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[Federal Register Volume 77, Number 135 (Friday, July 13, 2012)]
[Proposed Rules]
[Pages 41547-41600]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16836]

[[Page 41547]]

Vol. 77

Friday,

No. 135

July 13, 2012

Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 409, 424, 431 et al.

 Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2013, Hospice Quality Reporting Requirements, and 
Survey and Enforcement Requirements for Home Health Agencies; Proposed 
Rule

Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / 
Proposed Rules

[[Page 41548]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, 431, 484, 488, 489, and 498

[CMS-1358-P]
RIN 0938-AR18

Medicare Program; Home Health Prospective Payment System Rate 
Update for Calendar Year 2013, Hospice Quality Reporting Requirements, 
and Survey and Enforcement Requirements for Home Health Agencies

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the Home Health Prospective 
Payment System (HH PPS) rates, including the national standardized 60-
day episode rates, the national per-visit rates, the low-utilization 
payment amount (LUPA), and outlier payments under the Medicare 
prospective payment system for home health agencies effective January 
1, 2013. This rule also proposes requirements for the Hospice quality 
data reporting program. This proposed rule would also establish 
requirements for unannounced, standard and extended surveys of home 
health agencies (HHAs) and provide a number of alternative (or 
intermediate) sanctions that could be imposed if HHAs were out of 
compliance with Federal requirements. This proposed rule would set 
forth alternative sanctions that could be imposed instead of or in 
addition to termination of the HHA's participation in the Medicare 
program, which could remain in effect up to a maximum of 6 months, 
until the HHA achieved compliance with the HHA Conditions of 
Participation (CoPs), or until the HHA's provider agreement was 
terminated.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on September 4, 
2012.

ADDRESSES: In commenting, please refer to file code CMS-1358-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (Fax) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address only:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1358-P, P.O. Box 8016, Baltimore, MD 
21244-8016.

    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-1358-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.

    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call (410) 786-7195 in advance to schedule your arrival with one 
of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Kristine Chu, (410) 786-8953, for information about the HH payment 
reform study and report.
Robin Dowell, (410) 786-0060, for information about HH and Hospice 
quality improvement and reporting.
Kim Evans, (410) 786-0009, for information about HH therapy policies.
Mollie Knight, (410) 786-7948, for information about the HH market 
basket.
Hillary Loeffler, (410) 786-0456, for information about the HH PPS.
Lori Teichman, (410) 786-6684, for information about HHCAHPS.
Patricia Sevast, 410-786-8135 and Peggye Wilkerson, 410-786-4857, for 
survey and enforcement requirements for HHAs.

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

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Costs and Benefits
II. Background
    A. Statutory Background
    B. System for Payment of Home Health Services
    C. Updates to the HH PPS
III. Provisions of the Proposed Rule
    A. Case-Mix Measurement
    B. Outlier Policy
    C. CY 2013 Rate Update
    D. Home Health Face-to-Face Encounter
    E. Therapy Coverage and Reassessments
    F. Payment Reform: Home Health Study and Report
    G. International Classification of Diseases, 10th Edition (ICD-
10) Transition Plan and Grouper Enhancements
IV. Quality Reporting for Hospices

[[Page 41549]]

    A. Background and Statutory Authority
    B. Public Availability of Data Submitted
    C. Quality Measures for Hospice Quality Reporting Program and 
Data Submission Requirements for Payment Year FY 2014
    D. Quality Measures for Hospice Quality Reporting Program for 
Payment Year FY 2015 and Beyond
    E. Additional Measures Under Consideration and Standardization 
of Data Collection
V. Survey and Enforcement Requirements for Home Health Agencies
    A. Background and Statutory Authority
    B. Provisions of the Proposed Rule
    C. Provider Agreements and Supplier Approval
    D. Solicitation of Comments
VI. Collection of Information Requirements
VII. Response to Comments
VIII. Regulatory Impact Analysis
IX. Federalism Analysis

Regulations Text

Acronyms

    In addition, because of the many terms to which we refer by 
abbreviation in this proposed rule, we are listing these abbreviations 
and their corresponding terms in alphabetical order below:

ACH LOS Acute Care Hospital Length of Stay
ADL Activities of Daily Living
APU Annual Payment Update
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Pub. L. 106-113
CAD Coronary Artery Disease
CAH Critical Access Hospital
CBSA Core-Based Statistical Area
CHF Congestive Heart Failure
CMI Case-Mix Index
CMS Centers for Medicare and Medicaid Services
CoPs Conditions of Participation
COPD Chronic Obstructive Pulmonary Disease
CVD Cardiovascular Disease
CY Calendar Year
DM Diabetes Mellitus
DRA Deficit Reduction Act of 2005, Pub. L. 109-171, enacted February 
8, 2006
FDL Fixed Dollar Loss
FI Fiscal Intermediaries
FR Federal Register
FY Fiscal Year
HCC Hierarchical Condition Categories
HCIS Health Care Information System
HH Home Health
HHCAHPS Home Health Care Consumer Assessment of Healthcare Providers 
and Systems Survey
HH PPS Home Health Prospective Payment System
HHAs Home Health Agencies
HHRG Home Health Resource Group
HIPPS Health Insurance Prospective Payment System
IH Inpatient Hospitalization
IRF Inpatient Rehabilitation Facility
LTCH Long-Term Care Hospital
LUPA Low Utilization Payment Amount
MEPS Medical Expenditures Panel Survey
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173, enacted December 8, 2003
MSA Metropolitan Statistical Areas
MSS Medical Social Services
NRS Non-Routine Supplies
OBRA Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-2-3, 
enacted December 22, 1987
OCESAA Omnibus Consolidated and Emergency Supplemental 
Appropriations Act, Pub. L. 105-277, enacted October 21, 1998
OES Occupational Employment Statistics
OIG Office of Inspector General
OT Occupational Therapy
OMB Office of Management and Budget
PAC-PRD Post-Acute Care Payment Reform Demonstration
PEP Partial Episode Payment Adjustment
PT Physical Therapy
QAP Quality Assurance Plan
PRRB Provider Reimbursement Review Board
RAP Request for Anticipated Payment
RF Renal Failure
RFA Regulatory Flexibility Act, Pub. L. 96-354
RHHIs Regional Home Health Intermediaries
RIA Regulatory Impact Analysis
SLP Speech Language Pathology Therapy
SNF Skilled Nursing Facility
UMRA Unfunded Mandates Reform Act of 1995.

I. Executive Summary

A. Purpose

    This rule proposes updates to the payment rates for home health 
agencies (HHAs) for Calendar Year (CY) 2013 as required under section 
1895(b) of the Social Security Act (the Act). The proposed update to 
the prospective payment system addresses the market basket update, 
case-mix adjustments due to variation in costs among different units of 
services, adjustments for geographic differences in wage levels, 
outlier payments, the submission of quality data, and additional 
payments for services provided in rural areas.

B. Summary of the Major Provisions

    In this proposed rule, we use the methods described in the CY 2012 
HH PPS final rule (76 FR 68526) to update the prospective payment rates 
for CY 2013 using a proposed rebased and revised market basket 
described in section III.C.1 of this rule. This rule discusses the 
proposed case-mix up-coding adjustment. In addition, we propose 
additional regulatory flexibility regarding therapy documentation and 
reassessments as well as face-to-face encounter requirements. We also 
provide an update on the transition plan for ICD-10 and the home health 
study concerning home health care access. In addition, this rule 
proposes new requirements concerning the hospice quality reporting 
program. Lastly, this proposed rule would establish requirements 
concerning HHAs.

C. Summary of Costs and Benefits

----------------------------------------------------------------------------------------------------------------
        Provision description                Total costs             Total benefits             Transfers
----------------------------------------------------------------------------------------------------------------
CY 2013 HH PPS payment rate update...  N/A....................  The benefits of this     The overall economic
                                                                 proposed rule include    impact of this
                                                                 paying more accurately   proposed rule is an
                                                                 for the delivery of      estimated $20 million
                                                                 Medicare home health     in decreased payments
                                                                 services, providing      to HHAs.
                                                                 additional regulatory
                                                                 flexibility for HHAs
                                                                 to comply with therapy
                                                                 requirements and face-
                                                                 to-face encounter
                                                                 documentation
                                                                 requirements, and
                                                                 establishing
                                                                 alternative (or
                                                                 intermediate)
                                                                 sanctions that may be
                                                                 imposed when HHAs are
                                                                 out of compliance with
                                                                 Federal requirements.

[[Page 41550]]

 
Survey and Certification Requirements  The components of the    The overall benefit of
                                        rule which address       this rule is the
                                        survey and               expected increase in
                                        certification            provider participation
                                        requirements do not      in discussions with
                                        represent new costs      the State Survey
                                        with the exception of    Agency or CMS Regional
                                        the Informal Dispute     Offices related to
                                        Resolution process       survey findings via
                                        (IDR). These             the IDR.
                                        requirements codify
                                        Survey and
                                        Certification policies
                                        which were implemented
                                        between 1987 and 2011.
                                        We estimate that the
                                        costs associated with
                                        the IDRs will not be
                                        significantly greater
                                        than current actions
                                        related to termination
                                        actions.
Enforcement Requirements.............  We estimate a onetime    HHAs will be provided    .......................
                                        $2 million expense to    incentives to maintain
                                        modify internal          or regain compliance
                                        systems to monitor       with the HHA
                                        Civil Monetary           Conditions of
                                        Penalties. There will    Participation through
                                        also be annual           measures other than
                                        operating expenses       termination.
                                        associated with
                                        maintaining the
                                        system, training
                                        surveyors and
                                        troubleshooting issues
                                        of $335,972.
CMP Disbursement and Cost of Surveys.  This proposed rule       This is in compliance
                                        would provide that       with OMB Circular
                                        State Medicaid           A[dash]87.
                                        programs share in the
                                        cost of HHA surveys.
                                        The cost ratio would
                                        be calculated at 63
                                        percent for the
                                        Medicare program and
                                        37 percent for the
                                        Medicaid program. The
                                        projected HHA survey
                                        budget for FY 2013 is
                                        $39.9 million and FY
                                        2014 at $45.7 million.
                                        The anticipated State
                                        Medicaid share is $3.7
                                        million and $4.2
                                        million respectively
                                        (minus Federal match).
----------------------------------------------------------------------------------------------------------------

II. Background

A. Statutory Background

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted 
August 5, 1997), significantly changed the way Medicare pays for 
Medicare HH services. Section 4603 of the BBA mandated the development 
of the HH PPS. Until the implementation of a HH PPS on October 1, 2000, 
HHAs received payment under a retrospective reimbursement system.
    Section 4603(a) of the BBA mandated the development of a HH PPS for 
all Medicare-covered HH services provided under a plan of care (POC) 
that were paid on a reasonable cost basis by adding section 1895 of the 
Social Security Act (the Act), entitled ``Prospective Payment For Home 
Health Services''. Section 1895(b)(1) of the Act requires the Secretary 
to establish a HH PPS for all costs of HH services paid under Medicare.
    Section 1895(b)(3)(A) of the Act requires the following: (1) The 
computation of a standard prospective payment amount include all costs 
for HH services covered and paid for on a reasonable cost basis and 
that such amounts be initially based on the most recent audited cost 
report data available to the Secretary; and (2) the standardized 
prospective payment amount be adjusted to account for the effects of 
case-mix and wage levels among HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the HH applicable percentage 
increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
case-mix and geographic differences in wage levels. Section 
1895(b)(4)(B) of the Act requires the establishment of an appropriate 
case-mix change adjustment factor for significant variation in costs 
among different units of services.
    Similarly, section 1895(b)(4)(C) of the Act requires the 
establishment of wage adjustment factors that reflect the relative 
level of wages, and wage-related costs applicable to HH services 
furnished in a geographic area compared to the applicable national 
average level. Under section 1895(b)(4)(c) of the Act, the wage-
adjustment factors used by the Secretary may be the factors used under 
section 1886(d)(3)(E) of the Act.
    Section 1895(b)(5) of the Act gives the Secretary the option to 
make additions or adjustments to the payment amount otherwise paid in 
the case of outliers due to unusual variations in the type or amount of 
medically necessary care. Section 3131(b) of the Patient Protection and 
Affordable Care Act of 2010 (the Affordable Care Act) (Pub. L. 111-148, 
enacted March 23, 2010) revised section 1895(b)(5) of the Act so that 
total outlier payments in a given year would not exceed 2.5 percent of 
total payments projected or estimated. The provision also made 
permanent a 10 percent agency-level outlier payment cap.
    In accordance with the statute, as amended by the BBA, we published 
a final rule in the July 3, 2000 Federal Register (65 FR 41128) to 
implement the HH PPS legislation. The July 2000 final rule established 
requirements for the new HH PPS for HH services as required by section 
4603 of the BBA, as subsequently amended by section 5101 of the Omnibus 
Consolidated and Emergency Supplemental

[[Page 41551]]

Appropriations Act (OCESAA) for Fiscal Year 1999, (Pub. L. 105-277, 
enacted October 21, 1998); and by sections 302, 305, and 306 of the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 
1999, (Pub. L. 106-113, enacted November 29, 1999). The requirements 
include the implementation of a HH PPS for HH services, consolidated 
billing requirements, and a number of other related changes. The HH PPS 
described in that rule replaced the retrospective reasonable cost-based 
system that was used by Medicare for the payment of HH services under 
Part A and Part B. For a complete and full description of the HH PPS as 
required by the BBA, see the July 2000 HH PPS final rule (65 FR 41128 
through 41214).
    Section 5201(c) of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171, enacted February 8, 2006) added new section 1895(b)(3)(B)(v) 
to the Act, requiring HHAs to submit data for purposes of measuring 
health care quality, and links the quality data submission to the 
annual applicable percentage increase. This data submission requirement 
is applicable for CY 2007 and each subsequent year. If an HHA does not 
submit quality data, the HH market basket percentage increase is 
reduced 2 percentage points. In the November 9, 2006 Federal Register 
(71 FR 65884, 65935), we published a final rule to implement the pay-
for-reporting requirement of the DRA, which was codified at Sec.  
484.225(h) and (i) in accordance with the statute.
    The Affordable Care Act made additional changes to the HH PPS. One 
of the changes in section 3131 of the Affordable Care Act is the 
amendment to section 421(a) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173, 
enacted on December 8, 2003) as amended by section 5201(b) of the DRA. 
The amended section 421(a) of the MMA now requires, for HH services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act) with respect to episodes and visits ending on or after April 1, 
2010, and before January 1, 2016, that the Secretary increase, by 3 
percent, the payment amount otherwise made under section 1895 of the 
Act.

B. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS on the basis of 
a national standardized 60-day episode payment rate that is adjusted 
for the applicable case-mix and wage index. The national standardized 
60-day episode rate includes the six HH disciplines (skilled nursing, 
HH aide, physical therapy, speech-language pathology, occupational 
therapy, and medical social services). Payment for non-routine medical 
supplies (NRS) is no longer part of the national standardized 60-day 
episode rate and is computed by multiplying the relative weight for a 
particular NRS severity level by the NRS conversion factor (See section 
II.D.4.e). Payment for durable medical equipment covered under the HH 
benefit is made outside the HH PPS payment system. To adjust for case-
mix, the HH PPS uses a 153-category case-mix classification system to 
assign patients to a home health resource group (HHRG). The clinical 
severity level, functional severity level, and service utilization are 
computed from responses to selected data elements in the OASIS 
assessment instrument and are used to place the patient in a particular 
HHRG. Each HHRG has an associated case-mix weight which is used in 
calculating the payment for an episode.
    For episodes with four or fewer visits, Medicare pays national per-
visit rates based on the discipline(s) providing the services. An 
episode consisting of four or fewer visits within a 60-day period 
receives what is referred to as a low utilization payment adjustment 
(LUPA). Medicare also adjusts the national standardized 60-day episode 
payment rate for certain intervening events that are subject to a 
partial episode payment adjustment (PEP adjustment). For certain cases 
that exceed a specific cost threshold, an outlier adjustment may also 
be available.

C. Updates to the HH PPS

    As required by section 1895(b)(3)(B) of the Act, we have 
historically updated the HH PPS rates annually in the Federal Register. 
The August 29, 2007 final rule with comment period set forth an update 
to the 60-day national episode rates and the national per-visit rates 
under the Medicare prospective payment system for HHAs for CY 2008. The 
CY 2008 rule included an analysis performed on CY 2005 HH claims data, 
which indicated a 12.78 percent increase in the observed case-mix since 
2000. Case-mix represents the variations in conditions of the patient 
population served by the HHAs. Subsequently, a more detailed analysis 
was performed on the 2005 case-mix data to evaluate if any portion of 
the 12.78 percent increase was associated with a change in the actual 
clinical condition of HH patients. We examined data on demographics, 
family severity, and non-HH Part A Medicare expenditures to predict the 
average case-mix weight for 2005. We identified 8.03 percent of the 
total case-mix change as real, and therefore, decreased the 12.78 
percent of total case-mix change by 8.03 percent to get a final nominal 
case-mix increase measure of 11.75 percent (0.1278 * (1-0.0803) = 
0.1175).
    To account for the changes in case-mix that were not related to an 
underlying change in patient health status, we implemented a reduction 
over 4 years in the national standardized 60-day episode payment rates 
and the NRS conversion factor. That reduction was to be 2.75 percent 
per year for 3 years beginning in CY 2008 and 2.71 percent for the 
fourth year in CY 2011. In the CY 2011 HH PPS final rule (76 FR 68532) 
we updated our analyses of case-mix change and finalized a reduction of 
3.79 percent, instead of 2.71 percent, for CY 2011.
    For CY 2012, we published the November 4, 2011 final rule (76 FR 
68526) (hereinafter referred to as the CY 2012 HH PPS final rule) that 
set forth the update to the 60-day national episode rates and the 
national per-visit rates under the Medicare prospective payment system 
for HH services. In addition, as discussed in the CY 2012 final rule 
(76 FR 68528), our analysis indicated that there was a 22.59 percent 
increase in overall case-mix from 2000 to 2009 and that only 15.76 
percent of that overall observed case-mix percentage increase was due 
to real case-mix change. As a result of our analysis, we identified a 
19.03 percent nominal increase in case-mix. To fully account for the 
19.03 percent nominal case-mix growth which was identified from 2000 to 
2009, we finalized a 3.79 percent payment reduction in CY 2012 and 1.32 
percent payment reduction for CY 2013.

III. Provisions of the Proposed Rule

A. Case-Mix Measurement

    Every year since the HH PPS CY 2008 proposed rule, we have stated 
in HH PPS rulemaking that we would continue to monitor case-mix changes 
in the HH PPS and to update our analysis to measure change in case-mix, 
both real changes in case-mix and changes which are unrelated to 
changes in patient acuity (nominal). We have continued to monitor case-
mix changes, and our latest analysis continues to support the need to 
make payment adjustments to account for nominal case-mix growth.
    Before measuring nominal case-mix growth, we examined the total 
case-mix growth every year from 2000 to 2010. Our latest analysis 
indicates that there was about a 1 percent increase in the

[[Page 41552]]

average case-mix weight from 2009 to 2010. Specifically, the 2009 
average case-mix was 1.3435 and the 2010 average case-mix was 1.3578. 
We also examined the change in the reporting of secondary diagnoses on 
OASIS from 2009 to 2010 and have observed an increase in the reporting 
of secondary diagnoses from 2009 to 2010, thereby contributing to the 
growth in total case-mix. In addition, we looked at the change in the 
distribution of episodes by number of therapy visits from 2009 to 2010 
and saw that the percentage of non-therapy episodes decreased by 1.56 
percentage points and the percentage of episodes with therapy increased 
at all levels of therapy, thereby contributing to the growth in overall 
case-mix from 2009 to 2010. Our analysis also showed a continued 
increase in the percentage of episodes with 14-19 and 20+ therapy 
visits.
    For the remainder of this section, we will discuss our latest 
analysis of real and nominal case-mix change.
    Section 1895(b)(3)(B)(iv) of the Act gives CMS the authority to 
implement payment reductions for nominal case-mix growth, changes in 
case-mix that are not related to actual changes in patient 
characteristics over time. Nominal case-mix growth was assessed and 
reported in CY 2008, CY 2011, and CY 2012 rulemaking, and payment 
reductions to the base rate were implemented to account for the nominal 
case-mix growth observed.
    In CY 2008 rulemaking, to assess nominal case-mix growth, we first 
estimated real case-mix growth, changes in case-mix which are related 
to changes in patient characteristics, using a regression-based, 
predictive model of individual case-mix weights. The predictive model 
contained measures of patients' demographic characteristics, clinical 
status, inpatient history, and Part A Medicare costs in the time period 
leading up to their home health episodes. The regression coefficients 
for the predictive model were developed using 2000 as a base year and 
were applied to episodes from 2005, allowing for estimation of the 
change in real case-mix. We then determined the nominal case-mix growth 
from 2000 to 2005 using the regression model-predicted real case-mix 
change and the total case-mix change for the time period of interest.
    Our analysis indicated that there was a 12.78 percent increase in 
overall case-mix from 2000 to 2005 and 8.03 percent of that overall 
observed case-mix change was identified as real case-mix change. As a 
result of our analysis, we adjusted the 12.78 percent of total change 
in case-mix downward by 8.03 percent to get a final nominal case-mix 
change measure of 11.75 percent (0.1278 * (1-0.0803) = 0.1175). To 
account for the 11.75 percent increase in nominal case-mix, we 
implemented a payment reduction of 2.75 percent each year for 3 years, 
beginning in 2008, and we planned to implement a payment reduction of 
2.71 percent in CY 2011.
    Since the publication of the HH PPS CY 2008 proposed rule (72 FR 
25395), we have continued to monitor case-mix changes in the HH PPS, 
and in CY 2011 rulemaking we updated our analysis to measure more 
recent changes in real and nominal case-mix. In CY 2011 rulemaking, to 
accommodate the shift to the 153-group system in 2008, we developed two 
regression-based models to assess nominal case-mix growth from 2000 to 
2008. One model was developed using 2000 as a base year and the 80 
grouper case-mix system. The regression coefficients in the model were 
applied to 2007 data to determine the change in real case-mix from 2000 
to 2007. The second model was developed using 2008 as a base year and 
the 153 grouper case-mix system. The regression coefficients in the 
model were applied to 2007 data to determine the change in real case-
mix from 2007 to 2008. The data from both of the models were then used 
to calculate the overall real case-mix change from 2000 to 2008. Our 
analysis indicated that there was a 19.40 percent increase in overall 
case-mix from 2000 to 2008 and 10.07 percent of that overall observed 
case-mix change was identified as real case-mix change. Consequently, 
as a result of our analysis, we identified a 17.45 percent nominal 
increase in case-mix (0.1940 * (1-0.1007) = 0.1745) from 2000 to 2008. 
In other words, there was a growth in case-mix of 17.45 percent that 
was unrelated to differences in patient characteristics, reflecting 
changes in coding documentation and other behavioral responses to the 
home health prospective payment system rather than the treatment of 
more resource-intensive patients. To fully account for the 17.45 
percent nominal case-mix growth identified from 2000 to 2008, in the CY 
2011 proposed rule, we proposed a 3.79 percent payment reduction 
(replacing the planned 2.71 percent payment reduction) in CY 2011 and 
an additional 3.79 percent payment reduction in CY 2012.
    We received many comments on our CY 2011 HH PPS proposed rule that 
criticized our methodology for assessing real and nominal case-mix 
change. In the CY 2011 HH PPS final rule, we implemented the proposed 
payment reduction of 3.79 percent to the national standardized episode 
rate in CY 2011. However, due to the extensive comments we received, we 
deferred finalizing a payment reduction for CY 2012 until further study 
of the case-mix data and methodology was completed.
    To assess the validity of the criticisms we received about our 
models to measure real and nominal case-mix change, we procured an 
independent review of our methodology by a team at Harvard University 
led by Dr. David Grabowski. The review included an examination of the 
predictive regression models and data used in CY 2011 rulemaking, and 
further analysis consisting of extensions of the model to allow a 
closer look at nominal case-mix growth by categorizing the growth 
according to provider types and subgroups of patients.
    When reviewing the model, the Harvard team found that overall, our 
models were robust. However, one area of potential refinement to our 
models that the Harvard team suggested was to incorporate variables 
derived from Hierarchical Condition Categories (HCC) data, which is 
used by CMS to risk-adjust payments to managed care organizations in 
the Medicare program.
    During CY 2012 rulemaking, based on Dr. Grabowski and his team's 
recommendation and our previous consideration to incorporate HCC data 
in our models to assess real case-mix change, we explored the effects 
of adding HCC patient classification data into our models. For our 
analysis of real and nominal case-mix growth from 2000 to 2009, we 
incorporated the HCC community scores, HCC demographic variables, and 
disease indicator variables into our models. It should be noted that we 
enhanced our models with HCC data starting in 2005 due to the 
availability of HCC data in our analytic files.
    To use the HCC data as well as accommodate the shift to the 153-
group system in 2008, we analyzed real case-mix change for 3 different 
periods, from 2000 to 2005, from 2005 to 2007, and from 2007 to 2009. 
The real case-mix change from 2000 to 2005 was assessed using the same 
variables used in the model described in the CY 2011 HH PPS proposed 
rule (75 FR 43238). The real case-mix change from 2005 to 2007 and from 
2007 to 2009 was assessed using the pre-existing variable set plus 
additional information from the HCC variables. To determine the amount 
of real case-mix change from 2000 to 2009 (0.0390 case-mix units), we 
added the measured real change in case-mix units for each of the 3 
periods (0.0207 case-mix units for 2000 to 2005, 0.0061 case-mix units 
for 2005 to 2007, and 0.0122 case-mix units for 2007 to 2009). We

[[Page 41553]]

then compared the real change in case-mix (0.0390 case-mix units) for 
2000 to 2009 to the total change in case-mix from 2000 to 2009 (0.2476 
case-mix units). The total change in case-mix from 2000 to 2009 was 
calculated as the difference between the average case-mix in 2000 
(1.0959) and the average case-mix in 2009 (1.3435). Based on the 
results from our models, we estimated 15.76 percent (0.0390/0.2476 = 
0.1576) of the total case-mix change as real. It should be noted that 
there is a 0.01 percentage point difference between the calculated and 
actual value due to the fact that 0.0390 and 0.2476 are rounded 
figures. When taking into account the total case-mix change from 2000 
to 2009 of 22.59 percent ((1.3435 - 1.0959)/1.0959 = 0.2259) and the 
15.76 percent of total case-mix change estimated as real from 2000 to 
2009, we obtained a final nominal case-mix change measure of 19.03 
percent (0.2259 * (1 - 0.1576) = 0.1903) from 2000 to 2009.
    This year, we updated our estimates of real and nominal case-mix 
growth using 2010 data. To determine the amount of real case-mix growth 
from 2000 to 2010, we needed to obtain an estimate of real case-mix 
change for 2007 to 2010. We obtained this value using the same model as 
the one described in CY 2012 rulemaking, which was developed using 2009 
data. We note that when developing an estimate of real case-mix change 
for 2007 to 2010, we used 2010 data for all of the variables in the 
model except for the living arrangement variables. A crosswalk could 
not be built from OASIS C to OASIS B1 for the living arrangement 
variables and therefore we predicted the 2010 value based on trends 
from 2007 to 2009. After obtaining the estimate of real case-mix change 
for 2007 to 2010 (0.0150 case-mix units), we added this estimate to the 
2000 to 2005 estimate of real case-mix change (0.0207 case-mix units) 
and the 2005 to 2007 estimate of real case-mix change (0.0061 case-mix 
units). After adding together the estimated real case-mix change in 
case-mix units for the three periods, the total estimated change in 
real case-mix from 2000 to 2010 was 0.0418 (0.0207 + 0.0061 + 0.0150 = 
0.0418). Given that the total change in case-mix from 2000 to 2010 was 
0.2619 case-mix units (1.3578 - 1.0959 = 0.2619), we estimate that 
15.97 percent of the total percentage change in the national average 
case-mix weight since the interim payment system baseline through 2010 
is due to change in real case-mix (0.0418/0.2619 = 0.1597). It should 
be noted that there is a 0.01 percentage point difference between the 
calculated and actual value due to the fact that 0.0418 and 0.2619 are 
rounded figures. When taking into account the total measure of case-mix 
change (23.90 percent; see Table 1) and the 15.97 percent of total 
case-mix change estimated as real from 2000 to 2010, we obtained a 
final nominal case-mix change measure of 20.08 percent from 2000 to 
2010 (0.2390 * (1 - 0.1597) = 0.2008). Please see Table 1 for 
additional information about the calculations used to make the real and 
nominal case-mix change estimates from 2000 to 2010.
    Our estimates of real and nominal case-mix change are consistent 
with past results. Most of the case-mix change has been due to improved 
coding, coding practice changes, and other behavioral responses to the 
prospective payment system, such as increased use of high therapy 
treatment plans.

  Table 1--Summary of Real and Nominal Case-Mix Change Estimates: 2000-
                                  2010
------------------------------------------------------------------------
                            Measure                               Model
------------------------------------------------------------------------
Actual case-mix: 2000..........................................   1.0959
Actual case-mix: 2010..........................................   1.3578
Total change in case-mix.......................................   0.2619
Total percentage change........................................   23.90%
Estimated real change in case-mix..............................   0.0418
Percent of total change estimated as real......................   15.97%
Percent of total change estimated as nominal (creep)...........   84.03%
Real case-mix percent increase.................................    3.82%
Nominal case-mix percent increase..............................   20.08%
------------------------------------------------------------------------

    As we described earlier in this proposed rule, our CY 2008 HH PPS 
final rule finalized a reduction over 4 years in the national 
standardized 60-day episode payment rates to account for a large 
increase in case-mix from 2000 to 2005 which we determined was not 
related to treatment of more intense patients. We implemented a 2.75 
percent reduction each year for 2008, 2009, and 2010 and planned to 
reduce payments by 2.71 percent in 2011. In CY 2011 rulemaking, we 
updated our analysis of nominal case-mix growth through 2008 and 
determined that there was 17.45 percent nominal case-mix growth from 
2000 to 2008. Therefore, we proposed and finalized an increase in the 
planned 2.71 percent reduction to 3.79 percent for CY 2011. For the CY 
2012 proposed rule, after updating our models to incorporate HCC data, 
we determined that there was a 19.03 percent nominal case-mix change 
from 2000 to 2009. To account for the nominal case-mix growth through 
2009, we finalized a 3.79 percent payment reduction to the national 
standardized 60-day episode rates for nominal case-mix change for CY 
2012 and a 1.32 percent payment reduction to the rates in CY 2013.
    When including the latest data available, we determined that there 
was a 20.08 percent nominal case-mix change from 2000 to 2010. To fully 
account for the remainder of the 20.08 percent increase in nominal 
case-mix beyond that which has been accounted for in previous payment 
reductions, we estimate that the percentage reduction to the national 
standardized 60-day episode rates for nominal case-mix change would be 
2.18 percent. We considered proposing a 2.18 percent reduction to 
account for the remaining increase in measured nominal case-mix, and 
seek comments on that proposal, rather than moving forward with the 
1.32 percent reduction promulgated in last year's CY 2012 HH PPS final 
rule. However for CY 2013, we propose to move forward with the 1.32 
percent payment reduction to the national standardized 60-day episode 
rates as promulgated in the CY 2012 HH PPS Final Rule (76 FR 68532). 
Analysis, to date, would seem to indicate a high likelihood of 
continued growth in nominal case-mix going forward. As such, we will 
continue to monitor both real and nominal case-mix change and make 
updates as appropriate. CMS will consider any and all analyses as it 
continues to address the issue of the increase in nominal case-mix in 
future rulemaking.

B. Outlier Policy

1. Background
    Section 1895(b)(5) of the Act allows for the provision of an 
addition or adjustment to the national standardized 60-day case-mix and 
wage-adjusted episode payment amounts in the case of episodes that 
incur unusually high costs due to patient home health (HH) care needs. 
Prior to the enactment of the Affordable Care Act, this section of the 
Act stipulated that projected total outlier payments could not exceed 5 
percent of total projected or estimated HH payments in a given year. In 
the July 2000 final rule (65 FR 41188 through 41190), we described the 
method for determining outlier payments. Under this system, outlier 
payments are made for episodes whose estimated costs exceed a threshold 
amount for each Home Health Resource Group (HHRG). The episode's 
estimated cost is the sum of the national wage-adjusted per-visit 
payment amounts for all visits delivered during the episode. The 
outlier threshold for each case-mix group or

[[Page 41554]]

partial episode payment (PEP) adjustment is defined as the 60-day 
episode payment or PEP adjustment for that group plus a fixed dollar 
loss (FDL) amount. The outlier payment is defined to be a proportion of 
the wage-adjusted estimated cost beyond the wage-adjusted threshold. 
The threshold amount is the sum of the wage and case-mix adjusted PPS 
episode amount and wage-adjusted fixed dollar loss amount. The 
proportion of additional costs paid as outlier payments is referred to 
as the loss-sharing ratio.
2. Regulatory Update
    In the CY 2010 HH PPS final rule (74 FR 58080 through 58087), we 
discussed excessive growth in outlier payments, primarily the result of 
unusually high outlier payments in a few areas of the country. Despite 
program integrity efforts associated with excessive outlier payments in 
targeted areas of the country, we discovered that outlier expenditures 
still exceeded the 5 percent, target and, in the absence of corrective 
measures, would have continued do to so. Consequently, we assessed the 
appropriateness of taking action to curb outlier abuse. To mitigate 
possible billing vulnerabilities associated with excessive outlier 
payments and adhere to our statutory limit on outlier payments, we 
adopted an outlier policy that included a 10 percent agency level cap 
on outlier payments. This cap was implemented in concert with a reduced 
FDL ratio of 0.67. These policies resulted in a projected target 
outlier pool of approximately 2.5 percent. (The previous outlier pool 
was 5 percent of total HH expenditures.)
    For CY 2010, we first returned 5 percent of these dollars back into 
the national standardized 60-day episode rates, the national per-visit 
rates, the low utilization payment adjustment (LUPA) add-on payment 
amount, and the non-routine supplies (NRS) conversion factor. Then, we 
reduced the CY 2010 rates by 2.5 percent to account for the new outlier 
pool of 2.5 percent. This outlier policy was adopted for CY 2010 only.
3. Statutory Update
    As outlined in the CY 2011 HH PPS final rule (75 FR 70397 through 
70399), section 3131(b)(1) of the Affordable Care Act amended section 
1895(b)(3)(C) of the Act, ``Adjustment for outliers,'' states that 
``The Secretary shall reduce the standard prospective payment amount 
(or amounts) under this paragraph applicable to HH services furnished 
during a period by such proportion as will result in an aggregate 
reduction in payments for the period equal to 5 percent of the total 
payments estimated to be made based on the prospective payment system 
under this subsection for the period.'' In addition, section 3131(b)(2) 
of the Affordable Care Act amended section 1895(b)(5) of the Act by 
redesignating the existing language as section 1895(b)(5)(A) of the 
Act, and revising it to state that the Secretary, ``may provide for an 
addition or adjustment to the payment amount otherwise made in the case 
of outliers because of unusual variations in the type or amount of 
medically necessary care. The total amount of the additional payments 
or payment adjustments made under this paragraph with respect to a 
fiscal year or year may not exceed 2.5 percent of the total payments 
projected or estimated to be made based on the prospective payment 
system under this subsection in that year.''
    As such, beginning in CY 2011, our HH PPS outlier policy is that we 
reduce payment rates by 5 percent and target up to 2.5 percent of total 
estimated HH PPS payments to be paid as outliers. To get there, we 
first returned the 2.5 percent held for the target CY 2010 outlier pool 
to the national standardized 60-day episode rates, the national per 
visit rates, the LUPA add-on payment amount, and the NRS conversion 
factor for CY 2010. We then reduced the rates by 5 percent as required 
by section 1895(b)(3)(C) of the Act, as amended by section 3131(b)(1) 
of the Affordable Care Act. For CY 2011 and subsequent calendar years 
we target up to 2.5 percent of estimated total payments to be paid as 
outlier payments, and apply a 10 percent agency-level outlier cap.
4. Loss-Sharing Ratio and Fixed Dollar Loss (FDL) Ratio
    For a given level of outlier payments, there is a trade-off between 
the values selected for the FDL ratio and the loss-sharing ratio. A 
high FDL ratio reduces the number of episodes that can receive outlier 
payments, but makes it possible to select a higher loss-sharing ratio 
and, therefore, increase outlier payments for outlier episodes. 
Alternatively, a lower FDL ratio means that more episodes can qualify 
for outlier payments, but outlier payments per episode must then be 
lower.
    The FDL ratio and the loss-sharing ratio must be selected so that 
the estimated total outlier payments do not exceed the 2.5 percent 
aggregate level (as required by section 1895(b)(5)(A) of the Act). In 
the past, we have used a value of 0.80 for the loss-sharing ratio, 
which is relatively high, but preserves incentives for agencies to 
attempt to provide care efficiently for outlier cases. With a loss-
sharing ratio of 0.80, Medicare pays 80 percent of the additional 
estimated costs above the outlier threshold amount. We are not 
proposing a change to the loss-sharing ratio in this proposed rule. In 
the CY 2011 HH PPS final rule (75 FR 70398), in targeting total outlier 
payments as 2.5 percent of total HH PPS payments, we implemented an FDL 
ratio of 0.67, and we maintained that ratio in CY 2012. The national 
standardized 60-day episode payment amount is multiplied by the FDL 
ratio. That amount is wage-adjusted to derive the wage-adjusted FDL, 
which is added to the case-mix and wage-adjusted 60-day episode payment 
amount to determine the outlier threshold amount that costs have to 
exceed before Medicare will pay 80 percent of the additional estimated 
costs.
    Based on simulations using CY 2010 claims data, we estimate that 
outlier payments in 2012 will comprise approximately 2.12 percent of 
total HH PPS payments. Simulations based on CY 2009 claims data 
completed for the CY 2012 HH PPS final rule (76 FR 68528) suggested 
that outlier payments in 2011 would comprise approximately 2.14 percent 
of total HH PPS payments. As such, our simulations suggest outlier 
payments as a percentage total HH payments holding steady in CY 2009 
and CY 2010. However, we are proposing no change to the FDL, in part 
because we have not been able to verify these projections in our paid 
claims files since we implemented the 10 percent agency-level cap on 
outlier payments on January 1, 2010. Two claims processing errors were 
identified in our implementation of the 10 percent agency-level cap on 
outlier payments. These errors resulted in inaccuracies in outlier 
payment amounts in our paid claims files for CY 2010 and 2011. One 
error allows for certain HHAs to be paid beyond the cap, resulting in 
overpayments. The other applies the cap to HHAs who have not reached it 
yet, resulting in underpayments. System changes are currently underway, 
and thus the CY 2010 data file used in our analysis for this proposed 
rule reflects outlier payments with these claims processing errors. 
Furthermore, another consideration in proposing no change to the FDL is 
our implementation in the CY 2012 HH PPS final rule of changes to the 
case-mix weights. The changes put more weight on non-therapy cases that 
typically are more likely to receive outlier payments. The data showing 
the effects of the changes to the case-mix weights on outlier payments 
will not be available for analysis until next year. In

[[Page 41555]]

the final rule, we will update our estimate of the FDL ratio using the 
best analysis the most current and complete year of HH PPS data.
5. Outlier Relationship to the HH Payment Study
    As we discuss later in this proposed rule, section 3131(d) of the 
Affordable Care Act requires CMS to conduct a study and report on 
developing HH payment revisions that will ensure access to care and 
payment for HH patients with high severity of illness. Our Report to 
Congress containing this study's recommendations is due no later than 
March 1, 2014. Section 3131(d)(1)(A)(iii) of the Affordable Care Act, 
in particular, states that this study may include analysis of potential 
revisions to outlier payments to better reflect costs of treating 
Medicare beneficiaries with high levels of severity of illness.

C. CY 2013 Rate Update

1. Rebasing and Revising of the Home Health Market Basket
a. Background
    Section 1895(b)(3)(B) of the Act requires that the standard 
prospective payment amounts for CY 2013 be increased by a factor equal 
to the applicable home health market basket update for those HHAs that 
submit quality data as required by the Secretary.
    Effective for cost reporting periods beginning on or after July 1, 
1980, we developed and adopted an HHA input price index (that is, the 
home health ``market basket''). Although ``market basket'' technically 
describes the mix of goods and services used to produce home health 
care, this term is also commonly used to denote the input price index 
derived from that market basket. Accordingly, the term ``home health 
market basket'' used in this document refers to the HHA input price 
index.
    The percentage change in the home health market basket reflects the 
average change in the price of goods and services purchased by HHAs in 
providing an efficient level of home health care services. We first 
used the home health market basket to adjust HHA cost limits by an 
amount that reflected the average increase in the prices of the goods 
and services used to furnish reasonable cost home health care. This 
approach linked the increase in the cost limits to the efficient 
utilization of resources. For a greater discussion on the home health 
market basket, see the notice with comment period published in the 
February 15, 1980 Federal Register (45 FR 10450, 10451), the notice 
with comment period published in the February 14, 1995 Federal Register 
(60 FR 8389, 8392), and the notice with comment period published in the 
July 1, 1996 Federal Register (61 FR 34344, 34347). Beginning with the 
FY 2002 HH PPS payments, we used the home health market basket to 
update payments under the HH PPS. We last rebased the home health 
market basket effective with the CY 2008 update. For more information 
on the HH PPS home health market basket, see our proposed rule 
published in the May 4, 2007 Federal Register (72 FR 25435-25442).
    The home health market basket is a fixed-weight Laspeyres-type 
price index; its weights reflect the cost distribution for the base 
year while current period price changes are measured. The home health 
market basket is constructed in three major steps. First, a base period 
is selected and total base period expenditures are estimated for 
mutually exclusive and exhaustive spending categories based upon the 
type of expenditure. Then the proportion of total costs that each 
spending category represents is determined. These proportions are 
called cost or expenditure weights.
    The second step essential for developing an input price index is to 
match each expenditure category to an appropriate price/wage variable, 
called a price proxy. These proxy variables are mainly drawn from 
publicly available statistical series published on a consistent 
schedule, preferably at least quarterly.
    In the third and final step, the price level for each spending 
category is multiplied by the expenditure weight for that category. The 
sum of these products for all cost categories yields the composite 
index level in the market basket in a given year. Repeating the third 
step for other years will produce a time series of market basket index 
levels. Dividing one index level by an earlier index level will produce 
rates of growth in the input price index.
    We describe the market basket as a fixed-weight index because it 
answers the question of how much more or less it would cost, at a later 
time, to purchase the same mix of goods and services that was purchased 
in the base period. As such, it measures ``pure'' price changes only. 
The effects on total expenditures resulting from changes in the 
quantity or mix of goods and services purchased subsequent to the base 
period are, by design, not considered.
b. Rebasing and Revising the Home Health Market Basket
    We believe that it is desirable to rebase the home health market 
basket periodically so that the cost category weights reflect changes 
in the mix of goods and services that HHAs purchase in furnishing home 
health care. We based the cost category weights in the current home 
health market basket on CY 2003 data. We are proposing to rebase and 
revise the home health market basket to reflect CY 2010 Medicare cost 
report (MCR) data, the latest available and most complete data on the 
actual structure of HHA costs.
    The terms ``rebasing'' and ``revising,'' while often used 
interchangeably, actually denote different activities. The term 
``rebasing'' means moving the base year for the structure of costs of 
an input price index (that is, in this exercise, we are proposing to 
move the base year cost structure from CY 2003 to CY 2010) without 
making any other major changes to the methodology. The term 
``revising'' means changing data sources, cost categories, and/or price 
proxies used in the input price index.
    For this proposed rebasing and revising, we modified the wages and 
salaries and benefits cost categories to reflect revised occupational 
groupings of BLS Occupational Employment Statistics (OES) data of HHAs. 
As a result of the revised groupings, we are also proposing changes to 
the wage and benefit price proxies used in the HH market basket. We are 
also proposing to break out the Administration and General (A&G), 
Operations and Maintenance, and All Other (residual) cost category 
weight into more detailed cost categories, based on the 2002 Benchmark 
U.S. Department of Commerce, Bureau of Economic Analysis (BEA) Input-
Output (I-O) Table for HHAs. We are proposing to revise the price 
proxies for the Insurance and Transportation cost categories. Finally, 
we are proposing the use of four new price proxies for the four 
additional cost categories.
    The major cost weights for this proposed revised and rebased home 
health market basket are derived from the Medicare Cost Reports (MCR) 
data for freestanding HHAs, whose cost reporting period began on or 
after January 1, 2010 and before January 1, 2011. Using this 
methodology allowed our sample to include HHA facilities with varying 
cost report years including, but not limited to, the Federal fiscal or 
calendar year. We refer to the market basket as a calendar year market 
basket because the base period for all price proxies and weights are 
set to CY 2010.

[[Page 41556]]

    We propose to maintain our policy of using data from freestanding 
HHAs because we have determined that they better reflect HHAs' actual 
cost structure. Expense data for hospital-based HHAs can be affected by 
the allocation of overhead costs over the entire institution. Due to 
the method of allocation, total expenses will be correct, but the 
individual components' expenses may be skewed; therefore, if data from 
hospital-based HHAs were included, the resulting cost structure could 
be unrepresentative of the average HHA costs.
    Data on HHA expenditures for nine major expense categories (Wages 
and Salaries, Employee Benefits, Transportation, Operation and 
Maintenance, A&G, Professional Liability Insurance (PLI), Fixed 
Capital, Movable Capital, and a residual ``All Other'') were tabulated 
from the CY 2010 Medicare HHA cost reports. As prescription drugs and 
DME are not payable under the HH PPS, we excluded those items from the 
home health market basket and from the expenditures. Expenditures for 
contract services were also tabulated from these CY 2010 Medicare HHA 
cost reports and allocated to Wages and Salaries, Employee Benefits, 
A&G, and Other Expenses. After totals for these cost categories were 
edited to remove reports where the data were deemed unreasonable (for 
example, when total costs were not greater than zero), we then 
determined the proportion of total costs that each category represents. 
The proportions represent the major rebased home health market basket 
weights.
    Next, we disaggregated the costs for the A&G, Operations and 
Maintenance and ``All Other'' cost weights using the latest available 
(2002 Benchmark) U.S. Department of Commerce, Bureau of Economic 
Analysis (BEA) Input-Output (I-O) Table, from which we extracted data 
for HHAs. The BEA I-O data, which are updated at 5-year intervals, were 
most recently described in the Survey of Current Business article, 
``Benchmark Input-Output Accounts of the U.S., 2002'' (December 2002). 
These data were aged from 2002 to 2010 using relevant price changes. 
The methodology we used to age the data applied the annual price 
changes from the price proxies to the appropriate cost categories. We 
repeated this practice for each year. This methodology reflects a 
slight revision from the methodology used to derive the 2003-based HHA 
market basket index. For the 2003-based index, we only disaggregated 
the A&G and ``All Other'' cost categories using BEA I-O data. For the 
2010-based index, we are proposing to also disaggregate the Operations 
and Maintenance cost categories using the BEA I-O data. Our proposal is 
based on our examination of the MCR data which indicated that some 
providers may be including some operations and maintenance costs in the 
A&G category and/or other cost categories. The Operations and 
Maintenance cost category (which we previously proxied with the CPI for 
Fuel and Other Utilities) from the MCR showed a decrease in the cost 
weight obtained directly from the MCR data from 2003 to 2010, despite 
rapid increases in utility costs over this time period. The revised 
method would rely on the 2002 I-O data, aged by the relevant price 
proxy, to determine the Utilities cost weight. The resulting 
methodology shows an increase in the Utilities cost weight over the 
same time period, which we believe to be a more reasonable result. We 
believe this change in the methodology for estimating utility costs for 
HHAs better reflects the 2010 cost structures of HHAs.
    This process resulted in the identification of 16 separate cost 
categories, which is four more cost categories than presented in the 
2003-based home health market basket. The additional cost categories 
(Administrative and Support Services, Financial Services, Medical 
Supplies, and Rubber and Plastics) stem from further disaggregating the 
Other Products and Other Services cost categories presented in the 
2003-based index into more detail. The Administrative and Support 
Services cost weight would include expenses for a range of day-to-day 
office administrative services including but not limited to billing, 
recordkeeping, mail routing, and reception services. The Financial 
Services cost weight would reflect expenses for services including but 
not limited to banking services and security and commodity brokering. 
The Medical Supplies cost weight would reflect expenses for medical and 
surgical instruments as, well as laboratory analysis equipment. The 
Rubber and Plastics cost weight would reflect expenses for products 
such as plastic trash cans, and carpeting. We are proposing these 
additional cost categories in order to proxy price inflation in a more 
granular fashion. We provide our proposed price proxies in more detail 
below.
    The differences between the major categories for the proposed 2010-
based index and those used for the current 2003-based index are 
summarized in Table 2. We have allocated the Contract Services weight 
to the Wages and Salaries Employee Benefits, A&G, and Other Expenses 
cost categories in the proposed 2010-based index as we did in the 2003-
based index.

  Table 2--Comparison of 2003-Based and Proposed 2010-Based Home Health
            Market Baskets Major Cost Categories and Weights
------------------------------------------------------------------------
                                                        Proposed  2010-
                                     2003-Based home      based  home
          Cost categories             health market      health  market
                                          basket             basket
------------------------------------------------------------------------
Wages and Salaries, including                  64.484             66.325
 allocated contract services'
 labor............................
Employee Benefits, including                   12.598             12.210
 allocated contract services'
 labor............................
All Other Expenses including                   22.918             21.465
 allocated contract services'
 labor............................
                                   -------------------------------------
    Total.........................            100.000            100.000
------------------------------------------------------------------------

    The complete proposed 2010-based cost categories and weights are 
listed in Table 3.

[[Page 41557]]

 Table 3--Cost Categories, Weights, and Price Proxies in Proposed 2010-
                     Based Home Health Market Basket
------------------------------------------------------------------------
          Cost categories             Weight          Price proxy
------------------------------------------------------------------------
Compensation, including allocated      78.535  .........................
 contract services' labor.
Wages and Salaries, including          66.325  Proposed Home Health
 allocated contract services'                   Occupational Wage Index
 labor.                                         (2010).
Employee Benefits, including           12.210  Proposed Home Health
 allocated contract services'                   Occupational Benefits
 labor.                                         Index (2010).
Operations & Maintenance..........      1.002  CPI-U Fuel & Other
                                                Utilities.
Professional Liability Insurance..      0.375  CMS Physician
                                                Professional Liability
                                                Insurance Index.
Administrative & General & Other       15.381  .........................
 Expenses including allocated
 contract services' labor.
    Administrative Support........      0.699  ECI for Compensation for
                                                Office and
                                                Administrative Services
                                                (Private).
    Financial Services............      1.398  ECI for Compensation for
                                                Financial Services
                                                (Private).
    Medical Supplies..............      1.278  PPI for Medical Surgical
                                                & Personal Aid Devices.
    Rubber & Plastics.............      1.226  PPI for Rubber & Plastic
                                                Products.
    Telephone.....................      0.881  CPI-U Telephone Services.
    Postage.......................      0.279  CPI-U Postage.
    Professional Fees.............      5.811  ECI for Compensation for
                                                Professional and Related
                                                Workers (Private).
    Other Products................      1.439  PPI Finished Goods less
                                                Food and Energy.
    Other Services................      2.370  ECI for Compensation for
                                                Service Occupations
                                                (Private).
Transportation....................      2.545  CPI-U Transportation.
Capital-Related...................      2.162  .........................
Fixed Capital.....................      1.532  CPI-U Owner's Equivalent
                                                Rent.
Movable Capital...................      0.630  PPI Machinery &
                                                Equipment.
                                   -------------------------------------
    Total.........................    100.000  * *
------------------------------------------------------------------------
** Figures may not sum to total due to rounding.

    After we computed the CY 2010 cost category weights for the 
proposed rebased home health market basket, we selected the most 
appropriate wage and price indexes to proxy the rate of change for each 
expenditure category. With the exception of the price index for 
insurance costs, the proposed price proxies are based on Bureau of 
Labor Statistics (BLS) data and are grouped into one of the following 
BLS categories:
     Employment Cost Indexes--Employment Cost Indexes (ECIs) 
measure the rate of change in employee wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. They are not affected by shifts in skill mix. ECIs 
are superior to average hourly earnings as price proxies for input 
price indexes for two reasons: (a) They measure pure price change; and 
(b) they are available by occupational groups, not just by industry.
     Consumer Price Indexes--Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by the 
typical consumer. Consumer price indexes are used when the expenditure 
is more similar to that of a purchase at the retail level rather than 
at the wholesale level, or if no appropriate Producer Price Indexes 
(PPIs) were available.
     Producer Price Indexes--PPIs measures average changes in 
prices received by domestic producers for their goods and services. 
PPIs are used to measure price changes for goods sold in other than 
retail markets. For example, a PPI for movable equipment is used rather 
than a CPI for equipment. PPIs in some cases are preferable price 
proxies for goods that HHAs purchase at wholesale levels. These fixed-
weight indexes are a measure of price change at the producer or at the 
intermediate stage of production.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance. Reliability indicates that the 
index is based on valid statistical methods and has low sampling 
variability. Widely accepted statistical methods ensure that the data 
were collected and aggregated in way that can be replicated. Low 
sampling variability is desirable because it indicates that sample 
reflects the typical members of the population. (Sampling variability 
is variation that occurs by chance because a sample was surveyed rather 
than the entire population.) Timeliness implies that the proxy is 
published regularly, preferably at least once a quarter. The market 
baskets are updated quarterly and therefore it is important the 
underlying price proxies be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
helps ensure that we are using the most recent data available to update 
the market basket. We strive to use publications that are disseminated 
frequently because we believe that this is an optimal way to stay 
abreast of the most current data available. Availability means that the 
proxy is publicly available. We prefer that our proxies are publicly 
available because this will help ensure that our market basket updates 
are as transparent to the public as possible. In addition, this enables 
the public to be able to obtain the price proxy data on a regular 
basis. Finally, relevance means that the proxy is applicable and 
representative of the cost category weight to which it is applied. The 
CPIs, PPIs, and ECIs selected by us to be proposed in this regulation 
meet these criteria. Therefore, we believe that they continue to be the 
best measure of price changes for the cost categories to which they 
would be applied.
    As part of the revising and rebasing of the home health market 
basket, we are proposing to revise and rebase the home health blended 
Wage and Salary index and the home health blended Benefits index. We 
would use these blended indexes as price proxies for the Wages and 
Salaries and the Employee Benefits portions of the proposed 2010-based 
home health market basket, as we did in the 2003-based home health 
market basket. A more detailed discussion is provided below.
c. Price Proxies Used To Measure Cost Category Growth
     Wages and Salaries For measuring price growth in the 2010-
based home health market basket, we are proposing

[[Page 41558]]

to apply six price proxies to six occupational subcategories within the 
Wages and Salaries component, which would reflect the HHA occupational 
mix. This is the same approach used for the 2003-based index as there 
is not a published wage proxy for home health care workers that 
reflects only wage changes and not both wage and skill mix changes.
    The 2003-based blended wage index was comprised of four 
occupational subcategories proxied by five wage proxies. For the 2010 
blended wage index, we are proposing to further disaggregate the 
service workers occupations into health and social assistance service 
and other service occupational groups. We are also proposing to 
explicitly disaggregate professional and technical (P&T) workers into 
health-related P&T and non health-related P&T workers. We are proposing 
to continue to use the National Industry-Specific Occupational 
Employment and Wage estimates for North American Industrial 
Classification System (NAICS) 621600, Home Health Care Services, 
published by the BLS Office of Occupational Employment Statistics (OES) 
as the data source for the cost shares of the home health specific 
blended wage and benefits proxy. This is the same data source that was 
used for the 2003-based HHA blended wage and benefit proxies; however, 
we are proposing to use the May 2010 estimates in place of the November 
2003 estimates. Detailed information on the methodology for the 
national industry-specific occupational employment and wage estimates 
survey can be found at http://www.bls.gov/oes/current/oes_tec.htm.
    The needed data on HHA expenditures for the six occupational 
subcategories (managerial, health-related P&T, non health-related P&T, 
health and social assistance service, other service occupations, and 
administrative/clerical) for the wages and salaries component were 
tabulated from the May 2010 OES data for NAICS 621600, Home Health Care 
Services. This is a refinement to the four categories used for the 
2003-based wage proxy. Table 4 compares the proposed 2010 occupational 
assignments of the six CMS designated subcategories to the 2003 
occupational assignments of the four CMS designated subcategories.

    Table 4--Proposed 2010 Occupational Assignments Compared to 2003
        Occupational Assignments for CMS HH Wage Composite Index
------------------------------------------------------------------------
 
------------------------------------------------------------------------
     2010 Proposed 2003 Occupational Groupings
             Groupings
------------------------------------------------------------------------
   Group 1     Management..........  Group 1        Management
------------------------------------------------------------------------
11-0000        Management            11-0000        Management
                Occupations.                         Occupations.
------------------------------------------------------------------------
   Group 2     Non-Health            Group 2        Professional &
                Professional &                       Technical
                Technical.
------------------------------------------------------------------------
13-0000        Business and          13-0000        Business and
                Financial                            Financial
                Operations                           Operations
                Occupations.                         Occupations.
15-0000        Computer and          15-0000        Computer and
                Mathematical                         Mathematical
                Science Occupations.                 Science
                                                     Occupations.
17-0000        Architecture and      17-0000        Architecture and
                Engineering                          Engineering
                Occupations.                         Occupations.
19-0000        Life, Physical, and   19-0000        Life, Physical, and
                Social Science                       Social Science
                Occupations.                         Occupations.
23-0000        Legal Occupations...  21-0000        Community and Social
                                                     Services
                                                     Occupations.
25-0000        Education, Training,  23-0000        Legal Occupations.
                and Library
                Occupations.
27-0000        Arts, Design,         25-0000        Education, Training,
                Entertainment,                       and Library
                Sports, and Media                    Occupations.
                Occupations.
------------------------------------
   Group 3        Health-Related     27-0000        Arts, Design,
                   Professional &                    Entertainment,
                     Technical                       Sports, and Media
                                                     Occupations.
------------------------------------
29-1021        Dentists, General...  29-0000        Healthcare
                                                     Practitioners and
                                                     Technical
                                                     Occupations.
29-1031        Dietitians and        33-0000        Protective Service
                Nutritionists.                       Occupations.
29-1051        Pharmacists.........  35-0000        Food Preparation and
                                                     Serving Related
                                                     Occupations.
29-1062        Family and General    37-0000        Building and Grounds
                Practitioners.                       Cleaning and
                                                     Maintenance
                                                     Occupations.
29-1063        Internists, General.  41-0000        Sales and Related
                                                     Occupations.
29-1069        Physicians and        49-0000        Installation,
                Surgeons, All Other.                 Maintenance, and
                                                     Repair Occupations.
29-1071        Physician Assistants  51-0000        Production
                                                     Occupations.
29-1111        Registered Nurses...  53-0000        Transportation and
                                                     Material Moving
                                                     Occupations.
29-1122        Occupational
                Therapists.
29-1123        Physical Therapists.
29-1125        Recreational
                Therapists.
29-1126        Respiratory
                Therapists.
29-1127        Speech-Language
                Pathologists.
29-1129        Therapists, All
                Other.
29-1199        Health Diagnosing
                and Treating
                Practitioners, All
                Other.
------------------------------------------------------------------------
   Group 4     Other Service         Group 3        Service Workers
                Workers.
------------------------------------------------------------------------
33-0000        Protective Service    31-0000        Healthcare Support
                Occupations.                         Occupations.
35-0000        Food Preparation and  39-0000        Personal Care and
                Serving Related                      Service
                Occupations.                         Occupations.
37-0000        Building and Grounds
                Cleaning and
                Maintenance
                Occupations.
39-0000        Personal Care and
                Service Occupations.
41-0000        Sales and Related
                Occupations.
49-0000        Installation,
                Maintenance, and
                Repair Occupations.
51-0000        Production
                Occupations.
53-0000        Transportation and
                Material Moving
                Occupations.

[[Page 41559]]

 
------------------------------------------------------------------------
     2010 Proposed 2003 Occupational Groupings
             Groupings
------------------------------------------------------------------------
   Group 5        Health & Social
                  Service Workers
------------------------------------
21-0000        Community and Social
                Services
                Occupations.
29-2011        Medical and Clinical
                Laboratory
                Technologists.
29-2012        Medical and Clinical
                Laboratory
                Technicians.
29-2021        Dental Hygienists...
29-2032        Diagnostic Medical
                Sonographers.
29-2034        Radiologic
                Technologists and
                Technicians.
29-2041        Emergency Medical
                Technicians and
                Paramedics.
29-2051        Dietetic Technicians
29-2052        Pharmacy Technicians
29-2054        Respiratory Therapy
                Technicians.
29-2061        Licensed Practical
                and Licensed
                Vocational Nurses.
29-2071        Medical Records and
                Health Information
                Technicians.
29-2099        Health Technologists
                and Technicians,
                All Other.
29-9012        Occupational Health
                and Safety
                Technicians.
29-9099        Healthcare
                Practitioner and
                Technical Workers,
                All Other.
31-0000        Healthcare Support
                Occupations.
------------------------------------------------------------------------
   Group 6     Administrative......  Group 4        Administrative
------------------------------------------------------------------------
43-0000        Office and            43-0000        Office and
                Administrative                       Administrative
                Support Occupations.                 Support
                                                     Occupations.
------------------------------------------------------------------------

    Total expenditures by occupation were calculated by taking the OES 
number of employees multiplied by the OES annual average salary. The 
wage and salary expenditures were aggregated based on the groupings in 
Table 5. We determined the proportion of total wage costs that each 
subcategory represents. These proportions listed in Table 5 represent 
the major rebased and revised home health blended Wage and Salary index 
weights.

    Table 5--Proposed Home Health Occupational Wages and Salaries Index (Wages and Salaries Component of the
                                 Proposed 2010 Based Home Health Market Basket)
----------------------------------------------------------------------------------------------------------------
                                                     Proposed  2010
           Cost category               2003 Weight       weight              Price proxy           BLS Series ID
----------------------------------------------------------------------------------------------------------------
Health-Related Professional and              50.812          33.373  ECI for Wages & Salaries        CIU10262200
 Technical (P&T).                                                     for Civilian Hospital               00000I
                                                                      Workers.
Non Health-Related P&T.............  ..............           2.253  ECI for Wages & Salaries in     CIU20254000
                                                                      Private Industry for                00000I
                                                                      Professional, Specialty &
                                                                      Technical Workers.
Managerial/Supervisory.............           9.007           8.260  ECI for Wages & Salaries in     CIU20200001
                                                                      Private Industry for                10000I
                                                                      Executive, Administrative
                                                                      & Managerial Workers.
Administrative/Clerical............           7.596           7.720  ECI for Wages & Salaries in     CIU20200002
                                                                      Private Industry for                20000I
                                                                      Administrative Support,
                                                                      Including Clerical Workers.
Health and Social Assistance                 32.584          35.772  ECI for Wages & Salaries        CIU10262000
 Services.                                                            for Civilian Healthcare             00000I
                                                                      and Social Assistance.
Other Service Occupations..........  ..............          12.622  ECI for Wages & Salaries in     CIU20200003
                                                                      Private Industry Service            00000I
                                                                      Occupations.
                                    --------------------------------
Total..............................         100.000         100.000
----------------------------------------------------------------------------------------------------------------

    A comparison of the yearly changes from CY 2010 to CY 2013 for the 
2003-based HH wage and salary blend and the proposed 2010-based home 
health wage and salary blend is shown in Table 6. The average annual 
increase in the two price proxies is similar, and in no year is the 
difference greater than 0.3 percentage point.

 Table 6--Annual Growth in Proposed 2010 HH Wage Blend and 2003 HH Wage
                                  Blend
------------------------------------------------------------------------
                                        2010     2011     2012     2013
------------------------------------------------------------------------
HH Wage Blend 2010..................      1.6      1.5      2.1      2.7

[[Page 41560]]

 
HH Wage Blend 2003..................      1.5      1.5      1.8      2.4
------------------------------------------------------------------------
Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with
  historical data through 1st Quarter 2012.

     Employee benefits: For measuring employee benefits price 
growth in the 2010-based home health market basket, we are proposing to 
apply applicable price proxies to the six occupational subcategories 
that are used for the wage blend listed in Table 7. The percentage 
change in the blended price of home health employee benefits is applied 
to this component, which is described in Table 7.

  Table 7--Proposed Home Health Occupational Benefits Index (Employee Benefits Component of the Proposed 2010-
                                        Based Home Health Market Basket)
----------------------------------------------------------------------------------------------------------------
                                                             Proposed  2010
               Cost category                   2003 Weight       weight                  Price proxy
----------------------------------------------------------------------------------------------------------------
Health-Related Professional and Technical            50.506          33.506  ECI for Benefits for Civilian
 (P&T).                                                                       Hospital Workers.
Non Health-Related P&T.....................  ..............           2.246  ECI for Benefits in Private
                                                                              Industry for Professional,
                                                                              Specialty & Technical Workers.
Managerial/Supervisory.....................           8.766           8.029  ECI for Benefits in Private
                                                                              Industry for Executive,
                                                                              Administrative & Managerial
                                                                              Workers.
Administrative/Clerical....................           7.698           7.789  ECI for Benefits in Private
                                                                              Industry for Administrative
                                                                              Support, Including Clerical
                                                                              Workers.
Health and Social Assistance...............          33.024          35.887  ECI for Benefits for Civilian
                                                                              Healthcare and Social Assistance
                                                                              Workers.
Other Service Occupations..................  ..............          12.542  ECI for Benefits in Private
                                                                              Industry Service Occupations.
                                            --------------------------------------------------------------------
    Total..................................         100.000         100.000  ...................................
----------------------------------------------------------------------------------------------------------------

    There is no available data source that exists for benefit 
expenditures by occupation for the home health industry. Thus, to 
construct weights for the home health occupational benefits index we 
calculated the ratio of benefits to wages and salaries for CY 2010 for 
the six BLS ECI series we are proposing to use in the blended wage and 
benefit indexes. To derive the relevant benefit weight, we applied the 
benefit-to-wage ratios to each of the six occupational subcategories 
from the 2010 OES wage and salary weights, and normalized. For example, 
the ratio of benefits to wages from the 2010 home health occupational 
wage and benefit indexes for home health managers is 0.976. We apply 
this ratio to the 2010 OES weight for wages and salaries for home 
health managers, 8.260, and then normalize those weights relative to 
the other five benefit occupational categories to obtain a benefit 
weight for home health managers of 8.029.
    A comparison of the yearly changes from CY 2010 to CY 2013 for the 
2003-based HH benefit blend and the proposed 2010-based home health 
benefit blend is shown in Table 8. The average annual increase in the 
two price proxies is similar, and in no year is the difference greater 
than 0.3 percentage point.

  Table 8--Annual Growth in Proposed 2010 HH Benefits Blend and 2003 HH
                             Benefits Blend
------------------------------------------------------------------------
                                        2010     2011     2012     2013
------------------------------------------------------------------------
HH Benefits Blend 2010..............      2.6      2.7      2.7      2.8
HH Benefits Blend 2003..............      2.4      3.0      2.5      2.9
------------------------------------------------------------------------
Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with
  historical data through 1st Quarter 2012.

     Administrative and Support: We are proposing to use the 
ECI for Compensation for Office and Administrative Support Services 
(private industry) (BLS series code  CIU2010000220000I) to 
measure price growth of this cost category. The 2003-based index did 
not reflect this detailed cost category.
     Financial Services: We are proposing to use the ECI for 
Compensation for Financial Activities (private industry) (BLS series 
code  CIU201520A000000I) to measure price growth of this cost 
category. The 2003-based index did not reflect this detailed cost 
category.
     Medical Supplies: We are proposing to use the PPI for 
Medical Surgical & Personal Aid Devices (BLS series code  
WPU156) to measure price growth of this cost category. The 2003-based 
index did not reflect this detailed cost category.
     Rubber and Plastics: We are proposing to use the PPI for 
Rubber and Plastic Products (BLS series code  WPU07) to 
measure price growth of this cost category. The 2003-based index did 
not reflect this detailed cost category.
     Operations and Maintenance: We are proposing to use CPI 
for Fuel and Utilities (BLS series code  CUUR0000SAH2) to 
measure price growth of this cost category. The same proxy was used for 
the 2003-based market basket.
     Professional Liability Insurance: We are proposing to use 
the CMS Physician Professional Liability Insurance price index to 
measure price growth of this

[[Page 41561]]

cost category. The 2003-based index used the CPI for Household 
Insurance as the price proxy for this component. We are proposing to 
revise the price proxy for this category as we believe that it is more 
technically appropriate to proxy PLI price changes by an index specific 
to medical liability insurance. CMS currently does not have a PLI index 
specific to the HHA industry so we are proposing to use the CMS 
Physician Liability Insurance Index as we believe this would reasonably 
reflect the price changes associated with medical liability insurance 
purchased by home health agencies.
    To accurately reflect the price changes associated with physician 
PLI, each year, we solicit PLI premium data for physicians from a 
sample of commercial carriers. This information is not collected 
through a survey form, but instead is requested directly from, and 
provided by (on a voluntary basis), several national commercial 
carriers. As we require for our other price proxies, the PLI price 
proxy is intended to reflect the pure price change associated with this 
particular cost category. Thus, it does not include changes in the mix 
or level of liability coverage. To accomplish this result, we obtain 
premium information from a sample of commercial carriers for a fixed 
level of coverage, currently $1 million per occurrence and a $3 million 
annual limit. This information is collected for every State by 
physician specialty and risk class. Finally, the State-level, 
physician-specialty data are aggregated by effective premium date to 
compute a national total, using counts of physicians by State and 
specialty as provided in the AMA publication, Physician Characteristics 
and Distribution in the U.S.
     Telephone: We are proposing to use CPI for Telephone 
Services (BLS series code  CUUR0000SEED) to measure price 
growth of this cost category. The same proxy was used for the 2003-
based market basket.
     Postage: We are proposing to use CPI for Postage (BLS 
series code  CUUR0000SEEC01) to measure price growth of this 
cost category. The same proxy was used for the 2003-based market 
basket.
     Professional Fees: We are proposing to use the ECI for 
Compensation for Professional and Related Workers (private industry) 
(BLS series code  CIS2010000120000I) to measure price growth 
of this category. The same proxy was used for the 2003-based market 
basket.
     Other Products: We are proposing to use the PPI for 
Finished Goods Less Food and Energy (BLS series code ) to 
measure price growth of this category. For the 2003-based market basket 
we used the CPI for All Items Less Food and Energy to proxy this 
category. We believe that the PPI better reflects business input costs 
than the CPI index which better reflects cost faced by consumers.
     Other Services: We are proposing to use the ECI for 
Compensation for Service Occupations (private) (BLS series code 
 CIU2010000300000I) to measure price growth of this category. 
The same proxy was used for the 2003-based market basket.
     Transportation: We are proposing to use the CPI for 
Transportation (BLS series code  CUUR00000SAT) to measure 
price growth of this category. The 2003-based market basket used the 
CPI for Private Transportation (BLS series code  
CUUS0000SAT1). We are proposing to revise the price proxy to reflect 
price inflation of both private and public transportation costs. We are 
proposing this change as further investigation of the MCR instructions 
request providers to include both private and public transportation 
costs.
     Fixed capital: We are proposing to use the CPI for Owner's 
Equivalent Rent (BLS series code  CUUS0000SEHC) to measure 
price growth of this cost category. The same proxy was used for the 
2003-based market basket.
     Movable Capital: We are proposing to use the PPI for 
Machinery and Equipment (BLS series code  WPU11) to measure 
price growth of this cost category. The same proxy was used for the 
2003-based market basket.
    As we did in the 2003-based home health market basket, we allocated 
the Contract Services' share of home health agency expenditures among 
Wages and Salaries, Employee Benefits, A&G and Other Expenses.
d. Rebasing Results
    A comparison of the yearly changes from CY 2010 to CY 2013 for the 
2003-based home health market basket and the proposed 2010-based home 
health market basket is shown in Table 9.

 Table 9--Comparison of the 2003-Based Home Health Market Basket and the Proposed 2010-Based Home Health Market
                                        Basket, Percent Change, 2010-2013
----------------------------------------------------------------------------------------------------------------
                                                                               Proposed home       Difference
                                                              Home health      health market    (proposed 2010-
                                                            market basket,     basket, 2010-    based less 2003-
                                                              2003-based           based             based)
----------------------------------------------------------------------------------------------------------------
Historical: CY 2010......................................               1.7               1.8                0.1
Historical CY 2011.......................................               2.0               2.0                0.0
CY 2012..................................................               1.9               2.1                0.2
CY 2013..................................................               2.3               2.5                0.2
Average Change: 2010-2013................................               2.0               2.1                0.1
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with historical data through 1st Quarter 2012.

    Table 9 shows that the forecasted rate of growth for CY 2013, 
beginning January 1, 2013, for the proposed rebased and revised home 
health market basket is 2.5 percent, while the forecasted rate of 
growth for the current 2003-based home health market basket is 2.3 
percent. The higher growth rate for the 2010-based HHA market basket 
for CY 2013 is attributable to the proposed wage and benefit blended 
price proxies, as well as the relatively faster price growth for the 
A&G cost category. The revised wage and benefit blended index reflects 
a larger weight associated with health P&T occupations (which is 
proxied by the ECIs for Hospital Workers) compared to the 2003-based 
index. The wage and benefit ECIs for hospital workers are currently 
projected to grow faster than the other ECIs in the blended indexes.
e. Labor-Related Share
    In the 2003-based home health market basket the labor-related share 
was 77.082 percent while the remaining non-labor-related share was 
22.918 percent. In the proposed revised and rebased home health market 
basket, the labor-related share would be 78.535 percent. The labor-
related share includes wages and salaries and employee benefits, as 
well as allocated

[[Page 41562]]

contract labor costs. The proposed non-labor-related share would be 
21.465 percent. The increase in the labor-related share using the 2010-
based HH market basket is primarily due to the increase in costs 
associated with contract labor. Table 10 details the components of the 
labor-related share for the 2003-based and proposed 2010-based home 
health market baskets.

Table 10--Labor-Related Share of Current and Proposed Home Health Market
                                 Baskets
------------------------------------------------------------------------
                                           2003-based     Proposed 2010-
             Cost category               market basket     based market
                                             weight       basket weight
------------------------------------------------------------------------
Wages and Salaries....................           64.484           66.325
Employee Benefits.....................           12.598           12.210
                                       ---------------------------------
    Total Labor-Related...............           77.082           78.535
                                       =================================
    Total Non Labor-Related...........           22.918           21.465
------------------------------------------------------------------------

f. Proposed CY 2013 Market Basket Update for HHAs
    For CY 2013, we are proposing to use an estimate of the proposed 
2010-based HHA market basket to update payments to HHAs based on the 
best available data. Consistent with historical practice, we estimate 
the HHA market basket update for the HHA PPS based on IHS Global 
Insight, Inc.'s (IGI's) forecast using the most recent available data. 
IGI is a nationally recognized economic and financial forecasting firm 
that contracts with CMS to forecast the components of the market 
baskets.
    Based on IGI's second quarter 2012 forecast with history through 
the first quarter of 2012, the projected HHA market basket update for 
CY 2013 is 2.5 percent. Therefore, consistent with our historical 
practice of estimating market basket increases based on the best 
available data, we are proposing a market basket update of 2.5 percent 
for CY 2013. Furthermore, because the proposed CY 2013 annual update is 
based on the most recent market basket estimate for the 12-month period 
(currently 2.5 percent), we also are proposing that if more recent data 
are subsequently available (for example, a more recent estimate of the 
market basket), we would use such data, if appropriate, to determine 
the CY 2013 annual update in the final rule.
2. CY 2013 Home Health Payment Update Percentage
    Section 3401(e) of the Affordable Care Act amended section 
1895(b)(3)(B) of the Act by adding a new clause (vi) which states, 
``After determining the home health market basket percentage increase * 
* * the Secretary shall reduce such percentage * * * for each of 2011, 
2012, and 2013, by 1 percentage point. The application of this clause 
may result in the home health market basket percentage increase under 
clause (iii) being less than 0.0 for a year, and may result in payment 
rates under the system under this subsection for a year being less than 
such payment rates for the preceding year.'' Therefore, the proposed CY 
2013 market basket update of 2.5 percent must be reduced by 1 
percentage point. Thus, the proposed CY 2013 home health payment update 
is 1.5 percent.
3. Home Health Quality Reporting Program (QRP)
a. Background and Quality Reporting Requirements
    Section 1895(b)(3)(B)(v)(II) of the Act states that ``each home 
health agency shall submit to the Secretary such data that the 
Secretary determines are appropriate for the measurement of health care 
quality. Such data shall be submitted in a form and manner, and at a 
time, specified by the Secretary for purposes of this clause.''
    In addition, section 1895(b)(3)(B)(v)(I) of the Act states that 
``for 2007 and each subsequent year, in the case of a HHA that does not 
submit data to the Secretary in accordance with subclause (II) with 
respect to such a year, the HH market basket percentage increase 
applicable under such clause for such year shall be reduced by 2 
percentage points.'' This requirement has been codified in regulations 
at Sec.  484.225(i). HHAs that meet the quality data reporting 
requirements are eligible for the full home health market basket 
percentage increase. HHAs that do not meet the reporting requirements 
are subject to a 2 percentage point reduction to the home health market 
basket increase.
    Section 1895(b)(3)(B)(v)(III) of the Act further states that 
``[t]he Secretary shall establish procedures for making data submitted 
under sub clause (II) available to the public. Such procedures shall 
ensure that a home health agency has the opportunity to review the data 
that is to be made public with respect to the agency prior to such data 
being made public.''
    As codified at Sec.  484.250(a), we established that the quality 
reporting requirements could be met by the submission of OASIS 
assessments and Home Health CAHPS. In the CY 2012 HH PPS final rule (76 
FR 68576), we listed selected measures for the HH QRP and also 
established procedures for making the information available to the 
public by placing the information on the Home Health Compare Web site. 
The selected measures that are made available to the public can be 
viewed on the Home Health Compare Web site located at http://www.medicare.gov/HHCompare/Home.asp.
    In the CY 2012 HH PPS final rule (76 FR 68575), we finalized that 
we would also use measures derived from Medicare claims data to measure 
home health quality.
b. OASIS Data Submission and OASIS Data for Annual Payment Update
    The Home Health Conditions of Participation (CoPs) at Sec.  
484.55(d) require that the comprehensive assessment must be updated and 
revised (including the administration of the OASIS) no less frequently 
than: (1) The last five days of every 60 days beginning with the start-
of-care date, unless there is a beneficiary elected transfer, 
significant change in condition, or discharge and return to the same 
HHA during the 60-day episode; (2) within 48 hours of the patient's 
return to the home from a hospital admission of 24 hours or more for 
any reason other than diagnostic tests; and (3) at discharge.
    It is important to note that to calculate quality measures from 
OASIS data, there must be a complete quality episode, which requires 
both a Start of Care or Resumption of Care OASIS assessment and a 
Transfer or Discharge OASIS assessment. Failure to submit sufficient 
OASIS assessments to allow calculation of quality measures,

[[Page 41563]]

including transfer and discharge assessments, is failure to comply with 
the CoPs.
    Home Health Agencies do not need to submit OASIS data for those 
patients who are excluded from the OASIS submission requirements under 
the Home Health Conditions of Participation (CoPs) Sec.  484.1 through 
Sec.  484.265. As described in the Medicare and Medicaid Programs: 
Reporting Outcome and Assessment Information Set Data as Part of the 
Conditions of Participation for Home Health Agencies Final Rule (CMS-
3006-F) (70 FR 76202), these are:
     Those patients receiving only nonskilled services;
     Those patients for whom neither Medicare nor Medicaid is 
paying for home health care (patients receiving care under a Medicare 
or Medicaid Managed Care Plan are not excluded from the OASIS reporting 
requirement);
     Those patients receiving pre- or post-partum services; or
     Those patients under the age of 18 years.
    As set forth in the Medicare Program; Home Health Prospective 
Payment System Refinement and Rate Update for Calendar Year 2008 Final 
Rule (CMS-1541-CF) (72 FR 49863), HHAs that become Medicare-certified 
on or after May 31 of the preceding year are not subject to the OASIS 
quality reporting requirement nor any payment penalty for quality 
reporting purposes for the following year. For example, HHAs certified 
on or after May 31, 2012 are not subject to the 2 percentage point 
reduction to their market basket update for CY 2013. These exclusions 
only affect quality reporting requirements and do not affect the HHA's 
reporting responsibilities under the Conditions of Participation and 
Conditions of Payment (70 FR 76202).
c. Home Health Care Quality Reporting Program Requirements for CY 2014 
Payment and Subsequent Years
(1) Submission of OASIS data
    For CY 2013, we propose to consider OASIS assessments submitted by 
HHAs to CMS in compliance with HHA Conditions of Participation and 
Conditions for Payment for episodes beginning on or after July 1, 2011 
and before July 1, 2012 as fulfilling one portion of the quality 
reporting requirement for CY 2013. This time period would allow for 12 
full months of data collection and would provide us with the time 
necessary to analyze and make any necessary payment adjustments to the 
payment rates for CY 2013. We propose to continue this pattern for each 
subsequent year beyond CY 2013, considering OASIS assessments submitted 
in the time frame between July 1 of the calendar year two years prior 
to the calendar year of the Annual Payment Update (APU) effective date 
and July 1 of the calendar year one year prior to the calendar year of 
the APU effective date as fulfilling the OASIS portion of the quality 
reporting requirement for the subsequent APU.
(2) Acute Care Hospitalization Claims-Based Measure
    We have determined that claims data are a more robust source of 
data for accurately measuring acute care hospitalizations than other 
data sources. We propose that the claims-based Acute Care 
Hospitalization measure replace the OASIS-based measure on Home Health 
Compare. The OASIS-based measure will continue to be reported on the 
agency-specific Certification and Survey Provider Enhanced Reporting 
system (CASPER) reports.
    Due to technical issues with Home Health Compare files, we will 
delay the reporting of both ``Emergency Department Use Without 
Hospitalization'' and ``Acute Care Hospitalization'' until such time as 
the technical issues are resolved. The OASIS-based Acute Care 
Hospitalization measure will continue to be made available to the 
public via Home Health Compare until it is replaced with the claims-
based measure.
    To summarize, for the CY 2013 payment update and for subsequent 
annual payment updates, we propose to continue to use a HHA's 
submission of OASIS assessments between July 1 and June 30 as 
fulfilling one portion of the quality reporting requirement for each 
payment year. Medicare claims data and HHCAHPS data will also be used 
to measure home health care quality.
d. Home Health Care CAHPS Survey (HHCAHPS)
    In the HH PPS Rate Update for CY 2012 HH PPS final rule (76 FR 
68577), we stated that the expansion of the home health quality 
measures reporting requirements for Medicare-certified agencies 
includes the Consumer Assessment of Healthcare Providers and Systems 
(CAHPS[supreg]) Home Health Care (HHCAHPS) Survey for the CY 2012 
annual payment update (APU). In CY 2012 we moved forward with the 
HHCAHPS linkage to the pay-for-reporting (P4R) requirements affecting 
the HH PPS rate update for CY 2012. We are maintaining the stated 
HHCAHPS data requirements for CY 2013 that were set out in the CY 2012 
HH PPS final rule, for the continuous monthly data collection and 
quarterly data submission of HHCAHPS data.
Background and Description of HHCAHPS
    As part of the United States Department of Health and Human 
Services' (DHHS) Transparency Initiative, we have implemented a process 
to measure and publicly report patient experiences with home health 
care, using a survey developed by the Agency for Healthcare Research 
and Quality's (AHRQ's) CAHPS[supreg] program, and endorsed by the 
National Quality Forum (NQF). The HHCAHPS survey is part of a family of 
CAHPS[supreg] surveys that asks patients to report on and rate their 
experiences with health care. The HHCAHPS survey presents home health 
patients with a set of standardized questions about their home health 
care providers and about the quality of their home health care.
    Prior to this survey, there was no national standard for collecting 
information about patient experiences that would enable valid 
comparisons across all home health agencies (HHAs). The history and 
development process for HHCAHPS has been given in previous rules, but 
it is also available on our Web site https://homehealthcahps.org and 
also, in the annually-updated HHCAHPS Protocols and Guidelines Manual, 
which is downloadable from https://homehealthcahps.org.
    For public reporting purposes, we present five measures--three 
composite measures and two global ratings of care--from the questions 
on the HHCAHPS survey. The publicly reported data are adjusted for 
differences in patient mix across home health agencies. Each composite 
measure consists of four or more questions regarding one of the 
following related topics:
     Patient care (Q9, Q16, Q19, and Q24);
     Communications between providers and patients (Q2, Q15, 
Q17, Q18, Q22, and Q23); and
     Specific care issues on medications, home safety, and pain 
(Q3, Q4, Q5, Q10, Q12, Q13, and Q14).
    The two global ratings are the overall rating of care given by the 
HHA's care providers (Q20), and the patient's willingness to recommend 
the HHA to family and friends (Q25).
    The HHCAHPS survey is not supposed to measure the aspects of home 
health clinical care that can be captured through a medical record. 
Rather, the HHCAHPS survey focuses on areas where the home health 
patient is the best or only source for the

[[Page 41564]]

information. We believe that the HHCAHPS survey is a valid measure of 
patient's perspectives of home health care. The developmental work for 
the HHCAHPS survey began in mid-2006, and the first HHCAHPS survey was 
field-tested (to validate the length and content of the survey) in 2008 
by the AHRQ and the CAHPS[supreg] grantees, and the final HHCAHPS 
survey was used in a national randomized mode experiment in 2009 
through 2010.
    The HHCAHPS survey is currently available in several languages. At 
the time of the CY 2010 HH PPS final rule, HHCAHPS was only available 
in English and Spanish translations. In the proposed rule for CY 2010, 
we stated that we would provide additional translations of the survey 
over time in response to suggestions for any additional language 
translations. We now offer HHCAHPS in English, Spanish, Chinese, 
Russian, and Vietnamese languages. We will continue to consider 
additional translations of the HHCAHPS in response to the needs of the 
home health patient population.
    All of the requirements about home health patient eligibility for 
the HHCAHPS survey and conversely, which home health patients are 
ineligible for the HHCAHPS survey are delineated and detailed in the 
HHCAHPS Protocols and Guidelines Manual, which is downloadable from 
https://homehealthcahps.org. Home health patients are eligible for 
HHCAHPS if they received at least two skilled home health visits in the 
past two months, and are paid for by Medicare or Medicaid.
    Home health patients are ineligible for inclusion in HHCAHPS 
surveys if one of these conditions pertains to them:
     Are under the age of 18;
     Are deceased prior to pulling sample;
     Receive hospice care;
     Received routine maternity care only;
     Are not considered survey eligible because the state in 
which the patient lives restricts release of patient information for a 
specific condition or illness that the patient has; or
     Requested that their names not be released to anyone.
    We stated in previous rules that Medicare-certified agencies are 
required to contract with an approved HHCAHPS survey vendor. This 
requirement is also codified. Beginning in summer 2009, interested 
vendors applied to become approved HHCAHPS survey vendors. HHCAHPS 
survey vendors are required to attend introductory and all update 
trainings conducted by CMS and the HHCAHPS Survey Coordination Team, as 
well as to pass a post-training certification test. We now have 
approximately 40 approved HHCAHPS survey vendors. The list of approved 
HHCAHPS survey vendors is available at https://homehealthcahps.org.
HHCAHPS Oversight Activities
    We stated in prior final rules that vendors and HHAs would be 
required to participate in HHCAHPS oversight activities to ensure 
compliance with HHCAHPS protocols, guidelines, and survey requirements. 
The purpose of the oversight activities is to ensure that HHAs and 
approved survey vendors follow the HHCAHPS Protocols and Guidelines 
Manual. As stated previously in the CY 2010, CY 2011, and CY 2012 final 
rules, all approved survey vendors must develop a Quality Assurance 
Plan (QAP) for survey administration in accordance with the HHCAHPS 
Protocols and Guidelines Manual. An HHCAHPS survey vendor's first QAP 
must be submitted within 6 weeks of the data submission deadline date 
after the vendor's first quarterly data submission. The QAP must be 
updated and submitted annually thereafter and at any time that changes 
occur in staff or vendor capabilities or systems. A model QAP is 
included in the HHCAHPS Protocols and Guidelines Manual. The QAP should 
include the following:
     Organizational Background and Staff Experience
     Work Plan
     Sampling Plan
     Survey Implementation Plan
     Data Security, Confidentiality and Privacy Plan
     Questionnaire Attachments
    As part of the oversight activities, the HHCAHPS Survey 
Coordination Team conducts on-site visits to the approved HHCAHPS 
survey vendors. The purpose of the site visits is to allow the HHCAHPS 
Coordination Team to observe the entire Home Health Care CAHPS Survey 
implementation process, from the sampling stage through file 
preparation and submission, as well as to assess how the HHCAHPS data 
are stored. The HHCAHPS Survey Coordination Team reviews the survey 
vendor's survey systems, and assesses administration protocols based on 
the HHCAHPS Protocols and Guidelines Manual posted at https://homehealthcahps.org. The systems and program review includes, but is 
not limited to the following:
     Survey management and data systems;
     Printing and mailing materials and facilities;
     Telephone call center facilities;
     Data receipt, entry and storage facilities; and
     Written documentation of survey processes.
    After the site visits, HHCAHPS vendors are given a defined time 
period in which to correct any identified issues and provide follow-up 
documentation of corrections for review. HHCAHPS survey vendors are 
subject to follow-up site visits on an as-needed basis.
    We are proposing to codify the current guideline that all approved 
HHCAHPS survey vendors fully comply with all HHCAHPS oversight 
activities. We are proposing to include this survey requirement at 
Sec.  484.250(c).
HHCAHPS Requirements for CY 2014
    For the CY 2014 APU, we propose to continue monthly HHCAHPS data 
collection and reporting for four quarters. The data collection period 
for CY 2014 would include second quarter 2012 through first quarter 
2013 (the months of April 2012 through March 2013). HHAs would be 
required to submit their HHCAHPS data files to the Home Health CAHPS 
Data Center for CY 2014 for the second quarter 2012 by 11:59 p.m., 
Eastern Time on October 18, 2012; for the third quarter 2012 by 11:59 
p.m., Eastern Time on January 17, 2013; for the fourth quarter 2012 by 
11:59 p.m., Eastern Time on April 18, 2013; and for the first quarter 
2013 by 11:59 p.m., Eastern Time on July 18, 2013.
    As noted, we exempt HHAs receiving Medicare certification on or 
after April 1, 2012 from the full HHCAHPS reporting requirement for the 
CY 2014 APU, because these HHAs were not Medicare-certified in the 
period of April 1, 2011 through March 31, 2012. These HHAs would not 
need to complete a Participation Exemption Request Form for the CY 2014 
Annual Payment Update. We propose to maintain this stated exemption for 
new HHAs.
    As noted, HHAs that had fewer than 60 HHCAHPS-eligible unduplicated 
or unique patients in the period of April 1, 2011 through March 31, 
2012 would be exempt from the HHCAHPS data collection and submission 
requirements for the CY 2014 APU. Such agencies would be required to 
submit their patient counts for the period of April 1, 2011 through 
March 31, 2012 on the Participation Exemption Request form posted at 
https://homehealthcahps.org by 11:59 p.m., Eastern Time on January 17, 
2013. This deadline would be firm, as would be all of the quarterly 
data submission deadlines.
HHCAHPS Requirements for CY 2015
    For the CY 2015 APU, we propose to continue to require the 
continuous

[[Page 41565]]

monthly HHCAHPS data collection and reporting for four quarters. The 
data collection period for CY 2015 would include second quarter 2013 
through first quarter 2014 (the months of April 2013 through March 
2014). HHAs would be required to submit their HHCAHPS data files to the 
Home Health CAHPS Data Center for CY 2014 for the second quarter 2013 
by 11:59 p.m., Eastern Time on October 17, 2013; for the third quarter 
2013 by 11:59 p.m., Eastern Time on January 16, 2014; for the fourth 
quarter 2013 by 11:59 p.m., Eastern Time on April 17, 2014; and for the 
first quarter 2014 by 11:59 p.m., Eastern Time on July 17, 2014.
    We propose to continue to exempt HHAs receiving Medicare 
certification after the period in which HHAs do their patient count 
(April 1, 2012 through March 31, 2013) on or after April 1, 2013 from 
the full HHCAHPS reporting requirement for the CY 2015 APU, because 
these HHAs would not have been Medicare-certified throughout the period 
of April 1, 2012 through March 31, 2013. These HHAs do not need to 
complete a Participation Exemption Request Form for the CY 2015 Annual 
Payment Update. We propose to maintain this stated exemption for new 
HHAs.
    Likewise, we would require that all HHAs that had fewer than 60 
HHCAHPS-eligible unduplicated or unique patients in the period of April 
1, 2012 through March 31, 2013 would be exempt from the HHCAHPS data 
collection and submission requirements for the CY 2015 APU. Agencies 
with fewer than 60 HHCAHPS-eligible, unduplicated or unique patients in 
the period of April 1, 2012 through March 31, 2013 would be required to 
submit their patient counts on the Participation Exemption Request form 
for CY 2015 posted at https://homehealthcahps.org by 11:59 p.m., 
Eastern Time on January 16, 2014. This deadline would be firm, as would 
be all of the quarterly data submission deadlines.
HHCAHPS Reconsiderations and Appeals Process
    We believe that HHAs should monitor their respective HHCAHPS survey 
vendors to ensure that vendors submit their HHCAHPS data on time, by 
accessing their HHCAHPS Data Submission Reports on https://homehealthcahps.org. This will help HHAs ensure that their data are 
submitted in the proper format for data processing to the HHCAHPS Data 
Center.
    We believe that the reconsiderations process for HHCAHPS should not 
be burdensome to HHAs. We have modeled the HHCAHPS reconsiderations 
process after the one that is used for Hospital CAHPS, in use for 
nearly 7 years. We have described the HHCAHPS reconsiderations process 
requirements in the notification memorandum that the RHHIs/MACs sent to 
the affected HHAs, on behalf of CMS. HHAs have 30 days to send their 
reconsiderations to CMS. CMS has and will continue to fully examine all 
HHA reconsiderations.
Summary of Proposed Changes in CY 2013
    We are proposing only one change for the CY 2013 rule--to codify 
the HHCAHPS guideline that HHAs ensure that survey vendors fully comply 
with all HHCAHPS requirements.
For Further Information on the HHCAHPS Survey
    We strongly encourage HHAs to learn about the survey and view the 
HHCAHPS Survey Web site at the official Web site for the HHCAHPS at 
https://homehealthcahps.org. Home health agencies can also send an 
email to the HHCAHPS Survey Coordination Team at HHCAHPS@rti.org, or 
telephone toll-free (1-866-354-0985) for more information about 
HHCAHPS.
4. Home Health Wage Index
    Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the 
Secretary to provide appropriate adjustments to the proportion of the 
payment amount under the HH PPS that account for area wage differences, 
using adjustment factors that reflect the relative level of wages and 
wage-related costs applicable to the furnishing of home health 
services. For CY 2013, as in previous years, we are proposing to base 
the wage index adjustment to the labor portion of the HH PPS rates on 
the most recent pre-floor and pre-reclassified hospital wage index. We 
would apply the appropriate wage index value to the labor portion of 
the HH PPS rates based on the site of service for the beneficiary 
(defined by section 1861(m) of the Act as the beneficiary's place of 
residence). Previously, we determined each HHA's labor market area 
based on definitions of Metropolitan Statistical Areas (MSAs) issued by 
the Office of Management and Budget (OMB). We have consistently used 
the pre-floor, pre-reclassified hospital wage index data to adjust the 
labor portion of the HH PPS rates. We believe the use of the pre-floor, 
pre-reclassified hospital wage index data results in an appropriate 
adjustment to the labor portion of the costs, as required by statute.
    In the CY 2006 HH PPS final rule (70 FR 68132), we began adopting 
revised labor market area definitions as discussed in the Office of 
Management and Budget (OMB) Bulletin No. 03-04 (June 6, 2003). This 
bulletin announced revised definitions for Metropolitan Statistical 
Areas (MSAs) and the creation of Micropolitan Statistical Areas and 
Core-Based Statistical Areas (CBSAs). The bulletin is available online 
at www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB 
published subsequent bulletins regarding CBSA changes, including 
changes in CBSA numbers and titles. This rule incorporates the CBSA 
changes published in the most recent OMB bulletin. The OMB bulletins 
are available at http://www.whitehouse.gov/omb/bulletins/index.html.
    Finally, we would continue to use the methodology discussed in the 
CY 2007 HH PPS final rule (71 FR 65884) to address those geographic 
areas in which there were no IPPS hospitals and, thus, no hospital wage 
data on which to base the calculation of the HH PPS wage index. For 
rural areas that do not have IPPS hospitals, and therefore, lack 
hospital wage data on which to base a wage index, we would use the 
average wage index from all contiguous CBSAs as a reasonable proxy. For 
rural Puerto Rico, we do not apply this methodology due to the distinct 
economic circumstances that exist there, but instead continue using the 
most recent wage index previously available for that area (from CY 
2005).
    For urban areas without IPPS hospitals, we use the average wage 
index of all urban areas within the State as a reasonable proxy for the 
wage index for that CBSA. For CY 2012, the only urban area without IPPS 
hospital wage data is Hinesville-Fort Stewart, Georgia (CBSA 25980).
    The wage index values for rural areas and the CBSAs and their 
associated wage index values are available via the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices.html
5. Proposed CY 2013 Payment Update
a. National Standardized 60-Day Episode Rate
    The Medicare HH PPS has been in effect since October 1, 2000. As 
set forth in the July 3, 2000 final rule (65 FR 41128), the base unit 
of payment under the Medicare HH PPS is a national standardized 60-day 
episode rate. As set forth in Sec.  484.220, we adjust the national 
standardized 60-day episode rate by a case-mix relative weight and a

[[Page 41566]]

wage index value based on the site of service for the beneficiary.
    In the CY 2008 HH PPS final rule with comment period, we refined 
the case-mix methodology and also rebased and revised the home health 
market basket. To provide appropriate adjustments to the proportion of 
the payment amount under the HH PPS to account for area wage 
difference, we apply the appropriate wage index value to the labor 
portion of the HH PPS rates. As discussed in section III.C.1, we have 
proposed a labor-related share of the case-mix adjusted 60-day episode 
rate of 78.535 percent and a non-labor-related share of 21.465 percent. 
The proposed CY 2013 HH PPS rates use the same case-mix methodology and 
application of the wage index adjustment to the labor portion of the HH 
PPS rates as set forth in the CY 2008 HH PPS final rule with comment 
period. Following are the steps we take to compute the case-mix and 
wage adjusted 60-day episode rate:
    (1) Multiply the national 60-day episode rate by the patient's 
applicable case-mix weight.
    (2) Divide the case-mix adjusted amount into a labor (78.535 
percent) and a non-labor portion (21.465 percent).
    (3) Multiply the labor portion by the applicable wage index based 
on the site of service of the beneficiary.
    (4) Add the wage-adjusted portion to the non-labor portion, 
yielding the case-mix and wage adjusted 60-day episode rate, subject to 
any additional applicable adjustments.
    In accordance with section 1895(b)(3)(B) of the Act, this document 
constitutes the annual update of the HH PPS rates. The HH PPS 
regulations at Sec.  484.225 set forth the specific annual percentage 
update methodology. In accordance with Sec.  484.225(i), for a HHA that 
does not submit home health quality data, as specified by the 
Secretary, the unadjusted national prospective 60-day episode rate is 
equal to the rate for the previous calendar year increased by the 
applicable home health market basket index amount minus two percentage 
points. Any reduction of the percentage change will apply only to the 
calendar year involved and will not be considered in computing the 
prospective payment amount for a subsequent calendar year.
    For CY 2013, we propose to update the national per-visit rates for 
each discipline by the applicable home health payment update percentage 
of 1.5 percent. We propose to adjust the national per-visit rate by the 
appropriate wage index based on the site of service for the 
beneficiary, as set forth in Sec.  484.230. As discussed in the July 3, 
2000 HH PPS final rule, for episodes with four or fewer visits, 
Medicare pays the national per-visit amount by discipline, referred to 
as a low utilization payment amount (LUPA). We propose to adjust the 
labor portion of the updated national per-visit rates used to calculate 
LUPAs by the most recent pre-floor and pre-reclassified hospital wage 
index. We are also proposing to update the LUPA add-on payment amount 
and the NRS conversion factor by the applicable home health payment 
update of 1.5 percent for CY 2013.
    Medicare pays the 60-day case-mix and wage-adjusted episode payment 
on a split percentage payment approach. The split percentage payment 
approach includes an initial percentage payment and a final percentage 
payment as set forth in Sec.  484.205(b)(1) and Sec.  484.205(b)(2). We 
may base the initial percentage payment on the submission of a request 
for anticipated payment (RAP) and the final percentage payment on the 
submission of the claim for the episode, as discussed in Sec.  409.43. 
The claim for the episode that the HHA submits for the final percentage 
payment determines the total payment amount for the episode and whether 
we make an applicable adjustment to the 60-day case-mix and wage-
adjusted episode payment. The end date of the 60-day episode as 
reported on the claim determines which calendar year rates Medicare 
would use to pay the claim.
    We may also adjust the 60-day case-mix and wage-adjusted episode 
payment based on the information submitted on the claim to reflect the 
following:
     A low utilization payment provided on a per-visit basis as 
set forth in Sec.  484.205(c) and Sec.  484.230.
     A partial episode payment adjustment as set forth in Sec.  
484.205(d) and Sec.  484.235.
     An outlier payment as set forth in Sec.  484.205(e) and 
Sec.  484.240.
b. Proposed Updated CY 2013 National Standardized 60-Day Episode 
Payment Rate
    In calculating the annual update for the CY 2012 national 
standardized 60-day episode payment rates, we first look at the CY 2012 
rates as a starting point. The CY 2012 national standardized 60-day 
episode payment rate is $2,138.52.
    Next, we update the payment amount by the proposed CY 2013 home 
health payment update of 1.5 percent.
    As previously discussed in section III.A. (``Case-Mix 
Measurement'') of this proposed rule, our updated analysis of the 
change in case-mix that is not due to an underlying change in patient 
health status reveals an additional increase in nominal change in case-
mix. Therefore, we propose to reduce rates by 1.32 percent in CY 2013. 
The national 60-day episode payment amount is adjusted by the case-mix 
weight of the patient and by the wage index of the geographic area in 
which the beneficiary is located. The proposed CY 2013 national 
standardized 60-day episode payment rate for an HHA that submits the 
required quality data is shown in Table 11. The proposed CY 2013 
national standardized 60-day episode payment rate for an HHA that does 
not submit the required quality data is updated by the proposed CY 2013 
home health payment update (1.5 percent) minus 2 percentage points and 
is shown in Table 12.

                        Table 11--Proposed CY 2013 National 60-Day Episode Payment Amount
----------------------------------------------------------------------------------------------------------------
                                                     Multiply by the
                                                     proposed CY 2013      Reduce by 1.32      Proposed CY 2013
   CY 2012 National standardized 60-day episode    home health payment  percent for nominal   National standard-
                   payment rate                       update of 1.5      change in case-mix  ized 60-day episode
                                                         percent                                 payment rate
----------------------------------------------------------------------------------------------------------------
$2,138.52........................................             x 1.015             x 0.9868            $2,141.95
----------------------------------------------------------------------------------------------------------------

[[Page 41567]]

 Table 12--For HHAs That Do Not Submit the Quality Data--Proposed CY 2013 National 60-Day Episode Payment Amount
----------------------------------------------------------------------------------------------------------------
                                                     Multiply by the
                                                     proposed CY 2013                          Proposed CY 2013
                                                       home health         Reduce by 1.32          national
   CY 2012 National standardized 60-day episode     payment  update of  percent for nominal  standardized 60-day
                   payment rate                     1.5  percent minus   change in case-mix    episode payment
                                                   2 percentage points                               rate
                                                      (-0.5 percent)
----------------------------------------------------------------------------------------------------------------
$2,138.52........................................             x 0.995             x 0.9868             $2099.74
----------------------------------------------------------------------------------------------------------------

c. National Per-Visit Rates
    The national per-visit rates are used to pay LUPAs and are also 
used to compute imputed costs in outlier calculations. The per-visit 
rates are paid by type of visit or home health discipline. The six home 
health disciplines are as follows:
     Home Health Aide (HH aide);
     Medical Social Services (MSS);
     Occupational Therapy (OT);
     Physical Therapy (PT);
     Skilled Nursing (SN); and
     Speech Language Pathology Therapy (SLP).
    In order to calculate the CY 2013 national per-visit rates, the CY 
2012 national per-visit rates for each discipline are updated by the 
proposed CY 2013 home health payment update of 1.5 percent. The 
national per-visit rates are adjusted by the wage index based on the 
site of service of the beneficiary. The per-visit rates are not case-
mix adjusted nor are they subject to the 1.32 percent reduction related 
to the nominal increase in case-mix.
    The per-visit payment amounts for LUPAs are separate from the LUPA 
Add-On amount which is paid for episodes that occur as the only episode 
or initial episode in a sequence of adjacent episodes. The CY 2013 
national per-visit rates are shown in Table 13.

                                              Table 13--Proposed CY 2013 National Per-Visit Payment Amounts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           For HHAs that DO submit the required      For HHAs that DO  NOT submit the
-------------------------------------------------------------------------              quality data                        required quality data
                                                                         -------------------------------------------------------------------------------
                                                                                                                    Multiply by the
                                                                                                                   proposed CY 2013
                                                       CY 2012 per-visit    Multiply by the                        payment update of
             Home health discipline type               amounts per  60-    proposed CY 2013    Proposed CY 2013    1.5 percent minus   Proposed CY 2013
                                                          day episode      payment update of   per-visit payment     2 percentage      per-visit payment
                                                                              1.5 percent                            points (-0.5
                                                                                                                       percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
HH Aide.............................................              $51.13             x 1.015              $51.90             x 0.995              $50.87
MSS.................................................              180.96             x 1.015              183.67             x 0.995              180.06
OT..................................................              124.26             x 1.015              126.12             x 0.995              123.64
PT..................................................              123.43             x 1.015              125.28             x 0.995              122.81
SN..................................................              112.88             x 1.015              114.57             x 0.995              112.32
SLP.................................................              134.12             x 1.015              136.13             x 0.995              133.45
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. LUPA Add-on Payment Amount Update
    Beginning in CY 2008, LUPA episodes that occur as the only episode 
or initial episode in a sequence of adjacent episodes are adjusted by 
adding an additional amount to the LUPA payment before adjusting for 
area wage differences. We update the LUPA payment amount by the 
proposed CY 2013 home health payment update of 1.5 percent. The LUPA 
add-on payment amount is not subject to the 1.32 percent reduction 
related to the nominal increase in case-mix. For CY 2013, we propose 
that the add-on to the LUPA payment to HHAs that submit the required 
quality data be updated by the proposed CY 2013 home health payment 
update of 1.5 percent. The proposed CY 2013 LUPA add-on payment amount 
is shown in Table 14. We propose that the add-on to the LUPA payment to 
HHAs that do not submit the required quality data would be updated by 
the proposed CY 2013 home health payment update (1.5 percent) minus two 
percentage points.

                                 Table 14--Proposed CY 2013 LUPA Add-On Amounts
----------------------------------------------------------------------------------------------------------------
                                For HHAs that DO  submit the required        For HHAs that DO NOT submit the
                                            quality data                          required quality data
                             -----------------------------------------------------------------------------------
                                                                          Multiply by the
 CY 2012 LUPA add-on amount     Multiply by the                           proposed CY 2013
                                proposed CY 2013     Proposed CY 2013    payment update of     Proposed CY 2013
                               payment update of    LUPA add-on amount  1.5 percent minus 2   LUPA add-on amount
                                  1.5 percent                           percentage points (-
                                                                            0.5 percent)
----------------------------------------------------------------------------------------------------------------
$94.62......................             x 1.015               $96.04              x 0.995               $94.15
----------------------------------------------------------------------------------------------------------------

[[Page 41568]]

e. Nonroutine Medical Supply Conversion Factor Update
    Payments for nonroutine medical supplies (NRS) are computed by 
multiplying the relative weight for a particular severity level by the 
NRS conversion factor. We first increase CY 2012 NRS conversion factor 
($53.28) by the proposed payment update of 1.5 percent. The final 
updated CY 2013 NRS conversion factor for 2013 appears in Table 15.

Table 15--Proposed CY 2013 NRS Conversion Factor for HHAs That DO Submit
                        the Required Quality Data
------------------------------------------------------------------------
                                  Multiply by the
                                  proposed CY 2013     Proposed CY 2013
 CY 2012 NRS conversion factor   payment update of      NRS conversion
                                    1.5 percent             factor
------------------------------------------------------------------------
$53.28........................             x 1.015               $54.08
------------------------------------------------------------------------

    Using the NRS conversion factor ($54.08) for CY 2013, the payment 
amounts for the various severity levels are shown in Table 16.

        Table 16--Proposed CY 2013 NRS Payment Amounts for HHAs That DO Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed CY
                 Severity level                         Points  (scoring)            Relative        2013 NRS
                                                                                      Weight      payment amount
----------------------------------------------------------------------------------------------------------------
1..............................................  0..............................          0.2698          $14.59
2..............................................  1 to 14........................          0.9742           52.68
3..............................................  15 to 27.......................          2.6712          144.46
4..............................................  28 to 48.......................          3.9686          214.62
5..............................................  49 to 98.......................          6.1198          330.96
6..............................................  99+............................         10.5254          569.21
----------------------------------------------------------------------------------------------------------------

    For HHAs that do not submit the required quality data, we again 
begin with the CY 2012 NRS conversion factor. We first increase the CY 
2012 NRS conversion factor ($53.28) by the proposed CY 2013 home health 
payment update of 1.5 percent minus 2 percentage points. The CY 2013 
NRS conversion factor for HHAs that do not submit quality data is shown 
in Table 17.

  Table 17--Proposed CY 2013 NRS Conversion Factor for HHAs That DO NOT
                    Submit the Required Quality Data
------------------------------------------------------------------------
                                  Multiply by the
                                  proposed CY 2013
                                 payment update of     Proposed CY 2013
 CY 2012 NRS Conversion Factor  1.5 percent minus 2     NRS conversion
                                percentage points (-        factor
                                    0.5 percent)
------------------------------------------------------------------------
$53.28........................             x 0.995               $53.01
------------------------------------------------------------------------

    The payment amounts for the various severity levels based on the 
updated conversion factor for HHAs that do not submit quality data are 
calculated in Table 18.

      Table 18--Proposed CY 2013 NRS Payment Amounts for HHAs That Do Not Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                                     Relative      Proposed  NRS
                 Severity level                         Points  (scoring)             weight      payment amount
----------------------------------------------------------------------------------------------------------------
1..............................................  0..............................          0.2698          $14.30
2..............................................  1 to 14........................          0.9742           51.64
3..............................................  15 to 27.......................          2.6712          141.60
4..............................................  28 to 48.......................          3.9686          210.38
5..............................................  49 to 98.......................          6.1198          324.41
6..............................................  99+............................         10.5254          557.95
----------------------------------------------------------------------------------------------------------------

[[Page 41569]]

6. Rural Add-On
    Section 421(a) of the MMA required, for home health services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act), with respect to episodes or visits ending on or after April 1, 
2004 and before April 1, 2005, that the Secretary increase the payment 
amount that otherwise would have been made under section 1895 of the 
Act for the services by 5 percent.
    Section 5201 of the DRA amended section 421(a) of the MMA. The 
amended section 421(a) of the MMA required, for home health services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act), on or after January 1, 2006 and before January 1, 2007, that the 
Secretary increase the payment amount otherwise made under section 1895 
of the Act for those services by 5 percent.
    Section 3131(c) of the Affordable Care Act amended Section 421(a) 
of the MMA to provide an increase of 3 percent of the payment amount 
otherwise made under section 1895 of the Act for home health services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act), for episodes and visits ending on or after April 1, 2010 and 
before January 1, 2016.
    The statute waives budget neutrality related to this provision, as 
the statute specifically states that the Secretary shall not reduce the 
standard prospective payment amount (or amounts) under section 1895 of 
the Act applicable to home health services furnished during a period to 
offset the increase in payments resulting in the application of this 
section of the statute.
    The 3 percent rural add-on is applied to the national standardized 
60-day episode rate, national per-visit rates, LUPA add-on payment, and 
NRS conversion factor when home health services are provided in rural 
(non-CBSA) areas. Refer to Tables 19 through 23 for these payment 
rates.

      Table 19--Proposed CY 2013 Payment Amounts for 60-Day Episodes for Services Provided in a Rural Area
----------------------------------------------------------------------------------------------------------------
          For HHAs that do submit quality data                   For HHAs that do not submit quality data
----------------------------------------------------------------------------------------------------------------
Proposed CY  2013                      Proposed  rural   Proposed CY  2013                      Proposed  rural
     national       Multiply  by the   CY 2013 national       national       Multiply  by the   CY 2013 national
 standardized 60-   3 percent rural    standardized 60-   standardized 60-   3 percent rural    standardized 60-
   day episode           add-on          day episode        day episode           add-on          day episode
   payment rate                          payment rate       payment rate                          payment rate
----------------------------------------------------------------------------------------------------------------
       $2,141.95             x 1.03          $2,206.21          $2,099.74             x 1.03          $2,162.73
----------------------------------------------------------------------------------------------------------------

               Table 20--Proposed CY 2013 Per-Visit Amounts for Services Provided in a Rural Area
----------------------------------------------------------------------------------------------------------------
                                     For HHAs that do submit quality data   For HHAs that do not submit quality
                                   ---------------------------------------                  data
                                                                          --------------------------------------
                                                   Multiply     Proposed                  Multiply
    Home health discipline type       Proposed     by the 3     rural CY     Proposed     by the 3     Proposed
                                    CY 2013 per-   percent     2013 per-   CY 2013 per-   percent      rural CY
                                     visit rate   rural add-   visit rate   visit rate   rural add-   2013 per-
                                                      on                                     on       visit rate
----------------------------------------------------------------------------------------------------------------
HH Aide...........................       $51.90       x 1.03       $53.46       $50.87       x 1.03       $52.40
MSS...............................       183.67       x 1.03       189.18       180.06       x 1.03       185.46
OT................................       126.12       x 1.03       129.90       123.64       x 1.03       127.35
PT................................       125.28       x 1.03       129.04       122.81       x 1.03       126.49
SN................................       114.57       x 1.03       118.01       112.32       x 1.03       115.69
SLP...............................       136.13       x 1.03       140.21       133.45       x 1.03       137.45
----------------------------------------------------------------------------------------------------------------

               Table 21--Proposed CY 2013 LUPA Add-On Amounts for Services Provided in Rural Areas
----------------------------------------------------------------------------------------------------------------
          For HHAs that do submit quality data                   For HHAs that do not submit quality data
----------------------------------------------------------------------------------------------------------------
 Proposed CY 2013   Multiply by  the  Proposed rural CY   Proposed CY 2013  Multiply by the 3  Proposed rural CY
   LUPA add-on      3 percent rural    2013 LUPA add-on     LUPA add-on     percent rural add-  2013 LUPA add-on
      amount             add-on             amount             amount               on               amount
----------------------------------------------------------------------------------------------------------------
          $96.04             x 1.03             $98.92             $94.15             x 1.03             $96.97
----------------------------------------------------------------------------------------------------------------

              Table 22--Proposed CY 2013 NRS Conversion Factor for Services Provided in Rural Areas
----------------------------------------------------------------------------------------------------------------
          For HHAs that do submit quality data                   For HHAs that do not submit quality data
----------------------------------------------------------------------------------------------------------------
                    Multiply by  the  Proposed rural CY                      Multiply  by the  Proposed CY rural
 Proposed CY 2013   3 percent  rural   2013 conversion    Proposed CY 2013   3 percent  rural   2013 conversion
conversion factor        add-on             factor       conversion factor        add-on             factor
----------------------------------------------------------------------------------------------------------------
          $54.08             x 1.03             $55.70             $53.01             x 1.03             $54.60
----------------------------------------------------------------------------------------------------------------

[[Page 41570]]

               Table 23--Proposed CY 2013 NRS Payment Amounts for Services Provided in Rural Areas
----------------------------------------------------------------------------------------------------------------
                                                          For HHAs that do submit    For HHAs that do not submit
                                                             quality data (NRS            quality data (NRS
                                                        Conversion Factor = $55.70)  Conversion Factor = $54.60)
      Severity level             Points  (scoring)     ---------------------------------------------------------
                                                                       Total NRS                    Total NRS
                                                         Relative   payment amount    Relative   payment amount
                                                          weight    for rural areas    weight    for rural areas
----------------------------------------------------------------------------------------------------------------
1.........................  0                              0.2698            $15.03     0.2698            $14.73
2.........................  1 to 14                        0.9742             54.26     0.9742             53.19
3.........................  15 to 27                       2.6712            148.79     2.6712            145.85
4.........................  28 to 48                       3.9686            221.05     3.9686            216.69
5.........................  49 to 98                       6.1198            340.87     6.1198            334.14
6.........................  99+                           10.5254            586.26    10.5254            574.69
----------------------------------------------------------------------------------------------------------------

D. Home Health Face-to-Face Encounter

1. Acute or Post-Acute Physician Flexibility
    As a condition for payment, the Affordable Care Act requires that, 
prior to certifying a patient's eligibility for the home health 
benefit, the physician must document that the physician himself or 
herself or an allowed nonphysician practitioner (NPP) has had a face-
to-face encounter with the patient. Specifically, the Affordable Care 
Act states that a nurse practitioner or clinical nurse specialist, as 
those terms are defined in section 1861(aa)(5) of the Act, working in 
collaboration with the physician in accordance with State law, or a 
certified nurse-midwife (as defined in section 1861(gg) of the Act) as 
authorized by State law, or a physician assistant (as defined in 
section 1861(aa)(5) of the Act) under the supervision of the physician 
may perform the face to face encounter and inform the certifying 
physician, who documents the encounter as part of the certification of 
eligibility. In the CY 2012 HH PPS final rule (76 FR 68597), we stated 
that, in addition to the certifying physician and allowed NPPs, the 
physician who cared for the patient in an acute or post-acute care 
facility, and who had privileges in such facility, could also perform 
the face-to-face encounter and inform the certifying physician, who 
would document the encounter as part of the certification of 
eligibility, and that encounter supported the patient's homebound 
status and need for skilled services.
    For patients admitted to home health following care in an acute or 
post-acute care facility, the home health industry has asked whether it 
would be acceptable for an allowed NPP, working in the acute or post-
acute facility, to perform the face-to-face encounter in collaboration 
with the acute or post-acute care physician and communicate his or her 
clinical findings to the acute or post-acute care physician and, then, 
for the acute or post-acute care physician to communicate the NPP's 
findings to the certifying physician. In practice, it is our 
understanding from these stakeholders that acute or post-acute care 
physicians utilize NPPs to obtain information about the patient's 
clinical condition. As such, the industry suggests that it would be 
reasonable and appropriate for an allowed NPP working in an acute or 
post-acute facility to perform the face-to-face encounter and 
communicate the clinical findings to the acute or post-acute care 
physician who would then communicate information regarding the 
patient's homebound status and need for skilled services to the 
certifying physician. However, we do not believe the statute 
specifically addresses this situation.
    Currently, in guidance in the form of Qs and As and a recent MLN 
article available on CMS' Home Health Agency Center Web site (http://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html), 
we have communicated that physician residents, under the supervision of 
a teaching physician, would be allowed to perform the face-to-face 
encounter in the acute or post-acute facility and inform the teaching 
physician of the clinical findings of that face-to-face encounter. The 
teaching physician, in turn, informs the certifying physician of the 
clinical findings of the face-to-face encounter, to include the 
patient's homebound status and the need for skilled services.
    A resident is not precluded from performing the face-to-face 
encounter because he or she is a physician and can perform the 
encounter. However, we stated that because a resident does not have 
privileges, the teaching physician would be responsible for informing 
the certifying physician of the patient's homebound status and need for 
skilled services. Since we recognize this exchange of information 
between residents and teaching physicians as allowable under existing 
face-to-face requirements we believe that NPPs should not be precluded 
from performing the face-to-face encounter in collaboration with the 
acute or post-acute care physician who has privileges and cared for the 
patient in the acute or post-acute facility, informing the acute or 
post-acute care physician of the patient's clinical condition, and 
having the acute or post-acute care physician inform the certifying 
physician of the patient's homebound status and need for skilled 
services.
    Therefore, for patients admitted to home health from an acute or 
post-acute facility, we propose to modify the regulations at Sec.  
424.22(a)(1)(v) to allow an NPP in an acute or post-acute facility to 
perform the face-to-face encounter in collaboration with or under the 
supervision of the physician who has privileges and cared for the 
patient in the acute or post-acute facility, and allow such physician 
to inform the certifying physician of the patient's homebound status 
and need for skilled services. For the specific proposed changes to 
part 424, see the regulation text of this proposed rule. We encourage 
stakeholder comment on these proposed changes.
    In addition to meeting the goals of the face-to-face encounter 
provision, we believe this proposed policy change will result in more 
efficient care coordination between the acute or post-acute NPP and 
physician, and the certifying physician. We believe this more efficient 
care delivery will result in an improved transition of care from the 
acute or post-acute facility to the home health setting. Improving a 
patient's transition from one healthcare setting to another is widely 
regarded to be directly related to improved patient care and improved 
patient outcomes. We believe that this policy change would encourage 
the acute or post-acute NPP who is best informed of the patient's most 
current clinical condition to collaboratively communicate the patient's 
need for home health services to the physician who cared for the 
patient in the acute or post-acute facility, who would then inform the 
certifying physician. Because a standard protocol of communication or 
documentation is not mandated between the acute or post-acute NPP,

[[Page 41571]]

the acute or post-acute physician, and a patient's community physician, 
we believe the additional flexibility with the face-to-face encounter 
will encourage increased communication between the allowed 
practitioners and better care coordination for the patient. Further, 
for patients admitted to home health from an acute or post-acute 
facility, such a policy would be consistent with what believe is the 
goal of the provision, which is increased physician involvement in a 
patient's home health certification, without creating additional burden 
or preventing access to care. We believe that increased physician and 
NPP communication regarding the patient's clinical condition fits 
within the framework of Congress' goals associated with the face-to-
face encounter requirement.
2. Regulatory Text Clarification
    Additionally, because of the way our regulatory text is constructed 
at Sec.  424.22(a)(1)(v)(D), we received notice that claims are being 
denied if the face-to-face documentation is not ``clearly titled'' by 
the certifying physician. Our intent was that the face-to-face 
documentation be clearly titled, but not necessarily by the certifying 
physician. As such, we propose to revise our regulatory language so as 
to not be prescriptive as to what entity must title the documentation. 
The face-to-face documentation must still be signed by the certifying 
physician, and the content requirements are not changing. For the 
specific proposed changes to part 424, see the regulation text of this 
proposed rule. We encourage stakeholder comment on these proposed 
changes.

E. Therapy Coverage and Reassessments

1. Therapy Coverage
    In the CY 2011 HH PPS final rule (75 FR 70389), we clarified 
policies related to how therapy services are to be provided and 
documented, and began requiring additional therapy documentation to 
support medical necessity to address continuing concerns regarding the 
provision of unnecessary therapy in the home health setting. 
Specifically, we required that: (1) Measurable treatment goals be 
described in the plan of care and that the patient's clinical record 
demonstrate that the method used to assess a patient's function include 
objective measurement and successive comparisons of measurements, thus 
enabling objective measurement of progress toward goals and/or therapy 
effectiveness; (2) a qualified therapist (instead of an assistant) 
perform the needed therapy service, assess the patient, measure 
progress, and document progress toward goals at least once least every 
30 days during a therapy patient's course of treatment; (3) for those 
patients needing more than 13 or 19 therapy visits, we require that a 
qualified therapist (instead of an assistant) perform the therapy 
service required at the 13th or 19th visit, assess the patient, and 
measure and document effectiveness of the therapy; and (4) we cease 
coverage of therapy services if progress towards plan of care goals 
cannot be measured, unless the documentation supports the expectation 
that progress can be expected in a reasonable and predictable 
timeframe. We also finalized policies that provide additional 
flexibility for the 13th and 19th visit requirements in cases when: (1) 
The patient resides in a rural area; (2) documented exceptional 
circumstances prevent the qualified therapist from making the required 
visit; and (3) patients receive more than one type of therapy.
    Although in the CY 2011 HH PPS final rule, we clarified our therapy 
coverage requirements and instituted polices that, in exceptional 
circumstances, provide flexibility in fulfilling these requirements, 
concerns regarding certain aspects of these policies persist. The first 
issue involves the timing of when the resumption of coverage occurs 
after a qualified therapist misses one of the required 13th/19th or at 
least once every 30 days reassessment visits. Currently, when a 
qualified therapist misses one of the required reassessment visits, 
once the therapist has completed the required reassessment, coverage 
resumes after this reassessment visit. Some agencies and therapists 
believe they are being unfairly penalized by this policy and that the 
reassessment visit should be covered as therapy was also provided 
during that visit even though it was not timely.
    The second issue concerns patients receiving more than one type of 
therapy and the lack of coverage for all therapy disciplines if the 
required reassessment visit is missed for any one of the therapy 
disciplines for which therapy services are being provided. Currently, 
if a patient receives more than one type of therapy and the required 
reassessment visit is missed for any one of the therapy disciplines for 
which therapy services are being provided, therapy visits are not 
covered for any of the therapy disciplines until the qualified 
therapist that missed the reassessment visit complies with the 
reassessment visit requirements. Therefore, even if qualified 
therapists from the other therapy disciplines have completed all their 
required reassessment visits, therapy visits for these disciplines 
would not be covered until the qualified therapist who missed the 
reassessment visit has completed the previously missed reassessment 
visit. We received feedback from the home health industry that they 
believe this requirement is unfair in that it denies coverage for 
therapy disciplines that have met their requirement for qualified 
therapists to complete a reassessment visit and that they are providing 
what should be considered covered therapy services. We had additional 
concerns that this requirement may be negatively impacting 
beneficiaries' access to therapy services. That is, if an agency 
anticipates a visit will not be covered because one qualified therapist 
has not completed the required reassessment, it might be reluctant for 
any therapy visits to occur until that missed reassessment visit is 
completed. This is obviously not in the best interest of the 
beneficiary.
    We propose to revise our regulations at Sec.  409.44(c)(2)(i)(E) to 
state that if a qualified therapist missed a reassessment visit, 
therapy coverage would resume with the visit during which the qualified 
therapist completed the late reassessment, not the visit after the 
therapist completed late reassessment. We would expect minimal changes 
to claims submissions as a result of this policy change. However, we 
will monitor claims for unintended consequences, including possible up-
coding associated with therapy-related home health resource groups 
(HHRGs) pre- and post-implementation.
    In addition, we propose to revise our regulations at Sec.  
409.44(c)(2)(i)(E) to state that in cases where multiple therapy 
disciplines are involved, if the required reassessment visit was missed 
for any one of the therapy disciplines for which therapy services were 
being provided, therapy coverage would cease only for that particular 
therapy discipline. Therefore, as long as the required therapy 
reassessments were completed timely for the remaining therapy 
disciplines, therapy services would continue to be covered for those 
therapy disciplines. We encourage stakeholder comment on these proposed 
changes.
2. When Therapy Reassessment Visits Are To Be Conducted
    We continue to receive questions regarding acceptable visit ranges 
for the required 13th and 19th reassessment visits. As we codified at 
Sec.  409.44(c)(2)(i)(C)(1) and Sec.  409.44(c)(2)(i)(D)(1), if either 
a patient lives in a rural area, or documented circumstances outside 
the therapist's

[[Page 41572]]

control prevent her or him from completing the reassessment visit at 
the 13th or 19th visit, this requirement can be met by the therapist 
having made the visit during the 11th or 12th visit for the required 
13th visit or the 17th or 18th visit for the required 19th visit.
    We also intended for similar flexibility to be applicable in cases 
where beneficiaries are receiving more than one type of therapy. 
Therefore, we included in our regulations at Sec.  
409.44(c)(2)(i)(C)(2) and Sec.  409.44(c)(2)(i)(D)(2) that the 
therapist's visit need only be ``close to'' the 13th and 19th visits. 
However, because we recognize the industry's need for additional 
guidance, to provide more precise guidance, we propose to revise the 
regulations at Sec.  409.44(c)(2)(i)(C)(1) and Sec.  
409.44(c)(2)(i)(D)(1) to clarify that in cases where the patient is 
receiving more than one type of therapy, qualified therapists could 
complete their reassessment visits during the 11th, 12th, or 13th visit 
for the required 13th visit reassessment and the 17th, 18th, or 19th 
visit for the required 19th visit reassessment. We encourage 
stakeholder comment on these proposed changes.
3. Technical Correction to G-Code Description
    As part of our ``Home Health Prospective Payment System Rate Update 
for Calendar Year 2011,'' (75 FR 70389) we also provided notice of 
changes to existing G-codes and new G-codes related to skilled nursing 
and therapy services (75 FR 43248). In Change Request 7182, we 
finalized these new and revised G-codes. These codes included G0158, 
which had as its description, ``Services performed by a qualified 
occupational therapist assistant in the home health or hospice setting, 
each 15 minutes.'' After the publication of these codes, a national 
therapy association informed us that the use of the word, ``therapist'' 
rather than ``therapy'' is technically incorrect for the occupational 
therapy profession. This association requested that we change the 
terminology in the G-code. Because this description includes the 
terminology, ``occupational therapist assistant,'' we propose to make a 
technical correction to this terminology in G0158, so that the new 
description would instead include the terminology, ``occupational 
therapy assistant,'' making it also consistent with Sec.  484.4.

F. Payment Reform: Home Health Study and Report

    To address concerns that some beneficiaries are at risk of not 
having access to Medicare home health services and that the current HH 
PPS may encourage providers to adopt selective admission patterns, 
section 3131(d) of the Affordable Care Act requires the Secretary to 
conduct a study on home health agency costs involved with providing 
access to care to low-income Medicare beneficiaries or beneficiaries in 
medically underserved areas, and in treating beneficiaries with varying 
levels of severity of illness (specifically, beneficiaries with ``high 
levels of severity of illness''). As part of the study, we plan to 
assess whether these vulnerable populations (low-income Medicare 
beneficiaries, beneficiaries in medically underserved areas, and 
beneficiaries with high levels of severity of illness) experience 
access issues. We may also analyze methods to revise the current HH PPS 
to ensure access to care and better account for costs for these 
beneficiaries.
    Methods to revise the current HH PPS could include payment 
adjustments for services that involve either more or fewer resources, 
changes to reflect resources involved with providing home health 
services to low-income Medicare beneficiaries or Medicare beneficiaries 
residing in medically underserved area, and ways outlier payments could 
be revised to reflect costs of treating Medicare beneficiaries with 
high severity of illness. In addition, section 3131(d) of the 
Affordable Care Act allows for the investigation into other issues with 
the payment system as the Secretary determines appropriate. Therefore, 
in addition to examining access to care for vulnerable populations and 
examining ways to more accurately align payment with resource costs, we 
also plan to evaluate the current HH PPS and develop possible revisions 
to the payment system that might minimize vulnerabilities.
    As we stated in the CY 2012 proposed rule (76 FR 41025), we awarded 
a contract in the fall of 2010 to perform exploratory work for the 
study. The contractor performed a literature review of HH PPS payment 
vulnerabilities and access issues, established and convened technical 
expert panels and open door forums to help define the vulnerable 
populations and to gain insight on access issues these populations may 
face, and performed preliminary analysis looking at resource costs 
versus Medicare reimbursement. In September 2011, we awarded a study 
contract to develop an analytic plan, perform detailed analysis, and if 
necessary, develop recommendations for changes to the HH PPS. We are in 
the preliminary stages of our analyses. We plan to provide updates 
regarding our progress in future rulemaking and open door forums.
    The Affordable Care Act requires that the Secretary submit a Report 
to Congress regarding the study no later than March 1, 2014. The report 
may contain recommendations for revisions to the HH PPS, 
recommendations for legislation and administrative action, and 
recommendations for whether further research is needed. The Congress 
also provided CMS with the authority to conduct a separate 
demonstration project to test recommended HH PPS changes resulting from 
the study.

G. International Classification of Diseases, 10th Edition (ICD-10) 
Transition Plan and Grouper Enhancements

    On April 17, 2012 the Department of Health and Human Services (HHS) 
published a proposed rule ``Administrative Simplification: Adoption of 
a Standard for a Unique Health Plan Identifier; Addition to the 
National Provider Identifier Requirements; and a Change to the 
Compliance Date for ICD-10-CM and ICD-10-PCS Medical Data Code Set'' 
(77 FR 22950) that proposed, among other things, to delay, from October 
1, 2013 to October 1, 2014, the compliance date for the International 
Classification of Diseases, 10th Edition diagnosis and procedure codes 
(ICD-10). Any changes to the effective date for ICD-10 implementation 
would be announced in future rulemaking. We will include an update in 
our final rule and outline any impact on our ICD-10 transition plans as 
a result of the proposed change in ICD-10 compliance date.
    Although a compliance date change has been proposed, we continue to 
work with the HH PPS Grouper maintenance contractor to revise the HH 
PPS Grouper to accommodate ICD-10-CM codes. Home Health Agencies 
currently report IC-9-CM codes for their patients through OASIS-C. For 
Medicare patients, the data collection software invokes HH PPS Grouper 
software. The HH PPS Grouper will be revised to utilize ICD-10-CM 
codes. If determined to be appropriate, we plan to publish a draft list 
of ICD-10-CM codes for the HH PPS Grouper by the summer of 2012 for 
industry review and comment. An email account on the ICD-10 section of 
the CMS Web site to facilitate receipt of comments on the draft list of 
ICD-10-CM codes will be provided. Our current plans are to describe the 
testing approach for the HH PPS Grouper to accommodate and process ICD-
10 codes on the ICD-10 section of the CMS Web site in conjunction with 
the release of the draft grouper in April 2013. We plan

[[Page 41573]]

to update providers of any changes to our current plans through the 
following forums: the ICD-10 Home Health section of the CMS Web site, 
the Home Health, Hospice and DME Open Door Forums, and provider 
outreach sessions for ICD-10.
    In December 2008, we updated and released Attachment D: Selection 
and Assignment of OASIS Diagnoses to promote accurate selection and 
assignment of the patient's diagnosis (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/OASIS_Attachment_D_Guidance.html). This guidance was designed to ensure that providers 
limited the number of diagnoses assigned to M1024. In addition, 
Attachment D reminded HHA clinicians/coders to comply with ICD-9-CM 
coding guidelines when assigning primary and secondary diagnoses to the 
OASIS items M1020 and M1022. Analysis conducted by our HH PPS Grouper 
maintenance contractor revealed that many HHAs do not comply with these 
guidelines. The analysis demonstrated that HHAs are not limiting the 
number of diagnoses assigned to M1024 and continue to not comply with 
ICD-9-CM coding guidelines. We have reviewed the diagnosis codes 
identified in the HH PPS Grouper and confirmed that the only codes that 
cannot be reported as a primary or secondary diagnosis code (M1020 and 
M1022) are the fracture codes (V-code). As a result, we are proposing 
two enhancements for the HH PPS Grouper which we believe will encourage 
compliance with coding guidelines.
    We propose to restrict M1024 to only permit fracture (V-code) 
diagnoses codes which according to ICD-9-CM coding guidelines cannot be 
reported in a home health setting as a primary or secondary diagnosis. 
To further ensure compliance with proper coding guidelines, we propose 
to pair the fracture codes (V-code) with appropriate diagnosis codes 
and only when these pairings appear in the primary and payment 
diagnosis fields will the grouper award points. Currently, when a code 
from the Diabetes, Skin 1 or Neuro 1 group is submitted in the primary 
diagnosis position (M1020) the diagnosis code may score additional 
points. In situations where ICD-9 coding guidelines have required a V-
code to be submitted in the M1020 position, HHAs have been instructed 
to report the etiology code in the payment diagnosis field (M1024) and 
receive equivalent scoring. Specifically, we are proposing a revision 
in HHRG logic to permit equivalent scoring when the Diabetes, Skin 1 or 
Neuro 1 codes are submitted immediately following the V-code in the 
M1020 position without requiring utilization of the payment diagnosis 
field. These grouper enhancements will enforce appropriate use of our 
payment diagnosis field based upon the guidance issued in Attachment D 
(putting us in a much more favorable position to eventually retire the 
payment diagnosis field) until we move to ICD-10 where there is no 
longer an issue with fracture codes, and ensure ICD-9 and ICD-10 coding 
guidelines are followed to assist in the eventual transition of 
grouping the claim, versus OASIS, to determine the appropriate HIPPS 
code for payment.

IV. Quality Reporting for Hospices

A. Background and Statutory Authority

    Section 3004 of the Affordable Care Act amends the Act to authorize 
a quality reporting program for hospices. As added by section 3004 (c), 
new 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 fiscal year. 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 will not be cumulative and will not 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. 
Such data must be submitted in a form and manner, and at a time 
specified by the Secretary. Any measures selected by the Secretary must 
have been 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 a measure(s) that is(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. Under section 1814(i)(5)(D)(iii) of the Act, the Secretary 
must publish selected measures that will be applicable with respect to 
FY 2014 no later than October 1, 2012.

B. Public Availability of Data Submitted

    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. Such procedures will ensure that a 
hospice will have the opportunity to review the data regarding the 
hospice's respective program before it is made public. In addition, 
under section 1814(i)(5)(E) of the Act, the Secretary is authorized to 
report quality measures that relate to services furnished by a hospice 
on the CMS Web site. 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 it is essential 
that the data we make available to the public be meaningful data and 
that comparing performance between hospices requires that measures be 
constructed from data collected in a standardized and uniform manner. 
The development and implementation of a standardized data set for 
hospices must precede public reporting of hospice quality measures. We 
will announce the timeline for public reporting of data in future 
rulemaking.

C. Quality Measures for Hospice Quality Reporting Program and Data 
Submission Requirements for Payment Year FY 2014.

1. Quality Measures Required for Payment Year 2014
    In the Hospice Wage Index for Fiscal Year 2012 Final Rule (76 FR 
47302, 47320 (August 4, 2011)), to meet the quality reporting 
requirements for hospices for the FY 2014 payment determination as set 
forth in section 1814(i)(5) of the Act, we finalized the requirement 
that hospices report two measures:
     An NQF-endorsed measure that is related to pain 
management, NQF 0209: The percentage of patients who report 
being uncomfortable because of pain on the initial assessment (after 
admission to hospice services) who report pain was brought to a 
comfortable

[[Page 41574]]

level within 48 hours. The data collection period for this measure is 
October 1, 2012 through December 31, 2012, and the data submission 
deadline is April 1, 2013. The data for this measure are collected at 
the patient level, but are reported in the aggregate for all patients 
cared for within the reporting period, regardless of payor.
     A structural measure that is not endorsed by NQF: 
Participation in a Quality Assessment and Performance Improvement 
(QAPI) program that includes at least three quality indicators related 
to patient care. Specifically, hospice programs are required to report 
whether or not they have a QAPI program that addresses at least three 
indicators related to patient care. In addition hospices are required 
to check off, from a list of topics, all patient care topics for which 
they have at least one QAPI indicator. The data collection period for 
this measure is October 1, 2012 through December 31, 2012, and the data 
submission deadline is January 31, 2013. Hospices are not asked to 
report their level of performance on these patient care related 
indicators. The information being gathered will be used by CMS to 
ascertain the breadth and content of existing hospice QAPI programs. 
This stakeholder input will help inform future measure development.
    Hospice programs will be evaluated for purposes of the quality 
reporting program based on whether or not they respond, not on how they 
respond or on performance level. No additional measures are required 
for payment year FY 2014.
2. Data Submission Requirements for Payment Year 2014
    We will provide a Hospice Data Submission Form to be completed 
using a web-based data entry site. Training for use of this Web based 
data submission form will be provided to hospices through webinars and 
other downloadable materials before the data submission date. Though 
similar to the data entry site utilized during the hospice voluntary 
reporting period, the site will be changed to accommodate the addition 
of the NQF 0209 measure, as well as to simplify the data entry 
requirements for the structural measure. Hospices will be asked to 
provide identifying information, and then complete the web based data 
entry for the required measures. For hospices that cannot complete the 
web based data entry, a downloadable data entry form will be available 
upon request.
    The data submission form as well as details regarding education and 
resources related to the data collection and data submission for both 
the NQF 0209 measure and the structural measure will be 
provided on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting/.

D. Quality Measures for Hospice Quality Reporting Program for Payment 
Year FY 2015 and Beyond

1. Quality Measures Required for Payment Year FY 2015 and Subsequent 
Years
    To meet the quality reporting requirements for hospices for the FY 
2015 payment determination and each subsequent year, as set forth in 
section 1814(i)(5) of the Act, we propose that hospices report the 
following:
     The NQF-endorsed measure that is related to pain 
management, NQF 0209: The percentage of patients who report 
being uncomfortable because of pain on the initial assessment (after 
admission to hospice services) who report pain was brought to a 
comfortable level within 48 hours.
     The structural measure: Participation in a Quality 
Assessment and Performance Improvement (QAPI) Program that Includes at 
Least Three Quality Indicators Related to Patient Care. Specifically, 
hospice programs would report whether or not they have a QAPI program 
that addresses at least three indicators related to patient care.
    We are not extending the requirement that hospices provide a list 
of their patient care indicators. We invite comment on the proposed 
selection of measures.
2. Data Submission Requirements for Payment Year FY 2015.
    As previously noted, in the Hospice Wage Index for Fiscal Year 2012 
Final Rule, we finalized the following:
     All hospice quality reporting periods subsequent to that 
for Payment Year FY 2014 be based on a calendar year rather than a 
calendar quarter. For example, January 1, 2013 through December 31, 
2013 will be the data collection period used for determination of the 
hospice market basket update for each hospice in FY 2015, etc.; and
     Hospices submit data in the fiscal year prior to the 
payment determination. For FY 2015 and beyond, the data submission 
deadline will be April 1 of each year. For example, April 1, 2014 will 
be the data submission deadline used for determination of the hospice 
market basket update for each hospice in FY 2015, etc.

E. Additional Measures Under Consideration and Standardization of Data 
Collection

    While initially we will build a foundation for quality reporting by 
requiring hospices to report one NQF-endorsed measure and one 
structural measure, we seek to achieve a comprehensive set of quality 
measures to be available for widespread use for quality improvement and 
also informed decision making. The provision of quality care to hospice 
patients and families is of utmost importance to CMS. For annual 
payment determinations beyond FY2015, we are considering an expansion 
of the required measures to include some additional measures endorsed 
by NQF. The measures of particular interest are NQF numbers 1634, 1637, 
1638, 1639, and 0208 and can be found by searching the NQF site at 
www.qualityforum.org. We welcome comments on whether all, some, any, or 
none of these measures should be considered for future rulemaking. A 
potential timeline and titles of future measures under consideration 
are included below.
    To support the standardized collection and calculation of quality 
measures specifically focused on hospice services, we believe the 
required data elements would potentially require a standardized 
assessment instrument. We are committed to developing a quality 
reporting program for hospices that utilizes standardized methods to 
collect data needed to calculate endorsed quality measures. To achieve 
this goal, we have been working on the initial development and testing 
of a hospice patient-level data item set. This patient level item set 
could be used by all hospices at some point in the future to collect 
and submit standardized data items about each patient admitted to 
hospice. These data could be used for calculating quality measures. 
Many of the items currently in testing are already standardized and 
included in assessments used by a variety of other providers. Other 
items have been developed specifically for the hospice care settings, 
and obtain information needed to calculate the hospice-appropriate 
quality measures that were endorsed by NQF in February 2012. We are 
considering a target date for implementation of a standardized hospice 
data item set as early as CY 2014, dependent on development and 
infrastructure logistics. We welcome comments on the potential 
implementation of a hospice patient-level data item set in CY 2014.

[[Page 41575]]

    In developing the standardized data item set, we have included data 
items that will support the following endorsed measures:
     1617 Patients Treated With an Opioid Who Are Given a Bowel 
Regimen
     1634 Pain Screening
     1637 Pain Assessment
     1638 Dyspnea Treatment
     1639 Dyspnea Screening
    Starting with data collection in 2015, we envision these measures 
as possible measures that we would implement subject to future 
rulemaking. We welcome comments on the potential future implementation 
of these measures and the associated projected timeframe for 
implementation.
    We are also considering future implementation of measures based on 
an experience of care survey such as the Family Evaluation of Hospice 
Care Survey (FEHC). The NQF endorsed measure  0208 Family 
Evaluation of Hospice Care is such a measure. Implementation of an 
experience of care measure and the associated use of a specified survey 
could precede or follow the implementation of a standardized data set. 
We do not envision implementation of both a data set and an experience 
of care survey in the same year and would project implementation in 
succession in order to avoid excessive burden to hospices. We solicit 
comment on the succession of implementation of these two potential 
requirements.
    Summary Tables:

----------------------------------------------------------------------------------------------------------------
                                             Data
            Data collection               submission          APU impact                     Measures
----------------------------------------------------------------------------------------------------------------
                                         Proposed in This Proposed Rule
----------------------------------------------------------------------------------------------------------------
1/1/2013-12/31/2013....................     4/1/2014  FY 2015                    Structural measure without QAPI
                                                      (10/1/2014)                 list NQF 0209.
1/1/2014-12/31/2014....................     4/1/2015  FY 2016                    Structural measure without QAPI
                                                      (10/1/2015)                 list NQF 0209.
----------------------------------------------------------------------------------------------------------------
                    Target Date for Potential Future Implementation of Standardized Data Set
----------------------------------------------------------------------------------------------------------------
Considering Hospice Standardized Data Item Set for implementation in CY 2014.
----------------------------------------------------------------------------------------------------------------
                Target Dates for Potential Implementation of Future Measures Under Consideration
----------------------------------------------------------------------------------------------------------------
1/1/2015-12/31/2015....................     4/1/2016  FY 2017                    Structural measure without QAPI
                                                      (10/1/2016)                 list NQF 0209.
                                         ...........  .........................  Considering NQF endorsed
                                                                                  measures supported by a
                                                                                  standardized data set:
                                         ...........  .........................     1617 Patients
                                                                                 Treated With an Opioid Who Are
                                                                                 Given a Bowel Regimen
                                         ...........  .........................     1634 Pain Screening
                                         ...........  .........................     1637 Pain Assessment
                                         ...........  .........................     1638 Dyspnea
                                                                                 Treatment
                                         ...........  .........................     1639 Dyspnea
                                                                                 Screening
                                         ...........  .........................  Considering NQF endorsed
                                                                                  measure derived from the FEHC
                                                                                  survey:
                                         ...........  .........................     0208 Family
                                                                                 Evaluation of Hospice Care
----------------------------------------------------------------------------------------------------------------

V. Survey and Enforcement Requirements for Home Health Agencies

A. Background and Statutory Authority

    In the 1980s and 1990s, home health services became a rapidly 
growing segment of Medicare expenditures. During that time, Congress 
enacted several laws that dramatically expanded the authority of CMS in 
its administration of the home health benefit. The Omnibus Budget 
Reconciliation Act of 1987 (OBRA `87) (Pub. L. 100-203, enacted on 
December 22, 1987) amended the Act to incorporate provisions that would 
create mechanisms to improve the quality of home health services as 
well as long-term care services. It also provided the Secretary with 
the authority to change the manner in which CMS regulated and carried 
out enforcement actions with respect to HHAs participating in the 
Medicare program. Changes in both the HHA and long-term care arenas 
required significant adjustments and increased workload for CMS in its 
operation and regulatory oversight of these programs.
    The OBRA `87 amendments mandated an outcome-oriented survey process 
for HHAs that would include ``a survey of the quality of care and 
services furnished by the agency as measured by indicators of medical, 
nursing, and rehabilitative care,'' as reflected in section 
1891(c)(2)(C)(i)(II) of the Act. We responded to that mandate by 
creating an outcome-oriented survey process for HHAs that included 
specific procedures to be followed, including visits to patients in 
their homes. We also defined in our policies, although not in 
regulation, the different types of surveys to be used, including the 
standard, partial extended and extended surveys addressed in section 
1891 of the Act. This proposed rule would codify these types of surveys 
in regulation.
    To participate as an HHA in the Medicare program, an agency or 
organization must meet the definition of an HHA in section 1861(o) of 
the Act. Section 1861(o) of the Act defines an HHA as a public agency 
or private organization or a subdivision of such an agency or 
organization, which among other things, is primarily engaged in the 
provision of skilled nursing services and other therapeutic services, 
has policies established by a group of professional personnel, 
maintains clinical records, is licensed under State or local law, and 
meets the health and safety standards established by the Secretary. 
Additionally, section 1891(a) of the Act sets out specific 
participation requirements for HHAs. The regulations implementing 
sections 1861(o) and 1891(a) of the Act are known as health and safety 
standards, or CoPs, for HHAs and are codified in 42 CFR part 484.
    Home health services are covered for the elderly and disabled under 
the Hospital Insurance (Part A) and Supplemental Medical Insurance 
(Part B) benefits of the Medicare program. Section 1861(m) of the Act 
defines the

[[Page 41576]]

term ``home health services'' as services that must be furnished by, or 
under arrangement with, an HHA that participates in the Medicare 
program, must be provided on a visiting basis to the individual's home, 
and may include the following:
     Part-time or intermittent skilled nursing care furnished 
by or under the supervision of a registered nurse.
     Physical therapy, speech-language pathology, and 
occupational therapy.
     Medical social services under the direction of a 
physician.
     Part-time or intermittent home health aide services.
     Medical supplies, other than drugs and biologicals, but 
including osteoporosis drugs.
     Services of interns and residents if the HHA is owned by 
or affiliated with a hospital that has an approved medical education 
program.
     Services at hospitals, skilled nursing facilities, or 
rehabilitation centers when they involve equipment too cumbersome to 
bring to the home.
    The HHA CoPs were originally issued in 1973, with revisions made in 
1989 and 1991, to implement provisions of section 4021 of OBRA `87, 
which added section 1891(a) to the Act. Additional minor revisions to 
the CoPs have been made since that time. Over the years, additional 
home-health-specific areas of focus for CMS have included adjustments 
to the home health Prospective Payment System (HH PPS) and Outcome and 
Assessment Information Set (OASIS).
    The CoPs apply to an HHA as an entity, as well as to the services 
furnished to each individual under the care of the HHA, unless the CoPs 
are specifically limited to Medicare/Medicaid beneficiaries, such as 
the OASIS requirements at Sec.  484.11, Sec.  484.20 and Sec.  484.55. 
Under section 1891(b) of the Act, the Secretary is responsible for 
assuring that the CoPs, and their enforcement, are adequate to protect 
the health and safety of individuals under the care of an HHA and to 
promote the effective and efficient use of public monies.
    The Secretary is authorized to enter into an agreement with a State 
survey agency (SA) under section 1864(a) of the Act or a national 
accreditation organization (AO) under section 1865(a) of the Act, with 
oversight by CMS Regional Offices, to determine whether HHAs meet the 
Federal participation requirements for Medicare. Section 1902(a)(33)(B) 
of the Act provides for SAs to perform the same survey tasks for 
facilities participating or seeking to participate in the Medicaid 
program. The results of Medicare and Medicaid-related surveys are used 
by CMS and the Medicaid State Agency, respectively, as the basis for a 
decision to enter into, deny, or terminate a provider agreement with 
the agency. To assess compliance with Federal participation 
requirements, surveyors conduct onsite inspections (surveys) of 
agencies. In the survey process, surveyors directly observe the actual 
provision of care and services to patients and the effect or possible 
effects of that care to assess whether the care provided meets the 
assessed needs of individual patients. An SA periodically surveys HHAs 
and certifies its findings to CMS and to the State Medicaid Agency if 
the HHA is seeking to acquire or maintain Medicare or Medicaid 
certification, respectively. The general requirements regarding the 
survey and certification process are codified at 42 CFR part 488 and 
specific survey instructions are detailed in our State Operations 
Manual (SOM) (IOM Pub. 100-07) and in policy transmittals. Certain 
providers and suppliers, including HHAs, are also deemed by CMS to meet 
the Federal requirements for participation if they are accredited by an 
AO whose program is approved by CMS to meet or exceed Federal 
requirements under section 1865(a). However, these deemed providers and 
suppliers are subject to validation surveys under Sec.  488.7.
    On August 2, 1991, we published the Survey Requirements and 
Alternative Sanctions for Home Health Agencies proposed rule (56 FR 
37054) that proposed to establish survey and enforcement requirements, 
as well as alternative sanctions for HHAs under section 1891 of the 
Act, implementing the OBRA '87 provisions.
    While we attempted to finalize the proposed rule numerous times 
since its publication on August 2, 1991, sweeping changes in the law 
and other regulations, together with the demands of additional 
improvement efforts, impeded the promulgation of a final rule. Indeed, 
in response to the August 2008 Office of Inspector General (OIG) 
Report, ``Deficiency History and Recertification of Medicare Home 
Health Agencies,'' (OEI-09-06-00040), we noted that the August 2, 1991 
proposed rule would require substantial revisions and republication to 
implement the alternative sanctions. Due to the considerable length of 
time that has passed since publication of the August 2, 1991 proposed 
rule, we are now publishing a new proposed rule, which would implement 
those survey and enforcement requirements, as well as establish 
alternative sanctions specified under 1891(f) for HHAs.

B. Provisions of the Proposed Rule

1. Overview
    Sections 4022 and 4023 of OBRA '87 amended the Act by adding 
sections 1891(c) through (f) to establish requirements for surveying 
and certifying HHAs as well as to establish the authority of the 
Secretary to utilize varying enforcement mechanisms to terminate 
participation and to impose alternative sanctions if HHAs were found 
out of compliance with the CoPs. We propose to add new subparts I and J 
to 42 CFR part 488 to implement these sections of the Act. New subpart 
I would provide survey and certification guidance while new subpart J 
would outline the basis for enforcement of compliance standards for 
HHAs that are not in substantial compliance with Medicare participation 
requirements.
    In addition, we propose to amend certain sections of 42 CFR part 
488, subpart A--General Provisions. Currently, the general provisions 
include specific references to survey, certification and enforcement 
procedures for long term care facilities and the residents of those 
facilities. We are proposing to amend several regulations, where 
appropriate, to also include reference to HHAs and the patients they 
serve.
    Specifically, we propose to amend Sec.  488.2 to include the 
statutory reference to home health services (section 1861(m) of the 
Act), HHAs (section 1861(o) of the Act), and the Conditions of 
Participation (CoPs) for HHAs and home health quality (section 1891 of 
the Act).
    We propose to amend Sec.  488.3 by revising paragraph (a)(1) to 
include the statutory citations concerning HHAs mentioned above. In 
addition, we propose to amend Sec.  488.26 by revising paragraph (c)(2) 
and (e) to include references to ``patient'' and ``patients'' which is 
how individuals receiving services in an HHA are referenced. 
Furthermore, we propose to revise the heading for Sec.  488.28 to 
include reference to HHAs with deficiencies.
    Rules for certification, documentation of findings, periodic review 
of compliance and approval, certification of noncompliance, and 
determining compliance are set forth, respectively, in Sec. Sec.  
488.12, 488.18, 488.20, 488.24, and 488.26 of this part.
2. Proposed New Subpart I--Survey and Certification of HHAs
a. Basis and Scope (Sec.  488.700)
    Proposed section 488.700 of subpart I would specify the statutory 
authority for and general scope of standards proposed

[[Page 41577]]

in part 488 that establish the requirements for surveying HHAs to 
determine whether they meet the Medicare conditions of participation. 
In general, this proposed rule is based on the rulemaking authority in 
section 1891 of the Act as well as specific statutory provisions 
identified in the preamble where appropriate.
b. Definitions (Sec.  488.705)
    We propose to add Sec.  488.705 which would define certain terms. 
Sections 1891(c)(1) and (2) of the Act specify the requirements for 
types and frequency of surveys to be performed in HHAs, utilizing the 
terms ``standard'', ``abbreviated standard'', ``extended'', ``partial 
extended'' and ``complaint'' surveys, as well as specifying the minimum 
components of the standard and extended surveys. Therefore, we are 
proposing definitions for these surveys at Sec.  488.705.
    In addition to those terms, we are proposing to add definitions for 
``condition-level deficiency,'' ''deficiency,'' ``noncompliance,'' 
``standard-level deficiency,'' ``substandard care,'' and ``substantial 
compliance.'' The definitions of the different surveys as well as the 
additional proposed definitions have been a part of longstanding CMS 
policy, but have not yet been codified in the regulations for HHAs.
c. Standard Surveys (Sec.  488.710)
    At proposed Sec.  488.710, a standard survey would be conducted not 
later than 36 months after the date of the previous standard survey, as 
specified at section 1891(c)(2)(A) of the Act. Section 1891(c)(2)(C) of 
the Act requires for standard surveys, to the extent practicable, to 
review a case-mix stratified sample of individuals to whom the HHA 
furnishes services, which is reflected in proposed Sec.  488.710(a)(1). 
The statute specifies that CMS actually visit the homes of sampled 
patients, and that CMS conduct a survey of the quality of services 
being provided (as measured by indicators of medical, nursing, and 
rehabilitative care). At proposed Sec.  488.710(a), we would specify 
minimum requirements and provide that visits to homes of patients could 
be done only with the consent of the patient, their guardian or legal 
representative. The purpose of the home visit would be to evaluate the 
extent to which the quality and scope of services furnished by the HHA 
attained and maintained the highest practicable functional capacity of 
each patient as reflected in the patient's written plan of care and 
clinical records. Other forms of communication with patients, such as 
through telephone calls, could be used to complete surveys, if 
determined necessary by the State Survey Agency or CMS Regional Office. 
We also would provide in proposed Sec.  488.710(b) that the survey 
agency's failure to follow its own survey procedures would not 
invalidate otherwise legitimate determinations that deficiencies 
existed in an HHA. For example, if the Statement of Deficiencies was 
not forwarded to the provider within 10 days of the end of the exit 
conference, this would not invalidate the underlying determinations.
d. Partial Extended Survey (Sec.  488.715)
    In proposed Sec.  488.715, the partial extended survey would be 
conducted to determine if deficiencies and/or deficient practice(s) 
exist that were not fully examined during the standard survey. It would 
be conducted when a standard-level noncompliance was identified; or if 
the surveyor believed that a deficient practice existed at a standard 
or condition-level that was not examined during the standard survey. 
During the partial extended survey, the surveyor would review, at a 
minimum, additional standard(s) under the same CoP in which the 
deficient practice was identified during the standard survey. The 
surveyors could also review any additional standards under the same or 
related CoPs which would assist in making a compliance decision. Under 
Sec.  488.24 of our regulations, which applies to most other providers 
and suppliers and upon which this proposed provision is modeled, the SA 
certifies that a provider is not in compliance with the CoPs where the 
deficiencies are of such character as to substantially limit the 
provider's capacity to furnish adequate care or which adversely affect 
the health and safety of patients. A CoP may be considered out of 
compliance (and thus condition-level) for one or more standard level 
deficiencies, if, in a surveyor's judgment, the standard level 
deficiency constitutes a significant or a serious finding that 
adversely affects, or has the potential to adversely affect, patient 
outcomes. Surveyors are to use their professional judgment, in concert 
with the Federal forms, policies and interpretive guidelines in their 
assessment of a provider's compliance with the CoPs. The same 
procedures would be used with respect to HHAs.
e. Extended Surveys (Sec.  488.720)
    As described in proposed Sec.  488.720, the extended survey would 
review compliance with all CoPs and standards applicable to the HHA. It 
could be conducted at any time, at the discretion of CMS or the SA, but 
would be conducted when any condition level deficiency was found. This 
survey also would review the HHA's policies, procedures, and practices 
that produced the substandard care, which we define in proposed Sec.  
488.705 as noncompliance with one or more Conditions of Participation 
at the condition-level. The extended survey would be conducted no later 
than 14 calendar days after the completion of a standard survey which 
found the HHA had furnished substandard care. Additionally, the survey 
would review any associated activities that might have contributed to 
the deficient practice.
f. Unannounced Surveys (Sec.  488.725)
    Section 1891(c)(1) of the Act requires that standard surveys be 
unannounced. Moreover, CMS policy (State Operations Manual (SOM) 
section 2700A) requires that all HHA surveys be unannounced; this 
policy would be set out at proposed Sec.  488.725, which also would 
provide that surveys be conducted with procedures and scheduling that 
renders the onsite surveys as unpredictable in their timing as 
possible. In addition, section 1891(c)(1) of the Act requires CMS to 
review State scheduling and survey procedures to ensure that the agency 
has taken all reasonable steps to avoid giving advance notice to HHAs 
of impending surveys through these procedures. Generally, as with 
respect to other provider-types, State survey agencies make every 
effort to lessen the predictability of a survey occurring at a specific 
time, day, or month. Moreover, section 1891(c)(1) of the Act states 
that any individual who notifies (or causes to be notified) an HHA of 
the time or date of the standard survey is subject to a civil money 
penalty (CMP) not to exceed $2,000. Accordingly, our proposed 
regulations at Sec.  488.725 would reflect these survey requirements.
g. Survey Frequency and Content (Sec.  488.730)
    In proposed Sec.  488.730, we would set out the requirements for 
survey frequency and the substantive content of the survey, as 
discussed in Sec.  488.710, Sec.  488.715, and Sec.  488.720. Section 
1891(c)(2) of the Act requires HHAs to be subject to a standard survey 
at least every 36 months and the frequency of a standard survey to be 
commensurate with the need to assure the delivery of quality home 
health services. This 36 month interval is based upon the last day of 
the last standard survey. This section of the Act also gives CMS the 
authority to conduct a survey as often as necessary to assure the 
delivery of quality home health services by determining whether an HHA 
complies

[[Page 41578]]

with the CoP or to confirm the correction of previous deficiencies. A 
standard survey or abbreviated standard survey may be conducted within 
two months of a change in ownership, administration or management of an 
HHA, as specified in 1891(c)(2)(B)(ii) of the Act, and must be 
conducted within 2 months of a significant number of complaints 
reported against the HHA (as determined by CMS), and would also be 
conducted as otherwise directed by CMS to determine compliance with the 
CoP, such as the investigation of a complaint. Extended surveys and 
partial extended surveys may also be conducted at any time. As required 
in section 1891(c)(2)(D) of the Act, extended surveys and partial 
extended surveys must be conducted when an HHA is found to have 
furnished substandard care, and may also be conducted for other reasons 
at the discretion of CMS or the State in order to determine compliance 
with the CoP.
h. Surveyor Qualifications (Sec.  488.735)
    Section 1891(c)(2)(C)(iii) of the Act requires ``an individual who 
meets the minimum qualifications established by the Secretary'' to 
conduct a survey of an HHA. We interpret this statutory language to 
mean that each individual on a survey team must meet certain minimum 
CMS qualifications. We set forth our proposed criteria for surveyor 
minimum qualifications in Sec.  488.735. We are proposing that he or 
she successfully complete the relevant CMS-sponsored Basic HHA Surveyor 
Training Course and any associated course prerequisites prior to 
conducting an HHA survey.
    Proposed Sec.  488.735 would also set out the circumstances that 
would disqualify a surveyor from surveying a particular HHA as required 
by section 1891(c)(2)(C)(iii) of the Act. A surveyor would be 
prohibited from surveying an HHA if the surveyor currently serves, or 
within the previous two years has served, on the staff of or as a 
consultant to, the HHA undergoing the survey. Specifically, the 
surveyor could not have been a direct employee, employment agency staff 
at the HHA, or an officer, consultant or agent for the surveyed HHA 
regarding compliance with CoPs. A surveyor would be prohibited from 
surveying an HHA if he or she has a financial interest or an ownership 
interest in that HHA. The surveyor would also be disqualified if he or 
she has a family member who has a financial interest or ownership 
interest with the HHA to be surveyed or has a family member who is a 
patient of the HHA to be surveyed.
i. Certification of Compliance or Non-Compliance (Sec.  488.740)
    We propose in Sec.  488.740 to cross reference the rules for 
certification, documentation of findings, periodic review of compliance 
and approval, certification of non-compliance, and determining 
compliance for HHAs as set forth, respectively at Sec.  488.12, Sec.  
488.18, Sec.  488.24 and Sec.  488.26 of this part. These general rules 
must be followed when a State Agency certifies compliance or non-
compliance of the HHA with the Act and Conditions of Participation.
j. Informal Dispute Resolution (IDR) (Sec.  488.745)
    We propose in Sec.  488.745 to make available to HHAs an IDR 
process to address disputes related to condition-level survey findings 
following an HHA's receipt of the official statement of deficiencies. 
We propose adding an IDR process that would provide HHAs an informal 
opportunity to resolve disputes in the survey findings for those HHAs 
that are seeking recertification from the SA for continued 
participation in Medicare and for those HHAs that are currently under 
SA monitoring (either through a complaint or validation survey). 
Whenever possible, we want to provide every opportunity to settle 
disagreements at the earliest stage, prior to a formal hearing, 
conserving time and money potentially spent by the HHA, the State 
agency, and CMS. The goal of IDR is to offer an HHA the opportunity to 
refute one or more condition-level deficiencies cited on the official 
Statement of Deficiencies. An IDR between an HHA and the SA or RO, as 
appropriate, would allow the HHA an opportunity to provide an 
explanation of any material submitted to the SA and respond to the 
reviewer's questions.
    In proposed Sec.  488.745, we would provide HHAs with the option to 
dispute condition-level survey findings or repeat deficiencies 
warranting a sanction upon their receipt of the official Statement of 
Deficiencies. When survey findings indicate a condition level 
deficiency (or deficiencies), CMS or the State, as appropriate, would 
notify the HHA in writing of its opportunity to request an IDR of those 
deficiencies. This notice would be provided to the HHA at the time the 
Statement of Deficiencies is issued to the HHA. The HHA's request for 
IDR must be submitted in writing, should include the specific 
deficiencies that are disputed, and should be submitted within the same 
10 calendar day period that the HHA has for submitting an acceptable 
plan of correction.
    An HHA's initiation of the IDR process would not postpone or 
otherwise delay the effective date of any enforcement action. The 
failure to complete an IDR would not delay the effective date of any 
enforcement action. Further, if any findings are revised or removed 
based on IDR, the official Statement of Deficiencies is revised 
accordingly and any enforcement actions imposed solely as a result of 
those revised or removed deficiencies are adjusted accordingly. We 
believe that the IDR procedures would maintain the balance between an 
HHA's due process concerns and the public's interest in the timely 
correction of HHA deficiencies.
3. Proposed Subpart J--Alternative Sanctions for Home Health Agencies 
With Deficiencies
a. Statutory Basis (Sec.  488.800)
    We are proposing rules for enforcement actions for HHAs with 
deficiencies, including alternative sanctions, at new subpart J. Under 
sections 1866(b)(2)(B) and 1891(e) of the Act and Sec.  489.53(a)(3), 
we may terminate an HHA's provider agreement if that HHA is not in 
substantial compliance with the Medicare requirements (that is, the 
failure to meet one or more conditions of participation is considered a 
lack of substantial compliance). We may also terminate an HHA that 
fails to correct its deficiencies within a reasonable time (ordinarily 
no more than 60 days), even if those deficiencies are at the standard 
(rather than condition) level at Sec.  488.28. Prior to OBRA '87, the 
only action available to CMS to address HHAs out of compliance with 
Federal requirements was termination of their Medicare provider 
agreement. Section 4023 of OBRA '87 added subsections 1891(e) and (f) 
to the Act, which expanded the Secretary's options to enforce Federal 
requirements for HHAs. Under section 1891(e)(1) of the Act, if the 
Secretary determines on the basis of a standard, extended, or partial 
extended survey or otherwise, that a home health agency that is 
certified for participation under this title is no longer in compliance 
with the requirements specified in or pursuant to section 1861(o) or 
section 1891(a) of the Act and determines that the deficiencies 
involved immediately jeopardize the health and safety of the 
individuals to whom the agency furnishes items and services, the 
Secretary shall take immediate action to remove the jeopardy and 
correct the deficiencies through the remedy specified in section 
1891(f)(2)(A)(iii) or terminate the certification of the agency,

[[Page 41579]]

and may provide, in addition, for one or more of the other sanctions 
described in section 1891(f)(2)(A).
    We are proposing to set out the statutory basis for the new 
subsection at proposed Sec.  488.800, which is sections 1891(e) and (f) 
of the Act. Section 1891(e) provides for termination of home health 
agencies that fail to comply with Conditions of Participation. This 
section also provides for ensuring that the procedures with respect to 
the conditions under which each of the alternative sanctions developed 
by the Secretary shall be designed to minimize the time between 
identification of deficiencies and imposition of these sanctions, 
including imposition of incrementally more severe fines for repeated or 
uncorrected deficiencies. Furthermore, this section specifies that 
these sanctions are in addition to any others available under State or 
Federal law, and, except for civil money penalties, are imposed prior 
to the conduct of a hearing.
b. Definitions (Sec.  488.805)
    We are proposing to add Sec.  488.805 to define the frequently used 
terms, including ``directed plan of correction,'' ``immediate 
jeopardy,'' ``new admission,'' ``per instance,'' ``plan of 
correction,'' ``repeat deficiency'' and ``temporary management''.
    Although section 1891 of the Act uses the term ``intermediate 
sanctions,'' for consistency with other enforcement rules, this 
proposed rule uses ``alternative sanctions,'' which we consider to have 
the same meaning.
c. General Provisions (Sec.  488.810)
    We propose in Sec.  488.810 general rules for enforcement actions 
against an HHA with condition-level deficiencies. Sections 1891(e)(1) 
and (2) of the Act provide that if CMS finds that an HHA is not in 
compliance with the Medicare home health CoPs and the deficiencies 
involved either do or do not immediately jeopardize the health and 
safety of the individuals to whom the agency furnishes items and 
services, then we may terminate the provider agreement, impose an 
alternative sanction(s), or both. Therefore, our decision to impose one 
or more sanctions, including termination, would be based on condition-
level deficiencies, found in an HHA during a survey, pursuant to 
section 1891(e)(2) of the Act. We would be able to impose one or more 
sanctions for each deficiency constituting noncompliance or for all 
deficiencies constituting noncompliance.
    It is also important to note that HHAs acquire certification for 
participation in Medicare via a SA survey or via accreditation by a 
CMS-approved AO. Accreditation by a CMS-approved AO is voluntary and 
not necessary to participate in Medicare. The AO communicates any 
condition level findings to the applicable CMS Regional Office. When an 
accredited HHA is to lose its accreditation status from the AO due to 
condition-level findings that remain uncorrected, we would follow the 
usual procedures for the resumption of oversight by the SA and the same 
procedures for imposition of alternative sanctions if appropriate. Once 
a sanction was imposed on an HHA, oversight and enforcement of that HHA 
would be by the SA from the accrediting organization until the HHA 
achieved compliance and the alternative sanction was removed or until 
the HHA was terminated from the Medicare program.
    It is CMS policy that any deficiencies found at a branch of the HHA 
would be counted against the HHA as a business entity. Therefore, 
regardless of whether the deficient practice is identified at the 
branch or the parent location, all sanctions imposed would apply to the 
parent HHA. However, these sanctions would not apply to any non-branch 
subunit that was associated with an HHA if such subunit were 
independently required to meet the CoPs for HHAs. Such subunit instead 
could have sanctions imposed on it based on deficient practices found 
at that subunit. For HHAs that operate branch offices in multiple 
states, we would base enforcement decisions on surveys conducted by the 
State in which the parent office is located.
    In proposed Sec.  488.810(e) an HHA would be required to submit an 
acceptable plan of correction (POC) to CMS. We define plan of 
correction in proposed Sec.  488.805 whether it has standard-level or 
condition-level as a plan developed by the HHA and approved by CMS that 
is the HHA's written response to survey findings detailing corrective 
actions to cited deficiencies and specifies the date by which those 
deficiencies will be corrected. More specifically, a POC would detail 
how an HHA has or would correct each deficiency, how the HHA would act 
to protect patients in similar situations, how the HHA would ensure 
that each deficiency did not recur, how the HHA would monitor 
performance to sustain solutions, and in what timeframe corrective 
actions would be taken. We would determine if the POC was acceptable 
based on the information presented in the POC.
    In proposed Sec.  488.810(f) CMS would provide written notification 
of the intent to impose a sanction including the specific sanction, the 
statutory basis for the sanction and appeal rights including an 
opportunity to participate in the proposed Informal Dispute Resolution 
process.
    An HHA may appeal the determination of noncompliance leading to the 
imposition of a sanction under the provisions of 42 CFR Part 498. A 
pending hearing does not delay the effective date of a sanction against 
an HHA and sanctions continue to be in effect regardless of any pending 
appeals proceedings. Civil money penalties continue to accrue during 
the pendency of an appeal, but will not be collected until a final 
agency determination, as we note in proposed Sec.  488.845(f).
d. Factors To Be Considered in Selecting Sanctions (Sec.  488.815)
    Section 1891(e)(2) of the Act provides that if CMS finds that an 
HHA is not in compliance with the Medicare home health CoPs and the 
deficiencies involved do not immediately jeopardize the health and 
safety of the individuals to whom the agency furnishes items and 
services, CMS may terminate the provider agreement, impose an 
alternative sanction(s), or both, at CMS's discretion for a period not 
to exceed six months. The choice of any alternative sanction or 
termination would reflect the impact on patient care and the 
seriousness of the HHA's patterns of noncompliance and would be based 
on the factors proposed in Sec.  488.815. We could propose termination 
of the provider agreement and apply one or more sanctions for HHAs with 
the most egregious deficiencies, for an HHA that was unwilling or 
unable to achieve compliance within a maximum of six months, whether or 
not the violations constituted an ``immediate jeopardy'' situation.
    In proposed Sec.  488.815 and consistent with section 1891(f)(3) of 
the Act, procedures for selecting the appropriate alternative sanction, 
including the amount of any CMP and the severity of each sanction, have 
been designed to minimize the time between the identification of 
deficiencies and the final imposition of sanctions. To determine which 
sanction or sanctions to apply, we propose that we would consider the 
following:
     Whether the deficiencies pose immediate jeopardy to 
patient health and safety;
     The nature, incidence, degree, manner, and duration of the 
deficiencies or noncompliance;
     The presence of repeat deficiencies, the HHA's compliance 
history in general, and specifically with reference to the cited 
deficiencies, and any history

[[Page 41580]]

of repeat deficiencies at either the parent or branch location;
     Whether the deficiencies are directly related to a failure 
to provide quality patient care;
     Whether the HHA is part of a larger organization with 
documented performance problems;
     Whether the deficiencies indicate a system wide failure of 
providing quality care.
    Section 1891(f)(3) of the Act provides for the imposition of 
incrementally more severe fines for repeated or uncorrected 
deficiencies. We would define ``repeat deficiency'' in Sec.  488.805 as 
a standard or condition-level deficiency that was cited on a survey 
that was substantially the same as, or similar to, a finding of 
noncompliance issued within the preceding 365 days. The standard-level 
findings would be evaluated for condition-level noncompliance based on 
the HHA's failure to correct and sustain compliance. As noted in 
proposed 488.815(c), CMS would consider the presence of repeat 
deficiencies as a factor in selecting sanctions and civil money 
penalties.
e. Available Sanctions (Sec.  488.820)
    Section 1891(f)(1)(A) of the Act provides that CMS shall ``develop 
a range of intermediate [or alternative] sanctions'' that may be 
imposed in addition to, or instead of, termination when CMS finds that 
an HHA has deficiencies. The Act explicitly provides for the following: 
Civil money penalties, suspension of payment for new admissions, and 
temporary management. We are proposing those alternative sanctions in 
this proposed rule. In addition to those specified in the statute, we 
are proposing to add the following additional alternative sanctions: A 
directed plan of correction, directed in-service training, and/or 
suspension of payment for new PPS episodes. The list of alternative 
sanctions that could be imposed for a noncompliant HHA is in proposed 
Sec.  488.820.
f. Actions When Deficiencies Pose Immediate Jeopardy (Sec.  488.825)
    Under paragraph 1891(e)(1) of the Act, if CMS determined that the 
HHA's deficiencies immediately jeopardize the health or safety of its 
patients, then CMS must take immediate action to notify the HHA of the 
immediate jeopardy situation and the HHA must correct the deficiencies. 
We are proposing to implement the statutory requirement by proposing 
that if the IJ situation was not addressed and resolved within 23 days 
because the HHA was unable or unwilling to correct the deficiencies, 
CMS would terminate the HHA's provider agreement, using the procedures 
set out at Sec.  489.53(d). In addition, CMS could impose one or more 
other alternative sanctions permitted by section 1891(f)(2) of the Act, 
including a civil money penalty (CMP), temporary management and/or 
suspension of all Medicare payments before the effective date of 
termination. We propose to set out these provisions as new Sec.  
488.825.
    We also propose in Sec.  488.825 that for immediate jeopardy 
situations, we would terminate the HHA and we would give notice of the 
termination within 2 days before the effective date of the termination, 
which is consistent with the requirement for skilled nursing facilities 
in Sec.  489.53(d)(2)(ii). Under our regular survey process, providers 
are advised of any immediate jeopardy findings upon discovery of the 
immediate jeopardy situation during the survey or as part of the exit 
conference at the end of the survey. This would give an HHA time to 
remove the immediate jeopardy and correct the deficiencies that gave 
rise to the immediate jeopardy finding. If the HHA fails to remove the 
immediate jeopardy situation, we would terminate the provider agreement 
no later than 23 days from the last day of the survey. Consistent with 
the notice process established for hospital emergency departments with 
deficiencies that pose immediate jeopardy (set out at Sec.  489.53(b)), 
we are proposing at Sec.  488.825 that if an immediate jeopardy 
situation was not resolved within 23 days because the HHA was unable or 
unwilling to correct deficiencies found during a survey, CMS would 
terminate the HHA's provider agreement, using the termination 
procedures set out at Sec.  489.53 We propose to amend Sec.  489.53 by 
adding a new basis for termination at paragraph (a)(17), establishing 
that we would terminate an HHA's provider agreement if the HHA failed 
to correct a deficiency or deficiencies within the required time frame.
    The notice of our intent to impose a sanction as proposed Sec.  
488.825(b) would include the nature of the noncompliance, the sanctions 
to be imposed, the effective date of the sanction, opportunity for IDR 
and the right to appeal the determination leading to the sanction. In 
order to assure an HHA achieved prompt compliance, we expect that we 
would give HHAs written notice of impending enforcement actions against 
them as quickly as possible following the completion of a survey of any 
kind.
    Finally, in proposed Sec.  488.825(c), we would require an HHA 
whose provider agreement is terminated to appropriately and safely 
transfer its patients to another local HHA within 30 days of 
termination. The HHA would be responsible for providing information, 
assistance and any arrangements necessary for the safe and orderly 
transfer of its patients. The State would be required to assist the HHA 
with this process.
g. Actions When Deficiencies Are at the Condition-Level, But Do Not 
Pose Immediate Jeopardy (Sec.  488.830)
    While section 1891(e)(2) of the Act provides for termination of the 
HHA's provider agreement as an enforcement option in non-immediate 
jeopardy situations, we are interested in providing incentives for HHAs 
to achieve and maintain full compliance with the requirements specified 
under sections 1861(o) and 1891(a) of the Act before termination 
becomes necessary. Accordingly, our proposed regulations at Sec.  
488.830 reflect this enforcement policy and address the definition of 
``noncompliance,'' provision of 15 day notice, criteria for 
continuation of payment, and termination time frame when there is no 
immediate jeopardy.
    The statute does not require CMS to discontinue alternative 
sanctions when it proposes to terminate an HHA's participation in 
Medicare; thus, these sanctions, if imposed, could continue while CMS 
initiated termination proceedings. Therefore, alternative sanctions 
could be imposed before the termination became effective, but could not 
continue for a period that exceeded six months. Also, to protect the 
health and safety of individuals receiving services from the HHA, 
alternative sanctions would apply until the HHA achieved compliance or 
had its Medicare participation terminated. For example, the suspension 
of payment sanction would end when the HHA corrected all condition-
level deficiencies or was terminated.
    We propose in Sec.  488.830(b) that for a deficiency or 
deficiencies that do not pose immediate jeopardy, we would give the HHA 
at least 15 days advance notice of any proposed sanctions, except CMP, 
which would remain effective until the effective date of an impending 
termination (at 6 months) or until the HHA achieved compliance with 
CoPs, whichever was earlier. This is consistent with the general rule 
for providers and suppliers in Sec.  489.53(d).
    Section 1891(f)(3) of the Act provides that the Secretary shall 
develop and implement specific procedures for determining the 
conditions under which

[[Page 41581]]

alternative sanctions are to be applied, including the amount of any 
penalties and the severity of each sanction. The following sections 
describe each possible sanction and procedures for imposing them.
    Finally, in proposed Sec.  488.830(e), we would require an HHA 
whose provider agreement is terminated to appropriately and safely 
transfer its patients to another local HHA within 30 days of 
termination. The HHA would be responsible for providing information, 
assistance and any arrangements necessary for the safe and orderly 
transfer of its patients. The State would be required to assist the HHA 
with this process.
h. Temporary Management Sec.  488.835
    We are proposing in Sec.  488.835 when and how CMS applies 
temporary management, the duration of this sanction, and the payment 
procedures for temporary managers. We propose that temporary management 
means the temporary appointment by CMS or a CMS authorized agent of an 
authorized substitute manager or administrator (based on qualifications 
described in Sec.  484.4) who would be under the direction of the HHA's 
governing body and who would have authority to hire, terminate or 
reassign staff, obligate HHA funds, alter HHA procedures, and manage 
the HHA to correct deficiencies identified in the HHA's operation. We 
could impose temporary management when we determine that an HHA has 
condition-level deficiencies and that the deficiencies or the 
management limitations of the HHA are likely to impair the HHA's 
ability to correct the deficiencies and return the HHA to full 
compliance with the CoPs within the required timeframe. We would impose 
temporary management to bring an HHA into compliance with program 
requirements in non-IJ cases within six months, as we propose in Sec.  
488.835(c). We would also choose to impose temporary management as a 
sanction for deficiencies that posed immediate jeopardy to patient 
health and safety, as provided under proposed Sec.  488.825(a)(3).
    When temporary management is imposed, CMS would consider the HHA or 
SA's recommendation for a temporary manager when making the 
appointment. The individual appointed as a temporary manager would be 
required to have work experience and education that would qualify such 
individual to oversee the correction of deficiencies so that the HHA 
could achieve substantial compliance with the Medicare requirements. 
Each State Survey Agency will maintain a list of recommended 
individuals who would be eligible to serve as temporary managers, and 
annually submit the list to CMS.
    If the HHA refused to relinquish authority and control to the 
temporary manager, we would terminate the HHA's provider agreement. If 
a temporary manager was appointed, but the HHA failed to correct the 
condition-level deficiencies within 6 months from the last day of the 
survey, the HHA's Medicare participation would be terminated. 
Additionally, if the HHA resumes management control without CMS's 
approval, it would be deemed to be a failure to relinquish authority 
and control to the temporary manager and we would impose termination 
and could impose any additional sanctions. The appointment of a 
temporary manager would not relieve the HHA of its responsibility to 
achieve compliance.
    We propose in Sec.  488.835(c) that temporary management would end 
when:
     We determined that the HHA was in compliance with all CoPs 
and had the capability to remain in full compliance;
     The HHA provider agreement was terminated; or
     The HHA resumed management control without CMS approval.
    We believe that the proposed regulations at Sec.  488.805 and Sec.  
488.835 would provide the temporary manager with the authority 
necessary to manage the HHA and cause positive changes. The temporary 
manager would have the authority to hire, terminate, or reassign staff; 
obligate HHA funds; alter HHA policies and procedures; and otherwise 
manage an HHA to correct deficiencies identified in the HHA's 
operations. Temporary management would be provided at the HHA's 
expense. Before the temporary manager was installed, the HHA would have 
to agree to pay his/her salary directly for the duration of the 
appointment. We believe that the responsibility for the HHA to pay the 
expenses of the temporary manager is an inherent management 
responsibility of the agency for which the HHA is regularly reimbursed 
by Medicare and Congress, pursuant to section 1891(e)(1), though such 
temporary outside management might be necessary in some cases to bring 
the HHA back into compliance with the conditions of participation. We 
propose that the salary for the temporary manager would not be less 
than the amount equivalent to the prevailing salary paid by providers 
in the geographic area for positions of this type, based on the based 
on the Geographic Guide by the Department of Labor (BLS Wage Data by 
Area and Occupation). In addition, the HHA would have to pay for any 
additional costs that would have reasonably been incurred if such 
person had been in an employment relationship, and any other costs 
incurred by such a person in furnishing services under such an 
arrangement or as otherwise set by the State. An HHA's failure to pay 
the salary of the temporary manager would be considered by CMS to be a 
failure to relinquish authority and control to temporary management.
i. Suspension of Payment for All New Admissions and New Payment 
Episodes Sec.  488.840
    We are proposing at Sec.  488.840 regulations describing when and 
how CMS would apply a suspension of payment for new Medicare admissions 
and new PPS episodes of care. If an HHA had a condition-level 
deficiency or deficiencies (regardless of whether or not immediate 
jeopardy exists), we would suspend payments for new Medicare patient 
admissions to the HHA that were made on or after the effective date of 
the sanction. The suspension of payment would be for a period not to 
exceed six months and would end when the HHA either achieved 
substantial compliance or was terminated. Suspension of payment for new 
patient admissions and for new payment episodes that occurred on or 
after the effective date of the sanction could be imposed anytime an 
HHA was found to be out of substantial compliance. The CMS would 
provide the HHA with written notice of non-compliance at least two 
calendar days before the effective date of the sanction in immediate 
jeopardy situations (proposed Sec.  488.825(b)) or at least 15 calendar 
days before the effective date of the sanction in non-immediate 
jeopardy situations (proposed Sec.  488.830(b)). Our notice of 
suspension of payment for new admissions and new payment episodes would 
include the following: the nature of the non-compliance; the effective 
date of the sanction; and the right to appeal the determination leading 
to the sanction.
    We propose to define a ``new admission'' in Sec.  488.805 as the 
following:
     A patient who is admitted or readmitted to the HHA under 
Medicare on or after the effective date of a suspension of payment 
sanction; or
     A new payment episode that occurs on or after the 
effective date of a suspension of payment sanction. We have expanded 
the definition of ``new admission'' to include new payment episodes 
because we believe that each new payment episode (the 60 day

[[Page 41582]]

payment episode of HHA care) marks the beginning of a new assessment 
and a new care plan for the patient.
    Furthermore, patients who are admitted before the effective date of 
the suspension and who have temporarily interrupted their treatment in 
the middle of a payment episode but are not discharged would not be 
subject to the suspension of payment.
    Further, section 1891(f)(2)(C) of the Act provides that a 
suspension of payment sanction shall terminate when CMS finds that the 
HHA is in substantial compliance with all of the requirements specified 
in, or developed in accordance with, sections 1861(o) and 1891(a) of 
the Act. That is, the suspension of payment sanction would end when the 
HHA was determined to have corrected all condition-level deficiencies, 
or upon termination, whichever is earlier.
    We would notify the HHA of the imposition of this sanction under 
proposed Sec.  488.840(b)(1). Once such a sanction was imposed, we 
propose that the HHA would be required to notify any new patient 
admission and patients with new payment episodes that Medicare payment 
might not be available to this HHA because of the imposed suspension 
before care could be initiated. Moreover, the HHA would be precluded 
from charging the Medicare patient for those services unless it could 
show that, before initiating or continuing care, it had notified the 
patient or his/her representative both orally and in writing in a 
language that the patient or representative could understand, that 
Medicare payment might not be available. The suspension of payment 
would end when CMS terminated the provider agreement or CMS found, in 
accordance with 1891(f)(2)(C) of the Act, the HHA to be in compliance 
with all CoPs.
    In proposed Sec.  488.840(b)(3) in accordance with section 
1891(f)(2)(C) of the Act, if CMS terminated the provider agreement, or 
if the HHA was in substantial compliance with the CoPs (as determined 
by CMS), the HHA would not be eligible for any payments for services 
provided to new Medicare patients admitted during the time the 
suspension was in effect, or for existing Medicare patients beginning a 
new payment episode during their care. This policy would be consistent 
with the legislative history of OBRA '87, which states that ``suspended 
payments [are] not [to] be repaid to any agency once it has come back 
into compliance and the suspension has been lifted. It is the 
Committee's belief that if such repayment were permitted, there would 
be little incentive for deficient agencies to come back into compliance 
as quickly as possible.'' See H.R. Rep. No. 100-391(I) at 423 (1987). 
In accordance with the Committee's intent, we would construe the term 
``suspend'' to mean to temporarily stop Medicare payments, without the 
possibility of recovering the suspended payments. If compliance with 
the CoPs was achieved, we would resume payment to the HHA prospectively 
from the date that CMS had determined correction.
    In proposed Sec.  488.840(c), the suspension of payment would end 
when CMS terminates the provider agreement or CMS finds, in accordance 
with section 1891(f)(2)(C) of the Act, the HHA to be in substantial 
compliance with all of the CoPs.
j. Civil Money Penalties (CMPs) Sec.  488.845
    We are proposing in Sec.  488.845 rules for imposition of CMPs. 
Under sections 1891(e) and 1891(f)(2)(A)(i) of the Act, CMS may impose 
a CMP against an HHA that is determined to be out of compliance with 
one or more CoPs, regardless of whether the HHA's deficiencies pose 
immediate jeopardy to patient health and safety. We could also impose a 
civil money penalty for the number of days of immediate jeopardy. The 
CMP amount cannot exceed $10,000 for each day of non-compliance. A 
deficiency found during a survey at a parent HHA or any of its branches 
results in a noncompliance issue for the entire HHA, which can be 
subject to the imposition of a CMP.
    In this section, we propose both a ``per day'' and a ``per 
instance'' CMP at Sec.  488.845(a). The per day CMP would be imposed 
for each day of noncompliance with the CoPs. Additionally, should a 
survey identify a particular instance or instances of noncompliance 
during a survey, we propose to impose a CMP for that instance or those 
individual instances of noncompliance. We propose to define ``per 
instance'' in Sec.  488.805 as a single event of noncompliance 
identified and corrected during a survey, for which the statute 
authorizes CMS to impose a sanction. While there may be a single event 
which leads to noncompliance, there can also be more than one instance 
of noncompliance identified and more than one CMP imposed during a 
survey. For penalties imposed per instance of noncompliance, we are 
proposing penalties from $1,000 to $10,000 per instance. Such penalties 
would be assessed for one or more singular events of condition-level 
noncompliance that were identified at the survey and where the 
noncompliance was corrected during the onsite survey.
    Since the range of possible deficiencies is great and depends upon 
the specific circumstances at a particular time, it would be impossible 
to assign a specific monetary amount for each type of noncompliance 
that could be found. Thus, we believe that each deficiency would fit 
into a range of CMP amounts, which we discuss below.
    We are proposing that we would consider the following factors when 
determining a CMP amount, in addition to those factors that we would 
consider when choosing a type of sanction proposed in Sec.  488.815:
     The size of the agency and its resources.
     The availability of other HHAs within a region, including 
service availability in a given region.
     Accurate and credible resources such as PECOS and Medicare 
cost reports and claims information, that provide information on the 
operations and the resources of the HHA.
     Evidence that the HHA has a built-in, self-regulating 
quality assessment and performance improvement system to provide proper 
care, prevent poor outcomes, control patient injury, enhance quality, 
promote safety, and avoid risks to patients on a sustainable basis that 
indicates the ability to meet the conditions of participation and to 
ensure patient health and safety. When several instances of 
noncompliance would be identified at a survey, more than one per-day or 
per instance CMP could be imposed as long as the total CMP did not 
exceed $10,000 per day. Also, a per-day and a per-instance CMP would 
not be imposed simultaneously for the same deficiency.
    At proposed Sec.  488.845(b)(2), we would give ourselves the 
discretion to increase or reduce the amount of the CMP during the 
period of noncompliance depending on whether the level of noncompliance 
had changed at the time of a revisit survey. CMS could increase a CMP 
in increments based upon an HHA's inability or unwillingness to correct 
deficiencies, the presence of a system wide failure in the provision of 
quality care or a determination of immediate jeopardy with potential 
for harm. CMS could also decrease a CMP in increments to the extent 
that it finds, pursuant to a revisit, that substantial and sustainable 
improvements have been implemented even though the HHA is not yet in 
full compliance if earnest efforts have been made to address the causes 
of deficiencies and sustain improvement, If an HHA cured the immediate 
jeopardy situation, but not the

[[Page 41583]]

condition-level deficiencies, we could reduce penalties from the upper 
range to a lower range imposed in non-immediate jeopardy situations.
    However, section 1891(f)(2)(A)(i) of the Act specifies that the 
sanctions shall include a CMP in an amount not to exceed $10,000 for 
each day of noncompliance. Therefore, we are proposing at Sec.  
488.845(b)(2)(iii) that no CMP assessment exceed $10,000 per day of 
noncompliance. Because the Act directs us to establish the amounts of 
fines and the levels of severity, we propose to establish a three-tier 
system with subcategories which would establish the amount of a CMP. In 
proposed Sec.  488.845(b)(3), (b)(4), and (b)(5), we propose the 
following would be ranges of civil money penalty amounts based on three 
levels of seriousness--upper, middle and lower:
     Upper range--For a deficiency that poses immediate 
jeopardy to patient health and safety, we would assess a penalty within 
the range of $8,500 to $10,000 per day of condition level 
noncompliance.
     Middle range--For repeat and/or a condition-level 
deficiency that did not pose immediate jeopardy, but is directly 
related to poor quality patient care outcomes, we would assess a 
penalty within the range of $2,500 to $8,500 per day of noncompliance 
with the CoPs.
     Lower range--For repeated and/or condition-level 
deficiencies that did not constitute immediate jeopardy and were 
deficiencies in structures or processes that did not directly relate to 
poor quality patient care, we would assess a penalty within the range 
of $500 to $4,000 per day of noncompliance.
    Table is displayed to represent the relationship between the 
existing survey protocols and proposed ranges of CMP imposition. This 
table distinguishes proposed ranges based in IJ, Non-IJ, repeat 
deficiency and first time deficiency. It uses the terminology of 
structure, process, and outcomes, which is used in the quality 
improvement field as a hierarchy of measures. This structure would be 
further developed in the policy guidance stage and is presented for 
illustrative purposes only.

                              Table 24--CMP
                                [Per day]
------------------------------------------------------------------------
                                                       CMP fine  ranges/
                 Level of seriousness                        amount
------------------------------------------------------------------------
Immediate Jeopardy...................................    $8,500-$10,000;
(Non-IJ) Patient Care Outcomes.......................       2,500-8,500;
Repeat Deficiency....................................              8,500
    42 CFR 484.18 Acceptance of Patients, Plan of
     Care, & Medical Supervision.....................
    42 CFR 484.30 Skilled Nursing Services...........
    42 CFR 484.34 Medical Social Services............
    42 CFR 484.36 Home Health Aide Services..........
    42 CFR 484.55 Comprehensive Assessment of
     Patients........................................
First time deficiency................................              5,000
    42 CFR 484.18 Acceptance of Patients, Plan of
     Care, & Medical Supervision.....................
    42 CFR 484.30 Skilled Nursing Services...........
    42 CFR 484.34 Medical Social Services............
    42 CFR 484.36 Home Health Aide Services..........
    42 CFR 484.55 Comprehensive Assessment of
     Patients........................................
Structure or process issues..........................              2,500
    42 CFR 484.10 Patient Rights.....................
    42 CFR 484.12 Compliance With Federal, State and
     Local Laws, Disclosure and Ownership
     Information, and Accepted Professional Standards
     and Principles..................................
    42 CFR 484.14 Organization, Services, and
     Administration..................................
    42 CFR 484.48 Clinical Records...................
Non-IJ Structure/process.............................          500-4,000
Repeat Deficiency at revisit or from prior survey....              4,000
    42 CFR 484.11 Confidential OASIS Information.....
    42 CFR 484.16 Group of Professional Personnel....
    42 CFR 484.20 Reporting OASIS Information........
    42 CFR 484.52 Evaluation of the agency's program.
First time deficiency................................          500-3,000
    42 CFR 484.11 Confidential OASIS Information.....
    42 CFR 484.16 Group of Professional Personnel....
    42 CFR 484.20 Reporting OASIS Information........
    42 CFR 484.52 Evaluation of the agency's program.
Other structure or process issues....................          500-3,000
    Non patient care issues 42 CFR 484.34 Medical
     Social Services.................................
    42 CFR 484.38 Qualifying to Furnish Outpatient
     Physical Therapy or Speech Pathology Services...
------------------------------------------------------------------------

    If we imposed a CMP, we would send the HHA written notification of 
the intent to impose it, including the amount of the CMP being imposed 
and the proposed effective date of the sanction. After a final agency 
determination is made, a final notice would be sent with the final 
amount due and the rate of interest to be charged on unpaid balances 
(as published quarterly in the Federal Register). The notice would 
include reference to the nature of the noncompliance; the statutory 
basis for the penalty; the proposed amount of the penalty per day/
instance of noncompliance; the criteria we considered when determining 
the amount per-day or per-instance; the date on which the penalty would 
begin to accrue; when the penalty would stop accruing; when the penalty 
would be collected; and instructions for responding to the notice, 
including a statement of the HHA's appeal rights, including an 
opportunity to participate in the proposed IDR process and, as 
discussed below, the right to a hearing, and the implications of 
waiving a hearing. In accordance with our existing

[[Page 41584]]

regulations at Sec.  498.22(b)(3) and Sec.  498.40 and at proposed 
Sec.  488.845(c)(2), once a notice of intent to impose the CMP had been 
sent to the HHA, the HHA would have 60 days from the receipt of the 
notice to request an administrative hearing under Sec.  498.40 or waive 
its right to an administrative hearing in writing and receive a 35 
percent reduction in the CMP amount. This reduction would be offered to 
encourage HHAs to address deficiencies more expeditiously and to save 
the cost of hearings and appeals. Upon such reduction, the CMP would be 
due within 15 days of the receipt of the HHA's written request for 
waiver. The HHA could waive its right to a hearing in writing within 60 
calendar days from the date of the notice initial determination.
    The per-day CMP would begin to accrue on the day of the survey that 
identified the HHA noncompliance, and would end on the date of 
correction of all deficiencies, or the date of termination. We are 
proposing at 488.845(d) that in immediate jeopardy cases, if the 
immediate jeopardy was not removed, the CMP would continue to accrue 
until CMS terminated the provider agreement (within 23 calendar days 
after the last day of the survey which first identified the immediate 
jeopardy). Under proposed 488.845(d)(4), if immediate jeopardy did not 
exist, the CMP would continue to accrue until the HHA achieved 
substantial compliance or until we terminated the provider agreement. 
Additionally, we are proposing at Sec.  488.845(d)(2) that the per-day 
and per-instance CMP would not be imposed simultaneously in conjunction 
with a survey. In no instance will the period of noncompliance be 
allowed to extend beyond 6 months from the last day of the original 
survey that determined noncompliance. If the HHA has not achieved 
compliance with the CoPs within those 6 months, we would terminate the 
HHA. The accrual of the CMP stops on the day the HHA provider agreement 
is terminated or the HHA achieves substantial compliance, whichever is 
earlier.
    Total CMP amounts would be computed after a final agency 
determination; that is, after: (1) Compliance was verified; (2) the HHA 
provider agreement was involuntarily terminated; or (3) administrative 
remedies had been exhausted. If the HHA had achieved substantial 
compliance, we would send a separate notice to the HHA describing the 
amount of penalty per day, the number of days the penalty accrued, the 
total amount due, the due date of the penalty, and the interest rate 
for any unpaid balance. For a per-instance CMP, we would include the 
amount of the penalty, the total amount due, the due date of the 
penalty, and the rate of interest for any unpaid balance. In the case 
of the HHA that was terminated, we would send the HHA any CMP notice of 
final amount or a due and payable notice information in the termination 
notice, as described in Sec.  489.53(d).
    In proposed Sec.  488.845(f), a CMP would become due and payable 15 
days from the notice of final administrative decision, which is after:
     The time to appeal had expired without the HHA appealing 
its initial determination;
     CMS received a request from the HHA waiving its right to 
appeal the initial determination;
     A final decision of an Administrative Law Judge and/or DAB 
Appellate Board upheld CMS's determinations; or
     After an HHA achieves substantial compliance; or
     The HHA was terminated from the program and no appeal 
request was received.
    A request for hearing would not delay the imposition of the CMP, 
but would only affect the collection of any final amounts due to CMP. 
If an HHA timely waived its right to a hearing under proposed Sec.  
488.845(c)(2)(ii), we would reduce the final CMP amount by 35 percent. 
This reduction would be reflected once the CMP stops accruing: when the 
HHA achieved compliance before we received its request to waive a 
hearing, or the effective date of the termination occurred before we 
received the waiver request.
    The final CMP receivable amount would be determined when the per-
day CMP accrual period ended (either when the HHA achieved compliance 
or was terminated).
    An HHA has three options for action following the imposition of a 
penalty:
     The HHA could pay the fine in full for all CMPs imposed 
prior to the date a CMP is due and payable.
     The HHA could request a hearing based on the determination 
of noncompliance with Medicare requirements. Within 60 days of receipt 
of the notice of imposition of a penalty, the HHA could file a request 
directly to the Departmental Appeals Board in the Office of the 
Secretary, Department of Health and Human Services with a copy to the 
State and CMS. In accordance with Sec.  498.40(b), the HHA's appeal 
request would identify the specific issues of contention, the findings 
of fact and conclusions of the law with which the agency disagreed, and 
the specific bases for contending that the survey findings and 
determinations were invalid. A hearing would be completed before any 
penalty was collected. However, sanctions would continue regardless of 
the timing of any appeals proceedings if the HHA had not met the CoPs. 
Requesting an appeal would not delay or end the imposition of a 
sanction.
    A CMP would begin to accrue on the date of the survey which 
identified the noncompliance. These include penalties imposed on a per 
day basis, as well as penalties imposed per instance of noncompliance.
Offsets
    To maintain consistency in recovering a CMP among other types of 
providers who are subject to a CMP, we propose that the amount of any 
penalty, when determined, could be deducted (offset) from any sum CMS 
or the State Medicaid Agency owed to the HHA. Interest would be 
assessed on the unpaid balance of the penalty beginning on the due 
date. We propose that the rate of interest assessed on any unpaid 
balance would be based on the Medicare interest rate published 
quarterly in the Federal Register, as specified in Sec.  405.378(d). We 
would recover a CMP as set forth in section 1128A(f) of the Act. Those 
CMP receipts not recovered due to HHA failure to pay or inadequate 
funds for offset will be collected through the Debt Collection 
Improvement Act of 1996 which requires all debt owed to any Federal 
agency that is more than 180 days delinquent to be transferred to the 
Department of the Treasury for debt collection services.
    If payment was not received by the established due date, we propose 
to initiate action to collect the CMP through offset of monies owed or 
owing to the HHA. To initiate such an offset, we would instruct the 
appropriate Medicare Administrative Contractors/Fiscal Intermediaries 
and, when applicable, the State Medicaid agencies to deduct unpaid CMP 
balances from any money owed to the agency.
Disbursement of Recovered CMP Funds
    Under Sec.  488.845(g)(1), we propose to divide the CMP amounts 
recovered and any corresponding interest between the Medicare and 
Medicaid programs, based on a proportion that is commensurate with the 
comparative Federal expenditures under Titles XVIII and XIX of the Act, 
using an average of years 2007 to 2009 based on Medicaid Statistical 
Information System (MSIS) and HHA Prospective Payment System

[[Page 41585]]

(PPS) claims. Based on the proportions of HHA claims attributed to 
Medicare and Medicaid, respectively, for the FY 2007-2009 period, 
approximately 63 percent of the CMP amounts recovered would be 
deposited as miscellaneous receipts to the U.S. Department of the 
Treasury and approximately 37 percent will be returned to the State 
Medicaid Agency to improve the quality of care for those who need home-
based care. We propose that, beginning one year after these rules are 
finalized and become effective, these proportions would be updated 
annually based on the most recent 3 year period for which CMS 
determined that the Medicare and Medicaid expenditure data were 
essentially complete.
Costs of Home Health Surveys
    Consistent with the proposed disbursement to States of a portion of 
federally imposed-CMP amounts collected, this proposed rule would 
provide that State Medicaid programs share in the cost of HHA surveys 
for those HHAs that are Medicaid-certified. We propose to amend Sec.  
431.610(g) (Relations with standard-setting and survey agencies) to 
apply to HHA surveys the same cost accounting principles that are now 
applied to nursing homes. In other words, we are adding a reference to 
HHAs, along with nursing facilities (NFs) and Intermediate Care 
Facilities for Individuals with Intellectual Disabilities (ICF/IIDs). 
We project the initial cost to the Medicaid program would be 
approximately 37 percent of the cost of surveys for dually-certified 
programs, based on the same cost allocation methodology we propose to 
use for the disbursement to States of CMP collections, as described 
above. We request comment on the new requirement for State Medicaid 
programs and the methodology for calculating the State share of both 
survey costs and CMP disbursement.
k. Directed Plan of Correction Sec.  488.850
    We are proposing in Sec.  488.850 a directed plan of correction as 
an available sanction. This sanction is a part of the current nursing 
home alternative sanction procedures and has been an effective tool to 
encourage correction of deficient practices. Specifically, CMS would be 
able to impose a directed plan of correction on an HHA which is out of 
compliance with the Conditions of Participation. A directed plan of 
correction sanction would require the HHA to take specific actions in 
order to correct the deficient practice(s) if the HHA failed to submit 
an acceptable plan of correction. As proposed in Sec.  488.850(b)(2) an 
HHA's directed plan of correction would have to be developed by us or 
by the temporary manager, with our approval. The directed plan of 
correction would set forth the outcomes to be achieved, the corrective 
action necessary to achieve these outcomes, and the specific date the 
HHA would be expected to achieve such outcomes. For example, a directed 
plan of correction for a deficiency finding involving poor drug regimen 
review would likely indicate that the HHA would be required to: (1) 
Develop policies and procedures for assessing each patient and before 
accepting any new admissions; (2) assess every patient's drug regimen 
according to the regulations at Sec.  484.55(c); and (3) train staff in 
correct policies and procedures and implement them. The HHA would be 
responsible for achieving compliance. If the HHA failed to achieve 
compliance within the timeframes specified in the directed plan of 
correction, we would impose one or more additional alternative 
sanctions until the HHA achieved compliance or was terminated from the 
Medicare program. Before imposing this sanction, we would provide 
appropriate notice to the HHA of this sanction under proposed Sec.  
488.810(f).
l. Directed In-Service Training Sec.  488.855
    We are proposing in Sec.  488.855 when and how CMS would conduct 
directed in-service training for HHAs with deficiencies. Some 
compliance problems are a result of a lack of knowledge on the part of 
the health care provider relative to advances in health care technology 
and expectations of favorable patient outcomes. In proposed Sec.  
488.855(a) directed in-service training would be used in situations 
where staff performance resulted in deficient practices. A directed in-
service training program would correct this deficient practice through 
retraining the staff in the use of clinically and professionally sound 
methods to produce quality outcomes. Directed in-service training would 
be imposed if CMS determined that the HHA had a deficiency or 
deficiencies that indicated noncompliance, and that staff education was 
likely to correct the deficient practice(s). It could be imposed alone 
or in addition to other alternative sanctions.
    At proposed Sec.  488.855(a)(3), HHAs would be required to use in-
service programs conducted by instructors with an in-depth knowledge of 
the area(s) that would require specific training, so that positive 
changes would be achieved and maintained. HHAs would be required to 
participate in programs developed by well-established centers of health 
services education and training. These centers include, but are not 
limited to, schools of medicine or nursing, area health education 
centers, and centers for aging. We would only recommend possible 
training locations to an HHA and not require that the HHA utilize a 
specific school/center/provider. The HHA would be required to bear any 
resulting expenses. The ultimate evaluation of the training program 
would be in the demonstrated competencies of the HHA's staff in 
achieving the desired patient care outcomes after completion of the 
training program. In proposed Sec.  488.855(b) if the HHA did not 
achieve compliance after such training, we could impose one or more 
additional sanctions. The HHA itself would pay for the directed in-
service training for its staff.
m. Continuation of Payments to HHAs With Deficiencies Sec.  488.860
    We propose in Sec.  488.860 rules concerning the continuation of 
Medicare payments to HHAs with condition-level deficiencies. Section 
1891(e)(4) of the Act provides that the Secretary may continue Medicare 
payments to HHAs not in compliance with the conditions for 
participation for up to six months if:
     The survey agency finds it more appropriate to impose 
alternative sanctions to assure compliance with program requirements 
than to terminate the HHA from the Medicare program;
     The HHA submits a plan of correction to the Secretary, and 
to the office the Secretary has delegated the authority to approve the 
plan of correction; and
     The HHA agrees to repay the Federal government the 
payments under this arrangement should the HHA fail to take the 
corrective action as set forth in its approved plan of correction by 
the time of the revisit.
    We propose these same three criteria in Sec.  488.860(a). If any of 
these three requirements set forth in the Act and in our proposed rule 
are not met, an HHA with condition-level deficiencies would not receive 
any Federal payments from the time that deficiencies were initially 
identified. We would terminate the agreement before the end of the 6-
month correction period in accordance with proposed Sec.  488.865 if 
the requirements proposed at Sec.  488.860(a)(1) are not met. If any 
sanctions were also imposed, they would stop accruing or end when the 
HHA achieves compliance with all requirements, or when the HHA's 
provider agreement is terminated, whichever is earlier. We would 
terminate the HHA's provider agreement

[[Page 41586]]

if the HHA is not in compliance with the CoPs within 6 months of the 
last day of the survey. Finally, if an HHA provides an acceptable plan 
of correction but cannot achieve compliance with the CoPs within 6 
months of the last day of the survey, we are proposing in Sec.  
488.830(d) that CMS would terminate the provider agreement.
n. Termination of Provider Agreement (Sec.  488.865)
    At Sec.  488.865(a), we would address the termination of an HHA's 
Medicare provider agreement, as well as the effect of such termination. 
Termination of the provider agreement would end all payments to the 
HHA, including any payments that were continued under proposed Sec.  
488.860. Termination would also end any alternative sanctions imposed 
against the HHA, regardless of any proposed timeframes for the 
sanction(s) originally specified. In proposed Sec.  488.865(b) we would 
terminate the provider agreement if (1) the HHA failed to correct 
condition-level deficiencies within six months unless the deficiencies 
constitute immediate jeopardy; (2) the HHA failed to submit an 
acceptable plan of correction for approval by us under proposed Sec.  
488.810; or (3) the HHA failed to relinquish control to the temporary 
manager, if that sanction is imposed or (4) the HHA failed to meet the 
eligibility criteria for continuation of payments under proposed Sec.  
488.860. If CMS or the SA determined deficiencies existed which posed 
immediate jeopardy to patient health and safety, we would terminate the 
provider agreement. The provider could also voluntarily terminate its 
agreement. CMS and the SA would, if necessary, work with all Medicare-
approved HHAs that were terminated to ensure the safe discharge and 
orderly transfer of all patients to another Medicare-approved HHA.
    The procedures for terminating a provider agreement are set forth 
in Sec.  489.53 and we are proposing to continue to use those 
procedures for an enforcement action terminating an HHA at Sec.  
488.865(d). These procedures form the basis for termination by CMS and 
specify a provider's notice and appeal rights. Under Sec.  488.865(e), 
we propose that the HHA could appeal the termination of its provider 
agreement in accordance with 42 CFR part 498. We are also proposing to 
add an exception to the general notice provision as well as to amend 
Sec.  489.53(a) by adding a new paragraph (17) establishing that when 
an HHA failed to correct any deficiency (either standard-level or 
condition-level), we could terminate its provider agreement. The 
notification requirements in Sec.  489.53(d)(1) requires that CMS give 
notice to any provider and the public at least 15 days before the 
effective date of a termination of a provider agreement. We are 
proposing a new clause in Sec.  489.53(d)(2)(iii) which would provide 
for a timing exception to this general notice rule. Specifically, we 
propose that for HHA terminations based on deficiencies that posed 
immediate jeopardy to patient health and safety, we would give notice 
to the HHA of such termination at least 2 days before the effective 
date of the termination. As currently provided in Sec.  489.53(d)(4), 
we would give concurrent notice to the public when such termination 
occurred.

C. Provider Agreements and Supplier Approval

    We are also proposing to amend Sec.  498.3, Scope and 
applicability, by revising paragraphs (b)(13), (b)(14) introductory 
text, (b)(14)(i), and (d)(10) to include specific reference to HHAs and 
to cross-refer to our proposed regulation at proposed Sec.  488.740 
concerning appeals.

D. Solicitation of Comments

    Presently, we are required only to give notice of an HHA 
termination to the public 15 days before the effective date of an 
involuntary termination. We are soliciting comments related to 
additional public notices. We are considering that when a suspension of 
payments for new admissions and new payment episodes or a civil money 
penalty is imposed, we could, at our discretion, issue a public notice. 
The issuance of additional publicly-reported notices when certain 
sanctions are imposed would offer information to patients who were 
choosing a provider of home health services, as well as to current 
recipients of home health care. A home health patient does not 
necessarily know when a survey has been conducted at an HHA and if 
deficiencies had been determined or any sanctions imposed unless a 
surveyor visited the patient during a survey or the patient requested a 
copy of a Statement of Deficiencies from the SA or HHA. We are also 
soliciting comments on the proposed definition of a ``per instance'' of 
noncompliance when imposing a CMP sanction.

VI. Collection of Information Requirements

    While this proposed rule contains information collection 
requirements, this rule does not add new or revise any of the existing 
information collection requirements or burden with regard to: Sec.  
424.22(a) (OCN 0938-1083), Sec.  488.710 (OCN 0938-0355; CMS-1515 and 
CMS-1572), and Sec.  488.810(e) (OCN 0938-0391; CMS-2567). Nor does 
this proposed rule revise any of the existing information collection 
requirements or burden with regard to OASIS as discussed in preamble 
section III.C.3. and approved under OCN 0938-0760 or Home Health Care 
CAHPS as discussed in the same preamble section but approved under OCN 
0938-1066. All of the requirements and burden estimates associated with 
these collections are currently approved by OMB and are not subject to 
additional OMB review under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).
    In Sec.  431.610, HHAs would be added to the survey agency 
provision concerning State Plans. Since the State Medicaid Plans 
already include a provision that the State Survey Agencies will have 
qualified personnel perform onsite inspections as appropriate, we 
believe that this requirement is in the current plans and is inclusive 
of all Medicaid work being performed by the State Survey Agency. 
Consequently, the provision would not require a specific revision to 
any State Plans and would not impose any additional burden to States.
    In Sec.  488.710, for each HHA the SA must (existing requirement) 
conduct standard surveys according to their agreements with CMS under 
sections 1864 and 1891(c)(1) of the Act. CMS believes that the 
additional survey agency administrative activity required to impose 
alternative sanctions created by this rule will not generate a 
significant amount of additional paperwork burden at the State survey 
agency or HHA level. Imposing sanctions may require that states engage 
in some additional communication and carry out follow-up surveys, and 
CMS Regional Offices may need additional time for determining, imposing 
and tracking sanctions. In estimating appeal volume and costs, we note 
that in 2010 only 260 providers out of 11,821 had condition level-
deficiencies, and only seven of these involved immediate jeopardy 
situations. Further, the impact of additional activity on State budgets 
will be negligible because we estimate that about 63 percent of the 
cost attributable to Medicare will be paid to survey agencies under the 
authority provided by section 1864 for Medicare surveys; and Federal 
Medicaid funds will generally pay 75 percent of the remaining 37 
percent share of costs, since there is an increased Federal match for 
State survey activities as

[[Page 41587]]

referenced in section 1903(a)(2) of the Act. In addition, the State 
will benefit financially by the additional CMP funds returned to the 
State to use for the benefit of home based care participants.
    SAs survey HHAs to determine compliance with the CoPs under part 
484 and follow the guidance contained in the State Operations Manual, 
S&C Memoranda, and Interpretive Guidelines. This rule would serve to 
codify some existing CMS policies while proposing new requirements 
which would be consistent with OBRA `87 mandates discussed in the 
Background and Statutory Authority section. State Surveyor 
recordkeeping requirements already exist as Forms CMS-1515 and CMS-1572 
(OMB control number known as information collection 0938-0355) and CMS-
2567 (OMB 938-0391). CMS anticipates enhancing survey 
protocols and Interpretive Guidelines and providing additional S&C 
Memoranda and Surveyor Training in response to the issuance of new 
regulations. CMS would revise these currently approved collections as 
necessary in accordance with the final rule.
    In Sec.  488.735, State and Federal surveyors would be required to 
complete the CMS-sponsored Basic HHA Surveyor Training Course before 
they can serve on a HHA survey team. The CMS Central Office currently 
provides national training to all State surveyors for all of the 
provider types that are surveyed for Medicare and Medicaid. Those 
training courses are funded entirely by the Central Office and there is 
no burden to States since our annual budgets to the States (for the 
performance of survey activities) includes the cost of the salaries and 
the travel for participating in all national training courses. These 
training courses are designed to teach the surveyors how to conduct the 
survey process in accordance with the applicable regulations and 
associated Interpretive Guidance. During the course of the survey, all 
of the data collection tools that may be used (see the reference to 
CMS-1515, -1572, and -2567 above) have been approved by OMB through the 
PRA process.
    Section 488.810(e) requires each HHA that has deficiencies 
constituting noncompliance to submit a plan of correction for approval 
by CMS. This is a current requirement for both standard and condition 
level deficiencies, so the burden associated with this requirement that 
is above and beyond the existing effort put forth by the HHA is to 
prepare and submit a plan of correction would be to notify their 
governing body, potentially prepare for IDR or to issue a check for a 
CMP. While there is paperwork burden associated with this plan of 
correction requirement, it is already required and currently approved 
under OMB 0938-0391 (CMS-2567).
Information Collection Requests Exempt From the Paperwork Reduction Act
    In accordance with 5 CFR 1320.4(a)(2) and (c), the following 
information collection activities are exempt from the requirements of 
the Paperwork Reduction Act since they are associated with 
administrative actions: (1) Section 488.745(a) regarding HHA request to 
dispute condition-level survey findings; (2) Sec.  488.810(g) regarding 
appeals; (3) Sec.  488.845(c)(2)(i) regarding the submission of a 
written request for a hearing or waiver of a hearing; (4) Sec.  
488.840(b)(1)(ii) regarding HHA disclosure requirements; (5) Sec.  
488.845(c) regarding hearings; and (6) Sec.  488.855 regarding HHA 
deficiencies and directed in-service training.
    The information collection requirement in Sec.  488.825(c) 
regarding the transfer of care is exempt from the requirements of the 
Paperwork Reduction Act since it is associated with an administrative 
action (5 CFR 1320.4(a)(2) and (c)) and we estimate fewer than ten 
provider agreements will be terminated annually (5 CFR 1320.3(c)).
Information Collection Requests Regarding the Quality Reporting for 
Hospices
    Within the preamble of this proposed rule, in section IV, we note 
that section 3004 of the Affordable Care Act amends the Social Security 
Act (the Act) to authorize a quality reporting program for hospices. 
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. As added by section 3004(c), new 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 two percentage points for any hospice that does not comply with the 
quality data submission requirements with respect to that fiscal year.
    In implementing the Hospice quality reporting program, CMS seeks to 
collect measure-related information with as little burden to the 
providers as possible and which reflects the full spectrum of quality 
performance. Our purpose in collecting this data is to help achieve 
better health care and improve health through the widespread 
dissemination and use of performance information.
    The Hospice Data Submission form intended for data submission by 
January 31, 2013 (for the structural measure related to patient care-
focused QAPI indicators) and for data submission by April 1, 2013 (for 
the NQF 0209 measure related to pain) has been made available 
for public comment through a 60-day Federal Register notice that 
published on June 4, 2012 (77 FR 32977). A follow up 30-day notice will 
publish after the 60-day comment period closes. Technically, the form 
is not associated with this proposed rule but is discussed within this 
document to provide background information.

VII. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VIII. Regulatory Impact Analysis

A. Introduction

    We have examined the impact of this 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 (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 does not reach the economic 
threshold and thus is not considered a major rule. In accordance with 
the provisions of Executive Order

[[Page 41588]]

12866, this regulation was reviewed by the Office of Management and 
Budget.

B. Statement of Need

    This proposed rule adheres to the following statutory requirements. 
Section 4603(a) of the BBA mandated the development of a HH PPS for all 
Medicare-covered HH services provided under a plan of care (POC) that 
were paid on a reasonable cost basis by adding section 1895 of the Act, 
entitled ``Prospective Payment For Home Health Services''. Section 
1895(b)(1) of the Act requires the Secretary to establish a HH PPS for 
all costs of HH services paid under Medicare. In addition, section 
1895(b)(3)(A) of the Act requires (1) the computation of a standard 
prospective payment amount include all costs for HH services covered 
and paid for on a reasonable cost basis and that such amounts be 
initially based on the most recent audited cost report data available 
to the Secretary, and (2) the standardized prospective payment amount 
be adjusted to account for the effects of case-mix and wage levels 
among HHAs. Section 1895(b)(3)(B) of the Act addresses the annual 
update to the standard prospective payment amounts by the HH applicable 
percentage increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
case-mix and geographic differences in wage levels. Section 
1895(b)(4)(B) of the Act requires the establishment of appropriate 
case-mix adjustment factors for significant variation in costs among 
different units of services. Lastly, section 1895(b)(4)(C) of the Act 
requires the establishment of wage adjustment factors that reflect the 
relative level of wages, and wage-related costs applicable to HH 
services furnished in a geographic area compared to the applicable 
national average level.
    Section 1895(b)(5) of the Act, as amended by section 3131 of the 
Affordable Care Act, gives the Secretary the option to make changes to 
the payment amount otherwise paid in the case of outliers because of 
unusual variations in the type or amount of medically necessary care. 
Section 1895(b)(3)(B)(v) of the Act requires HHAs to submit data for 
purposes of measuring health care quality, and links the quality data 
submission to the annual applicable percentage increase. Also, section 
3131 of the Affordable Care Act requires that HH services furnished in 
a rural area (as defined in section 1886(d)(2)(D) of the Act) with 
respect to episodes and visits ending on or after April 1, 2010, and 
before January 1, 2016, receive an increase of 3 percent the payment 
amount otherwise made under section 1895 of the Act.

C. Overall Impact

    The update set forth in this proposed rule applies to Medicare 
payments under HH PPS in CY 2013. Accordingly, the following analysis 
describes the impact in CY 2013 only. We estimate that the net impact 
of the proposals in this rule is approximately $20 million in CY 2013 
savings. The $20 million impact reflects the distributional effects of 
an updated wage index ($70 million decrease) the +1.5 percent HH 
payment update ($300 million increase), and the -1.32 percent case-mix 
adjustment applicable to the national standardized 60-day episode rates 
($250 million decrease). The $20 million in savings is reflected in the 
first row of column 3 of Table 25 as 0.10 percent decrease in 
expenditures when comparing the current CY 2012 HH PPS to the proposed 
CY 2013 HH PPS. The RFA requires agencies to analyze options for 
regulatory relief of small entities, if a rule has a significant impact 
on a substantial number of small entities. For purposes of the RFA, 
small entities include small businesses, nonprofit organizations, and 
small governmental jurisdictions. Most hospitals and most other 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of less than $7.0 million to $34.5 million in any 
1 year. For the purposes of the RFA, our updated data show that 
approximately 98 percent of HHAs are considered to be small businesses 
according to the Small Business Administration's size standards with 
total revenues of $13.5 million or less in any 1 year. Individuals and 
States are not included in the definition of a small entity. The 
Secretary has determined that this proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
We define small HHAs as either non-proprietary or proprietary with 
total revenues of $13.5 million or less in any 1 year. We estimate that 
approximately 18 percent of HHAs are classified as non-proprietary. 
Analysis of Medicare claims data reveals a 0.11 percent decrease in 
estimated payments to small HHAs in CY 2013.
    A discussion on the alternatives considered is presented in section 
V.E. below. The following analysis, with the rest of the preamble, 
constitutes our initial RFA analysis. We solicit comment on the RFA 
analysis provided.
    In this proposed rule, we have stated that our analysis reveals 
that nominal case-mix continues to grow under the HH PPS. Specifically, 
nominal case-mix has grown from the 19.03 percent growth identified in 
our analysis for CY 2012 rulemaking to 20.08 percent for this year's 
rulemaking (see further discussion in section III.A.). As such, we 
believe it is appropriate to reduce the HH PPS rates using the 1.32 
percent payment reduction promulgated in the CY 2012 HH PPS Final Rule 
(76 FR 68532) in moving towards more accurate payment for the delivery 
of home health services. Our analysis shows that smaller HHAs are 
impacted slightly more than are larger HHAs by the proposed provisions 
of this rule.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of 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 
applies to HHAs. Therefore, the Secretary has determined that this 
proposed rule would not have a significant economic impact on the 
operations of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2012, that 
threshold is approximately $139 million. This proposed rule is not 
anticipated to have an effect on State, local, or tribal governments in 
the aggregate, or by the private sector, of $139 million or more.

D. Detailed Economic Analysis

    This proposed rule sets forth updates to the HH PPS rates contained 
in the CY 2012 HH PPS final rule. The impact analysis of this proposed 
rule presents the estimated expenditure effects of policy changes 
proposed in this rule. We use the latest data and best analysis 
available, but we do not make adjustments for future changes in such 
variables as number of visits or case-mix.
    This analysis incorporates the latest estimates of growth in 
service use and payments under the Medicare home health benefit, based 
on Medicare claims from 2010. We note that certain events may combine 
to limit the scope

[[Page 41589]]

or accuracy of our impact analysis, because such an analysis is future-
oriented and, thus, susceptible to errors resulting from other changes 
in the impact time period assessed. Some examples of such possible 
events are newly-legislated general Medicare program funding changes 
made by the Congress, or changes specifically related to HHAs. In 
addition, changes to the Medicare program may continue to be made as a 
result of the Affordable Care Act, or new statutory provisions. 
Although these changes may not be specific to the HH PPS, the nature of 
the Medicare program is such that the changes may interact, and the 
complexity of the interaction of these changes could make it difficult 
to predict accurately the full scope of the impact upon HHAs.
    Table 25 represents how HHA revenues are likely to be affected by 
the policy changes proposed in this rule. For this analysis, we used 
linked home health claims and OASIS assessments; the claims represented 
a 100-percent sample of 60-day episodes occurring in CY 2010. The first 
column of Table 25 classifies HHAs according to a number of 
characteristics including provider type, geographic region, and urban 
and rural locations. The second column shows the payment effects of the 
wage index only. The third column shows the payment effects of all the 
proposed policies outlined earlier in this rule. For CY 2013, the 
average impact for all HHAs due to the effects of the wage index is a 
0.34 percent decrease in payments. The overall impact for all HHAs, in 
estimated total payments from CY 2012 to CY 2013, is a decrease of 
approximately 0.10 percent.
    As shown in Table 25, the combined effects of all of the changes 
vary by specific types of providers and by location. In general, 
facility-based, proprietary agencies in rural areas would be impacted 
positively as a result of the proposed the provisions of this rule. In 
addition, free-standing, other volunteer/non-profit agencies and 
facility-based volunteer/non-profit agencies in urban areas would be 
impacted positively.

  Table 25--Proposed Home Health Agency Policy Impacts for CY 2013, by
                  Facility Type and Area of the Country
------------------------------------------------------------------------
                                            Comparisons
                                         ----------------
                                          Percent change   Impact of all
                                            due to the        CY 2013
                  Group                   effects of the    policies\1\
                                           updated wage      (percent)
                                               index
                                             (percent)
------------------------------------------------------------------------
All Agencies............................           -0.34           -0.10
Type of Facility
    Free-Standing/Other Vol/NP..........            0.04            0.32
    Free-Standing/Other Proprietary.....           -0.46           -0.23
    Free-Standing/Other Government......           -0.45           -0.19
    Facility-Based Vol/NP...............           -0.06            0.20
    Facility-Based Proprietary..........           -0.35           -0.11
    Facility-Based Government...........           -0.46           -0.22
        Subtotal: Freestanding..........           -0.36           -0.12
        Subtotal: Facility-based........           -0.13            0.13
        Subtotal: Vol/NP................            0.01            0.27
        Subtotal: Proprietary...........           -0.45           -0.22
        Subtotal: Government............           -0.46           -0.20
Type of Facility (Rural * Only)
    Free-Standing/Other Vol/NP..........           -0.61           -0.36
    Free-Standing/Other Proprietary.....           -0.83           -0.61
    Free-Standing/Other Government......           -0.56           -0.28
    Facility-Based Vol/NP...............           -0.51           -0.26
    Facility-Based Proprietary..........            0.16            0.39
    Facility-Based Government...........           -0.56           -0.31
Type of Facility (Urban * Only)
    Free-Standing/Other Vol/NP..........            0.15            0.42
    Free-Standing/Other Proprietary.....           -0.40           -0.17
    Free-Standing/Other Government......           -0.31           -0.07
    Facility-Based Vol/NP...............            0.07            0.33
    Facility-Based Proprietary..........           -0.58           -0.34
    Facility-Based Government...........           -0.34           -0.10
Type of Facility (Urban* or Rural*)
    Rural...............................           -0.72           -0.48
    Urban...............................           -0.26           -0.02
Facility Location: Region*
    North...............................            0.17            0.45
    South...............................           -0.69           -0.45
    Midwest.............................           -0.25           -0.02
    West................................            0.39            0.64
    Outlying............................           -0.49           -0.25
Facility Location: Area of the Country
    New England.........................            0.61            0.88
    Mid Atlantic........................           -0.09            0.20
    South Atlantic......................           -0.41           -0.17
    East South Central..................           -1.12           -0.91
    West South Central..................           -0.76           -0.53
    East North Central..................           -0.32           -0.10

[[Page 41590]]

 
    West North Central..................            0.11            0.35
    Mountain............................           -0.56           -0.31
    Pacific.............................            0.82            1.06
    Outlying............................           -0.49           -0.25
Facility Size: (Number of First
 Episodes)
                   -0.18            0.12
     $13.5 million).....................
------------------------------------------------------------------------
 Note: Based on a 100 percent sample of CY 2010 claims linked to OASIS
  assessments.
* Urban/rural status, for the purposes of these simulations, is based on
  the wage index on which episode payment is based. The wage index is
  based on the site of service of the beneficiary.
REGION KEY:
New England = Connecticut, Maine, Massachusetts, New Hampshire, Rhode
  Island, Vermont; Middle Atlantic = Pennsylvania, New Jersey, New York;
  South Atlantic = Delaware, District of Columbia, Florida, Georgia,
  Maryland, North Carolina, South Carolina, Virginia, West Virginia;
  East North Central = Illinois, Indiana, Michigan, Ohio, Wisconsin;
  East South Central = Alabama, Kentucky, Mississippi, Tennessee; West
  North Central = Iowa, Kansas, Minnesota, Missouri, Nebraska, North
  Dakota, South Dakota; West South Central = Arkansas, Louisiana,
  Oklahoma, Texas; Mountain = Arizona, Colorado, Idaho, Montana, Nevada,
  New Mexico, Utah, Wyoming; Pacific = Alaska, California, Hawaii,
  Oregon, Washington; Outlying = Guam, Puerto Rico, Virgin Islands.
\1\ Percent change due to the effects of the updated wage index, the 1.5
  percent proposed payment update, and the 1.32 percent case-mix
  adjustment.

E. Alternatives Considered

    As described in section VI.C. above, if we implement the case-mix 
adjustment for CY 2013 along with the home health payment update and 
the updated wage index, the aggregate impact would be a net decrease of 
$20 million in payments to HHAs, resulting from a $70 million decrease 
due to the updated wage index, a $300 million increase due to the home 
health payment update, and a $250 million decrease from the 1.32 
percent case-mix adjustment. If we were to not implement the 1.32 case-
mix adjustment, Medicare would pay an estimated $250 million more to 
HHAs in CY 2013, for a net increase of $230 million in payments to HHAs 
(market basket update of $300 million minus $70 million due to the 
updated wage index). We believe that not implementing a case-mix 
adjustment, and paying out an additional $250 million to HHAs when 
those additional payments are not reflective of HHAs treating sicker 
patients, would not be in line with the intent of the HH PPS, which is 
to pay accurately and appropriately for the delivery of home health 
services to Medicare beneficiaries.
    Section 1895(b)(3)(B)(iv) of the Act gives CMS the authority to 
implement payment reductions for nominal case-mix growth, changes in 
case-mix that are unrelated to actual changes in patient health status. 
We are committed to monitoring the accuracy of payments to HHAs, which 
includes the measurement of the increase in nominal case-mix, which is 
an increase in case-mix that is not due to patient acuity. As discussed 
in section III.A. of this rule, we have determined that there is a 
20.08 percent nominal case-mix change from 2000 to 2010. For CY 2013, 
we propose to move forward with the 1.32 percent payment reduction to 
the national standardized 60-day episode rates as promulgated in the CY 
2012 HH PPS final rule (76 FR 68532).
    We believe that the alternative of not implementing a case-mix 
adjustment to the payment system in CY 2013 to account for the increase 
in case-mix that is not real would be detrimental to the integrity of 
the PPS. As discussed in section III.A. of this rule, because nominal 
case-mix continues to grow as we update our analysis with more current 
data and thus to date we have not accounted for all the increase in 
nominal case-mix growth, we believe it is appropriate to reduce HH PPS 
rates now, thereby paying more accurately for the delivery of home 
health services under the Medicare home health benefit. The other 
reduction to HH PPS payments, a 1.0 percentage point reduction to the 
proposed CY 2013 home health market basket update, is discussed in this 
rule and is not discretionary as it is a requirement in section 
1895(b)(3)(B)(vi) of the Act (as amended by the Affordable Care Act).
    We solicit comment on the alternatives considered in this analysis.

F. Survey and Enforcement Requirements for Home Health Agencies

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$7.0 million to $34.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. We are not preparing 
an analysis for the RFA because we have determined, and the Secretary 
certifies, that this proposed regulation would not have a significant 
economic impact on a substantial number of small entities. In 2010, out 
of a total of 11,814 HHAs enrolled in the Medicare program, only 260 
HHA providers had the potential to be sanctioned based on noncompliance

[[Page 41591]]

with one or more CoPs. This would be 2.2 percent of the HHAs (small 
entities affected) which is less that 5 percent.
    We believe the benefit would be in assuring public health and 
safety CMS believes this proposed rule will have a minor impact on HHAs 
and SAs. This minor rule determination was made by examining the 
following survey data for calendar year (CY) 2010 in the CMS Providing 
Data Quickly (PDQ) System: Survey Activity Report, the Citation 
Frequency Report, the Condition-Level Deficiencies Report and the 
Active Provider Count Report(s).
    Our data below reflects the probability of low impact for monetary 
sanctions. In any given year approximately 11,814 surveyed agencies 
have the possibility of having a mandatory unannounced survey, but only 
260 are likely to be cited for condition level noncompliance.

                                Table 26
------------------------------------------------------------------------
                 CMS Survey data CY 2010                       Total
------------------------------------------------------------------------
Active HHAs.............................................          11,814
Standard Surveys Completed..............................           3,960
Complaint Surveys Completed.............................           1,446
Standard + Complaint Surveys Completed..................           5,406
HHAs with >=1 CoP Citation..............................             260
------------------------------------------------------------------------

    Also, by comparison, in our review of the nursing home data 
reports, we have found less than 0.3 percent of nursing homes have been 
subject to the Temporary Management Sanction in 2008 therefore we do 
not anticipate any major impact on home health provider costs with this 
sanction in the proposed regulation.
    Because implementation of the complex and far-reaching provisions 
of this proposed rule for CMS would require an infrastructure overhaul 
with changes to current tracking mechanisms and a nationwide training 
effort to train surveyors, their supervisors and related CMS personnel, 
we propose an effective date of one year following a final regulation.
    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 also conform to the provisions of section 603 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 for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
proposed regulation would not have a significant impact on the 
operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 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 2012, that 
threshold level is approximately $139 million. This rule will have no 
consequential effect on State, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We would incur certain administrative expenses in the 
course of designing and managing a CMP process. One-time costs are 
estimated at $2 million for redesigning certain parts of the survey 
information system (ASPEN) and ongoing expenses for maintenance and 
associated modifications of the system are estimated at $75,000 per 
year. In addition, we would incur expenses for training Federal and 
State surveyors, developing and publishing the necessary training and 
instruction documents and procedures, and tracking and reporting of CMP 
data. We estimate one 6 hour webinar training and trouble-shooting 
session per year involving approximately 302 surveyor and ancillary 
State and Federal personnel (1812 person-hours) and 190 hours for 
training development and design. We also estimate 104 hours per year in 
trouble-shooting and responding to questions. The total combined person 
hours of 2106 would cost $299,052 annually. We also estimate ongoing 
CMS costs for managing the collection and disbursement of CMPs to 
require about 260 person hours per year or approximately $36,920. The 
grand total amounts to $2 million in onetime expenses and approximately 
$335,972 in annual operating costs. The provisions in this proposed 
rule related to survey protocols have already been incorporated into 
long standing CMS survey policy, implemented in the years after 1987 
and most recently revised in 2011. We project that aggregate Medicare 
and Medicaid home health survey costs in FY 2013 and FY 2014 would be 
$39.9 million and $45.7 million, respectively. Assuming a standard 
State Medicaid obligation of 37 percent of the total, the Medicaid 
share would amount to $14.7 million and $16.9 million, respectively. 
The cost of surveys is treated as a Medicaid administrative cost, 
reimbursable at the professional staff rate of 75 percent. At this rate 
the net State Medicaid costs incurred in FYs 2013 and 2014 would be 
approximately $3.7 million and $4.2 respectively, spread out across all 
States and territories.

G. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 27, we have 
prepared an accounting statement showing the classification of the 
transfers associated with the provisions of this proposed rule. This 
table provides our best estimate of the decrease in Medicare payments 
under the HH PPS as a result of the changes presented in this proposed 
rule.

                     Table 27--Accounting Statement
------------------------------------------------------------------------
 
------------------------------------------------------------------------
            Category                             Transfers
------------------------------------------------------------------------
Classification of Estimated Transfers, from the CY 2012 HH PPS to the CY
                               2013 HH PPS
------------------------------------------------------------------------
Annualized Monetized Transfers..  -$20 million
From Whom to Whom?..............  Federal Government to HH providers.
------------------------------------------------------------------------

[[Page 41592]]

 
 Federal Medicaid HH Survey and             FYs 2013 to FY 2014
       Certification Costs
------------------------------------------------------------------------
            Category                             Transfers
------------------------------------------------------------------------
                                            Units Discount Rate
                                 ---------------------------------------
                                          7%                  3%
------------------------------------------------------------------------
   Classification of Estimated Transfers Relating to the Medicare and
  Medicaid Home Health Survey and Certification Costs, FYs 2013 to 2014
------------------------------------------------------------------------
Annualized Monetized Transfers..  $11.9 Million.....  $11.9 Million.
------------------------------------------------------------------------
From Whom to Whom?..............  Federal Government to Medicaid HH
                                   Survey Agencies.
------------------------------------------------------------------------
  State Medicaid HH Survey and              FYs 2013 to FY 2014
       Certification Costs
------------------------------------------------------------------------
            Category                             Transfers
------------------------------------------------------------------------
                                            Units Discount Rate
                                 ---------------------------------------
                                          7%                  3%
------------------------------------------------------------------------
Annualized Monetized Transfers..  $3.9 Million......  $3.9 Million.
------------------------------------------------------------------------
From Whom to Whom?..............  State Governments to Medicaid HH
                                   Survey Agencies.
------------------------------------------------------------------------
     Medicare HH Survey and                 FYs 2013 to FY 2014
       Certification Costs
------------------------------------------------------------------------
            Category                             Transfers
------------------------------------------------------------------------
                                            Units Discount Rate
                                 ---------------------------------------
                                          7%                  3%
------------------------------------------------------------------------
Annualized Monetized Transfers..  -$15.8 Million....  -$15.8 Million.
------------------------------------------------------------------------
From Whom to Whom?..............  Federal Government to Medicare HH
                                   Survey Agencies.
------------------------------------------------------------------------

H. Conclusion

    In conclusion, we estimate that the net impact of the proposals in 
this rule is approximately $20 million in CY 2013 savings. The -$20 
million impact to the proposed CY 2013 HH PPS reflects the 
distributional effects of an updated wage index ($70 million decrease), 
the 1.5 percent home health payment update ($300 million increase), and 
a 1.32 percent case-mix adjustment applicable to the national 
standardized 60-day episode rates ($250 million decrease). This 
analysis, together with the remainder of this preamble, provides a 
Regulatory Impact Analysis. In addition, this proposed rule would 
provide that State Medicaid programs share in the cost of HHA surveys. 
The cost ratio would be calculated at 63 percent for the Medicare 
program and 37 percent for the Medicaid program. The projected HHA 
survey budget for FY 2013 is $39.9 million and FY 2014 at $45.7 
million. The anticipated State Medicaid share is $3.7 million and $4.2 
million respectively (minus Federal match).

IX. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) establishes 
certain requirements that an agency must meet when it promulgates a 
proposed rule (and subsequent final rule) that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. We have reviewed this 
proposed rule under the threshold criteria of Executive Order 13132, 
Federalism, and have determined that it would not have substantial 
direct effects on the rights, roles, and responsibilities of States, 
local or tribal governments.

List of Subjects

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

42 CFR Part 431

    Grant programs-health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 484

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 488

    Administrative practice and procedure, Health facilities, Medicare, 
Record and reporting requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 498

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare reporting and recordkeeping requirements.

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

[[Page 41593]]

PART 409--HOSPITAL INSURANCE BENEFITS

    1. The authority citation for part 409 continues to read as 
follows:

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

    2. Section 409.44 is amended by revising paragraphs 
(c)(2)(i)(C)(2), (c)(2)(i)(D)(2), (c)(2)(i)(E) introductory text, and 
(c)(2)(i)(E)(1) to read as follows:

Sec.  409.44  Skilled services requirements.

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (C) * * *
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide all of the 
therapy services and functionally reassess the patient in accordance 
with paragraph (c)(2)(i)(A) of this section during the visit associated 
with that discipline which is schedule to occur after the 10th therapy 
visit but no later than the 13th therapy visit per the plan of care.
    (D) * * *
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide all of the 
therapy services and functionally reassess the patient in accordance 
with paragraph (c)(2)(i)(A) of this section during the visit associated 
with that discipline which is schedule to occur after the 16th therapy 
visit but no later than the 19th therapy visit per the plan of care.
    (E) As specified in paragraphs (c)(2)(i)(A), (B), (C), and (D) of 
this section, therapy visits for the therapy discipline(s) not in 
compliance with these policies will not be covered until the following 
conditions are met:
    (1) The qualified therapist has completed the reassessment and 
objective measurement of the effectiveness of the therapy as it relates 
to the therapy goals. As long as paragraphs (c)(2)(i)(E)(2) and 
(c)(2)(i)(E)(3) of this section are met, therapy coverage resumes with 
the completed reassessment therapy visit.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

    3. The authority citation for part 424 continues to read as 
follows:

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

    4. Section 424.22 is amended by--
    A. Revising paragraph (a)(1)(v) introductory text.
    B. Redesignating paragraphs (a)(1)(v)(A), (a)(1)(v)(B), 
(a)(1)(v)(C), and (a)(1)(v)(D) as paragraphs (a)(1)(v)(C), 
(a)(1)(v)(D), (a)(1)(v)(E), and (a)(1)(v)(F), respectively.
    C. Adding new paragraphs (a)(1)(v)(A) and (a)(1)(v)(B).
    D. Revising newly redesignated paragraphs (a)(1)(v)(C) and 
(a)(1)(v)(F).
    The revisions and additions read as follows:

Sec.  424.22  Requirements for home health services.

* * * * *
    (a) * * *
    (1) * * *
    (v) The physician responsible for performing the initial 
certification must document that the face-to-face patient encounter, 
which is related to the primary reason the patient requires home health 
services, has occurred no more than 90 days prior to the home health 
start of care date or within 30 days of the start of the home health 
care by including the date of the encounter, and including an 
explanation of why the clinical findings of such encounter support that 
the patient is homebound and in need of either intermittent skilled 
nursing services or therapy services as defined in Sec.  409.42(a) and 
(c) of this chapter, respectively.
    (A) The face-to-face encounter must be performed by one of the 
following:
    (1) The certifying physician himself or herself.
    (2) A physician, with privileges, who cared for the patient in an 
acute or post-acute care facility from which the patient was directly 
admitted to home health.
    (3) A nurse practitioner or a clinical nurse specialist (as those 
terms are defined in section 1861(aa)(5) of the Act) who is working in 
accordance with State law and in collaboration with the certifying 
physician or in collaboration with an acute or post-acute care 
physician with privileges who cared for the patient in the acute or 
post-acute care facility from which the patient was directly admitted 
to home health.
    (4) A certified nurse midwife (as defined in section 1861(gg)of the 
Act) as authorized by State law, under the supervision of the 
certifying physician or under the supervision of an acute or post-acute 
care physician with privileges who cared for the patient in the acute 
or post-acute care facility from which the patient was directly 
admitted to home health.
    (5) A physician assistant (as defined in section 1861(aa)(5) of the 
Act) under the supervision of the certifying physician or under the 
supervision of an acute or post-acute care physician with privileges 
who cared for the patient in the acute or post-acute care facility from 
which the patient was directly admitted to home health.
    (B) The documentation of the face-to-face patient encounter must be 
a separate and distinct section of, or an addendum to, the 
certification, and must be clearly titled and dated and the 
certification must be signed by the certifying physician.
    (C) In cases where the face-to-face encounter is performed by an 
acute or post-acute care physician who cared for the patient in an 
acute or post-acute care facility or by a non-physician practitioner in 
collaboration with or under the supervision of such an acute or post-
acute care physician who is not directly communicating to the 
certifying physician the clinical findings (i.e., the patient's 
homebound status and need for intermittent skilled nursing services or 
therapy services as defined in Sec.  409.42(a) and (c) of this 
chapter), the acute or post-acute care physician must communicate the 
clinical findings of that face-to-face encounter to the certifying 
physician. In all other cases where a non-physician practitioner 
performs the face-to-face encounter, the nonphysician practitioner must 
communicate the clinical findings of that face-to-face patient 
encounter to the certifying physician.
* * * * *
    (F) The physician responsible for certifying the patient for home 
care must document the face-to-face encounter on the certification 
itself, or as an addendum to the certification (as described in 
paragraph (a)(1)(v) of this section), that the condition for which the 
patient was being treated in the face-to-face patient encounter is 
related to the primary reason the patient requires home health 
services, and why the clinical findings of such encounter support that 
the patient is homebound and in need of either intermittent skilled 
nursing services or therapy services as defined in Sec.  409.42(a) and 
(c) of this chapter respectively. The documentation must be clearly 
titled and dated and the documentation must be signed by the certifying 
physician.
* * * * *

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

    5. The authority citation for part 431 continues to read as 
follows:

    Authority: Sec. 1102 of the Social Security Act, (42 U.S.C. 
1302)

[[Page 41594]]

    6. Section 431.610 is amended by revising paragraph (g) 
introductory text to read as follows:

Sec.  431.610  Relations with standard-setting and survey agencies.

* * * * *
    (g) Responsibilities of survey agency. The plan must provide that, 
in certifying NFs, HHAs, and ICF-IIDs, the survey agency designated 
under paragraph (e) of this section will--
* * * * *

PART 484--HOME HEALTH SERVICES

    7. The authority citation for part 484 continues to read as 
follows:

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

    8. Section 484.250 is amended by adding paragraph (c)(3) to read as 
follows:

Sec.  484.250  Patient assessment data.

* * * * *
    (c) * * *
    (3) Approved HHCAHPS survey vendors must fully comply with all 
HHCAHPS oversight activities, including allowing CMS and its HHCAHPS 
program team to perform site visits at the vendors' company locations.

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

    9. The authority citation for part 488 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act, 
unless otherwise noted (42 U.S.C. 1302 and 1395(hh)); Section 6111 
of the Patient Protection and Affordable Care Act (Pub. L. 111-148)

    10. Section 488.2 is amended by adding the following statutory 
basis in numerical order as follows:

Sec.  488.2  Statutory basis.

* * * * *
    1861(m)--Requirements for home health services.
    1861(o)--Requirements for home health agencies.
* * * * *
    1891--Conditions of participation for home health agencies; home 
health quality.
* * * * *
    11. Section 488.3 is amended by revising paragraph (a)(1) to read 
as follows:

Sec.  488.3  Conditions of participation; conditions for coverage; and 
long-term care requirements.

    (a) * * *
    (1) Meet the applicable statutory definition in sections 1138(b), 
1819, 1832(a)(2)(F), 1861, 1881, 1891, or 1919 of the Act.
* * * * *
    12. Section 488.26 is amended by revising paragraphs (c)(2) and (e) 
to read as follows:

Sec.  488.26  Determining compliance.

* * * * *
    (c) * * *
    (2) The survey process uses resident and patient outcomes as the 
primary means to establish the compliance process of facilities and 
agencies. Specifically, surveyors will directly observe the actual 
provision of care and services to residents and/or patients, and the 
effects of that care, to assess whether the care provided meets the 
needs of individual residents and/or patients.
* * * * *
    (e) The State survey agency must ensure that a facility's or 
agency's actual provision of care and services to residents and 
patients and the effects of that care on such residents and patients 
are assessed in a systematic manner.
    13. The section heading for Sec.  488.28 is revised to read as 
follows:

Sec.  488.28  Providers or suppliers, other than SNFs, NFs, and HHAs 
with deficiencies.

* * * * *
    14. A new subpart I is added to read as follows:
Subpart I--Survey and Certification of Home Health Agencies
Sec.
488.700 Basis and scope.
488.705 Definitions.
488.710 Standard surveys.
488.715 Partial extended surveys.
488.720 Extended surveys.
488.725 Unannounced surveys.
488.730 Survey frequency and content.
488.735 Surveyor qualifications.
488.740 Certification of compliance or noncompliance.
488.745 Informal Dispute Resolution (IDR).

Subpart I--Survey and Certification of Home Health Agencies

Sec.  488.700  Basis and scope.

    Section 1891 of the Act establishes requirements for surveying HHAs 
to determine whether they meet the Medicare conditions of 
participation.

Sec.  488.705  Definitions.

    As used in this subpart--
    Abbreviated standard survey means a focused survey other than a 
standard survey that gathers information on an HHA's compliance with 
specific conditions of participation. An abbreviated standard survey 
may be based on complaints received, a change of ownership or 
management, or other indicators of specific concern such as 
reapplication for Medicare billing privileges following a deactivation.
    Complaint survey means a survey that is conducted to investigate 
specific allegations of noncompliance.
    Condition-level deficiency means noncompliance as described in 
Sec.  488.24 of this part.
    Deficiency is a violation of the Act and regulations contained in 
part 484, subparts A through C of this chapter, is determined as part 
of a survey, and can be either standard or condition-level.
    Extended survey means a survey that reviews all conditions of 
participation. It may be conducted at any time but must be conducted 
when one or more condition-level deficiencies (substandard care) are 
identified.
    Noncompliance means any deficiency found at the condition-level or 
standard-level.
    Partial extended survey means a survey conducted to determine if 
deficiencies and/or deficient practice(s) exist that were not fully 
examined during the standard survey. The surveyors may review any 
additional requirements which would assist in making a compliance 
finding.
    Standard-level deficiency means noncompliance with one or more of 
the standards that make up each condition of participation for HHAs.
    Standard survey means a survey conducted in which the surveyor 
reviews the HHA's compliance with a select number of standards and/or 
conditions of participation in order to determine the quality of care 
and services furnished by an HHA as measured by indicators related to 
medical, nursing, and rehabilitative care.
    Substandard care means noncompliance with one or more conditions of 
participation, including deficiencies which could result in actual or 
potential harm to patients at an HHA.
    Substantial compliance means compliance with all condition-level 
requirements, as determined by CMS or the State.

Sec.  488.710  Standard surveys.

    (a) For each HHA, the survey agency must conduct a standard survey 
not later than 36 months after the date of the previous standard survey 
that includes, but is not limited to, all of the following (to the 
extent practicable):
    (1) A case-mix stratified sample of individuals furnished items or 
services by the HHA.
    (2) Visits to the homes of patients, (the purpose of the home visit 
is to

[[Page 41595]]

evaluate the extent to which the quality and scope of services 
furnished by the HHA attained and maintained the highest practicable 
functional capacity of each patient as reflected in the patient's 
written plan of care and clinical records), but only with their 
consent, and, if determined necessary by CMS or the survey team, other 
forms of communication with patients including telephone calls.
    (3) Review of indicators that include the outcomes of quality care 
and services furnished by the agency as indicated by medical, nursing, 
and rehabilitative care.
    (4) Review of compliance with a select number of regulations most 
related to high-quality patient care.
    (b) The survey agency's failure to follow the procedures set forth 
in this section will not invalidate otherwise legitimate determinations 
that deficiencies exist at an HHA.

Sec.  488.715  Partial extended surveys.

    A partial extended survey is conducted to determine if standard or 
condition-level deficiencies are present in the conditions of 
participation not fully examined during the standard survey and there 
are indications that a more comprehensive review of conditions of 
participation would determine if a deficient practice exists.

Sec.  488.720  Extended surveys.

    (a) Purpose of survey. The purpose of an extended survey is:
    (1) To review and identify the policies and procedures that caused 
an HHA to furnish substandard care.
    (2) To determine whether the HHA is in compliance with all of the 
conditions of participation.
    (b) Timing and basis for survey. An extended survey must be 
conducted not later than 14 calendar days after completion of a 
standard survey which found that a HHA had furnished substandard care.

Sec.  488.725  Unannounced surveys.

    (a) Basic rule. All HHA surveys must be unannounced and conducted 
with procedures and scheduling that renders the onsite surveys as 
unpredictable in their timing as possible.
    (b) State survey agency's scheduling and surveying procedures. CMS 
reviews each survey agency's scheduling and surveying procedures and 
practices to assure that the survey agency has taken all reasonable 
steps to avoid giving notice of a survey through the scheduling 
procedures and conduct of the surveys.
    (c) Civil money penalties. Any individual who notifies an HHA, or 
causes an HHA to be notified, of the time or date on which a standard 
survey is scheduled to be conducted is subject to a Federal civil money 
penalty not to exceed $2,000.

Sec.  488.730  Survey frequency and content.

    (a) Basic period. Each HHA must be surveyed not later than 36 
months after the last day of the previous standard survey. 
Additionally, a survey may be conducted as frequently as necessary to--
    (1) Assure the delivery of quality home health services by 
determining whether an HHA complies with the Act and conditions of 
participation; and
    (2) Confirm that the HHA has corrected deficiencies that were 
previously cited.
    (b) Change in HHA information. A standard survey or an abbreviated 
standard survey may be conducted within 2 months of a change in any of 
the following:
    (1) Ownership;
    (2) Administration; or
    (3) Management of the HHA.
    (c) Complaints. A standard survey, or abbreviated standard survey--
    (1) Must be conducted of an HHA within 2 months of when a 
significant number of complaints against the HHA are reported to CMS, 
the State, the State or local agency responsible for maintaining a 
toll-free hotline and investigative unit, or any other appropriate 
Federal, State, or local agency; or
    (2) As otherwise required to determine compliance with the 
conditions of participation such as the investigation of a complaint.

Sec.  488.735  Surveyor qualifications.

    (a) Minimum qualifications. Surveys must be conducted by 
individuals who meet minimum qualifications prescribed by CMS. In 
addition, before any State or Federal surveyor may serve on an HHA 
survey team (except as a trainee), he/she must have successfully 
completed the relevant CMS-sponsored Basic HHA Surveyor Training Course 
and any associated course prerequisites. All surveyors must follow the 
principles set forth in Sec.  488.24 through Sec.  488.28 according to 
CMS policies and procedures for determining compliance with the 
conditions of participation.
    (b) Disqualifications. Any of the following circumstances 
disqualifies a surveyor from surveying a particular agency:
    (1) The surveyor currently works for, or, within the past two 
years, has worked with the HHA to be surveyed as:
    (i) A direct employee;
    (ii) An employment agency staff at the agency; or
    (iii) An officer, consultant, or agent for the agency to be 
surveyed concerning compliance with conditions of participation 
specified in or pursuant to sections 1861(o) or 1891(a) of the Act.
    (2) The surveyor has a financial interest or an ownership interest 
in the HHA to be surveyed.
    (3) The surveyor has a family member who has a relationship with 
the HHA to be surveyed.
    (4) The surveyor has an immediate family member who is a patient of 
the HHA to be surveyed.

Sec.  488.740  Certification of compliance or noncompliance.

    Rules to be followed for certification, documentation of findings, 
periodic review of compliance and approval, certification of 
noncompliance, and determining compliance of HHAs are set forth, 
respectively, in Sec.  488.12, Sec.  488.18, Sec.  488.20, Sec.  
488.24, and Sec.  488.26.

Sec.  488.745  Informal Dispute Resolution (IDR).

    (a) Opportunity to refute survey findings. Upon the provider's 
receipt of an official statement of deficiencies, HHAs are afforded the 
option to request an informal opportunity to dispute condition-level 
survey findings.
    (b) Failure to conduct IDR timely. Failure of CMS or the State, as 
appropriate, to complete IDR shall not delay the effective date of any 
enforcement action.
    (c) Revised Statement of Deficiencies as a result of IDR. If any 
findings are revised or removed by CMS or the State based on IDR, the 
official statement of deficiencies is revised accordingly and any 
enforcement actions imposed solely as a result of those cited 
deficiencies are adjusted accordingly.
    (d) Notification. When the survey findings indicate a condition-
level deficiency, CMS or the State, as appropriate, must provide the 
agency with written notification of the opportunity for participating 
in an IDR process at the time the official statement of deficiencies is 
issued. The request for IDR must be submitted in writing to the State 
or CMS, should include the specific deficiencies that are disputed, and 
should be made within the same 10 calendar day period that the HHA has 
for submitting an acceptable plan of correction.
    15. A new subpart J is added to read as follows:
Subpart J--Alternative Sanctions for Home Health Agencies With 
Deficiencies
Sec.
488.800 Statutory basis.
488.805 Definitions.
488.810 General provisions.

[[Page 41596]]

488.815 Factors to be considered in selecting sanctions.
488.820 Available sanctions.
488.825 Action when deficiencies pose immediate jeopardy.
488.830 Action when deficiencies are at the condition-level but do 
not pose immediate jeopardy.
488.835 Temporary management.
488.840 Suspension of payment for all new patient admissions and new 
payment episodes.
488.845 Civil money penalties.
488.850 Directed plan of correction.
488.855 Directed in-service training.
488.860 Continuation of payments to an HHA with deficiencies.
488.865 Termination of provider agreement.

Subpart J--Alternative Sanctions for Home Health Agencies With 
Deficiencies

Sec.  488.800  Statutory basis.

    Section 1891(e) through (f) of the Act authorizes the Secretary to 
take actions to remove and correct deficiencies in an HHA through an 
alternative sanction or termination or both. Furthermore, this section 
specifies that these sanctions are in addition to any others available 
under State or Federal law, and, except for civil money penalties, are 
imposed prior to the conduct of a hearing.

Sec.  488.805  Definitions.

    As used in this subpart--
    Directed plan of correction means CMS or the temporary manager 
(with CMS/SA approval) may direct the HHA to take specific corrective 
action to achieve specific outcomes within specific timeframes.
    Immediate jeopardy means a situation in which the provider's 
noncompliance with one or more requirements of participation has 
caused, or is likely to cause serious injury, harm, impairment, or 
death to a patient(s).
    New admission means an individual who becomes a patient or is 
readmitted to the HHA on or after the effective date of a suspension of 
payment sanction or new payment episode of an existing patient on or 
after the effective date of a suspension of payment sanction.
    Per instance means a single event of noncompliance identified and 
corrected through a survey, for which the statute authorizes CMS to 
impose a sanction;
    Plan of correction means a plan developed by the HHA and approved 
by CMS that is the HHA's written response to survey findings detailing 
corrective actions to cited deficiencies and specifies the date by 
which those deficiencies will be corrected.
    Repeat deficiency means a standard or condition-level deficiency 
that is cited on the current survey and is substantially the same as, 
or similar to, a finding of noncompliance issued on the most recent 
previous survey.
    Temporary management means the temporary appointment by CMS or a 
CMS authorized agent of a substitute manager or administrator based 
upon qualifications described in Sec.  484.4 and Sec.  484.14(c), under 
the direction of the HHA's governing body who has authority to hire, 
terminate or reassign staff, obligate funds, alter procedures, and 
manage the HHA to correct deficiencies identified in the HHA's 
operation.

Sec.  488.810  General provisions.

    (a) Purpose of sanctions. The purpose of sanctions is to ensure 
prompt compliance with program requirements in order to protect the 
health and safety of individuals under the care of an HHA.
    (b) Basis for imposition of sanctions. When CMS chooses to apply 
one or more sanctions specified in Sec.  488.820, the sanctions are 
applied on the basis of noncompliance with conditions of participation 
found through surveys and may be based on failure to correct previous 
deficiency findings as evidenced by repeat deficiencies.
    (c) Number of sanctions. CMS may apply one or more sanctions for 
each deficiency constituting noncompliance or for all deficiencies 
constituting noncompliance.
    (d) Extent of sanctions imposed. When CMS imposes a sanction, the 
sanction applies to the parent HHA and its respective branch offices. 
The sanctions imposed on a parent and/or its respective branches do not 
apply to the associated subunit.
    (e) Plan of correction requirement. Regardless of which sanction is 
applied, a non-compliant HHA must submit a plan of correction for 
approval by CMS.
    (f) Notification requirements--(1) Notice. CMS provides written 
notification to the HHA of the intent to impose the sanction.
    (2) Date of enforcement action. The notice periods specified in 
Sec.  488.825(b) and Sec.  488.830(b) begin the day after the HHA 
receives the notice.
    (g) Appeals. (1) The provisions of part 498 of this chapter apply 
when the HHA requests a hearing on a determination of noncompliance 
leading to the imposition of a sanction, including termination of the 
provider agreement.
    (2) A pending hearing does not delay the effective date of a 
sanction, including termination, against an HHA. Sanctions continue to 
be in effect regardless of the timing of any appeals proceedings.

Sec.  488.815  Factors to be considered in selecting sanctions.

    CMS bases its choice of sanction or sanctions on consideration of 
one or more factors that include, but are not limited to, the 
following:
    (a) The extent to which the deficiencies pose immediate jeopardy to 
patient health and safety.
    (b) The nature, incidence, manner, degree, and duration of the 
deficiencies or noncompliance.
    (c) The presence of repeat deficiencies, the HHA's overall 
compliance history and any history of repeat deficiencies at either the 
parent or branch location.
    (d) The extent to which the deficiencies are directly related to a 
failure to provide quality patient care.
    (e) The extent to which the HHA is part of a larger organization 
with performance problems.
    (f) An indication of any system-wide failure to provide quality 
care.

Sec.  488.820  Available sanctions.

    In addition to termination of the provider agreement, the following 
alternative sanctions are available:
    (a) Civil money penalties.
    (b) Suspension of payment for all new admissions and new payment 
episodes.
    (c) Temporary management of the HHA.
    (d) Directed plan of correction, as set out at Sec.  488.850.
    (e) Directed in-service training, as set out at Sec.  488.855.

Sec.  488.825  Action when deficiencies pose immediate jeopardy.

    (a) Immediate jeopardy. If there is immediate jeopardy to the HHA's 
patient health or safety--
    (1) CMS immediately terminates the HHA provider agreement in 
accordance with Sec.  489.53 of this chapter.
    (2) CMS terminates the HHA provider agreement no later than 23 days 
from the last day of the survey, if the immediate jeopardy has not been 
removed by the HHA.
    (3) In addition to a termination, CMS may impose one or more 
alternative sanctions, as appropriate.
    (b) 2-day notice. Except for civil money penalties, for all 
sanctions specified in Sec.  488.820 that are imposed when there is 
immediate jeopardy, notice must be given at least 2 calendar days 
before the effective date of the enforcement action.
    (c) Transfer of care. An HHA, if its provider agreement is 
terminated, is responsible for providing information, assistance, and 
arrangements necessary for the proper and safe transfer of patients to 
another local HHA within 30

[[Page 41597]]

days of termination. The State must assist the HHA in the safe and 
orderly transfer of care and services for the patients to another local 
HHA.

Sec.  488.830  Action when deficiencies are at the condition-level but 
do not pose immediate jeopardy.

    (a) Noncompliance. If the HHA is no longer in compliance with the 
conditions of participation, either because the deficiencies 
substantially limit the provider's capacity to furnish adequate care 
but do not pose immediate jeopardy, or because the HHA has repeat 
noncompliance with standard-level deficiencies or repeat condition-
level deficiencies that would lead to noncompliance based on the HHA's 
failure to correct and sustain compliance as described in their 
proposed plan of correction with the condition as set forth in part 484 
of this chapter, CMS will:
    (1) Terminate the HHA's provider agreement; or
    (2) In addition to, or as an alternative to termination for a 
period not to exceed six months, impose one or more alternative 
sanctions set forth in Sec.  488.820(a) through (f) of this subpart.
    (b) 15-day notice. Except for civil money penalties, for all 
sanctions specified in Sec.  488.820 imposed when there is no immediate 
jeopardy, notice must be given at least 15 calendar days before the 
effective date of the enforcement action. The requirements of the 
notice are set forth in Sec.  488.810(f).
    (c) Not meeting criteria for continuation of payment. If an HHA 
does not meet the criteria for continuation of payment under Sec.  
488.860(a), CMS will terminate the HHA's provider agreement in 
accordance with Sec.  488.865.
    (d) Termination time frame when there is no immediate jeopardy. CMS 
terminates an HHA within 6 months of the last day of the survey, if the 
HHA is not in compliance with the conditions of participation, and the 
terms of the plan of correction have not been met.
    (e) Transfer of care. An HHA, if its provider agreement is 
terminated, is responsible for providing information, assistance, and 
arrangements necessary for the proper and safe transfer of patients to 
another local HHA within 30 days of termination. The State must assist 
the HHA in the safe and orderly transfer of care and services for the 
patients to another local HHA.

Sec.  488.835  Temporary management.

    (a) Application. (1) CMS may impose temporary management of an HHA 
if it determines that an HHA has a condition-level deficiency(ies) and 
CMS determines that management limitations or the deficiencies are 
likely to impair the HHA's ability to correct deficiencies and return 
the HHA to full compliance with the conditions of participation within 
the timeframe required.
    (2) [Reserved]
    (b) Procedures. (1) CMS notifies the HHA that a temporary manager 
is being appointed.
    (2) If the HHA fails to relinquish authority and control to the 
temporary manager, CMS terminates the HHA's provider agreement in 
accordance with Sec.  488.865.
    (c) Duration and effect of sanction. Temporary management continues 
until--
    (1) CMS determines that the HHA has achieved substantial compliance 
and has the management capability to ensure continued compliance with 
all the conditions of participation;
    (2) CMS terminates the provider agreement; or
    (3) The HHA reassumes management control without CMS approval. In 
such case, it would be a failure to relinquish authority and control to 
temporary management and CMS initiates termination of the provider 
agreement and may impose additional sanctions. Temporary management 
will not exceed a period of six months from the date of the survey 
identifying noncompliance.
    (d) Payment of salary. (1) The temporary manager's salary--
    (i) Is paid directly by the HHA while the temporary manager is 
assigned to that HHA; and
    (ii) Must be at least equivalent to the sum of the following:
    (A) The prevailing salary paid by providers for positions of this 
type in what the State considers to be the HHA's geographic area 
(prevailing salary based on the Geographic Guide by the Department of 
Labor (BLS Wage Data by Area and Occupation);
    (B) Any additional costs that would have reasonably been incurred 
by the HHA if such person had been in an employment relationship; and
    (C) Any other costs incurred by such a person in furnishing 
services under such an arrangement or as otherwise set by the State.
    (2) An HHA's failure to pay the salary and other costs of the 
temporary manager described in paragraph (d)(1) of this section is 
considered a failure to relinquish authority and control to temporary 
management.
    (3) The costs of a temporary manager is not an allowable item on a 
cost report, as described in Sec.  488.30.

Sec.  488.840  Suspension of payment for all new patient admissions and 
new payment episodes.

    (a) Application. (1) CMS may suspend payment for all new admissions 
and new payment episodes if an HHA is found to have condition-level 
deficiencies, regardless of whether those deficiencies pose immediate 
jeopardy.
    (2) CMS will consider this sanction for any deficiency related to 
poor patient care outcomes, regardless of whether the deficiency poses 
immediate jeopardy.
    (b) Procedures--(1) Notices. (i) Before suspending payments for new 
admissions or new payment episodes, CMS provides the HHA notice of the 
suspension of payment for all new admissions and all new payment 
episodes as set forth in Sec.  488.810(f). The CMS notice of suspension 
will include the nature of the non-compliance; the effective date of 
the sanction; and the right to appeal the determination leading to the 
sanction.
    (ii) The HHA may not charge a newly admitted HHA patient who is a 
Medicare beneficiary for services for which Medicare payment is 
suspended unless the HHA can show that, before initiating care, it gave 
the patient or his or her representative oral and written notice of the 
suspension of Medicare payment in a language and manner that the 
beneficiary or representative can understand.
    (2) Restriction. (i) Suspension of payment for all new admissions 
and new payment episodes sanction may be imposed anytime an HHA is 
found to be out of substantial compliance.
    (ii) Suspension of payment for patients with new admissions or 
patients with new payment episodes will remain in place until CMS 
determines that the HHA has achieved substantial compliance or is 
involuntarily terminated with the conditions of participation, as 
determined by CMS.
    (3) Resumption of payments. Payments to the HHA resume 
prospectively on the date that CMS determines that the HHA has achieved 
substantial compliance with the conditions of participation.
    (c) Duration and effect of sanction. This sanction ends when--
    (1) CMS determines that the HHA is in substantial compliance with 
all of the conditions of participation; or
    (2) When the HHA is terminated or CMS determines that the HHA is 
not in compliance with the conditions of participation at a maximum of 
6 months from the date noncompliance was determined.

[[Page 41598]]

Sec.  488.845  Civil money penalties.

    (a) Application. (1) CMS may impose a civil money penalty against 
an HHA for either the number of days the HHA is not in compliance with 
one or more conditions of participation or for each instance that an 
HHA is not in compliance, regardless of whether the HHA's deficiencies 
pose immediate jeopardy.
    (2) CMS may impose a civil money penalty for the number of days of 
immediate jeopardy.
    (3) A per-day and a per-instance CMP may not be imposed 
simultaneously for the same deficiency.
    (b) Amount of penalty. (1) Factors considered. CMS takes into 
account the following factors in determining the amount of the penalty:
    (i) The factors set out at Sec.  488.815.
    (ii) The size of an agency and its resources.
    (iii) The availability of other HHAs within a region.
    (iv) Accurate and credible resources, such as PECOS, Medicare cost 
reports and Medicare/Medicaid claims information that provide 
information on the operation and resources of the HHA.
    (v) Evidence that the HHA has a built-in, self-regulating quality 
assessment and performance improvement system to provide proper care, 
prevent poor outcomes, control patient injury, enhance quality, promote 
safety, and avoid risks to patients on a sustainable basis that 
indicates the ability to meet the conditions of participation and to 
ensure patient health and safety.
    (2) Adjustments to penalties. Based on revisit survey findings, 
adjustments to penalties may be made after a review of the provider's 
attempted correction of deficiencies.
    (i) CMS may increase a CMP in increments based on a HHA's inability 
or unwillingness to correct deficiencies, the presence of a system-wide 
failure in the provision of quality care, or a determination of 
immediate jeopardy with actual harm versus immediate jeopardy with 
potential for harm.
    (ii) CMS may also decrease a CMP in increments to the extent that 
it finds, pursuant to a revisit, that substantial and sustainable 
improvements have been implemented even though the HHA is not yet in 
full compliance with the conditions of participation.
    (iii) No penalty assessment shall exceed $10,000 for each day of 
noncompliance.
    (3) Upper range of penalty. Penalties in the upper range of $8,500 
to $10,000 per day of noncompliance are imposed for a condition-level 
deficiency that is immediate jeopardy. The penalty in this range will 
continue until compliance can be determined based on a revisit survey.
    (4) Middle range of penalty. Penalties in the range of $3,500-
$8,500 per day of noncompliance are imposed for a repeat and/or 
condition-level deficiency that does not constitute immediate jeopardy, 
but is directly related to poor quality patient care outcomes.
    (i) $8,500 per day for a repeat deficiency or deficiencies.
    (ii) $2500 to $5,000 per day for other deficiencies.
    (5) Lower range of penalty. Penalties within this range are imposed 
for a repeat and/or condition-level deficiency that does not constitute 
immediate jeopardy and that is related predominately to structure or 
process-oriented conditions (such as OASIS submission requirements) 
rather than directly related to patient care outcomes.
    (i) $4,000 per day for a repeat deficiency or deficiencies.
    (ii) $500 to $3,000 per day for other deficiencies.
    (6) Per instance penalty. Penalties imposed per instance of 
noncompliance may be assessed for one or more singular events of 
condition-level noncompliance that are identified and where the 
noncompliance was corrected during the onsite survey. When penalties 
are imposed for per instance of noncompliance, or more than one per 
instance of noncompliance, the penalties will be in the range of $1,000 
to $10,000 per instance, not to exceed $10,000 each day of 
noncompliance.
    (7) Decreased penalty amounts. If the immediate jeopardy situation 
is removed, but condition-level noncompliance continues, CMS will shift 
the penalty amount imposed per day from the upper range to the middle 
or lower range. An earnest effort to correct any systemic causes of 
deficiencies and sustain improvement must be evident.
    (8) Increased penalty amounts. (i) In accordance with paragraph 
(b)(2) of this section, CMS will increase the per day penalty amount 
for any condition-level deficiency or deficiencies which, after 
imposition of a lower-level penalty amount, become sufficiently serious 
to pose potential harm or immediate jeopardy.
    (ii) CMS increases the per day penalty amount for deficiencies that 
are not corrected and found again at the time of revisit survey(s) for 
which a lower-level penalty amount was previously imposed.
    (iii) CMS may impose a more severe amount of penalties for repeated 
noncompliance with the same condition-level deficiency or uncorrected 
deficiencies from a prior survey.
    (c) Procedures--(1) Notice of intent. CMS provides the HHA with 
written notice of the intent to impose a civil money penalty. The 
notice includes the amount of the CMP being imposed, the basis for such 
imposition, and the proposed effective date of the sanction.
    (2) Appeals--(i) Appeals procedures. An HHA may request a hearing 
on the determination of the noncompliance that is the basis for 
imposition of the civil money penalty. The request must meet the 
requirements in Sec.  498.40 of this chapter.
    (ii) Waiver of a hearing. An HHA may waive the right to a hearing, 
in writing, within 60 days from the date of the notice imposing the 
civil money penalty. If an HHA timely waives its right to a hearing, 
CMS reduces the penalty amount by 35 percent, and the amount is due 
within 15 days of the HHAs agreeing in writing to waive the hearing. If 
the HHA does not waive its right to a hearing in accordance to the 
procedures specified in this section, the civil money penalty is not 
reduced by 35 percent.
    (d) Accrual and duration of penalty. (1) The per day civil money 
penalty may start accruing as early as the beginning of the date of the 
survey that determines that the HHA was out of compliance, as 
determined by CMS.
    (2) A civil money penalty for each per instance of noncompliance is 
imposed in a specific amount for that particular deficiency, with a 
maximum of $10,000 per day per HHA. A penalty that is imposed per day 
and per instance of noncompliance may not be imposed simultaneously.
    (3) Duration of per day penalty when there is immediate jeopardy. 
(i) In the case of noncompliance that poses immediate jeopardy, CMS 
must terminate the provider agreement within 23 calendar days after the 
last date of the survey if the immediate jeopardy is not removed.
    (ii) A penalty imposed per day of noncompliance will stop accruing 
on the day the provider agreement is terminated or the HHA achieves 
substantial compliance, whichever occurs first.
    (4) Duration of penalty when there is no immediate jeopardy. (i) In 
the case of noncompliance that does not pose immediate jeopardy, the 
daily accrual of per day civil money penalties is imposed for the days 
of noncompliance prior to the notice specified in paragraph (c)(1) of 
this section and an additional period of no longer than 6 months 
following the last day of the survey.

[[Page 41599]]

    (ii) If the HHA has not achieved compliance with the conditions of 
participation, CMS terminates the provider agreement. The accrual of 
civil money penalty stops on the day the HHA agreement is terminated or 
the HHA achieves substantial compliance, whichever is earlier.
    (e) Computation and notice of total penalty amount. (1) When a 
civil money penalty is imposed on a per day basis and the HHA achieves 
compliance with the conditions of participation as determined by a 
revisit survey, CMS sends a final notice to the HHA containing all of 
the following information:
    (i) The amount of penalty assessed per day.
    (ii) The total number of days of noncompliance.
    (iii) The total amount due.
    (iv) The due date of the penalty.
    (v) The rate of interest to be assessed on any unpaid balance 
beginning on the due date, as provided in paragraph (f)(4) of this 
section.
    (2) When a civil money penalty is imposed for per instance of 
noncompliance, CMS sends a notice to the HHA containing all of the 
following information:
    (i) The amount of the penalty that was assessed.
    (ii) The total amount due.
    (iii) The due date of the penalty.
    (iv) The rate of interest to be assessed on any unpaid balance 
beginning on the due date, as provided in paragraph (f)(6) of this 
section.
    (3) In the case of an HHA for which the provider agreement has been 
involuntarily terminated and for which a civil money penalty was 
imposed on a per day basis, CMS sends this penalty information after 
one of the following actions has occurred:
    (i) Final administrative decision is made.
    (ii) The HHA has waived its right to a hearing in accordance with 
paragraph (c)(2)(ii) of this section.
    (iii) Time for requesting a hearing has expired and CMS has not 
received a hearing request from the HHA.
    (f) Due date for payment of penalty. A penalty is due and payable 
15 days from notice of the final administrative decision.
    (1) Payments are due for all civil money penalties within 15 days:
    (i) After a final administrative decision when the HHA achieves 
substantial compliance before the final decision or the effective date 
of termination before final decision,
    (ii) After the time to appeal has expired and the HHA does not 
appeal or fails to timely appeal the initial determination,
    (iii) After CMS receives a written request from the HHA requesting 
to waive its right to appeal the determinations that led to the 
imposition of a sanction,
    (iv) After substantial compliance is achieved, or
    (v) After the effective date of termination.
    (2) A request for hearing does not delay the imposition of any 
penalty; it only potentially delays the collection of the final penalty 
amount.
    (3) If an HHA waives its right to a hearing according to paragraph 
(c)(2)(ii) of this section, CMS will apply a 35 percent reduction to 
the CMP amount when:
    (i) The HHA achieved compliance with the conditions of 
participation before CMS received the written waiver of hearing; or
    (ii) The effective date of termination occurs before CMS received 
the written waiver of hearing.
    (4) The period of noncompliance may not extend beyond 6 months from 
the last day of the survey.
    (5) The amount of the penalty, when determined, may be deducted 
(offset) from any sum then or later owing by CMS or State Medicaid to 
the HHA.
    (6) Interest is assessed and accrues on the unpaid balance of a 
penalty, beginning on the due date. Interest is computed at the rate 
specified in Sec.  405.378(d) of this chapter.
    (g) Penalties collected by CMS--(1) Disbursement of CMPs. Civil 
money penalties and any corresponding interest collected by CMS from 
Medicare and Medicaid participating HHAs are disbursed in proportion to 
average dollars spent by Medicare and Medicaid at the national level 
based on MSIS and HHA PPS data for a three year fiscal period.
    (i) Based on expenditures for the FY 2007-2009 period, the initial 
proportions to be disbursed are 63 percent returned to the U.S. 
Treasury and 37 percent returned to the State Medicaid agency.
    (ii) Beginning one year after the effective date of this section, 
CMS shall annually update these proportions based on the most recent 3-
year fiscal period, prior to the year in which the CMP is imposed, for 
which CMS determines that the relevant data are essentially complete.
    (iii) The portion corresponding to the Medicare is returned to the 
U.S. Department of Treasury as miscellaneous receipts.
    (iv) The portion corresponding to the Medicaid payments is returned 
to the State Medicaid agency.
    (2) Penalties may not be used for Survey and Certification 
operations nor as the State's Medicaid non-Federal medical assistance 
or administrative match.

Sec.  488.850  Directed plan of correction.

    (a) Application. CMS may impose a directed plan of correction when 
an HHA:
    (1) Has one or more deficiencies that warrant directing the HHA to 
take specific actions; or
    (2) Fails to submit an acceptable plan of correction.
    (b) Procedures. (1) Before imposing this sanction, CMS provides the 
HHA notice of the impending sanction.
    (2) CMS or the temporary manager (with CMS approval) may direct the 
HHA to take corrective action to achieve specific outcomes within 
specific timeframes.
    (c) Duration and effect of sanction. If the HHA fails to achieve 
compliance with the conditions of participation within the timeframes 
specified in the directed plan of correction, CMS:
    (1) May impose one or more other sanctions set forth in Sec.  
488.820; or
    (2) Terminates the provider agreement.

Sec.  488.855  Directed in-service training.

    (a) Application. CMS may require the staff of an HHA to attend in-
service training program(s) if CMS determines that--
    (1) The HHA has deficiencies that indicate noncompliance;
    (2) Education is likely to correct the deficiencies; and
    (3) The programs are conducted by established centers of health 
education and training or consultants with background in education and 
training with Medicare Home Health Providers, or as deemed acceptable 
by CMS and/or the State (by review of a copy of curriculum vitas and/or 
resumes/references to determine the educator's qualifications).
    (b) Procedures. (1) Action following training. After the HHA staff 
has received in-service training, if the HHA has not achieved 
compliance, CMS may impose one or more other sanctions specified in 
Sec.  488.820.
    (2) Payment. The HHA pays for the directed in-service training for 
its staff.

Sec.  488.860  Continuation of payments to an HHA with deficiencies.

    (a) Continued payments. CMS may continue payments to an HHA with 
condition-level deficiencies that do not constitute immediate jeopardy 
for up to 6 months from the last day of the survey if the criteria in 
paragraph (a)(1) of this section are met.

[[Page 41600]]

    (1) Criteria. CMS may continue payments to an HHA not in compliance 
with the conditions of participation for the period specified in 
paragraph (a) of this section if all of the following criteria are met:
    (i) The HHA has been imposed an alternative sanction or sanctions 
and termination has not been imposed.
    (ii) The HHA has submitted a plan of correction approved by CMS.
    (iii) The HHA agrees to repay the Federal government payments 
received under this provision if corrective action is not taken in 
accordance with the approved plan and timetable for corrective action.
    (2) CMS may terminate the HHA's provider agreement any time if the 
criteria in paragraph (a)(1) of this section are not met.
    (b) Cessation of payments for new admissions. If termination is 
imposed, either on its own or in addition to an alternative sanction or 
sanctions, or if any of the criteria set forth in paragraph (a)(1) of 
this section are not met, the HHA will receive no Medicare payments, as 
applicable, for new admissions following the last day of the survey.
    (c) Failure to achieve compliance with the conditions of 
participation. If the HHA does not achieve compliance with the 
conditions of participation by the end of the period specified in 
paragraph (a) of this section, CMS will terminate the provider 
agreement of the HHA in accordance with Sec.  488.865 of this part.

Sec.  488.865  Termination of provider agreement.

    (a) Effect of termination by CMS. Termination of the provider 
agreement ends--
    (1) Payment to the HHA; and
    (2) Any alternative sanction(s).
    (b) Basis for termination. CMS terminates an HHA's provider 
agreement under any one of the following conditions--
    (1) The HHA is not in compliance with the conditions of 
participation.
    (2) The HHA fails to submit an acceptable plan of correction within 
the timeframe specified by CMS.
    (3) The HHA fails to relinquish control to the temporary manager, 
if that sanction is imposed by CMS.
    (4) The HHA fails to meet the eligibility criteria for continuation 
of payment as set forth in Sec.  488.860(a)(1).
    (c) Notice. CMS notifies the HHA and the public of the termination, 
in accordance with procedures set forth in Sec.  489.53 of this 
chapter.
    (d) Procedures for termination. CMS terminates the provider 
agreement in accordance with procedures set forth in Sec.  489.53 of 
this chapter.
    (e) Appeal. An HHA may appeal the termination of its provider 
agreement by CMS in accordance with part 498 of this chapter.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

    16. The authority citation for part 489 continues to read as 
follows:

    Authority:  Secs. 1102, 1128I and 1819, 1820(e), 1861, 1864(m), 
1866, 1869, and 1871 of the Social Security Act (42 U.S.C. 1302, 
1351i-3, 1395x, 1395aa(m), 1395cc, 1395ff, and 1395hh).

    17. Section 489.53 is amended by adding paragraphs (a)(17) and 
(d)(2)(iii) to read as follows:

Sec.  489.53  Termination by CMS.

    (a) * * *
    (17) In the case of an HHA, it failed to correct any deficiencies 
within the required time frame.
* * * * *
    (d) * * *
    (2) * * *
    (iii) Home health agencies (HHAs). For an HHA with deficiencies 
that pose immediate jeopardy to the health and safety of patients, CMS 
gives notice to the HHA at least 2 days before the effective date of 
termination of the provider agreement.
* * * * *

PART 498--APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT 
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT 
AFFECT THE PARTICIPATION OF ICFS/MR AND CERTAIN NFs IN THE MEDICAID 
PROGRAM

    18. The authority citation for part 498 continues to read as 
follows:

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

    19. Section 498.3 is amended by revising paragraphs (b)(13), 
(b)(14) introductory text, (b)(14)(i), and (d)(10) to read as follows:

Sec.  498.3  Scope and applicability.

* * * * *
    (b) * * *
    (13) Except as provided at Sec.  498.3(d)(12) for SNFs, NFs, and 
HHAs the finding of noncompliance leading to the imposition of 
enforcement actions specified in Sec.  488.406 or Sec.  488.740 of this 
chapter, but not the determination as to which sanction was imposed. 
The scope of review on the imposition of a civil money penalty is 
specified in Sec.  488.438(e) of this chapter.
    (14) The level of noncompliance found by CMS in a SNF, NF, or HHA 
but only if a successful challenge on this issue would affect--
    (i) The range of civil money penalty amounts that CMS could collect 
(for SNFs or NFs, the scope of review during a hearing on imposition of 
a civil money penalty is set forth in Sec.  488.438(e) of this 
chapter); or
* * * * *
    (d) * * *
    (10) For a SNF, NF, or HHA--
    (i) The finding that the provider's deficiencies pose immediate 
jeopardy to the health or safety of the residents or patients;
    (ii) Except as provided in paragraph (b)(13) of this section, a 
determination by CMS as to the provider's level of noncompliance; and
    (iii) For SNFs and NFs, the imposition of State monitoring.
* * * * *

    Authority:  Catalog of Federal Domestic Assistance Program No. 
93.773, Medicare--Hospital Insurance; and Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program.

    Dated: June 27, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: June 28, 2012.
Kathleen Sebelius,
Secretary.
[FR Doc. 2012-16836 Filed 7-6-12; 4:15 pm]
BILLING CODE 4120-01-P
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