healthcare setting are 
requirement to be reported. This has been longstanding existing policy. 
Adherence to coding guidelines when assigning ICD-9-CM and ICD-10-CM 
diagnosis and procedure codes is required under the Health Insurance 
Portability and Accountability Act (HIPAA) as well as our regulations 
at 45 CFR 162.1002.
    However, though established coding guidelines are required, it does 
not appear that all hospices are coding on hospice claims per these 
guidelines. In 2010, over 77 percent of hospice claims reported only 
one diagnosis. Previous rules have discussed requirements for hospice 
diagnosis reporting on claims and the importance of complete and 
accurate coding. Preliminary analysis of FY 2014 claims data 
demonstrates that hospice diagnosis coding is improving; however, 
challenges remain. Analysis of FY 2014 claims data indicates that 49 
percent of hospice claims listed only one diagnosis.\67\ We conducted 
additional analysis on instances where only one diagnosis was reported 
on the FY 2014 hospice claim and found that 50 percent of these 
beneficiaries had, on average, eight or more chronic conditions and 75 
percent had, on average, five or more chronic conditions.\68\ These 
chronic, comorbid conditions include: Hypertension, anemia, congestive 
heart failure, chronic obstructive pulmonary disease, ischemic heart 
disease, depression, diabetes and atrial fibrillation, to name a few.
---------------------------------------------------------------------------

    \67\ Preliminary FY 2014 hospice claims data from the Chronic 
Conditions Data Warehouse (CCW), accessed on January 13, 2015.
    \68\ Preliminary FY 2014 hospice claims data from the Chronic 
Conditions Data Warehouse (CCW), accessed on January 21, 2015.
---------------------------------------------------------------------------

    In the Medicare Program; Hospice Wage Index for Fiscal Year 2013 
Notice (77 FR 44248) we stated that hospices should report on hospice 
claims all coexisting or additional diagnoses that are related to the 
terminal illness; they should not report coexisting or additional 
diagnoses that are unrelated to the terminal illness, even though 
coding guidelines required the reporting of all diagnoses that affect 
patient assessment and planning. However, as discussed earlier in this 
section, there is widely varying interpretation as to what factors 
influence the terminal prognosis of the individual (that is, what 
conditions render the individual terminally ill and which conditions 
are related). Furthermore, based on the numerous comments received in 
previous rulemaking, and anecdotal reports from hospices, hospice 
beneficiaries, and non-hospice providers discussed above, we are 
concerned that hospices may not be conducting a comprehensive 
assessment nor updating the plan of care as articulated by the CoPs to 
recognize the conditions that affect an individual's terminal 
prognosis.
    Therefore, we are clarifying that hospices will report all 
diagnoses identified in the initial and comprehensive assessments on 
hospice claims, whether related or unrelated to the terminal prognosis 
of the individual. This is in keeping with the requirements of 
determining whether an individual is terminally ill. This would also 
include the reporting of any mental health disorders and conditions 
that would affect the plan of care as hospices are to assess and 
provide care for identified psychosocial and emotional needs, as well 
as, for the physical and spiritual needs. Our regulations at Sec.  
418.25(b) state, ``in reaching a decision to certify that the patient 
is terminally ill, the hospice medical director must consider at least 
the following information:
     Diagnosis of the terminal condition of the patient.
     Other health conditions, whether related or unrelated to 
the terminal condition.
     Current clinically relevant information supporting all 
diagnoses.

[[Page 25881]]

    ICD-10-CM Coding Guidelines state that diagnoses should be reported 
that develop subsequently, coexist or affect the treatment of the 
individual. Furthermore, having these diagnoses reported on claims 
falls under the authority of the Affordable Care Act for the collection 
of data to inform hospice payment reform. Section 3132 a(1)(C) of the 
Affordable Care Act states that the Secretary may collect the 
additional data and information on cost reports, claims, or other 
mechanisms as the Secretary determines to be appropriate. Having 
adequate data on hospice patient characteristics will help to inform 
thoughtful, appropriate, and clinically relevant policy for future 
rulemaking. We will monitor compliance with required coding practices 
and collaborate with all relevant CMS components to determine whether 
further policy changes are needed or if additional program integrity 
oversight actions need to be implemented.

IV. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995.

V. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule meets the requirements of our regulations at 
Sec.  418.306(c), which requires annual issuance, in the Federal 
Register, of the hospice wage index based on the most current available 
CMS hospital wage data, including any changes to the definitions of 
Core-Based Statistical Areas (CBSAs), or previously used Metropolitan 
Statistical Areas (MSAs). This proposed rule would also update payment 
rates for each of the categories of hospice care described in Sec.  
418.302(b) for FY 2016 as required under section 1814(i)(1)(C)(ii)(VII) 
of the Act. The payment rate updates are subject to changes in economy-
wide productivity as specified in section 1886(b)(3)(B)(xi)(II) of the 
Act. In addition, the payment rate updates may be reduced by an 
additional 0.3 percentage point (although for FY 2014 to FY 2019, the 
potential 0.3 percentage point reduction is subject to suspension under 
conditions specified in section 1814(i)(1)(C)(v) of the Act). In 2010, 
the Congress amended section 1814(i)(6) of the Act with section 3132(a) 
of the Affordable Care Act. The amendment authorized the Secretary to 
collect additional data and information determined appropriate to 
revise payments for hospice care and for other purposes. The data 
collected may be used to revise the methodology for determining the 
payment rates for routine home care and other services included in 
hospice care, no earlier than October 1, 2013. In accordance with 
section 1814(i)(6)(D) of the Act, this proposed rule would provide an 
update on hospice payment reform research and analyses and proposes a 
SIA payment in accordance with the requirement to revise the 
methodology for determining hospice payments in a budget-neutral 
manner. Finally, section 3004 of the Affordable Care Act amended the 
Act to authorize a quality reporting program for hospices and this rule 
discusses changes in the requirements for the hospice quality reporting 
program in accordance with section 1814(i)(5) of the Act.

B. Introduction

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA, March 
22, 1995; Pub. L. 104-4), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any 1 year). This proposed rule has been designated as economically 
significant under section 3(f)(1) of Executive Order 12866 and thus a 
major rule under the Congressional Review Act. Accordingly, we have 
prepared a regulatory impact analysis (RIA) that, to the best of our 
ability, presents the costs and benefits of the rulemaking. This 
proposed rule was also reviewed by OMB.

C. Overall Impact

    The overall impact of this proposed rule is an estimated net 
increase in Federal Medicare payments to hospices of $200 million, or 
1.3 percent, for FY 2016. The $200 million increase in estimated 
payments for FY 2016 reflects the distributional effects of the 1.8 
percent proposed FY 2016 hospice payment update percentage ($290 
million increase), the use of updated wage index data and the phase-out 
of the wage index budget neutrality adjustment factor (-0.7 percent/
$120 million decrease) and the proposed implementation of the new OMB 
CBSA delineations for the FY 2016 hospice wage index with a one-year 
transition (0.2 percent/$30 million increase). The elimination of the 
wage index budget neutrality adjustment factor (BNAF) was part of a 7-
year phase-out that was finalized in the FY 2010 Hospice Wage Index 
final rule (74 FR 39384), and is not a policy change. The proposed RHC 
rates and the proposed SIA payment, outlined in section III.B, would be 
implemented in a budget neutral manner in the first year of 
implementation, as required per section 1814(i)(6)(D)(ii) of the Act. 
In section III.B., we also proposed continuing to make the SIA payments 
budget neutral annually. The RHC rate budget neutrality factors and the 
SBNF used to reduce the overall RHC rate are outlined in section 
III.C.3. Therefore, the proposed RHC rates and the proposed SIA payment 
would not result in an overall payment impact for the Medicare program 
or hospices.
1. Detailed Economic Analysis
    Table 29, Column 3 shows the combined effects of the use of updated 
wage data (the FY 2015 pre-floor, pre-reclassified hospital wage index) 
and the phase-out of the BNAF (for a total BNAF reduction of 100 
percent), resulting in an estimated decrease in FY 2016 payments of 0.7 
percent ($-120 million). Column 4 of Table 29, shows the effects of the 
proposed 50/50 blend of the FY 2016 hospice wage index values (based on 
the use of FY 2015 pre-floor, pre-reclassified hospital wage index 
data) under the old and the new CBSA delineations, resulting in an 
estimated increase in FY 2016 payments of 0.2 percent ($30 million). 
Column 5 displays the estimated effects of the proposed RHC rates, 
resulting in no overall change in FY 2016 payments for hospices as this 
proposal would be implemented in a budget neutral manner. Column 6 
shows the estimated effects of the proposed SIA payment, resulting in 
no change in FY 2016

[[Page 25882]]

payments for hospices as this proposal would be implemented in a budget 
neutral manner through a reduction to the overall RHC rate for FY 2016. 
Column 7 shows the effects of the proposed FY 2016 hospice payment 
update percentage. The proposed 1.8 percent hospice payment update 
percentage is based on a 2.7 percent inpatient hospital market basket 
update for FY 2016 reduced by a 0.6 percentage point productivity 
adjustment and by 0.3 percentage point as mandated by the Affordable 
Care Act. The estimated effects of the 1.8 percent proposed hospice 
payment update percentage would result in an increase in payments to 
hospices of approximately $290 million. Taking into account the 1.8 
percent proposed hospice payment update percentage ($290 million 
increase), the use of updated wage data and the phase-out of the BNAF 
(-$120 million), and the proposed adoption of the new OMB CBSA 
delineations with a one-year transition for the FY 2016 hospice wage 
index ($30 million), Column 8 shows that hospice payments are estimated 
to increase by $200 million ($290 million - $120 million + $30 million 
= $200 million), or 1.3 percent, in FY 2016.
a. Effects on Hospices
    This section discusses our analysis of the estimated impacts on FY 
2016 payments to hospices due to: (1) The use of updated wage index 
data for the proposed FY 2016 hospice wage index (using FY 2015 
hospital pre-floor, pre-reclassified hospital wage data) and the phase-
out of the BNAF, (2) the proposed FY 2016 hospice wage index that 
adopts the new OMB CBSA delineations with a one-year transition, (3) 
the proposed RHC rates, (4) the proposed SIA payment, and (5) the 
proposed 1.8 percent hospice payment update percentage. Table 29 below 
shows the results of our analysis. For the purposes of our impact 
analysis, we use the utilization observed in the most complete hospice 
claims data available at the time of rulemaking (FY 2014 hospice claims 
submitted as of December 31, 2014). Presenting these data gives the 
hospice industry a more complete picture of the effects on their total 
revenue based on the use of updated hospital wage index data and the 
BNAF phase-out, the proposed adoption of the new OMB CBSA delineations 
with a one-year transition, the proposed SIA payment, and the proposed 
FY 2016 hospice payment update percentage as discussed in this proposed 
rule. Certain events may limit the scope or accuracy of our impact 
analysis, because such an analysis is susceptible to forecasting errors 
due to other changes in the forecasted impact time period. The nature 
of the Medicare program is such that the changes may interact, and the 
complexity of the interaction of these changes could make it difficult 
to predict accurately the full scope of the impact upon hospices.

                                  Table 29--Estimated Hospice Impacts by Facility Type and Area of the Country, FY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Proposed 50/
                                                                            Updated FY   50 blend of    Proposed                Proposed FY
                                                                            2016 wage   FY 2016 wage    routine    Proposed FY      2016       Total FY
                                                                            index data  index values   home care     2016 SIA     hospice        2016
                                                               Providers    and phase-    under old   rates (days  payment  (%    payment      proposed
                                                                           out of BNAF  and new CBSA   1 thru 60     change)       update      policies
                                                                            (% change)  delineations    and days                 percentage   (% change)
                                                                                          (% change)    61+) (%)                 (% change)
(1)                                                                   (2)          (3)           (4)          (5)          (6)          (7)          (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospices................................................        4,010         -0.7           0.2          0.0          0.0          1.8          1.3
Urban Hospices..............................................        3,015         -0.7           0.3          0.0          0.0          1.8          1.4
Rural Hospices..............................................          995         -0.3          -0.2          0.4          0.0          1.8          1.7
Urban Hospices--New England.................................          140          0.0           0.1          1.3         -0.1          1.8          3.1
Urban Hospices--Middle Atlantic.............................          251         -0.7          -0.2          0.8          0.0          1.8          1.7
Urban Hospices--South Atlantic..............................          410         -1.1           0.3         -0.7         -0.1          1.8          0.2
Urban Hospices--East North Central..........................          388         -0.8           0.7         -0.2          0.0          1.8          1.5
Urban Hospices--East South Central..........................          165         -0.7           0.5         -0.3          0.0          1.8          1.3
Urban Hospices--West North Central..........................          221         -0.7           0.6          0.7          0.0          1.8          2.4
Urban Hospices--West South Central..........................          593         -1.1           0.6         -1.2         -0.2          1.8         -0.1
Urban Hospices--Mountain....................................          299         -0.6           0.2         -0.4          0.0          1.8          1.0
Urban Hospices--Pacific.....................................          511         -0.1           0.0          1.0          0.2          1.8          2.9
Urban Hospices--Outlying....................................           37          0.0           0.3         -1.1         -0.2          1.7          0.7
Rural Hospices--New England.................................           24         -0.3           0.0          3.3          0.3          1.8          5.1
Rural Hospices--Middle Atlantic.............................           42          0.3          -0.1          1.8          0.5          1.8          4.3
Rural Hospices--South Atlantic..............................          141         -0.6           0.1         -0.2          0.0          1.8          1.1
Rural Hospices--East North Central..........................          135         -0.7          -0.4          0.8          0.2          1.8          1.7
Rural Hospices--East South Central..........................          133         -0.1          -0.1         -0.9         -0.2          1.8          0.5
Rural Hospices--West North Central..........................          184         -0.3          -0.1          2.2         -0.1          1.8          3.5
Rural Hospices--West South Central..........................          184         -0.1          -0.1         -1.0         -0.2          1.8          0.4
Rural Hospices--Mountain....................................          102         -1.4          -0.7          0.3          0.1          1.8          0.1
Rural Hospices--Pacific.....................................           47          2.1           0.1          3.3          0.3          1.8          7.6
Rural Hospices--Outlying....................................            3         -0.8          -0.2          1.9          0.2          1.8          2.9
0-3,499 RHC Days (Small)....................................          840         -0.5           0.1          3.0          0.1          1.8          4.5
3,500-19,999 RHC Days (Medium)..............................        1,924         -0.6           0.2          0.6          0.0          1.8          2.0
20,000+ RHC Days (Large)....................................        1,246         -0.7           0.3         -0.2          0.0          1.8          1.2
Non-Profit Ownership........................................        1,070         -0.6           0.2          1.2          0.1          1.8          2.7
For Profit Ownership........................................        2,398         -0.7           0.3         -1.0         -0.1          1.8          0.3
Govt/Other Ownership........................................          542         -0.6           0.3          0.6          0.1          1.8          2.2
Freestanding Facility Type..................................        3,016         -0.7           0.3         -0.4          0.0          1.8          1.0
HHA/Facility-Based Facility Type............................          994         -0.4           0.2          1.8          0.2          1.8          3.6
Rate of RHC NF/SNF Days is in Lowest Quartile (Less than or         1,002         -0.5           0.1          0.7          0.0          1.8          2.1
 equal to 3.1%).............................................
Rate of RHC NF/SNF Days is in 2nd Quartile (Greater than 3.1        1,003         -0.6           0.1          0.4          0.2          1.8          1.9
 and Less than or equal to 16.7%)...........................
Rate of RHC NF/SNF Days is in 3rd Quartile (Greater than            1,003         -0.7           0.3         -0.1          0.0          1.8          1.3
 16.7 and less than or equal to 35.5%)......................

[[Page 25883]]

 
Rate of RHC NF/SNF Days is in Highest Quartile (Greater than        1,002         -0.7           0.4         -0.6         -0.2          1.8          0.7
 35.5%).....................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FY 2014 hospice claims data from the Standard Analytic Files for CY 2013 (as of June 30, 2014) and CY 2014 (as of December 31, 2014).
Note: The proposed 1.8 percent hospice payment update percentage for FY 2016 is based on an estimated 2.7 percent inpatient hospital market basket
  update, reduced by a 0.6 percentage point productivity adjustment and by 0.3 percentage point. Starting with FY 2013 (and in subsequent fiscal years),
  the market basket percentage update under the hospice payment system as described in section 1814(i)(1)(C)(ii)(VII) or section 1814(i)(1)(C)(iii) of
  the Act will be annually reduced by changes in economy-wide productivity as set out at section 1886(b)(3)(B)(xi)(II) of the Act. In FY 2013 through FY
  2019, the market basket percentage update under the hospice payment system will be reduced by an additional 0.3 percentage point (although for FY 2014
  to FY 2019, the potential 0.3 percentage point reduction is subject to suspension under conditions set out under section 1814(i)(1)(C)(v) of the Act).
REGION KEY:
New England=Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic=Pennsylvania, New Jersey, New York; South
  Atlantic=Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia; East North
  Central=Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central=Alabama, Kentucky, Mississippi, Tennessee; West North Central=Iowa, Kansas,
  Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central=Arkansas, Louisiana, Oklahoma, Texas; Mountain=Arizona, Colorado, Idaho,
  Montana, Nevada, New Mexico, Utah, Wyoming; Pacific=Alaska, California, Hawaii, Oregon, Washington; Outlying=Guam, Puerto Rico, Virgin Islands.

    Table 29 above also presents the impact of the changes in this 
proposed rule according to the type of hospice, geographic location, 
type of ownership, hospice base, size, and percentage of RHC days in a 
SNF/NF. The majority of hospice payments are made at the routine home 
care rate; therefore, we based the size of each individual hospice's 
program on the number of routine home care days provided in FY 2014. As 
indicated in column 2 of Table 29, there are 4,010 hospices included in 
the regulatory impact analysis. Approximately 40 percent of Medicare-
certified hospices are identified as voluntary (non-profit) or 
government agencies (1,612 hospices) and 60 percent are proprietary 
(for-profit) (2,398 hospices). In addition, our analysis shows that 
most hospices are in urban areas, are medium-sized, and are 
freestanding.
b. Hospice Size
    The use of updated wage data combined with the BNAF phase-out is 
anticipated to decrease FY 2016 payments to large hospices by 0.7 
percent and to decrease payments to small and medium hospices by 0.5 
percent and 0.6 percent respectively (column 3). The proposed 50/50 
Blend for FY 2016 wage index values under the old and the new CBSA 
delineations is anticipated to result in an increase in payments to 
small hospices of 0.1 percent, an increase in payments to medium 
hospices of 0.2 percent, and an increase to large hospices of 0.3 
percent (column 4). The proposed RHC rates are projected to increase 
payments by 3.0 percent for small hospices and 0.6 percent for medium 
hospices. The proposed RHC rates are anticipated to decrease payments 
by 0.2 percent for large hospices. The proposed FY 2016 SIA payment is 
projected to result in an increase in FY 2016 payments of 0.1 percent 
for small hospices and no change in payments for medium and large 
hospices (column 6).
c. Geographic Location
    Column 3 of Table 29 shows the combined estimated effects of using 
updated wage data and the BNAF phase-out and results in a decrease in 
FY 2016 payments of 0.7 percent for urban hospices and 0.3 percent for 
rural hospices. Urban hospices can anticipate a decrease in payments 
ranging from 1.1 percent in the South Atlantic and West South Central 
regions to 0.1 percent for hospices in the Pacific. No change in 
payments is expected for urban hospices in the New England and outlying 
areas. Rural hospices are estimated to see a decrease in payments in 
eight regions, ranging from 1.4 percent in the Mountain region to 0.1 
percent in the East South Central and West South Central regions. Rural 
hospices can anticipate an increase in payments in the Middle Atlantic 
region of 0.3 percent and an increase of 2.1 percent in the Pacific 
region.
    Column 4 shows the effect of the proposed 50/50 Blend of the FY2016 
wage index values under the old and the new CBSA delineations. Overall, 
hospices are anticipated to experience a 0.2 percent increase in 
payments, with urban hospices experiencing an estimated increase of 0.3 
percent and rural hospices experiencing an estimated decrease of 0.2 
percent. All urban areas other than Middle Atlantic and Pacific are 
estimated to see increases in payments, ranging from 0.7 percent in the 
East North Central region to 0.1 percent in the New England region. No 
change in FY 2016 payments for hospices in urban areas in the Pacific 
region is expected. In contrast, rural hospices are estimated to 
experience a small decrease in payments in seven regions, ranging from 
0.1 percent in the East South Central, Middle Atlantic, and West North 
Central regions to 0.7 percent in the Mountain region. Payments in the 
New England region are anticipated to remain unchanged and payments in 
the South Atlantic and Pacific regions are estimated to increase 
slightly by 0.1 percent.
    Column 5 shows the anticipated effects of the proposed RHC rates, 
that is, paying separate rates for days 1 through 60 and days beyond 
60. Overall, hospices would experience no change in overall payments 
for FY 2016 due to the proposed RHC rates. FY 2016 payments are 
estimated to range from an increase of 3.3 percent for rural hospices 
in New England and Pacific regions to a decrease of 1.2 percent for 
urban hospices in the West South Central region.
    Column 6 shows the effects of proposed FY 2016 SIA Payment. 
Overall, hospices are anticipated to experience no change in overall 
payments for FY 2016. However, FY 2016 payments are estimated to range 
from an increase of 0.5 percent for rural hospices in the Middle 
Atlantic region to a decrease of 0.2 percent for urban hospices in the 
West South Central region and the Outlying region.
    Column 8 shows the total anticipated impact of the FY 2016 proposed 
policy

[[Page 25884]]

changes. Overall, all hospices are anticipated to receive a 1.3 percent 
increase in payment. Rural hospices in the Pacific Region show the 
largest anticipated payment increase of 7.6 percent. Rural hospices in 
New England are anticipated to receive an increase of 5.1 percent, 
Middle Atlantic hospices are anticipated to receive an increase of 4.3 
percent and rural hospices in the outlying regions are estimated to 
receive an increase of 2.9 percent in payments.
d. Type of Ownership
    Column 3 demonstrates the effect of the use of updated wage data 
and BNAF phase-out on estimated FY 2016 payments. We estimate that 
using the updated wage data and BNAF phase-out would decrease estimated 
payments to voluntary (non-profit) and government hospices by 0.6 
percent. Proprietary (for-profit) hospices are expected to have a 
decrease in payments of 0.7 percent. Column 4 demonstrates the effects 
of the proposed 50/50 Blend of FY 2016 wage index values under the old 
and the new CBSA delineations. Estimated FY 2016 payments to voluntary 
(non-profit), proprietary (for-profit) and government hospices are 
anticipated to increase by 0.2 percent, 0.3 percent and 0.3 percent, 
respectively. Column 5 shows the anticipated impacts for the two 
proposed RHC rates. Estimated FY 2016 payments are anticipated to 
increase for voluntary (non-profit) and government hospices by 1.2 
percent and 0.6 percent respectively and to decrease for proprietary 
(for-profit) hospices by 1.0 percent. Column 6 shows the estimated 
effects of the proposed SIA payment. Estimated FY 2016 payments are 
anticipated to increase for voluntary (non-profit) and government 
hospices by 0.1 percent and decrease for proprietary (for-profit) 
hospices by 0.1 percent.
e. Hospice Base and Percentage of RHC Days in a SNF/NF
    Column 3 demonstrates the combined effects of using the updated 
wage data and the BNAF phase-out on estimated payments for FY 2016. 
Estimated payments are anticipated to decrease for freestanding 
hospices by 0.7 percent and decrease for HHA/facility-based hospices by 
0.4 percent. Column 4 shows the effects of the proposed 50/50 Blend of 
FY 2016 wage index values under the old and new CBSA delineations. 
Payments are estimated to increase by 0.3 percent for freestanding 
hospices and by 0.2 percent for HHA/facility-based hospices. Column 5 
shows the effects of the proposed RHC rates. Payments to freestanding 
hospices are expected to decrease by 0.4 percent while payments to HHA/
facility-based hospices are expected to increase by 1.8 percent. Column 
6 shows the effects of the proposed SIA payment. Payments to 
freestanding hospices are expected to neither increase nor decrease due 
to the SIA proposal, while payments for HHA/facility-based hospices are 
expected to increase by 0.2 percent.
    Table 29 also shows the effects of the proposed changes in this 
rule by the rate of RHC NF/SNF days in quartiles. Column 3 shows that 
all four quartiles (lowest quartile being less than or equal to 3.1 
percent of RHC days in a SNF/NF to the highest quartile being greater 
than 35.5 percent of RHC days in a SNF/NF) are anticipated to 
experience a decrease in payments ranging from 0.5 percent for the 
first quartile to 0.7 percent for the third and fourth quartiles. 
Column 4 shows the effect of the proposed 50/50 Blend of FY 2016 wage 
index values under the old and the new CBSA delineations. All four 
quartiles are anticipated to experience an increase in payments under 
this proposal with the first and second quartiles anticipated to 
experience increases of 0.1percent, the third quartile anticipated to 
experience an increase of 0.3 percent, and the highest quartile to 
experience an increase in payments of 0.4 percent. Column 5 shows the 
anticipated impact of the proposed RHC rates on hospices by their rates 
of RHC days in a SNF/NF. The first and second quartiles are anticipated 
to see an increase in payments of 0.7 percent and 0.4 percent 
respectively. The third and fourth quartiles are anticipated to see 
decreases of 0.1 percent and 0.6 percent respectively due to the 
proposed RHC rates. Column 6 shows the anticipated effect of the 
proposed FY 2016 SIA payment on hospices by their rates of RHC days in 
a SNF/NF. The second quartile is anticipated to see an increase in 
payments of 0.2 percent. The first and third quartile is expected to 
experience no change in payments under the FY 2016 SIA payment proposal 
and the highest quartile is anticipated to experience a decrease in FY 
2016 payments of 0.2 percent under this proposal.
f. Effects on Other Providers
    This proposed rule would only affect Medicare hospices, and 
therefore has no effect on other provider types.
g. Effects on the Medicare and Medicaid Programs
    This proposed rule only affects Medicare hospices, and therefore 
has no effect on Medicaid programs. As described previously, estimated 
Medicare payments to hospices in FY 2016 are anticipated to increase by 
1.3 percent, or $200 million.
h. Alternatives Considered
    For the FY 2016 proposed rule, we considered several alternatives 
to the proposals articulated in section III.B. As described in Table 13 
in section III.B.1 of this preamble, previous work on a tiered payment 
model indicates that a different RHC payment could begin at day 31. 
Therefore, we considered proposing that the higher rate of the RHC 
payment to be the first 30 days of hospice care given the results above 
and given that MedPAC identified in their 2008 Report to Congress that 
the `break-even' point of profitability was found to be about three 
weeks. However, because our analysis found that `marginal costs' 
continued to decline slightly between days 15-30 and days 31-60 (see 
figure 5 in section III.B.2 of this preamble), we proposed to begin the 
lower RHC payment rate on day 61. In addition, we proposed to have the 
``count of days'' follow the patient (that is, count the days relative 
to the patient's lifetime length of stay) to mitigate potential high 
rates of live discharge and readmission due to the proposed RHC payment 
rates based on the days of care. For hospice patients who are 
discharged and readmitted to hospice within 60 days of that discharge, 
his/her prior hospice days will continue to follow the patient and 
count toward his/her patient days for the receiving hospice upon 
hospice election. We also considered a longer (that is, 90 days) window 
of time between a discharge and a subsequent hospice election as a 
basis of determining which RHC payment rate would be applied based on 
the days following the beneficiary. However, we proposed the 60 day 
time period. We also considered not applying the higher initial RHC 
rate (1 through 60 days) to beneficiaries in nursing homes.
    For the SIA payment, we considered allowing the first two days of a 
new hospice election with a unique hospice provider to also be eligible 
for the SIA payment. The reason for not proposing to allow the SIA 
payment to apply to the first two days of a new hospice election with a 
unique hospice was outlined in section III.B. In addition, because the 
SIA payment is required to be implemented in a budget neutral manner in 
the first year of implementation, per section 1814(i)(6)(D)(ii), 
allowing the first two days of the hospice election with a unique 
hospice provider to be eligible for the SIA payment would result in a 
larger decrease to the RHC rate for all hospice providers. We estimate 
that the

[[Page 25885]]

RHC would need to be reduced by 1.26 percent (rather than the proposed 
0.81 percent).
i. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 30 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with this proposed rule. Table 30 provides our 
best estimate of the increase in Medicare payments under the hospice 
benefit as a result of the changes presented in this proposed rule for 
3,879 hospices in our impact analysis file constructed using FY 2014 
claims as of December 31, 2014.

 Table 30--Accounting Statement: Classification of Estimated Transfers,
                         From FY 2015 to FY 2016
                             [In $millions]
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
           FY 2015 Hospice Wage Index and Payment Rate Update
------------------------------------------------------------------------
Annualized Monetized Transfers............  $200.
From Whom to Whom?                          Federal Government to
                                             Hospices.
------------------------------------------------------------------------

j. Conclusion
    In conclusion, the overall effect of this proposed rule is an 
estimated $200 million increase in Medicare payments to hospices. The 
$200 million increase in estimated payments for FY 2016 reflects the 
distributional effects of the 1.8 percent proposed FY 2016 hospice 
payment update percentage ($290 million increase), the use of updated 
wage index data and the phase-out of the wage index budget neutrality 
adjustment factor (-0.7 percent/$120 million decrease) and the proposed 
implementation of the new OMB CBSA delineations for FY 2016 hospice 
wage index with a one-year transition (0.2 percent/$30 million 
increase). The proposed SIA payment does not result in aggregate 
changes to estimate hospice payments for FY 2016 as this proposal would 
be implemented in a budget neutral manner through an overall reduction 
to the RHC payment rate for all hospices.
2. Regulatory Flexibility Act Analysis
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. The great majority of hospitals and most 
other health care providers and suppliers are small entities by meeting 
the Small Business Administration (SBA) definition of a small business 
(in the service sector, having revenues of less than $7.5 million to 
$38.5 million in any 1 year), or being nonprofit organizations. For 
purposes of the RFA, we consider all hospices as small entities as that 
term is used in the RFA. HHS's practice in interpreting the RFA is to 
consider effects economically ``significant'' only if they reach a 
threshold of 3 to 5 percent or more of total revenue or total costs. As 
noted above, the combined effect of the updated wage data and the BNAF 
phase-out (-0.7 percent decrease or -$120 million) the proposed 
implementation of the new OMB CBSA delineations for FY 2016 hospice 
wage index with a one-year transition (0.2 percent increase or $30 
million), the proposed SIA payment (no estimated aggregate impact on 
payments), and the proposed FY 2016 hospice payment update percentage 
(1.8 percent increase or $290 million) results in an overall increase 
in estimated hospice payments of 1.3 percent, or $200 million, for FY 
2016. Therefore, the Secretary has determined that this proposed rule 
will not create a significant economic impact on a substantial number 
of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This proposed rule only 
affects hospices. Therefore, the Secretary has determined that this 
proposed rule would not have a significant impact on the operations of 
a substantial number of small rural hospitals.
3. Unfunded Mandates Reform Act Analysis
    Section 202 of the Unfunded Mandates Reform Act of 1995 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 2015, that 
threshold is approximately $144 million. This proposed rule is not 
anticipated to have an effect on State, local, or tribal governments, 
in the aggregate, or on the private sector of $144 million or more.

VI. Federalism Analysis and Regulations Text

    Executive Order 13132, Federalism (August 4, 1999) requires an 
agency to provide federalism summary impact statement when it 
promulgates a proposed rule (and subsequent final rule) that has 
federalism implications and which imposes substantial direct 
requirement costs on State and local governments which are not required 
by statute. We have reviewed this proposed rule under these criteria of 
Executive Order 13132, and have determined that it will not impose 
substantial direct costs on State or local governments.

List of Subjects in 42 CFR Part 418

    Health facilities, Hospice care, Medicare, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
and Medicaid Services propose to amend 42 CFR chapter IV as set forth 
below:

PART 418--HOSPICE CARE

0
1. The authority citation for part 418 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart G--Payment for Hospice Care

0
2. Section 418.302 is amended by--
0
a. Adding paragraphs (b)(1)(i) and (ii).
0
b. Amending paragraphs (d)(1), (d)(2), (e) introductory text, (f)(2) 
and (f)(5)(ii) by removing the word ``intermediary'' and adding in its 
place the words ``Medicare Administrative Contractor''.
0
c. Revising paragraph (e)(1).
    The revisions and additions read as follows:

Sec.  418.302  Payment procedures for hospice care.

* * * * *
    (b) * * *
    (1) * * *
    (i) Service intensity add-on. Except as provided in paragraph 
(b)(1)(ii) of this section, routine home care days that occur during 
the last 7 days of a hospice election ending with a patient discharged 
as ``expired'' are eligible for a service intensity add-on payment. 
Such payment must be equal to the continuous home care hourly payment 
rate, as described in paragraph (e)(4) of this section, multiplied by 
the amount of direct patient care provided by a RN and/or social 
worker, up to 4 hours total per day.
    (ii) Routine home care days provided to patients residing in a 
skilled nursing facility (SNF) or a long-term care

[[Page 25886]]

nursing facility (NF) are not eligible for the service intensity add-on 
payment.
* * * * *
    (e) * * *
    (1) Payment is made to the hospice for each day during which the 
beneficiary is eligible and under the care of the hospice, regardless 
of the amount of services furnished on any given day (except as set out 
in paragraph (b)(1)(i) of this section).
* * * * *
0
3. Section 418.306 is amended by revising the section heading and 
paragraphs (a), (b), and (c) to read as follows:

Sec.  418.306  Annual update of the payment rates and adjustment for 
area wage differences.

    (a) Applicability. CMS establishes payment rates for each of the 
categories of hospice care described in Sec.  418.302(b). The rates are 
established using the methodology described in section 1814(i)(1)(C) of 
the Act and in accordance with section 1814(i)(6)(D) of the Act.
    (b) Annual update of the payment rates. The payment rates for 
routine home care and other services included in hospice care are the 
payment rates in effect under this paragraph during the previous fiscal 
year increased by the hospice payment update percentage increase (as 
defined in sections1814(i)(1)(C) of the Act), applicable to discharges 
occurring in the fiscal year.
    (1) For fiscal year 2014 and subsequent fiscal years, per section 
1814(i)(5)(A)(i) of the Act, in the case of a Medicare-certified 
hospice that submits hospice quality data, as specified by the 
Secretary, the payment rates are equal to the rates for the previous 
fiscal year increased by the applicable hospice payment update 
percentage increase.
    (2) For fiscal year 2014 and subsequent fiscal years, per section 
1814(i)(5)(A)(i) of the Act, in the case of a Medicare-certified 
hospice that does not submit hospice quality data, as specified by the 
Secretary, the payment rates are equal to the rates for the previous 
fiscal year increased by the applicable hospice payment update 
percentage increase, minus 2 percentage points. Any reduction of the 
percentage change will apply only to the fiscal year involved and will 
not be taken into account in computing the payment amounts for a 
subsequent fiscal year.
    (c) Adjustment for wage differences. Each hospice's labor market is 
determined based on definitions of Metropolitan Statistical Areas 
(MSAs) issued by OMB. CMS will issue annually, in the Federal Register, 
a hospice wage index based on the most current available CMS hospital 
wage data, including changes to the definition of MSAs. The urban and 
rural area geographic classifications are defined in Sec.  
412.64(b)(1)(ii)(A) through (C) of this chapter. The payment rates 
established by CMS are adjusted by the Medicare contractor to reflect 
local differences in wages according to the revised wage data.
* * * * *

Sec.  418.308   [Amended]

0
4. Section 418.308(c) is amended by removing the phrase ``(that is, by 
March 31st)''.
0
5. Section 418.309 is amended by revising the introductory text and 
paragraph (a) to read as follows:

Sec.  418.309  Hospice aggregate cap.

    A hospice's aggregate cap is calculated by multiplying the adjusted 
cap amount (determined in paragraph (a) of this section) by the number 
of Medicare beneficiaries, as determined by one of two methodologies 
for determining the number of Medicare beneficiaries for a given cap 
year described in paragraphs (b) and (c) of this section.
    (a) Cap amount. The cap amount was set at $6,500 in 1983 and is 
updated using one of two methodologies described in paragraphs (a)(1) 
and (2) of this section.
    (1) For accounting years that end on or before September 30, 2016 
and end on or after October 1, 2025, the cap amount is adjusted for 
inflation by using the percentage change in the medical care 
expenditure category of the Consumer Price Index (CPI) for urban 
consumers that is published by the Bureau of Labor Statistics. This 
adjustment is made using the change in the CPI from March 1984 to the 
fifth month of the cap year.
    (2) For accounting years that end after September 30, 2016, and 
before October 1, 2025, the cap amount is the cap amount for the 
preceding accounting year updated by the percentage update to payment 
rates for hospice care for services furnished during the fiscal year 
beginning on the October 1 preceding the beginning of the accounting 
year as determined pursuant to section 1814(i)(1)(C) of the Act 
(including the application of any productivity or other adjustments to 
the hospice percentage update).
* * * * *

    Dated: April 23, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 27, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-10422 Filed 4-30-15; 4:15 pm]
 BILLING CODE 4120-01-P
```