41128 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 409, 410, 411, 413, 424,

and 484

[HCFA–1059–F]

RIN 0938–AJ24

Medicare Program; Prospective

Payment System for Home Health

Agencies

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Final rule.

SUMMARY: This final rule establishes

requirements for the new prospective

payment system for home health

agencies as required by section 4603 of

the Balanced Budget Act of 1997, as

amended by section 5101 of the

Omnibus Consolidated and Emergency

Supplemental Appropriations Act for

Fiscal Year 1999 and by sections 302,

305, and 306 of the Medicare, Medicaid,

and SCHIP Balanced Budget Refinement

Act of 1999. The requirements include

the implementation of a prospective

payment system for home health

agencies, consolidated billing

requirements, and a number of other

related changes. The prospective

payment system described in this rule

replaces the retrospective reasonablecost-based system currently used by

Medicare for the payment of home

health services under Part A and Part B.

EFFECTIVE DATE: These regulations are

effective October 1, 2000.

FOR FURTHER INFORMATION CONTACT:

Bob Wardwell (Project Manager), (410)

786–3254

Susan Levy (Payment Policy), (410)

786–9364

Debbie Chaney (Data), (410) 786–8164

Randy Throndset (Data), (410) 786–0131

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www.access.gpo.gov/nara/index.html. To assist readers in referencing

sections contained in this document, we

are providing the following table of

contents.

Table of Contents

Preamble

I. Background

A. Current System for Payment of Home

Health Agencies

B. Requirements of the Balanced Budget Act

of 1997, the Omnibus Consolidated and

Emergency Supplemental

Appropriations Act for Fiscal Year 1999

and the Medicare, Medicaid and SCHIP

Balanced Budget Refinement Act of

1999, for the Development of a

Prospective Payment System for Home

Health Agencies

C. Summary of the Proposed Rule

1. Transition to PPS

2. Unit of Payment (60-Day Episode)

3. Split Percentage Payment Approach to

the 60-Day Episode Payment (Periodic

Interim Payments Statutorily Eliminated

With PPS)

4. Partial Episode Payment Adjustment

(PEP Adjustment)

5. Significant Change In Condition

Adjustment (SCIC Adjustment)

6. Low-Utilization Payment Adjustment

(LUPA)

7. Case-Mix Methodology

8. Outlier Payments

9. Consolidated Billing/Bundling

II. Provisions of Proposed Rule

III. Analysis and Responses to Public

Comments

A. 60-Date Episode Payment Definition

B. Definition of Non-Routine Medical

Supplies Included in the Episode

Definition

C. Possible Inclusion of Medicare Part B

Therapy Services in the Episode

D. Continuous Episode Recertifications

E. Transition/Blend

F. Split Percentage Payment

G. Statutory Elimination of Periodic Interim

Payments

H. Low Utilization Payment Adjustment

(LUPA)

I. Partial Episode Payment Adjustment (PEP

Adjustment)

J. Significant Change in Condition Payment

Adjustment (SCIC Adjustment)

K. Case-Mix

L. Episode Rate Methodology

M. Audited Cost Report Sample

N. Cost Outlier Payments

O. Budget Neutrality

P. Discharge Issues

Q. Consolidated Billing

R. Physician Certification of the HHRG

S. Small Rural Providers

T. Wage Index

U. Market Basket

V. Alternative Methods of Care

W. Discrimination

X. Other Federal Requirements

Y. OASIS Assessment and Plan of Care

Certification Transition Concerns

Z. Billing Issues

AA. Cost Reporting Under PPS

BB. OASIS Data and Grouper Issues

CC. Medical Review Under PPS

DD. Quality under PPS

EE. Medicare Secondary Payor (MSP) Under

PPS

FF. Appeal Rights Under PPS

GG. Suggestions for HCFA

IV. Overview of Final Regulation

A. Costs and Services Covered by the 60-Day

Episode Payment

B. Data Sources Used for the Development of

the 60-Day Episode Payment

1. Audited Cost Report Data

2. Home Health Agency Market Basket

Index

3. Claims Data

4. Hospital Wage Index

C. Methodology Used for the Calculation of

the 60-Day Episode Payment Amount

1. Cost Data—60-Day Episode Payment

2. Utilization Data—60-Day Episode

Payment

3. Updating the Data

4. Standardization Factor

5. Budget-Neutrality Factor

D. Methodology Used for Low-Utilization

Payments

E. Methodology Used for Outlier Payments

F. Examples of National Standardized 60-Day

Episode Payment Amounts and LowUtilization Payment Adjustments

G. Design and Methodology for Case-Mix

Adjustment of 60-Day Episode Payments

1. Revisions to the Case-Mix Classification

System

2. Diagnosis Coding Changes in the

Revised Case-Mix Model

3. Determining the Case-Mix Indices

H. Consolidated Billing

1. Background

2. HHA Consolidated Billing Legislation

3. Types of Services That Are Subject to

the Provision

4. Effects of This Provision

5. Effective Date for Consolidated Billing

V. Provisions of the Final Rule

VI. Collection of Information Requirements

VII. Regulatory Impact Analysis

A. Background

B. Revisions to the Proposed Rule

C. Effects of This Final Rule

D. Rural Hospital Impact Statement

VIII. Regulations Text

In addition, because of the many terms to

which we refer by abbreviation in this rule,

we are listing these abbreviations and their

corresponding terms in alphabetical order

below:

ADL Activities of Daily Living

BBA Balanced Budget Act of 1997

BBRA Medicare, Medicaid, and

SCHIP Balanced Budget

Refinement Act of 1999

COPs Conditions of participation

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41129

DME Durable medical equipment

FIs Fiscal intermediaries

FFY Federal fiscal year

FMR Focused medical review

FY Fiscal year

HHA Home health agency

HIC Health insurance claim

HHRGs Home Health Resource

Groups

IADL Instrumental Activities of

Daily Living

IPS Interim payment system

LUPA Low-utilization payment adjustment

MS Medical social services

MSA Metropolitan Statistical Area

NCSB Neurological, cognitive, sensory, and behavioral variables

OASIS Outcome and Assessment Information Set

OBQI Outcome based quality improvement

OCESAA Omnibus Consolidated and

Emergency Supplemental

Appropriations Act for

Fiscal Year 1999

OSCAR On-line Survey and Certification System

OT Occupational therapy

PEP Partial episode payment

PPS Prospective payment system

PT Physical therapy

RHHI Regional Home Health Intermediary

RUGs Resource Utilization Groups

SCIC Significant Change in Condition

SN Skilled nursing service

SP Speech-language pathology

I. Background

A. Current System for Payment of Home

Health Agencies

The Balanced Budget Act of 1997

(BBA), Public Law 105 33, enacted on

August 5, 1997, significantly changed

the way we pay for Medicare home

health services. Until the

implementation of a home health

prospective payment system (PPS),

home health agencies (HHAs) receive

payment under a cost-based

reimbursement system, referred to as the

interim payment system and generally

established by section 4602 of the BBA.

The interim payment system imposes

two sets of cost limits for HHAs. Section

4206(a) of the BBA reduced the home

health per-visit cost limits from 112

percent of the mean labor-related and

nonlabor-related, per-visit costs for

freestanding agencies to 105 percent of

the median. In addition, HHA costs are

subjected to an aggregate per-beneficiary

cost limitation. For those providers with

a 12-month cost reporting period ending

in Federal fiscal year (FFY) 1994, the

per-beneficiary cost limitation is based

on a blend of costs (75 percent on 98

percent of the agency-specific costs and

25 percent on 98 percent of the

standardized regional average of the

costs for the agency’s census region).

For new providers and those providers

without a 12-month cost-reporting

period ending in FFY 1994, the perbeneficiary limitation is the national

median of the per-beneficiary limits for

HHAs. Under the interim payment

system, HHAs are paid the lesser of (1)

actual reasonable costs; (2) the per-visit

limits; or (3) the per-beneficiary limits.

Effective October 1, 1997, the interim

payment system exists until prospective

payment for HHAs is implemented.

On October 21, 1998, the Omnibus

Consolidated and Emergency

Supplemental Appropriations Act for

FY 1999 (OCESAA), Public Law 105–

277, was signed into law. Section 5101

of OCESAA amended section

1861(v)(1)(L) of the Social Security Act

(the Act) by providing for adjustments

to the per-beneficiary and per-visit

limitations for cost-reporting periods

beginning on or after October 1, 1998.

We had published a notice with

comment period establishing the cost

limitations for cost reporting periods

beginning on or after October 1, 1998 in

the Federal Register that was entitled

‘‘Medicare Program; Schedules of PerVisit and Per-Beneficiary Limitations on

Home Health Agency Costs for Cost

Reporting Periods Beginning On or After

October 1, 1998’’ on August 11, 1998 (63

FR 42912). OCESAA made the following

adjustments to these limitations:

Providers with a 12-month cost

reporting period ending during FY 1994,

whose per-beneficiary limitations were

less than the national median, which is

to be set at 100 percent for comparison

purposes, will get their current perbeneficiary limitation plus 1⁄3 of the

difference between their rate and the

adjusted national median perbeneficiary limitation. New providers

and providers without a 12-month costreporting period ending in FFY 1994

whose first cost-reporting period begins

before October 1, 1998 will receive 100

percent of the national median perbeneficiary limitation.

New providers whose first costreporting periods begin during FFY

1999 will receive 75 percent of the

national median per-beneficiary

limitation as published in the August

11, 1998 notice. In the case of a new

provider or a provider that did not have

a 12-month cost-reporting period

beginning during FFY 1994 that filed an

application for HHA provider status

before October 15, 1998 or that was

approved as a branch of its parent

agency before that date and becomes a

subunit of the parent agency or a

separate freestanding agency on or after

that date, the per-beneficiary limitation

will be set at 100 percent of the median.

The per-visit limitation effective for

cost-reporting periods beginning on or

after October 1, 1998 is set at 106

percent of the median instead of 105

percent of the median, as previously

required in the BBA.

There was contingency language for

the home health PPS provided in the

BBA that was also amended by section

5101 of OCESAA. The language

provided that if the Secretary, for any

reason, does not establish and

implement the PPS for home health

services by October 1, 2000, the

Secretary will provide for a reduction by

15 percent to the per-visit cost limits

and per-beneficiary limits, as those

limits would otherwise be in effect on

September 30, 2000. Section 302 of the

Medicare, Medicaid, and SCHIP

Balanced Budget Refinement Act of

1999 (BBRA), Public Law 106–113,

enacted on November 29, 1999,

however, subsequently removed the

contingency language governing the 15

percent reduction to the IPS cost limits

for FFY 2001. It also increased the perbeneficiary limit for those providers

with limits below the national median.

B. Requirements of the Balanced Budget

Act of 1997, the Omnibus Consolidated

and Emergency Supplemental

Appropriations Act for Fiscal Year

1999, and the Medicare, Medicaid and

SCHIP Balanced Budget Refinement Act

of 1999 for the Development of a

Prospective Payment System for Home

Health Agencies

Section 4603(a) of the BBA provides

the authority for the development of a

PPS for all Medicare-covered home

health services paid on a reasonable cost

basis that will ultimately be based on

units of payment by adding section 1895

to the Act entitled ‘‘Prospective

Payment For Home Health Services.’’

Section 5101(c) of OCESAA amends

section 1895(a) of the Act by removing

the transition into the PPS by costreporting periods and requiring all

HHAs to be paid under PPS effective

upon the implementation date of the

system. Section 1895(a) of the Act now

states ‘‘Notwithstanding section 1861(v),

the Secretary shall provide, for portions

of cost reporting periods occurring on or

after October 1, 2000, for payments for

home health services in accordance

with a prospective payment system

established by the Secretary under this

section.’’

Section 1895(b)(1) of the Act requires

the Secretary to establish a PPS for all

costs of home health services. Under

this system all services covered and

paid for on a reasonable cost basis under

the Medicare home health benefit as of

41130 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

the date of enactment of the BBA,

including medical supplies, will be paid

on the basis of a prospective payment

amount. The Secretary may provide for

a transition of not longer than 4 years

during which a portion of the

prospective payment may be agencyspecific as long as the blend does not

exceed budget-neutrality targets.

Section 1895(b)(2) of the Act requires

the Secretary in defining a prospective

payment amount to consider an

appropriate unit of service and the

number, type, and duration of visits

furnished within that unit, potential

changes in the mix of services provided

within that unit and their cost, and a

general system design that provides for

continued access to quality services.

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

requires that (1) the computation of a

standard prospective payment amount

include all costs of home health services

covered and paid for on a reasonablecost basis and be initially based on the

most recent audited cost report data

available to the Secretary, and (2) the

prospective payment amounts be

standardized to eliminate the effects of

case-mix and wage levels among HHAs.

Section 5101(c) of OCESAA modifies

the effective date of the budgetneutrality targets for HHA PPS by

amending section 1895(b)(3)(A)(ii) of

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

Act, as amended, requires that the

standard prospective payment

limitation amounts be budget neutral to

what would be expended under the

current interim payment system with

the limits reduced by 15 percent at the

inception of the PPS on October 1, 2000.

Section 302 of the BBRA, delayed the

application of the 15 percent reduction

in the budget neutrality target for PPS

until one year after PPS

implementation. The law further

requires the Secretary to report within 6

months of implementation of PPS on the

need for the 15 percent reduction.

Section 5101(d)(2) of OCESAA also

modifies the statutory provisions

dealing with the home health market

basket percentage increase. For fiscal

years 2002 or 2003, sections

1895(b)(3)(B)(i) and (b)(3)(B)(ii) of the

Act, as so modified, require that the

standard prospective payment amounts

be increased by a factor equal to the

home health market basket minus 1.1

percentage points. In addition, for any

subsequent fiscal years, the statute

requires the rates to be increased by the

applicable home health market basket

index change. Section 306 of the BBRA

amended the statute to provide a

technical correction clarifying the

applicable market basket increase for

PPS in each of FYs 2002 and 2003. The

technical correction clarifies that the

update in home health PPS in FY 2002

and FY 2003 will be the home health

market basket minus 1.1 percent.

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

requires the Secretary to reduce the

prospective payment amounts if the

Secretary accounts for an addition or

adjustment to the payment amount

made in the case of outlier payments.

The reduction must be in a proportion

such that the aggregate reduction in the

prospective payment amounts for the

given period equals the aggregate

increase in payments resulting from the

application of outlier payments.

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 casemix and geographic differences in wage

levels. Section 1895(b)(4)(B) of the Act

requires the establishment of an

appropriate case-mix adjustment factor

that explains a significant amount of the

variation in cost 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 the furnishing of home health

services in a geographic area compared

to the national average applicable level.

These wage-adjustment factors may be

the factors used by the Secretary for

purposes of section 1886(d)(3)(E) of the

Act.

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

Secretary the option to grant additions

or adjustments to the payment amount

otherwise made in the case of outliers

because of unusual variations in the

type or amount of medically necessary

care. Total outlier payments in a given

fiscal year cannot exceed 5 percent of

total payments projected or estimated.

Section 1895(b)(6) of the Act provides

for the proration of prospective payment

amounts between the HHAs involved in

the case of a patient electing to transfer

or receive services from another HHA

within the period covered by the

prospective payment amount.

Section 1895(d) of the Act limits

review of certain aspects of the HHA

PPS. Specifically, there is no

administrative or judicial review under

sections 1869 or 1878 of the Act, or

otherwise, of the following: the

establishment of the transition period

under 1895(b)(1) of the Act, the

definition and application of payment

units under section 1895(b)(2) of the

Act, the computation of initial standard

prospective amounts under

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

reduction described in section

1895(b)(3)(A)(ii) of the Act), the

establishment of the adjustment for

outliers under 1895(b)(3)(C) of the Act,

the establishment of case-mix and area

wage adjustments under 1895(b)(4) of

the Act, and the establishment of any

adjustments for outliers under

1895(b)(5) of the Act.

Section 4603(b) of the BBA amends

section 1815(e)(2) of the Act by

eliminating periodic interim payments

for HHAs effective October 1, 2000.

Section 4603(c) of the BBA sets forth

the following conforming amendments:

• Section 1814(b)(1) of the Act is

amended to indicate that payments

under Part A will also be made under

section 1895 of the Act;

• Section 1833(a)(2)(A) of the Act is

amended to require that home health

services, other than a covered

osteoporosis drug, are paid under HHA

PPS;

• Section 1833(a)(2) is amended by

adding a new subparagraph (G)

regarding payment of Part B services at

section 1861(s)(10)(A) of the Act; and

• Section 1842(b)(6)(F) is added to

the Act and section 1832(a)(1) of the Act

is amended to include a reference to

section 1842(b)(6)(F), both governing the

consolidated billing requirements.

Section 4603(d) of the BBA was

amended by section 5101(c)(2) of

OCESAA by changing the effective date

language for the HHA PPS and the other

changes made by section 4603 of the

BBA. Section 4603(d) now provides

that: ‘‘Except as otherwise provided, the

amendments made by this section shall

apply to portions of cost reporting

periods occurring on or after October 1,

2000.’’ This change requires all HHAs to

be paid under HHA PPS effective

October 1, 2000 regardless of the current

cost-reporting period.

Section 4603(e) of the BBA sets forth

the contingency language for HHA PPS

noting that if the Secretary, for any

reason, does not establish and

implement HHA PPS on October 1,

2000, the per-visit cost limits and perbeneficiary limits under the interim

payment system will be reduced by 15

percent. Section 302(a) of the BBRA of

1999 eliminated the interim payment

system contingency language by striking

this section from the statute.

Section 305 of the BBRA refined the

consolidated billing requirements under

PPS. The new law excludes durable

medical equipment (DME) from the

home health consolidated billing

requirements.

C. Summary of the Proposed Rule

We published a proposed rule in the

Federal Register on October 28, 1999 at

(64 FR 58134) that set forth proposed

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41131

requirements that would establish the

new prospective payment system for

home health agencies as required by the

Balanced Budget Act (BBA) of 1997, as

amended by the Omnibus Consolidated

and Emergency Supplemental

Appropriations Act (OCESAA), of 1999,

and the Medicare, Medicaid, and SCHIP

Balanced Budget Refinement Act of

1999 (BBRA). The PPS would replace

the retrospective reasonable cost-based

system currently used by Medicare for

the payment of home health services

under Part A and Part B.

1. Transition to PPS

The statute provides authority for a

transition period of no longer than 4

years to PPS. We proposed a full

transition to the PPS. The overwhelming

majority of the industry seems eager to

move to PPS. However, some individual

home health agencies (HHAs) will

object to PPS because they currently

enjoy a competitive advantage with high

cost limits under the interim payment

system. Furthermore, the statute now

requires that we pay all providers under

PPS on October 1, 2000 rather than

phasing in by cost reporting period.

2. Unit of Payment (60-Day Episode)

We proposed a 60-day episode as the

basic unit of payment under the HHA

PPS. Evidence from the Phase II perepisode HHA PPS demonstration

illustrated that the length of a 60-day

episode captured a majority of the

patients. Moreover, the 60-day episode

would coordinate with the 60-day

physician recertification of the plan of

care and with the 60-day reassessment

of the patient using the Outcomes and

Assessment Information Set (OASIS).

This would encourage physicians’

involvement in the plan of care.

3. Split Percentage Payment Approach

to the 60-Day Episode Payment

(Periodic Interim Payments Statutorily

Eliminated With PPS)

Because the PPS system must

maintain a cash flow to agencies

accustomed to billing on 30-day cycles

or receiving periodic interim payments,

we proposed a split percentage billing

for each 60-day episode. Under this

system, an agency would receive a

partial episode payment (50 percent) as

soon as it notifies us of an admission

and a final percentage (50 percent)

payment at the close of the 60-day

episode.

4. Partial Episode Payment Adjustment

(PEP Adjustment)

The partial episode payment

adjustment (PEP adjustment) provides a

simplified approach to the episode

definition and accounts for key

intervening events in a patient’s care

defined as:

—A beneficiary elected transfer, or

—A discharge and return to the same

HHA that would warrant a new clock

for purposes of payment, OASIS

assessment, and physician

certification of the new plan of care.

When a new 60-day episode begins,

the original 60-day episode payment

is proportionally adjusted to reflect

the length of time the beneficiary

remained under the agency’s care

before the intervening event. The

proportional payment is the PEP

adjustment.

The proposed PEP adjustment is

based on the span of days including the

start-of-care date/first billable service

date through and including the last

billable service date under the original

plan of care before the intervening

event. The PEP adjustment is calculated

by using the span of days (first billable

service date through and including the

last billable service date) under the

original plan of care as a proportion of

60. The proportion is multiplied by the

original case-mix and wage-adjusted 60-

day episode payment.

We also proposed to close out the

initial episode payment with a PEP

adjustment and restart the 60-day

episode clock under an existing episode

due to a beneficiary elected transfer. We

are concerned that these transfer

situations could be subject to

manipulation. Therefore, we proposed

that we will not apply the PEP

adjustment if the transfer is between

organizations of common ownership.

In addition, the discharge and return

to the same HHA during the 60-day

episode period is only recognized when

a beneficiary reached the treatment

goals in the original plan of care. The

original plan of care must be terminated

with no anticipated need for additional

home health services for the balance of

the 60-day period. The discharge cannot

be a result of a significant change in

condition. In order for the situation to

be defined as a PEP adjustment due to

discharge and return to the same HHA

during the 60-day episode, the discharge

must be a termination of the complete

course of treatment in the original plan

of care. We would not recognize any

PEP adjustment in an attempt to

circumvent the payment made under

the significant change in condition

payment adjustment discussed below.

5. Significant Change in Condition

Adjustment (SCIC Adjustment)

We proposed that the third

intervening event over a course of a 60-

day episode of home health care that

could trigger a change in payment level

to be a significant change in the

patient’s condition. We proposed the

significant change in condition payment

adjustment (SCIC adjustment) as the

proportional payment adjustment

reflecting the time both before and after

the patient experienced a significant

change in condition during the 60-day

episode. The proposed SCIC adjustment

occurs when a beneficiary experiences a

significant change in condition during a

60-day episode that was not envisioned

in the original plan of care. In order to

receive a new case-mix assignment for

purposes of SCIC payment during the

60-day episode, the HHA must complete

an OASIS assessment and obtain the

necessary physician change orders

reflecting the significant change in

treatment approach in the patient’s plan

of care.

The SCIC adjustment is calculated in

two parts. The first part of the SCIC

adjustment reflects the adjustment to

the level of payment before the

significant change in the patient’s

condition during the 60-day episode.

The second part of the SCIC adjustment

reflects the adjustment to the level of

payment after the significant change in

the patient’s condition occurs during

the 60-day episode. The first part of the

SCIC adjustment uses the span of days

of the first billable service date through

the last billable service date before the

intervening event of the patient’s

significant change in condition that

warrants a new case-mix assignment for

payment. The first part of the SCIC

adjustment is determined by taking the

span of days before the patient’s

significant change in condition as a

proportion of 60 multiplied by the

original episode payment amount. The

original episode payment level is

proportionally adjusted using the span

of time the patient was under the care

of the HHA before the significant change

in condition that warranted an OASIS

assessment, physician change orders

indicating the need for a significant

change in the course of the treatment

plan, and the new case-mix assignment

for payment at the end of the 60-day

episode.

The second part of the SCIC

adjustment reflects the time the patient

is under the care of the HHA after the

patient experienced the significant

change in condition during the 60-day

episode that warranted the new casemix assignment for payment purposes.

The second part of the SCIC adjustment

is a proportional payment adjustment

reflecting the time the patient will be

under the care of the HHA after the

significant change in condition and

41132 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

continuing until the end of the 60-day

episode. Once the HHA completes the

OASIS, obtains the necessary physician

change orders reflecting the need for a

new course of treatment in the plan of

care, and assigns a new case-mix level

for payment, the second part of the SCIC

adjustment begins. The second part of

the SCIC adjustment is determined by

taking the span of days (first billable

service date through the last billable

service date) after the patient

experiences the significant change in

condition through the balance of the 60-

day episode as a proportion of 60

multiplied by the new episode payment

level resulting from the significant

change. The initial percentage payment

provided at the start of the 60-day

episode will be adjusted at the end of

the episode to reflect the first and

second parts of the SCIC adjustment (or

any applicable medical review or low

utilization payment adjustment (LUPA)

discussed below) determined at the final

billing for the 60-day episode.

6. Low-Utilization Payment Adjustment

(LUPA)

We proposed payments for lowutilization episodes by paying those

episodes at a standardized average pervisit amount. Episodes with four or

fewer visits would be paid the per-visit

amount times the number of visits

actually provided during the episode.

‘‘Savings’’ from reduced episode

payments would be redistributed to all

episodes.

7. Case-Mix Methodology

In the proposed rule, we described a

home health case-mix system developed

under a research contract with Abt

Associates, Inc., of Cambridge,

Massachusetts. The case-mix system

uses selected data elements from the

OASIS assessment instrument and an

additional data element measuring

receipt of therapy services of at least 8

hours (the 8-hour threshold has been

defined as 10 visits for purposes of casemix adjustment of PPS

reimbursements). The data elements are

organized into three dimensions to

capture clinical severity factors,

functional severity factors, and services

utilization factors influencing case-mix.

The process of selecting data elements

for each dimension was described in the

proposed rule. In the clinical and

functional dimensions, each data

element is assigned a score value

derived from multiple regression

analysis of the Abt research data. The

score value measures the impact of the

data element on total resource use.

Scores are also assigned to data

elements in the services utilization

dimension. To find a patient’s case-mix

group, the case-mix grouper sums the

patient’s scores within each of the three

dimensions. The resulting sum is used

to assign the patient to a severity level

on each dimension. There are four

clinical severity levels, five functional

severity levels, and four services

utilization severity levels. Thus there

are 80 possible combinations of severity

levels across the three dimensions. Each

combination defines one of the 80

groups in the case-mix system. For

example, a patient with high clinical

severity, moderate functional severity,

and low services utilization severity is

placed in the same group with all other

patients whose summed scores place

them in the same set of severity levels

for the three dimensions.

8. Outlier Payments

Outlier payments are payments made

in addition to the 60-day episode

payments for episodes that incur

unusually large costs. Outlier payments

would be made for episodes whose

estimated cost exceeds a threshold

amount for each case-mix group. The

outlier threshold for each case-mix

group, PEP adjustment or total SCIC

adjustment would be the episode

payment amount, PEP adjustment, or

total SCIC adjustment for that group

plus a fixed dollar loss amount that is

the same for all case-mix groups. The

outlier payment would be a proportion

of the amount of estimated costs beyond

the threshold. Costs would be estimated

for each episode by applying standard

per-visit amounts to the number of visits

by discipline reported on claims. The

fixed dollar loss amount and the losssharing proportion are chosen so that

total outlier payments are estimated to

be no more than 5 percent of estimated

total payments. There is no need for a

long-stay outlier payment because we

would not be limiting the number of

continuous episode payments in a fiscal

year that may be made for Medicare

covered home health care to eligible

beneficiaries.

9. Consolidated Billing/Bundling

Under the consolidated billing

requirement, we would require that the

HHA submit all Medicare claims for the

home health services included in

1861(m) of the Social Security Act while

the beneficiary is under the home health

plan of care established by a physician

and is eligible for the home health

benefit. The proposed rule included an

approach that was superseded by

changes to the law made by the BBRA.

II. Provisions of Proposed Rule

In the proposed rule that was

published on October 28, 1999 (64 FR

54134), we proposed a number of

revisions to the regulations in order to

implement the prospective payment

system, the HHA consolidated billing

provision, and conforming statutory

changes. We proposed to make

conforming changes in 42 CFR parts

409, 424, and 484 to synchronize all

timeframes for the plan of care

certification, OASIS Recertification

(follow-up) assessment, and episode

payments to reflect a 60-day period. In

addition, we proposed to add a new

subpart in part 484 to set forth our new

payment system for HHAs. These

revisions and others are discussed in

detail below.

First, we proposed to revise part 409,

subpart E, and discussed the

requirements that must be met for

Medicare to make payment for home

health services. We proposed to make a

conforming change in § 409.43 regarding

the plan of care requirements.

Specifically, we proposed to revise the

frequency for review in paragraph (e) of

this section by replacing the phrase ‘‘62

days’’ with ‘‘60 days unless there is—

• An intervening beneficiary elected

transfer;

• A significant change in condition

resulting in a new case-mix assignment;

or

• A discharge and return to the same

HHA during the 60-day episode that

warrants a new 60-day episode payment

and a new physician certification of the

new plan of care.

In addition, we proposed to revise

subpart H of this part regarding

payments of hospital insurance benefits.

We proposed to revise paragraph (a) in

§ 409.100, which discusses payment for

services, to specify the conditions under

which Medicare may pay hospital

insurance benefits for home health

services. We proposed to provide

introductory text to paragraph (a) and to

redesignate the current paragraph (a) as

paragraph (a)(1). Proposed paragraph

(a)(2) of this section would require that

Medicare may pay hospital insurance

benefits for the home health services

specified at section 1861(m) of the Act,

when furnished to an individual who at

the time the item or service is furnished

is under a plan of care of an HHA, to

the HHA (without regard to whether the

item or service is furnished by the HHA

directly, under arrangement with the

HHA, or under any other contracting or

consulting arrangement).

We proposed to make similar changes

in part 410, subpart I, which deals with

payment of benefits under Part B. We

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41133

proposed to add a new paragraph (b)(19)

to § 410.150 to specify the conditions

under which Medicare Part B pays for

home health services. Specifically,

proposed paragraph (b)(19) specified

that Medicare Part B pay a participating

HHA, for home health services

furnished to an individual who at the

time the item or service is furnished is

under a plan of care of an HHA (without

regard to whether the item or service is

furnished by the HHA directly, under

arrangement with the HHA, or under

any other contracting or consulting

arrangement).

We also proposed to revise part 411

subpart A, which discusses excluded

services. We proposed to add a new

paragraph (q) to § 411.15 to specify the

conditions under which HHA services

are excluded from coverage. Proposed

paragraph (q) specified that a home

health service as defined in section

1861(m) of the Act furnished to an

individual who is under a plan of care

of an HHA is excluded from coverage

unless that HHA has submitted a claim

for payment for such services.

We also proposed to simplify the

authority citation for part 413. In § 413.1

in the introduction to the section on

principles of reasonable cost

reimbursement, we proposed to add a

new paragraph (h) to include the

timeframe under which home health

services will be paid prospectively.

Paragraph (h) under this section

specified that the amount paid for home

health services as defined in section

1861(m) of the Act that are furnished

beginning on or after October 1, 2000 to

an eligible beneficiary under a home

health plan of care is determined

according to the prospectively

determined payment rates for HHAs set

forth in part 484, subpart E of this

chapter. In addition, we proposed to

amend § 413.64 concerning payments to

providers. Specifically, we proposed to

amend paragraph (h)(1) of this section

by removing Part A and Part B HHA

services from the periodic interim

payment method.

We also proposed to revise part 424,

which explains the conditions for

Medicare payment. We proposed to

revise § 424.22 regarding the

certification requirements as a condition

for payment. We proposed to add a new

paragraph (a)(1)(v) that would specify

that as a condition for payment of home

health services under Medicare Part A

or Medicare Part B, a physician must

certify that the individual is correctly

assigned to one of the HHRGs. We

proposed to make a conforming change

at paragraph (b)(1) of this section

regarding the timing of the

recertification. Specifically, we

proposed to amend § 424.22(b) by

replacing the phrase ‘‘at least every 2

months’’ with ‘‘at least every 60 days,’’

and adding the following sentence:

‘‘Recertification is required at least

every 60 days preferably unless there is

a beneficiary elected transfer, a

significant change in condition resulting

in a new case-mix assignment, or a

discharge and return to the same HHA

during the 60-day episode that warrants

a new 60-day episode payment and a

new physician certification of the new

plan of care.’’

We proposed to add a new statutory

authority, section 1895 of the Act, to

paragraph(a) of § 484.200, ‘‘Basis and

scope.’’ Section 1895(a) provides for the

implementation of a prospective

payment system for HHAs for portions

of cost-reporting periods occurring on or

after October 1, 2000.

We proposed to revise the regulations

in 42 CFR part 484, which set forth the

conditions that an HHA must meet in

order to participate in Medicare. First,

we proposed to revise the part heading

from ‘‘Conditions Of Participation:

Home Health Agencies’’ to the more

generic heading ‘‘Home Health

Services.’’ We proposed to make a

conforming change in § 484.18(b) by

replacing the phrase ‘‘62 days’’ with ‘‘60

days’’ unless there is—

• A beneficiary elected transfer;

• A significant change in condition

resulting in a change in the case-mix

assignment; or

• A discharge and return to the same

HHA during the 60-day episode.

Also, we proposed to revise

§ 484.55(d)(1) by replacing ‘‘every

second calendar month’’ with language

that reflects the 60-day episode and

possible PEP Adjustment or SCIC

Adjustment. We proposed to require

that the comprehensive assessment be

updated and revised as frequently as the

patient’s condition warrants but not less

frequently than every 60 days beginning

with the start-of-care date unless there

is—

• A beneficiary elected transfer;

• A significant change in condition

resulting in a change in the case-mix

assignment; or

• A discharge and return to the same

HHA during the 60-day episode.

In addition, we proposed to add and

reserve a new subpart D, then add a new

subpart E, ‘‘Prospective Payment System

for Home Health Agencies.’’ This

proposed subpart sets forth the

regulatory framework of the new

prospective payment system. It

specifically discussed the development

of the payment rates, associated

adjustments, and related rules. In

§ 484.202, ‘‘Definitions,’’ we proposed

the following definitions for purposes of

this new subpart:

As used in this subpart—

Case-mix index means a scale that

measures the relative difference in

resource intensity among different

groups in the clinical model.

Clinical model means a system for

classifying Medicare-eligible patients

under a home health plan of care into

mutually exclusive groups based on

clinical, functional, and intensity-ofservice criteria. The mutually exclusive

groups are defined as Home Health

Resource Groups (HHRGs).

Discipline means one of the six home

health disciplines covered under the

Medicare home health benefit (skilled

nursing services, home health aide

services, physical therapy services,

occupational therapy services, speechlanguage pathology services, and

medical social services).

Market basket index means an index

that reflects changes over time in the

prices of an appropriate mix of goods

and services included in home health

services.

In proposed § 484.205 ‘‘Basis of

payment,’’ we discussed the Medicare

payment to providers of services.

Proposed § 484.205(a) described the

method by which the provider would

receive payment. Specifically,

§ 484.205(a)(1) provided that an HHA

receives a national 60-day episode

payment of a predetermined rate for a

home health service paid on a

reasonable cost basis. We determine this

national 60-day episode payment under

the methodology set forth in § 484.215.

Paragraph (a)(2) specified that an HHA

may receive a low-utilization payment

adjustment (LUPA) of a predetermined

per-visit rate. We proposed to determine

the LUPA under the methodology set

forth in § 484.230. Paragraph (a)(3) of

this section provided that an HHA may

receive a partial episode payment (PEP)

adjustment due to an intervening event

during an existing 60-day episode that

initiates the start of a new 60-day

episode payment and a new patient plan

of care. We proposed to determine the

PEP Adjustment under the methodology

set forth in § 484.235. Paragraph (a)(4) of

this section specified that a HHA may

receive a significant change in condition

(SCIC) Adjustment due to the

intervening event defined as a

significant change in the patient’s

condition during an existing 60-day

episode. We proposed to determine the

SCIC adjustment under a methodology

set forth in 484.237.

Proposed paragraph (b) discussed the

60-day episode payment and

circumstances surrounding adjustments

to the payment method. This paragraph

41134 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

proposed that the national 60-day

episode payment represents payment in

full for all costs associated with

furnishing a home health service paid

on a reasonable cost basis as of August

5, 1997 (the date of the enactment of the

BBA) unless the national 60-day episode

payment is subject to a low-utilization

payment adjustment as set forth in

§ 484.230, a partial episode payment

adjustment as set forth in § 484.235, a

significant change in condition payment

adjustment as set forth in 484.237, or an

additional outlier payment as set forth

in § 484.240. All payments under this

system may be subject to a medical

review adjustment. We noted that DME

provided as a home health service as

defined in section 1861(m) of the Act

would continue to be paid the fee

schedule amount.

In paragraph (c) of this section, we

proposed the low-utilization payment

adjustment to the 60-day episode

payment. We would require that an

HHA receive a national 60-day episode

payment of a predetermined rate for

home health services paid on a

reasonable cost basis as of August 5,

1997, unless we determine at the end of

the 60-day episode that the HHA

furnished minimal services to a patient

during the 60-day episode. The lowutilization payment adjustment would

be determined under the methodology

set forth in § 484.230.

In paragraph (d), we discussed the

partial episode payment adjustment. We

describe that an HHA receives a

national payment of a predetermined

rate for home health services paid on a

reasonable cost basis as of August 5,

1997, unless there is an intervening

event that warrants the initiation of a

new 60-day episode payment and a new

physician certification of the new plan

of care. The initial HHA receives a

partial episode payment adjustment

reflecting the length of time the patient

remained under its care. A partial

episode payment adjustment would be

determined under the methodology set

forth in § 484.235.

In paragraph (e), we discussed the

significant change in condition

adjustment. We discussed that the HHA

receives a national 60-day episode

payment of a pre-determined rate for

home health services paid on a

reasonable cost basis as of August 5,

1997, unless HCFA determines an

intervening event defined as a

beneficiary experiencing a significant

change in condition during a 60-day

episode that was not envisioned in the

original plan of care. In order to receive

a new case-mix assignment for purposes

of payment during the 60-day episode,

the HHA must complete an OASIS

assessment and obtain the necessary

physician change orders reflecting the

significant change in the treatment

approach in the patient’s plan of care.

The significant change in condition

payment adjustment is a proportional

payment adjustment reflecting the time

both before and after the patient

experienced a significant change in

condition during the 60-day episode.

In paragraph (f), we discussed how we

treat payment for outliers. In this

paragraph we would provide that an

HHA receives a national 60-day episode

payment of a predetermined rate for

home health services paid on a

reasonable-cost basis as of August 5,

1997, unless the estimated cost of the

60-day episode exceeds a threshold

amount. The outlier payment is defined

to be a proportion of the estimated costs

beyond the threshold. An outlier

payment is a payment in addition to the

national 60-day episode payment. The

total of all outlier payments is limited

to 5 percent of total outlays under the

HHA PPS. An outlier payment would be

determined under the methodology set

forth in § 484.240.

In proposed § 484.210, we specified

the data used for the calculation of the

national prospective 60-day episode

payment. These data include the

following:

• Medicare cost data on the most

recent audited cost report data available.

• Utilization data based on Medicare

claims.

• An appropriate wage index to

adjust for area wage differences.

• The most recent projections of

increases in costs from the HHA market

basket index.

• OASIS assessment data and other

data that account for the relative

resource utilization for different HHA

Medicare patient case-mix.

Proposed § 484.215, paragraphs (a)

through (e) specified the methodology

used for the calculation of the national

60-day episode payment. Proposed

paragraph (a) specified that in

calculating the initial unadjusted

national 60-day episode payment

applicable for a service furnished by an

HHA using data on the most recent

available audited cost reports, we

determined each HHA’s costs by

summing its allowable costs for the

period. We then determined the

national mean cost per visit.

Proposed paragraph (b) of this section

specified that in calculating the initial

unadjusted national 60-day episode

payment, we determined the national

mean utilization for each of the six

disciplines using home health claims

data.

Proposed paragraph (c) of this section

specified that we used the HHA market

basket index to adjust the HHA cost data

to reflect cost increases occurring

between October 1, 1996 through

September 30, 2001. For each fiscal year

from 2002 or 2003, we would update the

cost data by a factor equivalent to the

annual market basket index percentage

minus 1.1 percentage points.

Proposed paragraph (d) regarding

standardization of the data for variation

in area wage levels and case-mix

specified that we would standardize the

cost data described in paragraph (a) of

this section to remove the effects of

geographic variation in wage levels and

variation in case-mix. We would then

standardize the cost data for geographic

variation in wage levels using the

hospital wage index. We standardized

the cost data for HHA variation in casemix using the case-mix indices and

other data that indicate HHA case-mix.

Proposed paragraph (e) of this section

described how we calculated the

unadjusted national average prospective

payment amount for the 60-day episode.

Specifically, we calculated this payment

amount by—

• Computing the mean standardized

national cost per visit;

• Computing the national mean

utilization for each discipline; then

• Multiplying the mean standardized

national cost per visit by the national

mean utilization summed in the

aggregate for each discipline.

Proposed § 484.220 described how we

calculated the national adjusted

prospective 60-day episode payment

rate for case-mix and area wage levels.

This section specified that we adjusted

the national prospective 60-day episode

payment rate to account for HHA casemix using a case-mix index to explain

the relative resource utilization of

different patients. We also adjusted the

national prospective 60-day episode

payment rate to account for geographic

differences in wage levels using an

appropriate wage index.

In proposed § 484.225, we explained

our methods for annually updating the

national adjusted prospective payment

rates for inflation. We proposed to

handle it in the following manner:

• We update the unadjusted national

60-day episode payment rate on a fiscal

year basis.

• For FY 2001, the unadjusted

national 60-day episode payment rate is

adjusted using the latest available

market basket factors.

• For fiscal year 2002 or 2003, the

unadjusted national 60-day episode

payment rate is equal to the rate for the

previous period or fiscal year increased

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41135

by a factor equal to the HHA market

basket minus 1.1 percentage point.

• For any subsequent fiscal years, the

unadjusted national rate is equal to the

rate for the previous fiscal year

increased by the applicable HHA market

basket index amount.

In proposed § 484.230, we explained

the methodology we use for the

calculation of the low-utilization

payment adjustment. In this section, we

specified that in calculating the lowutilization payment adjustment, an

episode with four or fewer visits is paid

the national average standardized pervisit amount by discipline for each visit

type. We also specified that the national

average standardized per-visit amount is

determined by using cost data set forth

in § 484.210(a) and adjusting by the

appropriate wage index.

Proposed § 484.235 illustrated the

methodology we used to calculate the

partial episode payment adjustment.

The intervening event of either a

beneficiary elected transfer or discharge

and return to the same HHA during the

60-day episode warrants a new 60-day

episode payment and a new physician

certification of a new plan of care. The

original 60-day episode payment is

adjusted with a partial episode payment

that reflects the length of time the

beneficiary remained under the care of

the original HHA. The partial episode

payment is calculated using the actual

days served by the original HHA as a

proportion of 60 multiplied by the

initial 60-day episode payment.

Proposed 484.237 illustrated the

methodology we used to calculate the

significant change in condition payment

adjustment. The intervening event, here,

a beneficiary experiencing a significant

change in condition during a 60-day

episode that was not envisioned in the

original plan of care, initiates the

significant change in condition payment

adjustment. The significant change in

condition is calculated in two parts. The

first part of the SCIC adjustment reflects

the adjustment to the level of payment

prior to the significant change in the

patient’s condition during the 60-day

episode. The second part of the SCIC

adjustment reflects the adjustment to

the level of payment after the significant

change in the patient’s condition occurs

during the 60-day episode. The first part

of the SCIC adjustment is determined by

taking the span of days prior to the

patient’s significant change in condition

as a proportion of 60 multiplied by the

original episode amount. The original

episode payment level is proportionally

adjusted using the span of time the

patient was under the care of the HHA

prior to the significant change in

condition that warranted an OASIS

assessment, physician change orders

indicating the need for a significant

change in the course of the treatment

plan, and the new case-mix assignment

for payment at the end of the 60-day

episode. The second part of the SCIC

adjustment is a proportional payment

adjustment reflecting the time the

patient will be under the care of the

HHA after the significant change in

condition and continuing until the end

of the 60-day episode. The second part

of the SCIC adjustment is determined by

taking the span of days (first billable

visit date through the last billable visit

date) after the patient experiences the

significant change in condition through

the balance of the 60-day episode as a

proportion of 60 multiplied by the new

episode payment level resulting from

the significant change. The initial

percentage payment provided at the

start of the 60-day episode will be

adjusted at the end of the episode to

reflect the first and second part of the

SCIC adjustment.

Proposed § 484.240 described the

methodology we used to calculate the

outlier payment. The methodology for

the calculation of the outlier payment

would involve the following:

• We make an outlier payment for an

episode whose estimated cost exceeds a

threshold amount for each case-mix

group.

• The outlier threshold for each casemix group is the episode payment

amount for that group plus a fixed

dollar loss amount that is the same for

all case-mix groups.

• The outlier payment is a proportion

of the amount of estimated cost beyond

the threshold.

• We estimate the cost for each

episode by applying the standard pervisit amount to the number of visits by

discipline reported on claims.

• The fixed dollar loss amount and

the loss-sharing proportion are chosen

so that the estimated total outlier

payment is no more than 5 percent of

total episode payment.

Proposed § 484.250 related to data

that must be submitted for the

development of a reliable case-mix.

Specifically, we would require an HHA

to submit the OASIS data described at

the current § 484.55(b)(1) and (d)(1)

(that we proposed to revise in the

proposed rule) to administer the

payment rate methodologies described

in § 484.215 (methodology used for the

calculation of the national 60-day

episode payment), § 484.230

(methodology used for the calculation of

the LUPA) and 484.237 (methodology

used for the calculation of the SCIC

adjustment).

Proposed § 484.260 discussed the

limitation for review with regard to our

new payment system. In this section, we

specified that judicial or administrative

review under sections 1869 or 1878 of

the Act, or otherwise, is prohibited with

regard to the establishment of a payment

unit including the national 60-day

episode payment rate and the LUPA.

This prohibition includes the

establishment of the transition period,

definition and application of the unit of

payments, the computation of initial

standard prospective payment amounts,

the establishment of the adjustment for

outliers, and the establishment of casemix and area wage adjustment factors.

III. Analysis and Responses to Public

Comments

We received approximately 381

timely comments on the HHA

prospective payment system proposed

rule HCFA–1059–P published on

October 28, 1999 (64 FR 58134).

Comments were submitted by HHAs

and other health care providers,

national industry associations, suppliers

and practitioners (both individually and

through their respective trade

associations), State associations, health

care consulting firms, and private

citizens. The comments centered on

various aspects of the proposed policies

governing our approach to the home

health prospective payment system. We

have considered all comments received

during the 60-day public comment

period in this final rule and have set

forth our responses to the comments

and corresponding policy modifications

in the following section.

As noted in the proposed rule,

because of the large number of items of

correspondence we normally receive on

Federal Register documents published

for comment, we are unable to respond

to them individually. In particular, a

number of commenters on the proposed

rule raised extremely technical and

detailed questions, many of which were

not directly related to the proposed rule,

regarding OASIS, the cost report, RHHI

systems and the billing process. These

questions are of the nature that would

more appropriately be addressed

through manual instructions and other

issuances than in these regulations. In

this final rule, we are addressing the

policy concerns raised by the

commenters that are related to the

proposed rule. Summaries of the major

issues and our responses to those

comments are set forth below.

A. 60-Day Episode Payment Definition

(§ 484.205)

Comment: We received several

comments on our proposed definition of

41136 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

a 60-day episode as the unit of payment

under HHA PPS. The majority of

commenters supported the 60-day

episode approach. A few commenters

suggested a shorter time period for the

unit of payment.

Response: We believe the 60-day

episode definition is the most

appropriate approach to define the unit

of payment under HHA PPS. Public

support for the 60-day episode as the

unit of payment under PPS centered on

the general consensus that HHAs and

physicians predict home care needs

over a 60-day period due to current plan

of care requirements and OASIS

assessments that basically follow a 60-

day period. As discussed in detail in the

proposed rule, research indicated that

the 60-day episode captures the majority

of stays experienced in the Phase II perepisode HHA PPS demonstration.

We will continue to monitor the

appropriateness of the 60-day unit of

payment and may consider modifying

our approach to the episode definition

in subsequent years of PPS, if

warranted.

Comment: A few commenters raised

concerns with the change to a 60-day

episode from the current plan of care

certification and OASIS assessments

requirements that follow a bimonthly

period, that is, at least every 62 days.

Some of the concerns centered on

confusion and the possible burden

associated with the change to a 60-day

episode.

Response: The statute requires us to

establish an appropriate unit of

payment. We believe the 60-day episode

is the most suitable time frame upon

which to base payment and to manage

home care needs of patients. To

effectively implement a payment system

that is built on a foundation of (1)

OASIS assessments for case-mix

adjustment and (2) plan of care

certifications to ensure the appropriate

plan of treatment, all schedules for

assessment, certification and payment

term should be on a parallel track. The

current schedules for OASIS assessment

and plan of care certification basically

mirror a 60-day episode. Thus, for

purposes of payment, assessment, and

care planning, we do not believe it is an

undue burden to adjust to a 60-day

episode from a bimonthly period.

Comment: A few commenters

recommended that we re-examine the

language we proposed to govern the 60-

day episode. The commenters referred

specifically to the following statement

in the proposed rule: ‘‘An HHA that

accepts a Medicare eligible beneficiary

for home health care for the 60-day

episode period and submits a bill for

payment may not refuse to treat an

eligible beneficiary who has been

discharged from the HHA during the 60-

day episode, but later requires Medicare

covered home health services during the

same 60-day episode period and elects

to return to the same HHA * * *’’ (64

FR 58201) Commenters suggested that

HHAs should be allowed to refuse to

readmit a Medicare eligible beneficiary

in accordance with HHA policies when

the safety of HHA staff or the patient are

threatened; when the HHA does not

have the staff necessary to meet the

patient’s needs; or when the patient or

caregiver refuses to cooperate or comply

with the plan of care.

Response: We proposed this policy to

indicate that we would not accept a

refusal to treat the beneficiary when

only the HHA’s economic interests were

the cause of the refusal. It was not our

intent to restrict the legitimate rights of

an HHA that has a well-documented

individualized situation that results in a

determination to refuse further care of a

patient. This would include threats to

the safety of HHA staff or patients or

failure of patients to cooperate in the

care plan. As long as agencies treat all

similarly situated patients equally,

document the individualized situation,

and comply with all Federal and State

laws, they have the right to refuse to

treat patients in certain welldocumented situations.

B. Definition of Non-Routine Medical

Supplies Included in the Episode

Definition

Comment: We received several

comments regarding certain non-routine

medical supply costs that were not

included in the computation of the 60-

day national episode rate. Specifically,

the commenters suggested that we

include non-routine medical supplies

both paid on the cost report and nonroutine medical supply amounts that

could have been unbundled to part B

prior to PPS in the 60-day episode rate.

Commenters also provided several

suggestions for a revised approach to the

payment for non-routine medical

supplies under HHA PPS.

Recommendations included the

following:

• Providing for a separate payment

for non-routine medical supplies used

by a patient designated as a new

designated home health supply payment

amount separate from the prospective

payment rate.

• Allowing all non-routine medical

supplies to be billed under Part B.

• Carving out or adjusting the

medical supply amount due to the

variation in intermediary coverage

guidelines.

• Adjusting the medical supply

amounts to reflect the costs associated

with wound patients, chux and diaper

supply patients.

• Paying medical supplies as used

because of the wide variation in use due

to patients who sustain out-of-pocket

payments.

• Carving out wound care and

diabetes related medical supplies and

re-examining the overall calculation of

the non-routine supply costs, both

bundled and non-routine supply costs

that could have been unbundled,

because commenters viewed the

amounts inadequate to care for patients

requiring supplies which then might

lead to access issues.

Commenters further noted problems

with the 199 HCPCs codes we used to

calculate the non-routine medical

supply amounts that could have been

unbundled to Part B before

implementation of PPS. We adjusted the

proposed rate to account for the nonroutine medical supply behavior prior

to PPS. Several commenters suggested

that the inclusion of glucose test strips

codes were inappropriate codes

included in the original 199 code list for

non-routine medical supply costs. Other

commenters believed we inadvertently

omitted certain codes in the original list

of 199 codes. Furthermore, several

commenters centered on consolidated

billing requirements for non-routine

medical supplies. We note that all

consolidated billing comments and

responses are included under the

consolidated billing portion of this

section of the regulation.

Response: The goal of reviewing and

calculating the non-routine medical

supply costs that could have been

unbundled to Part B was to ensure

adequate payment for non-routine

medical supplies used by a patient

under a home health plan of care in the

prospective payment rate. As stated in

the proposed rule, we developed a list

of 199 codes that could have possibly

been unbundled to Part B before

implementation of PPS, linked those

Part B supply claims that included any

of the 199 codes to home health claims

for beneficiaries under a home health

plan of care during calendar year 1997.

We have replicated the exact claims

analysis on corresponding calendar year

1998 claims data to develop an updated

supply amount for this final regulation.

This calculation was performed on an

adjusted list of codes based upon review

of comments and is described below.

As stated in the proposed rule, section

1895(b)(1) of the Act, which governs the

development of the unit of payment

under HHA PPS, requires all services

covered and paid on a reasonable cost

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41137

basis as of the date of enactment of the

BBA, including medical supplies, to be

paid on the basis of a prospective

payment amount under HHA PPS. The

statutory language specifically refers to

the inclusion of medical supplies in the

prospective payment rate. We believe

the statute requires the inclusion of

costs of non-routine medical supplies in

the episode rate. However, as stated in

the proposed rule, since DME covered

as a home health service as part of the

Medicare home health benefit is not

currently paid on a reasonable cost

basis, DME will continue to be paid

under the DME fee schedule as a

separate payment amount from the

prospective payment rates under HHA

PPS.

As mentioned above, commenters also

supplied us with an additional 79 codes

that they believed should be included

on our list of non-routine medical

supplies that could have been

unbundled to Part B. We re-examined

our approach to the original 199 codes

used to calculate the amounts that could

have been unbundled non-routine

medical supplies. We found that several

of the recommended codes had been

discontinued. Further, upon reexamination of our original list, we

found that several of the original codes

were inappropriately included, for

example, glucose test strips. These

codes have subsequently been deleted.

Our analysis results in a final list of 178

codes as listed below. We have provided

the following analysis in order to clarify

our revised approach.

59 codes proposed in comments were

discontinued codes as of 12/31/96.

A4190 ...... Transparent film each

A4200 ...... Gauze pad medicated/non-med

A4202 ...... Elastic gauze roll

A4203 ...... Non-elastic gauze roll

A4204 ...... Absorptive drsg

A4205 ...... Nonabsorptive drsg

K0197 ...... Alginate drsg > 16 <=48 sq in

K0198 ...... Alginate drsg > 48 sq in

K0199 ...... Alginate drsg wound filler

K0203 ...... Composite drsg <= 16 sq in

K0204 ...... Composite drsg > 16 <=48 sq in

K0205 ...... Composite drsg > 48 sq in

K0206 ...... Contact layer <= 16 sq in

K0207 ...... Contact layer > 16 <= 48 sq in

K0208 ...... Contact layer > 48 sq in

K0209 ...... Foam drg <= 16 sq in w/o bdr

K0210 ...... Foam drg > 16 <=48 sq in w/o

b

K0211 ...... Foam drg > 48 sq in w/o brdr

K0212 ...... Foam drg <= 16 sq in w/bdr

K0213 ...... Foam drg > 16 <=48 sq in w/

bdr

K0214 ...... Foam drg > 48 sq in w/bdr

K0215 ...... Foam dressing wound filler

K0219 ...... Gauze <= 16 sq in w/bdr

K0220 ...... Gauze > 16 <=48 sq in w/bdr

K0221 ...... Gauze > 48 sq in w/bdr

K0222 ...... Gauze <= 16 in no w/sal w/o b

K0223 ...... Gauze > 16 <=48 no w/sal w/o

b

K0224 ...... Gauze > 48 in no w/sal w/o b

K0228 ...... Gauze <= 16 sq in water/sal

K0229 ...... Gauze > 16 <=48 sq in watr/sal

K0230 ...... Gauze > 48 sq in water/salne

K0234 ...... Hydrocolloid drg <= 16 w/o

bdr

K0235 ...... Hydrocolloid drg > 16 <=48 w/

o b

K0236 ...... Hydrocolloid drg > 48 in w/o b

K0237 ...... Hydrocolloid drg <= 16 in w/

bdr

K0238 ...... Hydrocolloid drg > 16 <=48 w/

bdr

K0239 ...... Hydrocolloid drg > 48 in w/bdr

K0240 ...... Hydrocolloid drg filler paste

K0241 ...... Hydrocolloid drg filler dry

K0242 ...... Hydrogel drg <= 16 in w/o bdr

K0243 ...... Hydrogel drg > 16 <=48 w/o

bdr

K0244 ...... Hydrogel drg > 48 in w/o bdr

K0245 ...... Hydrogel drg <= 16 in w/bdr

K0246 ...... Hydrogel drg > 16 <=48 in w/b

K0247 ...... Hydrogel drg > 48 sq in w/b

K0248 ...... Hydrogel drsg gel filler

K0249 ...... Hydrogel drsg dry filler

K0251 ...... Absorpt drg <= 16 sq in w/o b

K0252 ...... Absorpt drg > 16 <=48 w/o bdr

K0253 ...... Absorpt drg > 48 sq in w/o b

K0254 ...... Absorpt drg <= 16 sq in w/bdr

K0255 ...... Absorpt drg > 16 <=48 in w/

bdr

K0256 ...... Absorpt drg > 48 sq in w/bdr

K0257 ...... Transparent film <= 16 sq in

K0258 ...... Transparent film > 16 <=48 in

K0259 ...... Transplant filmpercent 48 sq in

K0261 ...... Wound filler gel/paste/oz

K0262 ...... Wound filler dry form/gram

K0266 ...... Impreg gauze no h20/sal/yard

Seven codes included in original list

should be removed because they are

considered routine medical supplies

and as such would not be separately

billable by an HHA.

A4214 ...... 30 CC sterile water/saline

K0216 ...... Non-sterile gauze <= 16 sq in

K0217 ...... Non-sterile gauze > 16 <= 48 sq

K0218 ...... Non-sterile gauze > 48 sq in

K0263 ...... Non-sterile elastic gauze/yd

K0264 ...... Non-sterile no elastic gauze

K0265 ...... Tape per 18 sq inches

Four codes are not valid for Medicare.

A4206 ...... 1 CC sterile syringe & needle

A4207 ...... 2 CC sterile syringe & needle

A4208 ...... 3 CC sterile syringe & needle

A4209 ...... 5+ CC sterile syringe & needle

Three codes are for items that are not

covered under Medicare.

A4210. ..... Nonneedle injection device

K0250 ...... Skin seal protect moisturizer

K0260 ...... Wound cleanser any type/size

One code is a DME Fee Schedule code

and should not be included in

accordance with the statute.

A4221 ...... Maint drug infus cath per wk

One code is not separately paid by

Part B.

A4211 ...... Supp for self-adm injections

Three codes mentioned by

commenters had already been included

in our original list of 199 codes.

A4212 ...... Non coring needle or stylet

A4213 ...... 20+ CC syringe only

A4215 ...... Sterile needle

After further re-examination based

upon the comments, we added the

following code to the list:

A4554 ...... Disposable underpads

Upon further review of the original

199 codes used in the proposed rule, the

following codes were deemed

inappropriate to be included in the

definition of non-routine medical

supplies and were deleted from the list

used in this final rule:

A4206 ...... 1 CC sterile syringe & needle

A4207 ...... 2 CC sterile syringe & needle

A4208 ...... 3 CC sterile syringe & needle

A4209 ...... 5+ CC sterile syringe & needle

A4210 ...... Nonneedle injection device

A4211 ...... Supp for self-adm injections

A4214 ...... 30 CC sterile water/saline

A4253 ...... Blood glucose/reagent strips

A4255 ...... Glucose monitor platforms

A4256 ...... Calibrator solution/chips

A4258 ...... Lancet device each

A4259 ...... Lancets per box

A4454 ...... Tape all types all sizes

A6216 ...... Non-sterile gauze <= 16 sq in

A6217 ...... Non-sterile gauze > 16 <= 48 sq

A6218 ...... Non-sterile gauze > 48 sq in

A6263 ...... Non-sterile elastic gauze/yd

A6264 ...... Non-sterile no elastic gauze

A6265 ...... Tape per 18 sq inches

K0137 ...... Skin barrier liquid per oz

K0138 ...... Skin barrier paste per oz

K0139 ...... Skin barrier powder per oz

The following is the final list of 178

codes for non- Routine Medical

Supplies that have a duplicate Part B

code that could have been unbundled

and billed under Part B before

implementation of PPS. The following

codes were used to calculate additional

non-routine medical supply costs to the

national rate. The revised rate

calculation is found in section IV.C. of

this preamble.

A4212 ...... Non coring needle or stylet

A4213 ...... 20+ CC syringe only

A4215 ...... Sterile needle

A4310 ...... Insert tray w/o bag/cath

A4311 ...... Catheter w/o bag 2-way latex

A4312 ...... Cath w/o bag 2-way silicone

A4313 ...... Catheter w/bag 3-way

A4314 ...... Cath w/drainage 2-way latex

A4315 ...... Cath w/drainage 2-way silcne

A4316 ...... Cath w/drainage 3-way

A4320 ...... Irrigation tray

A4321 ...... Cath therapeutic irrig agent

A4322 ...... Irrigation syringe

A4323 ...... Saline irrigation solution

A4326 ...... Male external catheter

A4327 ...... Fem urinary collect dev cup

A4328 ...... Fem urinary collect pouch

A4329 ...... External catheter start set

A4330 ...... Stool collection pouch

A4335 ...... Incontinence supply

A4338 ...... Indwelling catheter latex

A4340 ...... Indwelling catheter special

A4344 ...... Cath indw foley 2 way silicn

A4346 ...... Cath indw foley 3 way

41138 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

A4347 ...... Male external catheter

A4351 ...... Straight tip urine catheter

A4352 ...... Coude tip urinary catheter

A4353 ...... Intermittent urinary cath

A4354 ...... Cath insertion tray w/bag

A4355 ...... Bladder irrigation tubing

A4356 ...... Ext ureth clmp or compr dvc

A4357 ...... Bedside drainage bag

A4358 ...... Urinary leg bag

A4359 ...... Urinary suspensory w/o leg bag

A4361 ...... Ostomy face plate

A4362 ...... Solid skin barrier

A4363 ...... Liquid skin barrier

A4364 ...... Ostomy/cath adhesive

A4365 ...... Ostomy adhesive remover wipe

A4367 ...... Ostomy belt

A4368 ...... Ostomy filter

A4397 ...... Irrigation supply sleeve

A4398 ...... Ostomy irrigation bag

A4399 ...... Ostomy irrig cone/cath w brs

A4400 ...... Ostomy irrigation set

A4402 ...... Lubricant per ounce

A4404 ...... Ostomy ring each

A4421 ...... Ostomy supply misc

A4454 ...... Tape all types all sizes

A4455 ...... Adhesive remover per ounce

A4460 ...... Elastic compression bandage

A4462 ...... Abdmnl drssng holder/binder

A4481 ...... Tracheostoma filter

A4622 ...... Tracheostomy or larngectomy

A4623 ...... Tracheostomy inner cannula

A4625 ...... Trach care kit for new trach

A4626 ...... Tracheostomy cleaning brush

A4649 ...... Surgical supplies

A5051 ...... Pouch clsd w barr attached

A5052 ...... Clsd ostomy pouch w/o barr

A5053 ...... Clsd ostomy pouch faceplate

A5054 ...... Clsd ostomy pouch w/flange

A5055 ...... Stoma cap

A5061 ...... Pouch drainable w barrier at

A5062 ...... Drnble ostomy pouch w/o barr

A5063 ...... Drain ostomy pouch w/flange

A5071 ...... Urinary pouch w/barrier

A5072 ...... Urinary pouch w/o barrier

A5073 ...... Urinary pouch on barr w/flng

A5081 ...... Continent stoma plug

A5082 ...... Continent stoma catheter

A5093 ...... Ostomy accessory convex inse

A5102 ...... Bedside drain btl w/wo tube

A5105 ...... Urinary suspensory

A5112 ...... Urinary leg bag

A5113 ...... Latex leg strap

A5114 ...... Foam/fabric leg strap

A5119 ...... Skin barrier wipes box pr 50

A5121 ...... Solid skin barrier 6x6

A5122 ...... Solid skin barrier 8x8

A5123 ...... Skin barrier with flange

A5126 ...... Disk/foam pad +or¥ adhesive

A5131 ...... Appliance cleaner

A5149 ...... Incontinence/ostomy supply

A6020 ...... Collagen wound dressing

A6154 ...... Wound pouch each

A6196 ...... Alginate dressing <= 16 sq in

A6197 ...... Alginate drsg > 16 <= 48 sq in

A6198 ...... Alginate dressing > 48 sq in

A6199 ...... Alginate drsg wound filler

A6200 ...... Compos drsg <= 16 no bdr

A6201 ...... Compos drsg > 16 <=48 no bdr

A6202 ...... Compos drsg > 48 no bdr

A6203 ...... Composite drsg <= 16 sq in

A6204 ...... Composite drsg > 16 <=48 sq in

A6205 ...... Composite drsg > 48 sq in

A6206 ...... Contact layer <= 16 sq in

A6207 ...... Contact layer > 16 <= 48 sq in

A6208 ...... Contact layer > 48 sq in

A6209 ...... Foam drsg <= 16 sq in w/o bdr

A6210 ...... Foam drg > 16 <=48 sq in w/o

b

A6211 ...... Foam drg > 48 sq in w/o brdr

A6212 ...... Foam drg <= 16 sq in w/bdr

A6213 ...... Foam drg > 16 <=48 sq in w/

bdr

A6214 ...... Foam drg > 48 sq in w/bdr

A6215 ...... Foam dressing wound filler

A6219 ...... Gauze <= 16 sq in w/bdr

A6220 ...... Gauze > 16 <=48 sq in w/bdr

A6221 ...... Gauze > 48 sq in w/bdr

A6222 ...... Gauze <= 16 in no w/sal w/o b

A6223 ...... Gauze > 16 <= 48 no w/sal w/o

b

A6224 ...... Gauze > 48 in no w/sal w/o b

A6228 ...... Gauze <= 16 sq in water/sal

A6229 ...... Gauze > 16 <=48 sq in watr/sal

A6230 ...... Gauze > 48 sq in water/salne

A6234 ...... Hydrocolld drg <= 16 w/o bdr

A6235 ...... Hydrocolld drg > 16 <= 48 w/o

b

A6236 ...... Hydrocolld drg > 48 in w/o b

A6237 ...... Hydrocolld drg <= 16 in w/bdr

A6238 ...... Hydrocolld drg > 16 <=48 w/

bdr

A6239 ...... Hydrocolld drg > 48 in w/bdr

A6240 ...... Hydrocolld drg filler paste

A6241 ...... Hydrocolloid drg filler dry

A6242 ...... Hydrogel drg <= 16 in w/o bdr

A6243 ...... Hydrogel drg > 16 <=48 w/o

bdr

A6244 ...... Hydrogel drg > 48 in w/o bdr

A6245 ...... Hydrogel drg <= 16 in w/bdr

A6246 ...... Hydrogel drg > 16 <=48 in w/b

A6247 ...... Hydrogel drg > 48 sq in w/b

A6251 ...... Absorpt drg <= 16 sq in w/o b

A6252 ...... Absorpt drg > 16 <=48 w/o bdr

A6253 ...... Absorpt drg > 48 sq in w/o b

A6254 ...... Absorpt drg <= 16 sq in w/bdr

A6255 ...... Absorpt drg > 16 <=48 in w/

bdr

A6256 ...... Absorpt drg > 48 sq in w/bdr

A6257 ...... Transparent film <= 16 sq in

A6258 ...... Transparent film > 16 <=48 in

A6259 ...... Transparent film > 48 sq in

A6261 ...... Wound filler gel/paste/oz

A6262 ...... Wound filler dry form/gram

A6266 ...... Impreg gauze no h20/sal/yard

A6402 ...... Sterile gauze <= 16 sq in

A6403 ...... Sterile gauze > 16 <= 48 sq in

A6404 ...... Sterile gauze > 48 sq in

A6405 ...... Sterile elastic gauze/yd

A6406 ...... Sterile non-elastic gauze/yd

K0137 ...... Skin barrier liquid per oz

K0138 ...... Skin barrier paste per oz

K0139 ...... Skin barrier powder per oz

K0277 ...... Skin barrier solid 4x4 equiv

K0278 ...... Skin barrier with flange

K0279 ...... Skin barrier extended wear

K0280 ...... Extension drainage tubing

K0281 ...... Lubricant catheter insertion

K0407 ...... Urinary cath skin attachment

K0408 ...... Urinary cath leg strap

K0409 ...... Sterile H2O irrigation solut

K0410 ...... Male ext cath w/adh coating

K0411 ...... Male ext cath w/adh strip

K0419 ...... Drainable plstic pch w fcplt

K0420 ...... Drainable rubber pch w fcplt

K0421 ...... drainable plstic pch w/o fp

K0422 ...... Drainable rubber pch w/o fp

K0423 ...... Urinary plstic pouch w fcplt

K0424 ...... Urinary rubber pouch w fcplt

K0425 ...... Urinary plstic pouch w/o fp

K0426 ...... Urinary hvy plstc pch w/o fp

K0427 ...... Urinary rubber pouch w/o fp

K0428 ...... Ostomy faceplt/silicone ring

K0429 ...... Skin barrier solid ext wear

K0430 ...... Skin barrier w flang ex wear

K0431 ...... Closed pouch w st wear bar

K0432 ...... Drainable pch w ex wear bar

K0433 ...... Drainable pch w st wear bar

K0434 ...... Drainable pch ex wear convex

K0435 ...... Urinary pouch w ex wear bar

K0436 ...... Urinary pouch w st wear bar

K0437 ...... Urine pch w ex wear bar conv

K0438 ...... Ostomy pouch liq deodorant

K0439 ...... Ostomy pouch solid deodorant

We believe our revised approach to

the calculation that incorporates both

non-routine medical supplies provided

under a plan of care and those nonroutine medical supplies that could

have been unbundled to Part B prior to

the consolidated billing requirements

results in an equitable payment

methodology. As stated above, we have

re-examined the list of non-routine

medical supplies that could have been

unbundled to Part B, recalculated the

costs, and have adjusted the rates

accordingly. We have also included any

additional medical supply costs

included in the audited cost report data

from the sample that became available

after the publication of the proposed

rule.

We have thoroughly re-examined the

issue of all non-routine medical

supplies included in the rate. The

statute does not provide for an

exception for the removal of any or all

supplies for certain type of patients

from the PPS rate. We have used the

best data available to calculate the nonroutine medical supply component of

the rates. We will continue to monitor

the issue of non-routine medical supply

costs with implementation of PPS.

Comment: Several commenters

recommended that we re-examine the

amount we added to adjust the LUPA

per-visit amounts to account for nonroutine medical supply costs. Many

commenters suggested that the amount

was inadequate, especially for wound

care patients.

Response: As stated above, we have

re-examined the issue of the appropriate

level of non-routine medical supply

costs in terms of wound care supplies

and all non-routine medical supplies as

they relate to all rates in the proposed

rule, including the LUPA amounts.

Based on comments, we have decided to

increase the LUPA amount by paying

the updated, prospective per-visit

amount by discipline. We believe this

per-visit amount accurately reflects an

appropriate per-visit payment level,

including medical supplies and other

services furnished during LUPA visits.

This provision is set forth in regulations

at § 484.230. The revised LUPA

approach is discussed in section IV.D. of

this rule.

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41139

Comment: Commenters requested

clarification of the application of 20

percent co-payment of non-routine

medical supplies not related to the plan

of care.

Response: Medical supplies are

specifically listed in section 1861(m) of

the Act as a covered home health

service. All covered home health

services are ordered by a physician for

a patient under a plan of care. The 20

percent copayment does not apply to

non-routine medical supplies covered as

a home health service. There is

currently no imposition of copayment

on home health services except for

DME. There is a 20 percent copayment

on DME covered as a home health

service. However, as stated above in

section I.B. of this rule, BBRA of 1999

removed DME covered as a home health

service from the consolidated billing

requirements.

We note that Part B does not provide

coverage of and payment for items

termed ‘‘non-routine medical supplies.’’

DME may have a DME supply

component, but that supply cost is

related to the DME and included in the

DME fee schedule payment. Further, the

statute governing consolidated billing

specifically refers to a patient under a

plan of care. Providers cannot

circumvent the consolidated billing

requirements by attempting to exclude

certain non-routine medical supplies

from the plan of care by distinguishing

between non-routine medical supplies

related and unrelated to the plan of care.

The comment may reflect concern with

Part B services such as parenteral or

enteral nutrition that are neither

currently covered as home health

services nor defined as a non-routine

medical supply. Parenteral or enteral

nutrition would therefore not be subject

to the requirements governing home

health consolidated billing because

those Part B services are not home

health services as defined in section

1861(m)of the Act. The applicable

copayment or deductible requirements

governing Medicare Part B outside of

the Medicare home health benefit

defined in section 1861(m) of the Act

are not changed by this rule.

Comment: A few commenters stated

that if a beneficiary has a continuing

medical need for medical supplies due

to a chronic illness unrelated to the

condition the HHA is treating, the

patient should be excluded from the

PPS rate and consolidated billing.

Response: As we indicated in the

proposed rule and the response to the

previous comment, the law is very

specific regarding the inclusion of

medical supplies in the prospective

rates. The law requires all services

covered and paid on a reasonable cost

basis as of the date of enactment of the

BBA, including medical supplies, to be

paid on the basis of a prospective

payment amount under HHA PPS. The

consolidated billing requirements at

section 1842(b)(6)(F) of the Act, as

amended by section 305 of BBRA,

specifically require ‘‘in the case of home

health services (including medical

supplies described in section

1861(m)(5), but excluding durable

medical equipment to the extent

provided for in such section) furnished

to an individual who (at the time the

item or service is furnished) is under a

plan of care of a home health agency,

payment shall be made to the agency

(without regard to whether or not the

item or service was furnished by the

agency, by others under arrangement

with them made by the agency, or when

any other contracting or consulting

arrangement, or otherwise).’’

The statutory language governing

consolidated billing clearly states that

the patient is under the plan of care. If

the patient requires medical supplies

that are currently covered and paid for

under the Medicare home health benefit

during a certified episode under HHA

PPS, the billing for those medical

supplies falls under the auspices of the

HHA due to the consolidated billing

requirements. As stated in previous

comments, there is no statutory latitude

for an exception or carve-out of medical

supplies from the PPS rate for patients

under a plan of care under HHA PPS.

We have included the costs of all such

supplies in the rates.

Comment: A few commenters

suggested that we establish clear

guidelines so that providers of medical

supplies receive adequate notice when

items they may be furnishing to a

beneficiary become subject to HHA PPS.

Response: The law refers to a patient

under a home health plan of care. All

routine and non-routine medical

supplies that are currently covered as a

Medicare home health service are

subject to the home health PPS

requirements. We believe the proposed

rule and this final rule as well as current

Medicare policies governing coverage of

medical supplies under the home health

benefit provide the notice of the

requirements governing the HHA PPS.

We will be directing our carrier to

inform suppliers of this change and will

be developing efforts to prevent

erroneous billings. Further clarification

of routine and non-routine medical

supplies can be found in section 204.1

of the Medicare home health agency

manual.

Comment: A few commenters

suggested that we review the nonroutine medical supply coverage

policies of the various RHHIs and

establish a consistent national coverage

policy. Adjustments to the medical

supply component of the rate should be

made based on the analysis of the

coverage variations in the original data

used to establish the PPS rates.

Response: We have re-examined our

approach to the national coverage policy

governing non-routine medical supplies

under the Medicare home health

benefit. We do not have any indication

of the existence of significant

inconsistencies in coverage policies

across RHHIs. As stated in previous

comments, we will continue to monitor

the coverage and utilization of nonroutine medical supplies in subsequent

years of PPS implementation.

Comment: Commenters suggested that

medical supplies should be paid as used

due to the wide variation in supply

usage across patients and because some

patients have historically paid out-ofpocket for supplies although HHAs were

required to furnish them.

Response: As indicated above, the law

specifically includes costs of medical

supplies in determining the PPS rates.

We are concerned that commenters even

suggested that HHAs have historically

permitted or even encouraged eligible

Medicare beneficiaries to pay out-ofpocket for Medicare services that

patients were not required to pay. We

emphasize that agencies are obligated to

furnish and Medicare will pay for

needed medical supplies covered under

the home health benefit.

C. Possible Inclusion of Medicare Part B

Therapy Services in the Episode

Comment: We received a few

comments regarding certain Part B

therapy costs that were not included in

the computation of the PPS rates.

Several commenters suggested that we

collect Medicare Part B Claims

information for all therapy services

provided to patients while receiving

home health services under the home

health benefit and adjust the episode

definition, payment rate, and budget

neutrality factor accordingly.

Commenters believed that HHAs prior

to PPS, as with non-routine medical

supplies, had the option to unbundle

therapy services outside of the home

health benefit to Part B therapy

providers. Because such services cannot

be unbundled under PPS, commenters

suggested that, based on our analysis of

Part B therapy claims during a home

health stay, an adjustment to the nonstandardized amount should be made to

account for this additional cost for

therapy services.

41140 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

Response: Before implementation of

PPS, HHAs were not clearly prohibited

from unbundling therapies to Part B.

Consistent with our approach to nonroutine medical supplies that could

have been unbundled to Part B prior to

PPS, we again analyzed Part B therapy

claims data. Section IV.B.3. of this rule

describes our claims analysis of the Part

B therapy claims. Based on the analysis,

we have adjusted the rates accordingly

with the methodology described in

section V. of this rule.

D. Continuous Episode Recertification

Comment: Several commenters

support continuous episode

certifications because the policy permits

access to home health services for

eligible beneficiaries. A few commenters

requested clarification of continuous

episode recertification with regard to

long term utilizers of Medicare home

health services. In addition, commenters

requested further clarification of the

definition of terms associated with

continuous episode recertification.

Some commenters requested specific

clarification of the dates governing

continuous episode recertification.

Response: We proposed continuous

recertifications and payment, as

appropriate, for beneficiaries who

continue to be eligible for home health

services. The payment system set forth

in this final rule will permit continuous

episode recertification for Medicare

eligible beneficiaries. We believe this

policy negates the need for a day or time

(length of stay) outlier because

beneficiaries will continue to be

recertified for continuous episodes as

long as they remain eligible for the

Medicare home health benefit. In order

to address the needs of longer stay

patients, we are not limiting the number

of 60-day episode recertifications

permitted in a given fiscal year

assuming a patient remains eligible for

the Medicare home health benefit.

In response to comments, our

explanation of the dates governing

continuous episode recertification and

clarification of terms associated with

subsequent episode recertifications is

given below. The first day of a

subsequent second episode is day 61.

The first day of all subsequent episodes,

whether it is the second or third, etc.

continuous episode, will be termed the

‘‘subsequent episode date.’’ The first

day of a subsequent episode is not

necessarily the first billable visit date.

Unlike the initial episode, the first day

of a subsequent episode may not occur

on the first billable service date.

Therefore, one must distinguish

between the definition of the

subsequent continuing episode date and

the initial episode. Further technical

examples of continuous care will be

found in billing instructions that will be

issued after publication of this rule.

E. Transition/Blend

Comment: Several commenters and

most national industry associations

supported full transition to a national

rate. Conversely, only one industry

association supported a four-year blend

of agency-specific and national PPS

rates. A few commenters suggested the

continuation of IPS for the first

certification or assessment period or

next discharge date or a blend with IPS

related data. A few commenters

provided other creative alternative

blend approaches that fell out of the

scope of the statutory authority for the

transition blend.

Response: Section 1895(b)(1) of the

Act provides the option for a four-year

transition to HHA PPS by blending

agency-specific and national rates. We

proposed full transition to the 60-day

national episode rate. We believed

blending cost based IPS with an episode

rate was not a viable, effective option.

After thorough re-examination of the

comments and subsequent analysis, we

continue to believe that full transition to

national PPS rates without any blend of

current IPS on October 1, 2000 is the

most appropriate alternative. A blended

rate system would be overly complex,

distort the positive incentives in PPS,

and reallocate limited resources from

more efficient HHAs to less costconscious providers. A national PPS

system has significant advantages over

IPS. It recognizes case-mix and provides

additional payments for higher cost

outliers.

Comment: Several commenters

objected to all HHAs being paid under

home health PPS effective October 1,

2000. Many commented that this was

unprecedented and recommended that

the implementation date should be

transitioned based on cost reporting

year.

Response: The law governing the

effective date for home health PPS

implementation is very specific. In fact,

section 5101(c)(1)(A) of OCESSA

amended section 1895(a) of the Act to

change the effective date for PPS from

a transition by cost reporting periods to

an immediate start-up date for all HHAs,

effective October 1, 2000. The law, as

amended, does not provide

implementation by cost reporting

period.

F. Split Percentage Payment

Comment: Current regulations require

a physician signed plan of care before a

HHA can bill Medicare for payment.

Several commenters suggested the need

to receive the initial percentage

payment based on verbal orders. Many

commenters were concerned about cash

flow. Further, commenters believed that

if we adopt a policy that permits initial

payment based on verbal orders the

need for a notice of admission would be

eliminated.

Response: A number of commenters

expressed concerns about cash flow to

providers under the proposed system.

Many reasons centered on the

percentage of total payment provided

upfront, as opposed to the end of the

episode and the potential delays in

receiving payments as a result of claims

processing times, documentation

requirements, and medical review. We

appreciate these issues and are very

interested in ensuring HHAs have

adequate cash flow to maintain quality

services to beneficiaries. As a result, we

have taken a number of steps in this

final rule that include increasing the

amount of the initial percentage

payment for initial episodes and a

number of adjustments detailed below

to significantly shorten the amount of

time between the submission of the

request for anticipated payment

(defined below) and the receipt of

payment. We believe these changes will

significantly lessen the time for the

receipt of payment as opposed to the

approach set forth in the proposed rule.

We are revising our approach to the

split percentage payment as originally

set forth in our proposed rule. We view

the initial percentage payment as a

‘‘request for anticipated payment’’

rather than a Medicare ‘‘claim’’ for

purposes of the Act. However, a request

for anticipated payment is a ‘‘claim’’ for

purposes of Federal, civil, criminal, and

administrative law enforcement

authorities, including but not limited to

the civil monetary penalties law (as

defined in 42 U.S.C. 1320a–7a(i)(2)), the

Civil False Claims Act (as defined in 31

U.S.C. 3729(c)), and the Criminal False

Claims Act (18 U.S.C. 287)). We also

note that where we use the term ‘‘claim’’

in this final regulation, it refers to a

‘‘Medicare claim.’’ The first percentage

payment will not require a physician

signed plan of care before submission.

The request for anticipated payment

reflecting the initial percentage payment

for the episode may be submitted based

on verbal orders. All physician verbal

orders must: (1) Be put in writing; (2)

reflect the agreement between the home

health agency and the physician with

the appropriate detail regarding the

patient’s condition and the services to

be rendered; (3) be compatible with the

regulations governing the plan of care at

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41141

§ 409.43, § 424.22, and § 484.18; and (4)

be signed by a physician prior to

submission of the claim. In order to

request anticipated payment for the

initial percentage payment based on

physician verbal orders, a copy of the

plan of care with all physician verbal

orders placed in writing and dated with

the date of receipt by the registered

nurse or qualified therapist (as defined

in § 484.4) responsible for furnishing or

supervising the ordered service must be

completed. A copy of the plan of care,

which includes the verbal orders, must

also be transmitted to the physician for

his or her records. We believe this

documentation need is consistent with

current practice. Alternatively, the

request for anticipated payment may be

submitted if the HHA has a signed

referral prescribing the physician’s

detailed orders for the services to be

rendered and the patient’s condition.

Signed orders must, however, be

obtained as soon as possible and before

the submission of the claim for services

is submitted for the final percentage

payment for each episode. The final

percentage payment including all of the

utilization data for the episode is the

Medicare claim. The claim for the

residual final percentage payment

requires a signed plan of care prior to

billing for payment. Since the request

for anticipated payment may be

submitted based on verbal orders that

are copied into the plan of care with the

plan of care being immediately

submitted to the physician and is not

considered a Medicare claim, the

request for anticipated payment will be

canceled and recovered unless the claim

for the episode is submitted within the

greater of 60 days from the end of the

episode or 60 days from the issuance of

the anticipated payment. The request of

anticipated payment for the initial

percentage payment is a request for

payment of anticipated services. The

claim for final payment of the residual

percentage payment constitutes the

claim for services furnished. We believe

this revised approach to split percentage

payment will alleviate cash flow

concerns raised in the public comments.

We revised current § 409.43(c)

governing physician signature of the

plan of care. Specifically, paragraph

(c)(1) of this section specifies, ‘‘If the

physician signed plan of care is not

available, the request for anticipated

payment of the initial percentage

payment must be based on—

• A physician’s verbal order that—

++ Is recorded in the plan of care;

++ Includes a description of the

patient’s condition and the services to

be provided by the home health agency;

++ Includes an attestation (relating to

the physician’s orders and the date

received) signed and dated by the

registered nurse or qualified therapist

(as defined in 42 CFR 484.4) responsible

for furnishing or supervising the

ordered service in the plan of care; and

++ Is copied into the plan of care and

the plan of care is immediately

submitted to the physician; or

• A referral prescribing detailed

orders for the services to be rendered

that is signed and dated by a

physician.’’

In paragraph (c)(2) of this section, we

specify that ‘‘HCFA has the authority to

reduce or disapprove requests for

anticipated payments in situations

when protecting Medicare program

integrity warrants this action. Since the

request for anticipated payment is based

on verbal orders as specified in

paragraphs (c)(1)(i) and/or a prescribing

referral as specified in (c)(1)(ii) of this

section and is not a Medicare claim for

purposes of the Act (although it is a

‘‘claim’’ for purposes of Federal, civil,

criminal, and administrative law

enforcement authorities, including but

not limited to the Civil Monetary

Penalties Law (as defined in 42 U.S.C.

1320a–7a(i)(2), and the Civil False

Claims Act (as defined in 31 U.S.C.

3729(c), and the Criminal False Claims

Act (18 U.S.C. 287), the request for

anticipated payment will be canceled

and recovered unless the claim is

submitted within the greater of 60 days

from the end of the episode or 60 days

from the issuance of the request for

anticipated payment.’’

Paragraph (c)(3) of this section

specifies that ‘‘The plan of care must be

signed and dated—

• By a physician as described who

meets the certification and

recertification requirements of § 424.22

of this chapter and;

• Before the claim for each episode

for services is submitted for the final

percentage payment.’’

Paragraph (c)(4) of this section

specifies that ‘‘Any changes in the plan

must be signed and dated by a

physician.’’

We agree with the commenter and

believe that our revised approach

eliminates the need for an additional

notice of admission as originally

proposed. We believe that the requests

for anticipated payment of the initial

percentage payment based on physician

verbal orders responds directly to

commenters concerns with current

requirements governing physician

signatures prior to claim submission.

Commenters were concerned that the

current signature requirements could

disrupt necessary cash flow under PPS.

We believe the request for anticipated

payment for the initial percentage

payment alleviates the cash flow

concerns. Further, the request for

anticipated payment of the initial

percentage payment will provide

appropriate cash flow to all providers

because the requests are not subject to

the current payment floor processing

restrictions. The revised request for

anticipated payment approach to the

split percentage payment ensures

adequate cash flow to providers who

rely on Medicare resources to ensure

continued quality care. Both the request

for anticipated payment and the claim

will be subject to medical review

determinations. Subsequent payment

withholdings may occur, as applicable.

If a provider is targeted for medical

review due to a history of excessive

claim denials, it may not be able to

submit requests for anticipated

payment.

Comment: In the proposed rule, we

proposed a 50/50 split percentage

payment approach to the 60-day episode

payment. The majority of commenters

recommended a higher initial

percentage payment in order to

recognize the front loading of

administrative costs associated with

patient admissions. Many commenters

requested increasing the initial

percentage payment on at least the first

episode due to the up-front costs

associated with new patients.

Response: Based on comments that

we have received, we believe the public

has raised serious issues regarding cash

flow under PPS. Therefore, we have reevaluated our original split percentage

proposal and have decided to revise our

proposed approach to incorporate a 60/

40 split for all initial episodes in order

to recognize the up-front costs

associated with new admissions. This

new split percentage payment approach

for all initial episodes is set forth in

regulations at § 484.205(b)(1). All

subsequent episodes will be paid at the

50/50 percentage payment split. The

split percentage payment approach for

subsequent episodes is set forth in

regulations at § 484.205(b)(2). We

believe our revised approach to the split

percentage payment will provide

appropriate financial relief to HHAs,

adequate cash flow, and preserve the

integrity of the Medicare trust funds. We

believe our revised approach to the split

percentage payment to include both the

higher up-front percentage for first

episodes and the submission of the

request for anticipated payment of the

initial percentage payment based on

verbal orders, alleviates the cash flow

issue for non-PIP providers as well as

ongoing cash flow issues for PIP

41142 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

providers. PIP providers will receive

their last September PIP payments

during October. That continuing

payment flow during the transition

combined with the ability to submit all

requests for anticipated payment of the

initial percentage payment based on

verbal orders at the onset of PPS will

ensure adequate cash flow to PIP

providers. The ability to submit all

requests for anticipated payment of the

initial percentage payment based on

physician verbal orders responds

directly to commenters concerns with

current requirements governing

physician signatures prior to submission

of the claim. Commenters were

concerned that the current signature

requirements could disrupt necessary

cash flow under PPS. We believe the

request for anticipated payment for the

initial percentage payment alleviates the

cash flow concerns. Further, the request

for anticipated payment of the initial

percentage payment will provide

appropriate cash flow to all providers

because the requests are not subject to

the current payment floor processing

restrictions. We plan to continue to

study the up-front rate of utilization

under PPS.

G. Statutory Elimination of Periodic

Interim Payments (PIP)

Comment: The majority of

commenters recommended the

reinstatement of PIP or a PIP-like

accelerated payment under PPS to

ensure adequate cash flow to PIP

providers as well as all providers. One

commenter specifically suggested

accelerated payments for high volume

HHAs.

Response: Section 4603(b) of the BBA

amended section 1815(e)(2) of the Act to

eliminate periodic interim payments.

PIP payments are a method to

periodically pay in advance before

receiving a claim. Accordingly, we

proposed to revise § 413.64(h)(1) to

eliminate PIP for HHAs for services

furnished on or after October 1, 2000. In

this final rule, we are also removing

paragraph (h)(2)(iv) of this section to

comply with the BBA requirement that

eliminates PIP for home health services

upon implementation of PPS.

Based on comments received, we

believe the public has raised critical

issues regarding the need to provide

adequate cash flow to all providers and

specifically to PIP providers during the

transition to PPS. However, traditional

PIP is related to cost-based payment

reconciliations and cannot be readily

adopted to PPS rates.

As stated previously, we believe our

revised approach to the split percentage

billing to include both the higher upfront percentage for first episodes and

the submission of the request for

anticipated payment of the initial

percentage payment based on verbal

orders, that are copied into the plan of

care with the plan of care being

immediately submitted to the physician,

eliminates the cash flow issue for nonPIP providers as well as ongoing cash

flow issues for PIP providers. With

regard to transition payments to PIP

providers, they will be receiving their

last September PIP payments during

October. That continuing payment flow

during transition combined with the

ability to submit all requests for

anticipated payment of the initial split

percentage payment at the onset of PPS

as of October 1, 2000, will also ensure

adequate cash flow to PIP providers. We

believe our revised methodology will

reduce payment flow issues and meet

the needs of all providers equitably.

In addition, accelerated payments, as

historically available, may be available

to HHAs that are disadvantaged by

delayed payments due to unanticipated

HCFA claims processing system failures

or delays to ensure adequate cash flow.

In regulations at § 413.64(g) for costreimbursed providers, and in

§§ 412.116(f) and 413.350(d) for

hospitals and skilled nursing facilities,

respectively, that receive payment

under a prospective payment system,

we have provided for the availability of

accelerated payments for non-PIP

providers in certain situations. We do

not believe that HHAs should be

penalized for unanticipated claims

processing system delays and are

extending the availability of accelerated

payments to all HHAs under PPS.

Therefore, we are adding a new

§ 484.245 to provide HHAs the ability to

request accelerated payments under

home health PPS if the HHA is

experiencing financial difficulties due

to delays by the intermediary in making

payment to the HHA.

H. Low Utilization Payment Adjustment

(LUPA) (§ 484.230)

Comment: Commenters on the LUPA

centered on such issues as the total

elimination of the LUPA, retaining the

four or fewer visit threshold at a

minimum, the lack of recognition of

additional costs associated with the first

visit in the episode due to patient

admission responsibilities, negative

impact on rural and small providers,

and the inadequate payment amount

proposed for each standardized per-visit

amount per-discipline. Many

commenters suggested we increase the

proposed LUPA amounts to reflect the

current per-visit limits by discipline or

cost per visit by discipline or by a

percentage increase approach. A few

commenters suggested the elimination

of LUPA for the first episodes, but

supported application of the LUPA for

subsequent episodes.

Response: We proposed a low

utilization payment adjustment in order

to moderate provision of minimal or

negligible care, that is, to discourage

HHAs from providing a minimal

number of visits in an episode. We

proposed episodes with four or fewer

visits be paid the wage adjusted national

standardized per-visit amount by

discipline for each of the four or fewer

visits rendered during the 60-day

episode. We solicited comments on the

most appropriate threshold and

specifically solicited comments on the

use of the higher threshold of six or

fewer visits. We will retain the original

four or fewer visit threshold as no

commenters supported moving the

threshold to six or fewer visits. In this

final rule, we respond to the

recommendation to increase the

proposed LUPA amount by now

calculating the LUPA based on a higher

national average per-visit amount by

discipline updated by the market basket

to FY 2001. This will provide a higher

level of payment and fully compensate

HHAs for such visits. We are revising

our regulations at § 484.230 to reflect

the higher per-visit amounts that will be

used to calculate the LUPA payments.

We are not adopting the comment to

increase the payment only for the first

visit to account for the front-loading of

costs in an episode because we believe

the approach set forth in this rule will

adequately account for the costs for low

utilization episodes. We will continue

to monitor the impact of the four or

fewer visit threshold and the revised

LUPA per-visit amounts on all types of

providers under PPS. The revised LUPA

methodology and rate tables are found

in section IV. of this rule.

Comment: Commenters suggested that

we apply LUPA only to acute patients

and not to chronic patients who require

B–12 injections or catheter changes.

Response: The LUPA payment

approach does not distinguish between

an acute or chronic home care patient.

The goal of the LUPA is to appropriately

pay for low utilization episodes. As

stated above we have revised § 484.230

to reflect the higher per-visit amounts

that will be used to calculate the LUPA

payments. We believe the revised

approach to calculating the LUPA pervisit amounts by discipline will more

adequately reflect average costs

associated with low volume episodes.

Comment: A few commenters

suggested the removal of wage index

adjustment in the LUPA payment

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41143

approach. Commenters also suggested

that we case-mix adjust the LUPA.

Response: The LUPAs are not casemix adjusted because they are

calculated using national claims data for

episodes with four or fewer visits. The

claims data is only wage adjusted, not

case-mix adjusted. We believe it is

important to adjust the labor component

of the LUPA based on the most recent

pre-floor and pre-reclassified hospital

wage index as historically reflected in

the labor portion of home health

services.

Comment: One commenter requested

clarification of whether telephone

contact or a telemedicine visit will

count as a visit for purposes of the

LUPA policy.

Response: The current definition of a

Medicare home health visit has not

changed with the implementation of

home health PPS. The definition of a

visit is set forth in § 409.48(c) of the

regulations specifies that ‘‘A visit is an

episode of personal contact with the

beneficiary by staff of the HHA or others

under arrangements with the HHA for

the purpose of providing a covered

service.’’ A telephone contact or

telemedicine visit does not meet the

definition of a visit and therefore would

not count toward a LUPA visit.

Comment: A few commenters

requested clarification of the type of

practitioner that would provide a LUPA

visit.

Response: The current personnel

qualifications and coverage guidelines

governing the provision of covered

home health services are not changed by

home health PPS. All visits provided

under HHA PPS regardless of the

provision under an episode rate or

LUPA rate must meet current Medicare

coverage guidelines.

Comment: A few commenters

requested a specific HHRG level for

LUPA cases.

Response: We do not believe the casemix weight methodology as proposed

would accommodate an HHRG specific

weight for the LUPA. The LUPA is a

wage adjusted per-visit payment.

Constructing a LUPA specific HHRG

would confuse the concept of case-mix

adjustment and per-visit payment for

LUPAs. However, we will continue to

consider this proposal as we further

refine PPS in the future.

I. Partial Episode Payment Adjustments

(PEP Adjustment)

Comment: Several commenters did

not support the use of billable visit

dates to calculate the PEP adjustment

due to possible gaps in days that may

not be recognized in the payment. Many

commenters recommended the use of

the first billable visit date through the

day before the intervening event or

discharge date as the span of time used

to calculate the proportional payment.

Many commenters did not believe the

PEP reflected the increased costs

associated with admission during the

start of the episode. Commenters

proposed eliminating the proportional

payment aspect of the provision thus

yielding a full episode payment for the

initial HHA and a full episode payment

for the HHA receiving the patient due to

the intervening event. Several

commenters provided alternative

payment approaches to the PEP policy

as set forth in the proposed rule.

Response: In the October 28, 1999

proposed rule, we proposed a PEP

Adjustment to address the key

intervening events of the beneficiary

elected transfer to another HHA and the

discharge of a beneficiary who returns

to the same HHA during the 60-day

episode. We proposed to restart the 60-

day episode clock due to the two

intervening events and end the original

episode payment with a proportional

payment adjustment. The proportional

payment adjustment would be

calculated by using the span of billable

visit dates prior to the intervening

event. We are not adopting the

commenters’ suggestions to use the day

before the intervening event or

discharge date to calculate the

proportional payment. We are retaining

the use of billable service dates to

determine the appropriate payments

because of the HHAs involvement in

decisions influencing the intervening

events for a beneficiary elected transfer

or the beneficiary is discharged and

returns to the same HHA during the

same 60-day episode period.

Proportional payments based on billable

visit dates will continue to be the

payment methodology for the initial

HHA as a result of the intervening

event. We believe the new 60/40

percentage payment split for first

episode payments as specified in

regulations at § 484.205(b)(1) will

alleviate concerns with costs associated

with new patients.

Comment: A few commenters

requested clarification of the calculation

of the therapy hour threshold in the case

of the transfer PEP Adjustment.

Response: The therapy threshold will

apply separately to the proportional

portion of the first episode and the new

episode that results from the intervening

event. The initial HHA will have the

period of time of the first billable

service date through the last billable

visit date in the original plan of care

prior to the intervening event to reach

the therapy threshold. The new episode

resulting from the intervening event will

not incorporate therapy usage from the

prior period but will determine the

therapy needs for the patient resulting

from the new certified plan of care. Each

part of the episode, the PEP adjusted

portion and the new 60-day episode

resulting from the intervening event is

subject to separate therapy thresholds.

The therapy threshold is not combined

or prorated across episodes. Each

episode whether full or proportionally

adjusted is subject to its own unique

therapy threshold for purposes of casemix adjusting the payment for that

individual patient’s resource needs.

This PEP approach to the therapy

threshold applies to both intervening

events of the beneficiary elected transfer

and the discharge and return to the

same HHA during the same 60-day

episode period.

Comment: Several commenters

suggested the elimination or

modification of the proposed policy that

prevents the PEP adjustment when a

beneficiary elects to transfer to an HHA

that is under common ownership with

the initial HHA. We proposed that

transfers among HHAs under common

ownership would be paid as an under

arrangement situation. Commenters

believed that the proposed common

ownership policy should not apply

when the transfer was made because the

patient moved out of the first HHA’s

geographic service area defined by the

agency’s license. Further, commenters

were concerned that if the proposed

language regarding common ownership

was not changed to conform to the rules

currently governing related parties, it

would be viewed as an attempt by

HCFA to pierce the corporate veil and

offset the liabilities of one corporation

against payments due to another.

Response: In response to these

concerns, we are providing further

clarification of our definition of

common ownership for purposes of the

PEP adjustment for beneficiary elected

transfers. If an HHA has a significant

ownership interest as defined in

§ 424.22 (Requirement for home health

services), then the PEP adjustment

would not apply. Those situations

would be considered services provided

under arrangement on behalf of the

originating HHA by the receiving HHA

with the ownership interest until the

end of the episode. The common

ownership exception to the transfer PEP

adjustment does not apply if the

beneficiary moved out of their MSA or

non-MSA during the 60-day episode

before the transfer to the receiving HHA.

The transferring HHA not only serves as

the billing agent, but must also exercise

professional responsibility over the

41144 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

arranged-for services in order for the

services provided under arrangements

to be paid.

Comment: A few commenters

requested that we clarify how we apply

our PEP policy when a home health

patient elects hospice before the end of

the episode. The comments focused on

a hospice that is under common

ownership with the HHA.

Response: If a patient elects hospice

before the end of the episode and the

patient did not experience an

intervening event of discharge and

return to the same HHA, or transfer to

another HHA during an open 60-day

episode prior to the hospice election,

the HHA receives a full episode

payment for that patient. Upon hospice

election, the beneficiary is no longer

eligible for the home health benefit. The

common ownership restriction for the

PEP adjustment applies only to the

relationship between two HHAs

providing covered home health services

to a home health eligible beneficiary.

Comment: A few commenters

requested clarification of whether a PEP

adjustment will apply to the initial HHA

when a physician or patient-initiated

termination of home health services

occurs and the treatment goals have not

been reached. In addition, commenters

further requested clarification of the

beneficiary elected transfer PEP policy

when the beneficiary transfers because

the HHA provided minimal or negligible

services.

Response: To account for the situation

when a patient initiates the termination

of services for any reason and requests

a transfer to another HHA, we

developed the PEP adjustment to assure

that the patient’s freedom of choice was

honored and that the Medicare Trust

funds were protected by a policy that

ensures adequate payment levels that

reflect the time each HHA served the

patient under a transfer situation.

Unless the beneficiary refused further

care or was a safety risk to the HHA

staff, we do not envision a situation in

which a physician would terminate care

prior to the completion of treatment

goals. However, we would focus survey

or medical review resources to

investigate complaints of minimal or

negligible service delivery as a

motivating factor for a beneficiary’s

election to transfer from the original

HHA.

Comment: A few commenters

suggested that we allow the physician to

reinstate the initial plan of care rather

than requiring a new plan of care in the

situation of discharge and return to the

same HHA during the same 60-day

episode.

Response: We are not adopting this

comment. We believe that a new

certified plan of care is a critical feature

of any episode payment, regardless of

whether prior treatment goals were met

and the patient was formally

discharged. We do not believe that it is

unduly burdensome because the HHA

will be receiving access to an entire 60-

day episode payment. Further, a patient

that returns to the HHA for admission

after discharge would require a new

OASIS assessment and new plan of care

under current practice guidelines.

Comment: Some commenters asked if

the PEP adjustment is applied when a

patient dies.

Response: A full episode payment

will be paid in the event of a patient’s

death during a 60-day episode. No PEP

adjustment will be calculated due to a

patient’s death during an episode.

Comment: A few commenters argued

that the PEP adjustment policy

approach does not adequately address

‘‘snow birds’’, persons who seasonally

migrate from one place to another.

Response: We believe the PEP

adjustment will adequately address this

situation. As stated previously, if for

any reason, a beneficiary elects to

transfer to another HHA, the original

HHA’s episode payment would be

proportionately adjusted with a PEP

adjustment to reflect the time the HHA

served the patient prior to the

intervening event of the transfer. This

would include the ‘‘snow bird’’

situation. We do not believe there is a

need for an exception from the transfer

policy regarding ‘‘snow birds’’. Our PEP

adjustment policy governing transfers

provides for a clean slate for a 60-day

episode payment, OASIS assessment,

and certification for the receiving HHA.

We believe this is an equitable approach

to intervening events during the 60-day

episode.

Comment: Commenters argued PEP

adjustment governing discharge and

return should not apply when there is

a readmission for the same diagnosis.

Commenters stated that the discharge

and return to the same HHA during the

60-day episode PEP adjustment requires

the goals in the original plan of care to

be met prior to discharge. Commenters

requested further clarification of

meeting treatment goals in the original

plan of care.

Response: We will not provide for

payment for two full episodes at any

time during a given certified 60-day

episode. If an HHA discharges a patient,

it is assumed that the patient has met

the course of treatment set forth in

conjunction with physician orders in

the patient’s original plan of care. If the

patient returns with the same diagnosis,

it may not indicate the same plan of

care. Even if the HHRG level did not

change upon return, the patient’s initial

discharge indicated completion of the

original course of treatment. The

original episode payment would be

proportionately adjusted to reflect the

time prior to discharge with a PEP

adjustment.

J. Significant Change in Condition

Payment Adjustment (SCIC Adjustment)

(§ 484.237)

In the October 28, 1999 proposed rule,

we proposed a significant change in

condition adjustment to recognize the

event of a significant change in patient

condition that was not envisioned in the

original plan of care. The SCIC

adjustment is calculated as a

proportional payment reflecting the

time both before and after the patient

experienced the significant change in

condition. Billable visit dates are used

to calculate the proportional payments.

Comment: Some commenters did not

support the use of billable visit dates

due to the potential gaps in payment

days used to calculate the SCIC

adjustment. Commenters suggested

using the dates that the patient received

comprehensive case management or all

the days in the 60-day episode. Many

commenters suggested the restart of the

60-day episode clock due to the

patient’s significant change in

condition, resulting in two full episode

payments or a prorated payment plus a

full new episode payment. Other

commenters suggested that the

admission to an inpatient facility should

indicate close of a previous episode for

outcome data collection, similar to the

PEP proportional payment approach.

Other SCIC comments centered on

prorating payments based on visits or

increasing the SCIC proportional

payments by an equitable percentage

increase to each proportional payment

for the original diagnosis.

Response: The use of billable visit

dates as the boundaries for the payment

adjustment encourages appropriate

service use and supports the delivery of

all needed care. We further believe that

the current SCIC adjustment policy

provides financial relief to HHAs who

would otherwise be locked into a casemix adjusted payment based on a point

in time of the patient’s condition at the

beginning of the episode. We will retain

the current SCIC adjustment policy and

are not adopting the commenters’

suggestions. The SCIC adjustment

ensures HHAs will have adequate

resources to meet the changing patient

needs of its mix of patients. The SCIC

adjustment provides HHAs with the

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41145

ability to meet the changing resource

needs of their patients.

Comment: Many commenters

requested clarification, and others

requested removal, of the policy set

forth in the preamble of the proposed

rule governing intervening hospital

stays during a 60-day episode. In the

proposed rule, we stated that if a patient

experiences an intervening hospital stay

during an existing 60-day episode under

an open plan of care, then the patient

would not have met all of the treatment

goals in the plan of care. Therefore, the

intervening hospital admission during

an existing 60-day episode could result

in a SCIC adjustment, but could not be

considered a discharge and return to the

same HHA PEP adjustment. Currently,

HHAs are provided the option to

discharge patients upon transfer to an

inpatient facility.

Response: We believe that HHAs

should be given the option to discharge

the patient within the scope of their

own operating policies; however, when

an HHA discharges a patient as a result

of a hospital admission during the 60-

day episode that discharge will not be

recognized by Medicare for payment

purposes. Either an intervening hospital

stay will result in an applicable SCIC

adjustment or if the Resumption of Care

OASIS assessment upon return to home

health does not indicate a change in

case-mix level, a full 60-day episode

payment will be provided spanning the

home health episode start of care date

prior to the hospital admission, through

and including the days of the hospital

admission, and ending with the 59th

day from the original start of care date

of the episode.

Comment: Commenters requested

clarification that the SCIC adjustment

will only apply in cases of deterioration,

that is, increased payment due to a new

HHRG and not improvement resulting

in a possible decrease in payment for

the second part of the SCIC adjustment.

Response: We designed the SCIC

adjustment to permit the HHA to adjust

the assessment and the concomitant

HHRG assignment when the patient’s

condition changes in a significant way

that was unanticipated in the context of

the initial assessment. The SCIC

adjustment will occur in both situations

of significant patient deterioration and

improvement. Excessive use of the SCIC

adjustment for patient deterioration will

be monitored under PPS to ensure the

legitimacy of claims for increased

payment.

Comment: A few commenters asked if

there is a limit to the number of SCIC

adjustments in one 60-day episode.

Response: Although there is the

clinical possibility of more than one

SCIC adjustment during a given 60-day

episode, we believe it will be a rare

occurrence. While we will permit more

than one SCIC per episode, providers

who demonstrate a pattern of multiple

SCIC adjustments will likely be subject

to review to assure the validity of such

situations.

Comment: Several commenters

suggested the use of a modified OASIS

assessment for purposes of SCIC

Adjustments. Commenters requested

that we require only those OASIS and

other items necessary for case-mix for

the determination of a SCIC adjustment.

Response: Totally apart from PPS, the

current protocol governing OASIS

assessment schedules, requires the

complete OASIS assessment at points in

time when the patient experiences a

significant change in condition. Further,

we believe it is necessary to have all

OASIS items relevant for outcome

measures to monitor the use of SCIC

adjustments under PPS. We are not

adopting this comment on the approach

to SCIC adjustments. The SCIC

adjustment provides an additional

payment adjustment without which PPS

would have locked the HHA and patient

in a 60-day episode payment level

according to the patient’s status at the

beginning of the 60-day episode. We do

not believe the completion of the full

OASIS assessment generates a cost that

outweighs the benefit of the SCIC

adjustment from a payment and quality

of care perspective.

Comment: Commenters had

additional questions regarding our

policies governing the SCIC adjustment.

Specifically, commenters asked if

physician verbal orders would suffice to

precipitate a SCIC adjustment or would

the form 485 have to be completed.

Response: The SCIC adjustment

occurs when a beneficiary experiences a

significant change in condition during

the 60-day episode that was not

accounted for in the original plan of

care. In order to receive a new case-mix

assignment for purposes of the SCIC

adjustment payment during the 60-day

episode, the HHA must complete an

OASIS assessment and obtain necessary

change orders reflecting the significant

change in treatment approach in the

patient’s plan of care. While the

physician’s verbal order and the

corresponding OASIS reassessment may

precipitate the new case-mix level and

corresponding payment grouping the

HHRG for the balance of the 60-day

episode, the SCIC adjusted episode, like

any other episode, requires a signed

plan of care prior to submission of the

claim for the final percentage payment.

Comment: Commenters requested

clarification of whether the LUPA will

apply in situations of the SCIC

adjustment.

Response: A SCIC adjusted episode

payment could be further adjusted to

reflect the LUPA, if applicable.

However, because a LUPA payment is

not case-mix adjusted, the SCIC would

have no payment consequence on an

episode paid at the LUPA level. This

would be a limited, but not

inconceivable, occurrence that would

likely be targeted by medical review.

K. Case-Mix

Caregiver Variables on OASIS Not Used

in Case-Mix System

Comment: In the proposed rule we

stated that caregiver variables would be

omitted from the case-mix model. Some

commenters were concerned that failure

to consider caregiver availability may

result in inadequate payment. One

commenter stated that returning to

independence or assuming care on a

long-term basis often depends on the

patient’s support system or lack thereof.

Commenters stressed that caregiver

availability is a particularly strong factor

in rural areas where patients have fewer

community supports to make up for the

lack of caregiver assistance in the home.

Response: In the proposed rule, we

discussed our basis for excluding such

variables. We recognize that adjusting

payment in response to the presence or

absence of a caregiver may be seen as

inequitable by patients and their

families. To the extent the availability of

caregiver services, particularly privately

paid services, reflects socioeconomic

status differences, reducing payment for

patients who have caregiver assistance

may be particularly sensitive in view of

Medicare’s role as an insurance program

rather than a social welfare program.

Furthermore, adjusting payment for

caregiver factors risks introducing new

and negative incentives into family and

patient behavior. It is questionable

whether Medicare should adopt a

payment policy that could weaken

informal familial supports currently

benefiting patients at times when they

are most vulnerable.

Notwithstanding these considerations,

we examined the usefulness of caregiver

factors but found them to be only

minimally helpful in explaining or

predicting resource use. A variable on

the availability of a caregiver had no

impact on average resource cost (Abt

Associates, Second Interim Report,

September 24, 1999), and only a modest

impact after controlling for other patient

characteristics (Abt Associates, First

Interim Report, July 1998 [Revised

December 1998]). This could result if

patients who are able to remain in the

41146 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

home without a caregiver are inherently

less impaired and more able to provide

self-care than other home care patients.

(One commenter seemed to confirm this

hypothesis in stating that caregiver

availability can determine whether a

patient can safely live at home.) A

strong relationship between caregiver

assistance and patient health/functional

status could make it difficult

analytically to identify a cost impact

resulting from the caregiver’s lack of

availability. As a technical matter, this

problem could hinder accurate

incorporation of caregiver availability

into the case-mix system, were it

deemed appropriate.

Results from the Phase II per-episode

prospective payment demonstration

lend credence to the limited value of

caregivers in explaining resource use

under a PPS system. Evaluation of the

demonstration indicated that reductions

in service utilization among PPS

patients were the same, regardless of

whether the patient had other caregiving

(Mathematica Policy Research, Inc.,

‘‘Per Episode Prospective Payment for

Medicare Home Health Care Sharply

Reduces Service Use,’’ Draft Report,

December 1998). The findings suggest

that, despite intentions to rely more

heavily on other caregivers as a way of

reducing home care costs, PPS agencies

did not target their service reductions

more heavily on patients with

caregivers. The reason for this outcome

is unclear. (There was also little or no

indication that PPS agencies tried to

avoid patients without caregivers.)

Other caregiver variables examined in

the case-mix study, measuring

frequency of assistance and caregiver

health/psychosocial status, also

exhibited a relatively modest impact on

resource cost. When added to the

existing model they added less than one

point to the model’s explanatory power

(R-squared) (Abt Associates, Second

Interim Report, September 24, 1999).

These findings weaken the assertion

that failure to adjust for caregiver factors

could render payments inadequate. It

should also be noted that, based on

preliminary data, these caregiver

variables did not have particularly

strong item reliability (Abt Associates,

Second Interim Report, September 24,

1999, Appendix G). Low reliability

means an assessment item is prone to

mis-measurement. In measuring casemix for payment purposes, we wish to

avoid, to the extent possible, items with

weaker reliability. (We will continue to

examine the reliability data as they are

finalized.)

In summary, we believe that in light

of data that support our policy concerns

surrounding caregiver variables, and

their insignificant contribution to

predicting resource use, these OASIS

items are not appropriate for use in the

case-mix adjuster.

Comment: Several commenters urged

us to continue to study the issue of

caregiver impacts, including further

study of language used in the caregiver

items for the OASIS.

Response: We will continue to

examine OASIS caregiver variables and

their impact as we analyze national

OASIS and claims data to pursue

refinements to the case-mix system.

However, in the absence of policy

consensus that caregiver variables are

appropriate to include, it would not be

cost-effective to commission further

studies of alternative wording of

caregiver-related assessment items.

Variables Identifying Preadmission

Location in the Services Utilization

Dimension

In the proposed rule we set forth a

services utilization dimension within

the case-mix model. We proposed

including variables indicating whether

certain inpatient stays occurred in the

14-day period immediately preceding

the home health episode. Not only are

pre-admission inpatient stays a

traditional indication of need in clinical

practice, but also such variables were

useful correlates of resource cost in our

analyses of the case-mix data (Abt

Associates, First Interim Report, July

1998 [Revised December 1998], Abt

Associates, Second Interim Report,

September 24, 1999).

Comment: Several commenters

requested clarification about the

derivation of the scores and severity

grouping in the services utilization

dimension.

Response: Our data indicate that an

acute care hospital discharge (without

follow up post-acute inpatient stay)

within the 14 days immediately

preceding admission to home care is

associated with the lowest costs during

the 60-day episode. Other research has

shown similar findings. For example, in

the home health Phase II per-episode

prospective payment demonstration

research, multivariate analysis of home

care utilization in the year following

admission also suggested that pre-homecare hospital stays were associated with

reduced home care utilization. In the

case-mix data, episodes involving

patients with no pre-admission

inpatient stay had the second-lowest

cost; episodes involving patients who

had both a hospital and post-acute-care

institutional stay (that is, skilled nursing

facility (SNF) or rehabilitation facility)

had the third-lowest cost; and episodes

involving patients who had only a SNF

or rehabilitation facility stay had the

highest cost. The highest-cost category

(SNF or rehabilitation stay alone, given

a 14-day window) may actually be

comprised predominantly of relatively

long stays. These stays appear to be

indicators for patients who, upon their

return home, have high care needs

during the 60 days following home

health admission.

In the case-mix data, if a patient who

had a hospital stay in the 14 days

preceding admission is evaluated to

need significant home therapy, then the

resource costs increase sharply.

Likewise, therapy utilization markedly

increased resource cost for the episodes

preceded by the other three preadmission locations. Because the

therapy utilization was to be considered

simultaneously with the preadmission

location in the services utilization

dimension, we examined the resource

cost according to eight categories. These

eight categories are the four preadmission locations (hospital stay alone,

no inpatient hospital or SNF/rehab stay,

a hospital-stay-plus-SNF/rehab-stay, or

a SNF/rehab stay alone) with and

without therapy utilization of at least

eight hours.

The resulting array of average

resource cost indicated that among

episodes not meeting the therapy

threshold, those following a hospital

stay, no inpatient hospital or SNF/rehab

stay, or a hospital-stay-plus-SNF/rehabstay all had similar resource costs. We

assigned increasing scores—zero to 2—

for these groups, in accordance with the

trend in the data overall, but ultimately

grouped them into a single severity level

reflecting their similar resource costs.

Episodes not meeting the therapy

threshold but with a SNF/rehab stay

alone were effectively assigned a score

of three (from the combination of

scoring for the hospital stay and SNF/

rehab response categories) and grouped

separately into the second severity level,

because their resource cost was

significantly higher than patients with a

score of zero to 2.

The remaining two severity groups

were for episodes that met the therapy

threshold. Therapy-threshold patients

coming from the first three locations

were grouped together into a third

severity level because of the similarity

in their resource costs. Scoring for these

patients again reflected the overall trend

by preadmission location (scores of

zero, one, and two for hospital stay, no

inpatient hospital or SNF/rehab stay, or

a hospital-stay-plus-SNF/rehab-stay,

respectively) but included an additional

four points to reflect the cost impact of

the therapy. High-therapy patients from

the fourth pre-admission location (SNF/

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41147

rehab stay alone) had the highest costs

of any group, so we placed them in the

fourth and final severity category.

Following the existing scoring logic,

these episodes had a total score of seven

based on three points for the

preadmission location and four points

for the therapy need.

Comment: Some commenters stated

that their own experience did not

confirm the relationship between preadmission institutional stays and

resource cost as indicated in our casemix research data. Specifically,

commenters indicated that patients

coming from the hospital are often more

acutely ill and resource-intensive than

other patients, particularly patients who

had no preadmission institutional care.

For example, these patients typically

need more frequent visits and teaching.

As a result, according to these

comments, the case-mix system fosters a

disincentive to admit post-acutehospital patients.

Response: The conclusion reached by

the commenters is incorrect because the

severity grouping (though not the

scoring) is neutral with regard to preadmission hospital stays. Patients with

such stays, as well as patients without

any institutional stays, and patients

with hospital-plus-SNF/rehab care, are

all grouped together in the same severity

category. The patients who were

admitted with only a SNF/rehab stay in

the previous 14 days are grouped into a

separate severity category. Within each

of these two severity categories, the

patients meeting the therapy threshold

are split off into an analogous severity

category reserved for therapy patients. It

is the severity category that determines

the case-mix weight. (In the services

utilization dimension, the scoring

system is simply a device to organize

the assessment data on preadmission

location and therapy threshold.)

Comment: Several commenters

suggested that the 14-day definition for

the preadmission location on OASIS

actually encompasses a heterogeneous

group of patients, and that comparison

of patients admitted to home care

within 1 or 2 days of discharge with

patients admitted within 5 to 14 days of

discharge would reveal a cost

difference.

Response: While this distinction or

others related to the time since

discharge might prove useful, the

OASIS assessment does not provide the

level of detail necessary to recognize

any difference. In analyzing the data

available to us, we examined the cost

separately for the subset of patients who

experienced a SNF/rehab stay as well as

an acute care stay (and thus were

unlikely to be among the patients

admitted to home care within one to

two days of discharge). This subset of

patients was generally about as costly as

the hospital-stay-only patients. This

suggests that in the absence of the SNF/

rehab stay, the agency would have

otherwise incurred higher resource costs

by admitting the patient to home care

directly from the acute-care-hospital.

The timing of the home health

admission is to some extent correlated

with SNF use, which in turn may be

correlated with case severity. Under

these conditions, it may be difficult to

quantify a suspected relationship

between the timing of the admission

and resource use. (This is similar to the

comment noted earlier concerning

caregiver variables; that is, a variable

such as caregiver availability or SNF use

may tend to offset resource cost for

particularly costly patients, making it

difficult to observe the relationship

between these patients’ severity and

their presumed costliness.) We will

continue to examine this issue in the

future using claims and linked OASIS

data.

Comment: Another comment stated

that paying a higher rate for patients

experiencing a pre-episode SNF or

rehab stay puts rural agencies at a

disadvantage, because many patients

elect to return directly home from the

hospital due to a shortage of post-acute

institutional care facilities.

Response: As stated earlier, three preadmission location categories are all

grouped in the same severity level. The

fourth category was grouped

separately—patients experiencing only a

SNF/rehab stay within the previous 14

days. As we noted in the proposed rule,

these patients likely experienced a

relatively long SNF stay, which appears

to be an indicator for exceptionally high

case severity. Whether such cases from

rural areas systematically fail to be

placed appropriately in post-acute-care

institutions deserves further study. Our

impact analysis suggests, however, that

rural agencies will experience payment

increases under PPS (see Table 11).

Examination of payment-to-cost ratios

in the Abt case-mix data also suggests

that rural agencies will experience

payments under the PPS system that

exceed their historical cost levels

(Second Interim Report, September 24,

1999).

Comment: One commenter stated that

recent hospitalization affects the plan of

care, particularly within the first 30

days. We also received a comment

noting the costliness of care for

‘‘chronic, long-term’’ patients coming

from the community as their preadmission location, but with high

clinical and functional severity.

Response: We emphasize that the

resource cost used to develop the casemix system was measured over the

patient’s first 60 days under the care of

the HHA. Thus, it is entirely possible

that patients with contrasting preadmission locations could have similar

total resource costs albeit with different

care trajectories. For example, for

relatively healthy patients who are

bound for recovery from an acute

illness, and who may therefore be

discharged from home care fairly soon

after a short, intensive period of

teaching and support, the total 60-day

resource cost may be comparable to the

cost for certain chronically ill patients

who have less-intensive but more

sustained needs over the course of the

60-day episode.

Comment: A commenter urged us to

revise the services utilization scoring of

OASIS item M0170 because a patient

coming from the community is similar

in resource need to one coming from a

rehabilitation hospital or SNF, but they

have different scores on the services

utilization category.

Response: We have not revised the

scoring of M0170 because the

combination of scoring for M0170, lines

1, 2, and 3, allows for differentiation

between SNF or rehabilitation patients

with and without hospital discharge.

This distinction is important in casemix system grouping.

Comment: Commenters also indicated

concern about the accuracy of reporting

on the OASIS for the preadmission

location.

Response: We agree that assessing

clinicians may have difficulty in some

instances obtaining accurate data on the

type of institution and the dates of

discharge. The fact that the severity

levels in the services utilization

dimension are neutral with respect to

most pre-admission location scenarios

partially mitigates this concern.

Assessing clinicians would be welladvised to confirm information with

multiple sources (for example, the

patient, family, referring physician,

local hospital) to ensure its accuracy.

The clinician may also ask to see the

patient’s discharge instructions.

Virtually all institutional stays that

require ascertainment for case-mix

purposes are covered by Medicare. The

National Claims History and other data

bases eventually record these events,

potentially affording Medicare’s fiscal

intermediaries opportunities for

reviewing case-mix accuracy on a postpay basis. We will instruct the fiscal

intermediaries to take into consideration

the challenges faced by agencies in

accurately reporting the preadmission

41148 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

location, and formulate review policies

accordingly.

Comment: A commenter expressed

concern that preadmission location

variables are a matter of timing for a

service rather than a measure of acuity.

The commenter questioned why a SNF

discharge 16 days before would differ

from one 14 days before home health

admission.

Response: The preadmission location

item M0170 was originally included in

OASIS as one of many variables useful

for risk adjusting outcome measures. A

recent institutional stay (discharge

within two weeks) continues to be a

frequent event preceding home care.

The two-week definition is

unambiguous, and has proven statistical

impact in both a case-mix and outcomes

research context. Using a longer recall

period would present measurement

problems and would be less helpful in

explaining resource use.

Comment: A commenter stated that

the OASIS item on prior location

(M0170) creates an artificial distinction

between patients who received care in

a rehabilitation wing of an acute care

hospital and patients who received care

in a rehabilitation facility.

Response: OASIS instructions define

a rehabilitation facility as a freestanding

rehabilitation hospital or a

rehabilitation distinct part unit of a

general acute care hospital. Therefore, a

rehabilitation wing (that is, distinct part

unit) is included in the OASIS

rehabilitation facility definition.

Comment: A commenter stated that

the language regarding nursing facilities

was inconsistent between Table 7 in the

proposed rule and OASIS. A related

comment suggested that we clarify the

response categories in OASIS item

number MO170 to distinguish between

stays in skilled nursing facilities and

extended care facilities.

Response: We are revising the OASIS

MO170 response categories to allow

separate reporting of skilled nursing

facility discharges within the previous

14 days. This change will resolve the

inconsistency.

Comment: A commenter requested

clarification of Case 1 in the proposed

rule (page 58179) and asked whether the

case information or Table 7 is correct.

Response: We apologize for this error

in the case description. The Service

Dimension should have read ‘‘Service

Domain=4 (therapy more than 8

hours).’’

Comment: A commenter stated that

there should be much less emphasis on

where the patient is located and more

on the patient’s clinical needs.

Response: We included preadmission

location information in the services

utilization dimension because it has

traditionally been associated with

variation in home care services

utilization, and in our case-mix research

it helped to explain variation in home

care resource use. We do not believe the

case-mix system places excessive

emphasis on this type of predictor

variable. Clinical needs are addressed in

the clinical dimension.

Variables Measuring Therapy

Utilization in the Services Utilization

Dimension

To ensure that patients who require

therapy would maintain their access to

appropriate services under the HHA

prospective payment system, in the

proposed rule we grouped patients

according to their therapy utilization

status. Specifically, we defined a

therapy threshold of at least eight hours

of combined physical, speech, or

occupational therapy over the 60-day

episode, to identify high therapy cases.

We proposed a threshold of eight hours

of therapy based on clinical judgment

about the level of therapy that reflects

a clear need for rehabilitation services

and that would reasonably be expected

to result in meaningful treatment over

the course of 60 days. Subsequently,

further development and refinement of

the Abt case-mix model assumed this

threshold as part of the grouper logic.

The 15-minute-increment billing

requirement in principle allows the

RHHI payment system to verify the casemix therapy threshold. However, there

is uncertainty about the completeness

and accuracy of the 15-minute

reporting. This led us to propose that,

pending resolution of this issue, the

therapy threshold be expressed in a

defined number of visits. Returning to

the resource use data of the Abt study,

we determined that on average a therapy

visit lasted approximately 48 minutes.

This implies that on average eight hours

of therapy would be exhausted in 10

visits.

Comment: Several commenters urged

us to change the conversion to eight

visits to be consistent with current cost

reporting and salary equivalency

practice equating one visit to one hour.

Commenters suggested that, without

such a change, the proposal effectively

reduces therapy payments. Some

commenters argued that a conversion to

eight visits (or fewer—other commenters

proposed six visits and four visits)

would compensate for excluding time

spent on a case outside of the home

from the calculation of resource cost in

the Abt study. In addition, commenters

pointed out that some patients will

achieve eight or more hours in fewer

than 10 visits, so HCFA should

recognize that the therapy threshold has

been met as soon as the eight hours are

achieved.

Response: We see no reason to

associate the cost reporting and salary

equivalency practices with the

independent, congressionally mandated

15-minute-increment reporting

requirement. The origin of this

requirement was Congress’s intent that

adequate data be available to both

develop and refine the HHA prospective

payment system. We see these data

potentially as key resources for

improving the case-mix system in the

future. Upon linking the claims with the

OASIS assessments, a data resource

comparable to the Abt case-mix study

data will be available for research

purposes. This resource promises to

improve upon the Abt data by virtue of

the large sample sizes it would provide.

Many suggestions from commenters for

improvements that need study can be

pursued once these data are assembled.

We believe there are advantages to the

continued gathering of 15-minute billing

information. We urge home health

agencies to continue their diligent

collection of these data so that

eventually the therapy threshold can be

used as originally defined—in terms of

time spent in the home, not visits.

The PPS pricer developed for the first

year of PPS will determine the case-mix

adjustment based on the 10-visit

threshold without consideration of the

15-minute-increment billing data on the

claim. Upon analysis of national claims

data under PPS, we will determine

whether the pricer should be changed to

take into account information from the

15-minute-increment reporting. We are

concerned that counting visits rather

than hours to satisfy the therapy

threshold in the case-mix groupings

could become a source of potential

abuse. Therefore, if we identify

providers whose therapy visits are

systematically and significantly shorter

than the 48-minute standard, yet meet

the 10-visit threshold, we will examine

such cases and reduce the case-mix

assignment if evidence documents that

therapy hours were well below the 8-

hour threshold.

The commenters’ suggestion that we

compensate for excluded time spent

outside the home by adopting a lower

therapy threshold does not resolve a

significant issue that requires further

study. The commenters’ proposal can

result in diminished payment accuracy,

because the relative weights are based

on groups defined from the 8-hour

threshold. If, over time, the composition

of the therapy groups shifts to lowercost patients, the relative weights would

need to be adjusted accordingly.

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41149

If we adopted a lower therapy

threshold or a graduated threshold, as

some commenters suggested, we believe

the result would be an increase in the

incentive to maximize payment by

manipulating the delivery of therapy.

Comments proposing that Medicare

prorate the therapy factor in transfer or

in cases where the therapy utilization is

spread over more than one episode,

present problems for this reason as well.

The comment suggesting that the

therapy factor be prorated when

utilization is spread over more than one

episode appears to reflect a

misunderstanding of our intent to have

the therapy threshold, as applied within

the 60-day episode, target patients with

significant therapy needs. The rationale

for recognizing a therapy utilization

factor is to ensure that agencies will be

adequately compensated for delivering

this high-cost service, thus preserving

access for patients with therapy needs.

It is the same rationale that underlies

case-mix adjustment itself. Payment

weights for groups containing patients

whose therapy utilization is spread over

multiple episodes reflect the reduced

resource costs of these patients per each

60-day episode. As discussed

previously, in a PEP situation (for

example, a transfer), the therapy

threshold is separately measured for the

proportional episode and the new

episode resulting from the beneficiary

elected transfer. In the SCIC situation,

the therapy threshold applies to the

total therapy visits provided to the

beneficiary during the episode both

before and after the significant change

in condition occurred.

Further suggestions that skilled

nursing time as well as aide time be

measured and treated the same as

therapy hours would also seem to

reinforce these undesirable incentives,

as skilled nursing visits make up the

single largest discipline category in

home health care, and aide visits the

second largest, with both far

outweighing therapy visits.

Comment: Several commenters

questioned the decision to use a therapy

threshold in the case-mix adjustment

system.

Response: We recognize that, as we

indicated in the proposed rule, using a

utilization variable such as the therapy

measure is susceptible to manipulation.

However, currently our best available

data requires us to rely in part on the

therapy measure. Without it, we cannot

achieve the preferred level of payment

accuracy, notwithstanding its potential

susceptibility to manipulation. We note

that the case-mix system for home

health is similar to the other major

Medicare case-mix systems, in that

these others also use measures of

treatment planned or received. We will

continue to review the use of a

utilization variable in this system over

the long term.

Comment: We received several

suggestions from commenters that

amounted to changing the group

assignment for certain types of patients

so that the payment weights for these

patients would be comparable to or even

higher than the existing therapy-group

weights. For example, one suggestion

was to award points to the services

utilization dimension when the patient

is assessed at the highest level of the

clinical and functional dimensions.

Another suggestion was to add points to

the services utilization dimension when

the patient is a user of multiple

therapies, perhaps by defining a fifth

severity level within the services

utilization dimension.

Response: We appreciate these

comments as they will aid us as we

further refine the case-mix model. At

this time, however, it is not clear that

such changes would provide a

satisfactory remedy for the problems the

commenters have raised. In deciding on

the basic structural characteristics of the

case-mix system, we had to balance

clinical acceptability, complexity, and

technical issues, such as the feasibility

of estimating payment weights from

varying group sample sizes. Thus,

suggestions that imply a larger number

of groups must be evaluated in terms of

their potential to impact the accuracy of

the payment weights, the system’s

clinical logic add to, not lessen, the

complexity of administering the system.

Any grouping changes potentially affect

the entire array of payment weights

because they are relative values.

Comment: One commenter stated that

it will be very difficult for agencies to

comply with the requirement to project

the number of therapy hours at the start

of care, because physicians’ orders in

the plan of care do not typically indicate

the number of anticipated therapy hours

or visits.

Response: The Home Health

Certification and Plan of Care (HCFA

485) requires the physician orders to

specify the amount, frequency, and

duration for disciplines and treatments.

We expect agencies to make the

projection from these orders.

Comment: A commenter sought

confirmation that the reconciliation of

projected therapy use with actual

therapy services furnished during the

60-day episode has the potential to

either decrease or increase final

payment.

Response: The commenter is correct.

The final payment may increase or

decrease in response to a difference

between the therapy projected at the

start of care and the therapy received by

the patient by the end of the 60-day

episode.

Comment: A commenter stated that

the Phase II per-episode prospective

payment demonstration research

indicated barriers to occupational

therapy (OT) services under PPS. The

commenter recommended that we

consider a more interdisciplinary

approach to OASIS so occupational

therapy would not be underutilized.

Response: The therapy threshold in

the case-mix adjuster is based on all

three therapy disciplines combined. The

design of the demonstration did not

include a case-mix adjuster with a

therapy threshold of any sort. It does not

necessarily follow that the national PPS

would introduce a barrier to OT

services.

Comment: A commenter

recommended that therapists should

assess the patient’s functional status to

minimize errors in measurement. In

addition, the commenter believes

monitoring will be needed to prevent

payment incentives from distorting

functional assessment measurements.

Response: We expect that agencies

will measure functional status as

accurately as possible, consistent with

incentives for efficiency in the

prospective payment system. We have

no authority to mandate functional

status assessment by a particular

discipline. We agree that medical

review activities should include review

of functional assessment results.

Comment: A commenter stated that,

as a result of the therapy threshold, the

case-mix system will divert utilization

of the home health benefit away from

the frail elderly and in favor of the

short-term patient.

Response: It is not our intention to

change access under the home health

benefit through a case-mix adjusted

prospective payment system. Moreover,

the payment for continuous 60-day

episodes of care under PPS will be more

conducive to the care of longer stay

patients than the current interim

payment system. We expect that

evaluations of the system’s impact will

study the question raised by this

commenter.

Comment: A commenter

recommended standardizing therapy

visits in hours or 15-minute increments

to meet the current statutory

requirements of section 4603 of the BBA

that specify that home health visits are

reported in 15-minute increments.

Response: We have not accepted this

recommendation. We believe this would

41150 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

restrict agencies’ ability to manage care

efficiently.

Comment: One commenter was

concerned about the high relative

payment weight associated with

therapy-threshold case-mix groups, and

because of this concern, questioned

whether the Abt Associates sample was

representative of agencies in the

industry offering therapy programs.

Response: The Abt Associates sample

used to develop the case-mix groups

was selected to be representative of

national service delivery patterns. The

90 participating agencies were selected

from all four census regions of the

country, from among different

ownership categories (freestanding forprofit, freestanding voluntary/private

nonprofit; hospital-based; and

government), from both urban and rural

areas, and from among agencies with

high, medium, or low practice patterns

(as measured by the number of visits

per-episode in 1995). As we note

elsewhere in this rule, in our

subsequent analysis of OASIS data and

utilization data for the nation as a

whole, we have found that these

agencies on average appear to resemble

the nation closely. We have no reason

to believe that their therapy service

delivery is unusual and would result in

an inaccurate relative weight for

therapy-threshold cases.

Wound Care Patients

Comment: Many commenters argued

that services for many wound patients

would be inadequately reimbursed

under the proposed case-mix system.

One often cited reason was the high cost

of wound supplies for some patients.

Some commenters recommended that

wound supplies costs should be directly

reimbursed, rather than being bundled

into the episode payment.

Response: We have not adopted this

recommendation. We have no statutory

authority to unbundle the wound

supplies costs. All supplies costs are

now in the base costs used in

determining the payment amount. As

we note in our response to comments on

omission of time spent outside the home

from the calculation of resource costs,

the current system of relative weights

assumes that the omitted costs are

directly proportional to time spent in

the home. We will consider methods for

testing this assumption, including the

impact on wound care reimbursement.

Case-mix model revisions, adopted in

response to comments concerning

wound care patients, have resulted in

increased payments for wound care

patients. These are described below and

in the section on changes to the casemix model.

Comment: Several commenters noted

that the clinical dimension does not

address wounds from trauma.

Response: In response to this

comment, we have added a variable to

identify trauma and burn patients who

have wounds. This variable is now

included in the clinical dimension. If a

patient has a primary diagnosis of

trauma or burns and OASIS item M0440

indicates that there is a wound, the

clinical score is increased by 21 points.

Comment: A commenter

recommended that the scoring for

pressure ulcers in the clinical

dimension should take into account

their number, size, condition, or

complexity.

Response: The clinical dimension in

the proposed rule took into account the

stage of the most problematic observable

pressure ulcer, if any. OASIS does not

record the size of pressure ulcers. The

assessment covers the number of

pressure ulcers at each stage. The status

of the most problematic observable

pressure ulcer is also reported. These

stage and status measures are intended

to measure the condition and

complexity of the pressure ulcers.

In accordance with the comments on

pressure ulcers, we re-examined the

impact of the pressure ulcer stage and

status variables, and the number of

pressure ulcers by stage, in the Abt data.

We analyzed a newly available larger

learning sample of 11,503 episodes. As

a result of these analyses, we identified

a statistically significant score to add to

the clinical dimension score if the

number of pressure ulcers at stage three

or four is two or more. This variable is

now included in addition to the original

variable measuring the stage of the most

problematic pressure ulcer. It adds 17

points to the clinical score. As in our

earlier investigations, the status of the

most problematic observable pressure

ulcer did not contribute significantly to

the model after the other variables were

included. As we continue to study

revisions to OASIS, we will consider

including additional data on such

factors as the size of pressure ulcers.

Comment: Several commenters

indicated that wound variables should

be more detailed to provide better

reimbursement for wound patients who

score low on the clinical dimension but

nevertheless incur high costs. For

example, a commenter stated that if a

stasis ulcer status is early/partial

granulation, no points are given, but this

does not make sense if the goal is to heal

the wound. Another commenter

recommended that early/partially

granulating stasis ulcers should be given

24 points to make the case-mix system’s

treatment of stasis ulcers consistent

with its treatment of surgical wounds.

Response: In addition to analyses on

pressure ulcers (described above), we reexamined the definition of the case-mix

variables for the status of stasis ulcers

and surgical wounds. We used the

newly available larger learning sample

of 11,503 episodes. As a result, we have

identified separate score values to add

to the clinical dimension for early/

partial granulation. These scores are 14

and 7 for the early/partially granulating

most problematic stasis ulcer and early/

partially granulating most problematic

surgical wound, respectively. Revised

scores for the most problematic

nonhealing stasis ulcer and most

problematic nonhealing surgical wound

are 22 and 15, respectively.

In further attempts to more accurately

measure the severity of wound patients,

we investigated interactions between

wound severity and several

comorbidities (for example, diabetes)

and immobility, but statistical results

generally did not support including

such interactions as additional scorebearing variables. In future work

refining the case-mix model, we plan to

use national claims and OASIS data to

continue investigating comorbidities.

Agencies could assist such efforts by

reporting diagnosis codes on OASIS at

the complete four-digit or five-digit

level, as recommended by the official

coding guidelines.

Comment: One commenter reasoned

that costly wound patients, especially

severe pressure ulcer patients, often

may receive additional points in the

clinical dimension for other problems

(for example, diabetes or vision

problems), but there is no recognition in

the case-mix system for a sum of clinical

points exceeding 27. In a similar vein,

another commenter recommended

creating a fifth severity level in the

clinical dimension to increase payments

for severe wound patients.

Response: In addition to refining

measures for pressure ulcers, stasis

ulcers, and surgical wounds, in a further

effort to improve payment accuracy for

wound patients, we have revised the

case-mix system by re-defining the

clinical severity score intervals. The

revised score intervals are as follows:

minimal severity: 0–7; low severity: 8–

19; moderate severity: 20–40; high

severity: 41+. The relative frequencies

in the Abt sample for the revised

clinical severity levels are 30 percent,

36 percent, 28 percent, and 6 percent,

for minimal, low, moderate, and high

clinical severity, respectively. (In the

proposed rule, the corresponding

percentages were 30 percent, 30 percent,

23 percent, 17 percent) This change has

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41151

generally resulted in higher case-mix

relative weights for the case-mix groups

involving moderate and high clinical

severity. It has also resulted in a wider

range of weights for therapy-threshold

case-mix groups and non-therapythreshold case-mix groups. We have not

added a fifth level of clinical severity.

Given the array of the clinical scores in

the sample, the amount of sample data

available, and our objective of

administrative feasibility, at this time

we believe that four clinical severity

levels is an appropriate structure for the

case-mix model.

Comment: In commenting on the

status of wound care patients under the

case-mix system, several commenters

specifically stated that services for daily

care wound patients would be

inadequately reimbursed under the

proposed rule. Some commenters

recommended that we add a variable to

the services utilization dimension that

recognizes skilled nursing hours,

analogous to our use of therapy hours in

the services utilization score. They

suggested that this would be a way to

remedy inadequate payment for daily

wound care patients while recognizing

the skilled wound treatments that

contribute to their higher costs.

Response: The wound care patient

must be deemed eligible for the

Medicare Home Health Benefit which

dictates that the skilled nursing care be

provided on an ‘‘intermittent’’ basis, as

required by sections 1814(a)(2)(C) and

1835(a)(2)(A). The ‘‘intermittent’’ skilled

care provided must be either provided

or needed on fewer than 7 days each

week or less than 8 hours of each day

for periods of 21 days or less (with

extensions in exceptional circumstances

when the need for additional care is

finite and predictable). The need for

skilled nursing care for a wound care

patient on a continuing basis is

contingent upon evidence documented

in the patient’s record that the wound

is improving in response to the wound

care provided. It is neither reasonable

nor medically necessary to continue a

given type of wound care if evidence of

wound improvement cannot be shown.

For the following reasons, we are not

accepting the recommendation that

skilled nursing hours be treated

comparably with therapy hours in order

to address the needs of costly wound

care patients. First, as described

previously concerning changes to the

case-mix system, we have made

additions and modifications to the

clinical dimension in an attempt to

better capture variations in clinical

severity associated with wound care

patients. Second, we are concerned that

adopting an additional utilization-based

measure strongly compromises the

intention of home health payment

reform to move away from a cost-based

system. Finally, we are also concerned

that in some instances extended wound

care episodes may reflect inattention to

the statutory eligibility requirement

regarding ‘‘finite and predictable’’ need,

and to our policy that continuing

wound care must be efficacious. We

will, however, continue reviewing the

OASIS wound measures and the casemix system’s ability to adequately

reflect the needs of wound care patients.

Daily Insulin Injection Patients

Comment: Many commenters

identified diabetic patients requiring

daily insulin injection as a group similar

to daily wound care patients in terms of

their extraordinary costs. They

maintained that such patients might

experience access barriers because the

case-mix system does not account for

their extraordinary care needs. They

further indicated that the proposed

outlier payment methodology would not

necessarily result in payments adequate

to compensate agencies for the cost of

these patients.

Response: The OASIS does not

provide information allowing accurate

identification of these diabetic patients.

Daily insulin patients appear to be a

heterogeneous group, some of whom

can be taught self-injection. There are

no variables on the OASIS assessment

that clearly distinguish such patients

from others unable or unwilling to selfinject. As the outlier payment is

intended to compensate for difficulties

in case-mix measures, we have

determined that daily insulin injection

patients are likely candidates for outlier

payments. We assume that daily

injection visits tend to be low-cost

visits, so it is likely that outlier

payments will be adequate for many

daily insulin patients.

Diagnoses Included and Excluded From

the Clinical Dimension

Comment: The case-mix system

discussed in the proposed rule

recognized three diagnostic categories in

the clinical dimension. These were

certain orthopedic and neurological

diagnoses, and diabetes. Diagnoses in

these groups are assigned a score to help

determine the patient’s clinical

dimension total score when the

diagnoses appear in the OASIS primary

home care diagnosis field (M0230A). A

commenter suggested that we classify

all diagnoses. Other commenters stated

that the three categories proposed do

not include all high-acuity diagnoses.

Response: From our work with the

Abt Associates sample, we concluded

that a complete classification of all

diagnoses would not necessarily make

the case-mix system appreciably more

accurate, but it would make the

grouping system more complex. In

developing the clinical dimension, we

studied the effect of placing every

patient in one of several defined groups

of diagnoses (such as orthopedic,

cardiovascular/pulmonary, psychiatric).

We investigated how this classification

contributed to explaining resource use

in home care. The three groups in the

proposed rule stood out as accounting

for significantly higher costs on average

than other groups we defined. Adding

the other groups to the model did not

appreciably raise the explanatory power

of the case-mix adjuster. Consequently,

we believe that restricting recognition in

the clinical dimension to the

orthopedic, neurological, and diabetes

groups balances our payment policy

objectives of payment accuracy and

administrative feasibility. We have not

added any diagnoses to these three

groups published in the proposed rule.

However, we have added a variable to

identify certain wound patients. This

variable uses selected diagnoses codes

from the primary diagnosis (OASIS item

M0230, line a). We added this new

variable to respond to comments we

received about wound patients.

We are continuing to study a variation

of the case-mix system that recognizes

more diagnostic groups, but it would be

a more complicated system with a

substantially larger number of groups.

We would require any such system to

explain significantly more variation in

resource cost than does the current

model, in order to justify the added

administrative complexity.

Currently, the OASIS instructions do

not require complete four-digit and fivedigit coding of the primary and

secondary home care diagnoses. Threedigit coding of the category code is

allowed, although agencies may

voluntarily report complete four and

five-digit coding. In the interests of

future case-mix refinement, we will

consider requiring that all agencies

report the complete code. Such a

requirement would conform OASIS

with existing coding guidelines in the

Medicare program and nationally.

Comment: One commenter pointed

out that we did not list all diagnoses in

the three groups in the clinical

dimension, and requested confirmation

that this was an error.

Response: The list of code categories

presented in the proposed rule was

complete. We omitted certain code

categories based on clinical judgment

and knowledge of coding practices in

the community. We believe that

41152 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

including these codes would reduce the

explanatory power of the model,

because they are likely to consist of

heterogeneous or low-cost cases. When

we examined the resource cost of

orthopedic diagnoses omitted from the

orthopedic group, we found indications

that confirmed our decision.

Comment: Several commenters

indicated that they believed the list

should not exclude common diagnoses.

Response: Some of the diagnoses cited

by commenters are frequently

encountered in home care. It was not

our objective to identify common

diagnoses, but to pinpoint conditions

that were associated with variations in

resource cost. Some common diagnoses

are associated with widely varying

needs for home care services, which

would tend to make them poor

predictors statistically.

Comment: Some commenters

suggested that the case-mix system

recognize certain diagnoses in addition

to those listed. Several commenters

mentioned cardiac, respiratory,

cardiopulmonary, and ‘‘other

circulatory’’ diagnoses.

Response: As noted previously,

cardiac, vascular, and respiratory

diagnoses were a category studied

during development of the clinical

dimension, but the category did not

demonstrate a contribution to the model

sufficient to justify its inclusion, after

we accounted for existing elements such

as dyspnea and wound problems. We

will continue to study this group of

diagnoses.

Comment: We received various

comments suggesting that we should

have included psychiatric, mental

health, or behavioral diagnoses. A

commenter stated that three points for

mental health conditions is inadequate,

citing the additional credentials

Medicare requires for psychiatric nurses

as a reason for higher costs of

psychiatric patients. Another

commenter noted that depression,

common among many elderly patients

with health problems, negatively affects

response to treatment. One commenter

suggested the addition of ‘‘780

(alteration of consciousness)’’, in order

to ensure access for psychiatric patients.

Response: In the clinical dimension,

we included MO610 on behavioral

problems to capture both cognitive and

behavioral factors affecting resource

cost. If the assessing clinician checks

one or more of the response categories,

three points are added to the clinical

dimension. During case-mix system

development, we examined diagnoses

and various OASIS assessment items

relating to mental health, sensory, and

cognitive status. Specific to mental

health, we looked at the relationship

between home health resource use and

mental health diagnoses (psychoses,

drug psychoses, and neurotic disorders).

We found that this group of conditions

did not greatly contribute to explaining

variation in resource use in home care

after including functional, clinical, and

service factors in the case-mix model.

However, we do not interpret our

statistical results as necessarily

indicating that mental health issues are

unimportant in home care. One reason

our statistical findings do not support

including further information specific to

mental health status is that the

remaining functional and service factors

in the case-mix system already capture

the costliness of these patients. Thus,

the impact of behavioral health issues is

being recognized in factors other than

diagnosis-specific elements. Other

possible reasons for our statistical

findings may stem from the extreme

impairment of many psychiatric

patients, which can lead to periods of

institutional care and extensive informal

support in the home. Such factors may

tend to reduce the measured resource

cost.

In future review of the case-mix

system, we will continue to study casemix measures for mental health

patients.

Comment: A few commenters

suggested that we include cancer

diagnoses in the list of diagnoses for

clinical dimension scoring.

Response: Several cancer diagnosis

code categories appear in the orthopedic

and neurological lists used in the casemix model. We found no evidence

during case-mix development activities

that cancer diagnoses should be a

separate group in the clinical

dimension. We believe that part of the

reason is that care needs for certain

cancer patients (for example, functional

assistance, wound care, pain

management) are already accounted for

in the case-mix model. Therefore, we

have not added any more cancer

diagnoses to the final regulation.

Comment: A commenter suggested

that we include terminal cancer patients

as a diagnosis group. Another

commenter stated that end-stage

cardiac/respiratory disease cases should

be included.

Response: We have not added

terminal cancer patients or end-stage

cardiac/respiratory cases as a special

diagnostic category. There are no OASIS

items directly identifying these cases. In

developing the case-mix model, we

considered including OASIS items

assessing overall prognosis and life

expectancy, which potentially have a

use in identifying terminal cancer

patients. However, we concluded that

these items are inappropriate elements

for payment policy because of their

inherent subjectivity and vulnerability

to gaming. Moreover, statistical analyses

have suggested the life expectancy item

has poor scientific reliability.

Comment: A commenter suggested

that we add category code 438, ‘‘late

effects of cerebrovascular disease’’, to

the list of neurological diagnostic

categories because it is extremely

common in home care and is the correct

code assignment following

hospitalization for an acute

cerebrovascular accident (codes 434 and

436). The commenter added that we

should delete codes 434 and 436

because coding guidelines reserve them

for hospital coding.

Response: We have not adopted this

suggestion. Codes 434 and 436 are being

used in home care, notwithstanding the

coding guidelines. In the Abt case-mix

data, episodes coded with 436 are about

nine times as common as episodes

coded with 438. Code 434 is also used,

but appears only about one-third as

often as 438. The definition of 438

encompasses sequelae whose lags may

be of any length. For this reason, we

believe that including 438 presents

significant risks of inappropriate

payment. We will continue to examine

the applicability of code 438 in future

work.

Comment: A few commenters

suggested that we include joint

replacement diagnoses in the orthopedic

diagnosis group.

Response: Joint replacement

diagnoses are V-codes, which are not

used on the OASIS assessment.

Therefore, we did not study or specify

including such codes in the case-mix

system. However, care needs of many

joint replacement patients are addressed

in the therapy-threshold variable of the

services utilization dimension and in

the functional dimension. In setting the

therapy threshold, based primarily on

clinical judgment, we had in mind the

treatment needs of the many joint

replacement patients covered by the

Medicare home health benefit.

Comment: Several commenters

requested clarification about the

omission of certain orthopedic diagnosis

codes from the orthopedic group. These

comprised 715 (osteoarthrosis and allied

disorders), 719 (other and unspecified

disorders of joint), 726 (peripheral

enthesopathies and allied syndromes),

727 (other disorders of synovium,

tendon and bursa), and 729 (other

disorders of soft tissues).

Response: The exclusion of these

diagnoses was intentional, based on

clinical judgment that they are often

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41153

reflective of low case severity, and

therefore unsuitable for the purposes of

the groups defined in the proposed rule.

Statistical information supports this

judgment. In the Abt data, the average

resource cost of the omitted diagnoses

was 85 percent of the average resource

cost of the included diagnoses, an

indication that the excluded codes’ cost

impact is significantly lower. We also

found statistical evidence that including

these code categories in the current

orthopedic diagnosis group does not

improve, and may slightly reduce, the

predictive value of the diagnosis groups

included in the clinical dimension.

Comment: A commenter

recommended that we add category

code 733, ‘‘other disorders of bone and

cartilage’’, to the orthopedic group

because this category includes

pathological fractures. The commenter

added that requiring greater specificity

in code assignment, beyond the threedigit category code, would allow

inclusion of the pathological fracture

codes without inclusion of other

diagnoses in category 733.

Response: We disagree. We did not

add 733 because the range of severity in

this category may be very wide. For

example, this code category includes

osteoporosis, a very common condition

in the elderly population. On the other

hand, 733 also contains aseptic necrosis

of bones, and aseptic necrosis of the

femoral head is an indication for hip

joint replacement. Without more

information about the specific frequency

of diagnoses, we expect that the

osteoporosis cases would be much more

common. We believe that adding this

category code to the orthopedic group

increases the risks of inappropriate

payment. We will continue to study the

excluded diagnosis codes. We agree that

greater specificity in coding could solve

this problem. Agencies can assist our

efforts to develop information about the

usefulness of specific codes in case-mix

models by reporting diagnoses at the

complete four-digit and five-digit code

level.

Comment: One commenter suggested

that we add diagnosis code category 707

(chronic ulcers) to the orthopedic

category because these patients may

present high costs for such services as

debridement and dressing changes.

Response: The orthopedic group is

not an appropriate placement for this

code. However, as noted elsewhere in

this rule, we have added assessment

items to the clinical dimension in an

attempt to strengthen the case-mix

measurement for wound patients.

Comment: A commenter stated that

we should include the diagnosis

severity index on OASIS in the clinical

dimension scoring.

Response: We did not include this

assessment item because we believe its

inherent subjectivity and vulnerability

to gaming make it unsuitable for use in

the case-mix model. Preliminary

statistical analysis suggests the scientific

reliability of the index is low for

orthopedic and neurological diagnoses.

Comment: One commenter stated that

the categories included in the diagnosis

groups were unrealistic and unrelated to

the need for home care services in an

elderly population.

Response: Our statistical information

indicates otherwise. The statistical

results are shown in Abt Associates,

Second Interim Report, September 24,

1999, Appendix H. They indicate that

the incremental cost associated with

each of the diagnosis groups is large and

highly statistically significant.

Comment: We received various

general and specific comments

suggesting the use of secondary or

multiple diagnoses in the clinical

dimension. Some commenters stated

that comorbidities are important in

determining patient needs, and

therefore they should be recognized in

the case-mix system. A commenter

suggested that, to improve the accuracy

of the clinical dimension score, patients

with multiple diagnoses from the

existing groups should be credited with

additional points in their clinical

dimension measurement. One

commenter suggested considering the

first three diagnoses in order of

importance. A couple of commenters

mentioned diabetes as a secondary

diagnosis that may appear in

conjunction with wound care as a

primary diagnosis, a situation that, if

accounted for in scoring, might improve

payment accuracy.

Response: Although we agree that

multiple diagnoses and comorbidities

warrant consideration, we have not used

any of these suggestions because data

and time constraints do not allow

adequate evaluation of their

contribution and impact on resource

cost. To conduct an orderly exploration

of the impact on case-mix measurement,

and to assign a valid score in such cases,

would require more observations than

the Abt data set contains. We did test

the impact of diabetes on severe wound

patients, but the results suggested that

some of the most severe wound patients

would be paid inappropriately if the

clinical score was increased. Further

analysis of these suggestions to fully

understand the implications can be

undertaken with appropriate resources.

We intend to use national claims data

linked to OASIS to investigate multiple

diagnoses/comorbidity issues in future

case-mix analyses. We believe that such

an effort would be significantly aided by

complete four-digit and five-digit

diagnosis coding on the OASIS record.

Comment: Commenters suggested that

we credit the points published in the

proposed rule for the neurological,

orthopedic, or diabetes groups to the

patient’s clinical dimension score

whether the diagnosis is primary or

secondary.

Response: We believe such

suggestions should be tested empirically

to derive an appropriate score as there

is more than one way to implement this

suggestion. These are subjects for study

when larger data resources become

available.

Comment: Two commenters stated

that the adjuster’s use of a limited

number of diagnosis groups will lead to

more coding of the specified diagnoses

as the primary diagnosis, distorting

national data that would be used to

make refinements of the system.

Response: We believe such practices

would be counterproductive. Paymentmotivated coding can eventually lower

the predictive ability of a case-mix

measure, and result in less

differentiation among case-mix groups.

We will continue to examine the

accuracy of the case-mix model and the

reliability of the data used for

determining payments. If necessary, we

would adjust the case-mix weights in

response to those studies. As stated in

the proposed rule, we intend to revise

the case-mix weights over time to adjust

for changes in patient population, actual

changes in home health care practice

patterns, and changes in the coding or

classification of patients that do not

reflect real changes in case-mix.

Comment: A commenter expressed

concern that the quality of the diagnosis

codes reported for home care are of such

poor quality that they would be of no

value in the development of the

prospective payment system.

Response: We recognize the

commenter’s position, but we believe

diagnoses are still useful in developing

a case-mix model. The three diagnosis

code categories in the model are the

strongest contributors of all the

diagnosis groups we defined in

conducting our analyses on the Abt

sample. We will continue to study the

usefulness of diagnoses, and believe that

agencies can assist our efforts by

reporting diagnoses at the complete

four-digit and five-digit code level.

Comment: One commenter urged us

to clearly define ‘‘primary home care

diagnosis’’ to prevent inappropriate

upcoding.

41154 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

Response: The OASIS implementation

manual suggests strategies for the

assessor to use in identifying the

diagnoses for the diagnosis reporting

items (M0230 and M0240). There is no

specific guidance on differentiating the

primary from secondary diagnoses.

However, a definition for the primary

diagnosis on the physician certification

and plan of care (HCFA form 485) is

discussed in the Medicare Home Health

Agency Manual. We believe agencies are

very familiar with the instructions in

the Manual. The diagnosis guidance in

the Manual is consistent with the

language used in the OASIS

instructions. (One difference, however,

is that the Manual allows V-codes and

the OASIS does not.) Nonetheless, we

agree that it might be desirable to

expand the instructions on the OASIS in

the future. We will consider this in

modifications to the OASIS form.

Comment: One commenter stated that

the OASIS diagnosis reporting

requirement that allows only three-digit

ICD–9–CM category codes to be reported

has a severe adverse impact on clinical

severity data and, thus, adversely

impacts the design of the home health

classification system. The commenter

noted that this practice violates official

coding guidelines.

Response: We agree that a lack of

specificity in code assignment

somewhat diminishes accurate case-mix

development and ascertainment. To

help rectify the situation, we urge

agencies to voluntarily code to the

complete four-digit or five-digit code

level.

Comment: A commenter expressed

concern that the OASIS reporting

requirements do not allow V-codes, in

contrast to official coding guidelines

approved by HCFA which accept Vcodes as potentially the most

appropriate codes in some

circumstances in the home health

setting. The commenter cited the

distinction between acute fracture codes

in the hospital setting and aftercare

codes in the home health setting.

According to the commenter, this

conflict with the official coding

guidelines threatens the consistency and

uniformity of national health care data,

resulting in data that are of poor quality

and little value.

Response: The OASIS instructions

state that instead of V-codes the agency

should list the relevant diagnosis. This

requirement was installed to serve the

needs of OASIS as it was originally

designed—as a quality assurance tool.

We have adopted OASIS as a valuable

quality assurance tool. Therefore, any

changes in coding policy on OASIS

would have to balance the quality

assurance objectives with the

consistency and uniformity objectives

articulated by the commenter. At this

time we do not believe that adopting Vcodes is consistent with the needs of

either OASIS or the case-mix system.

Regarding case-mix, one of our

objectives is to classify patients with

minimal reliance on treatments planned

or received. Given that objective, there

is little clear benefit from adopting the

applicable V-codes intended to indicate

aftercare services.

Comment: A commenter stated that

certain category codes in the three

diagnosis groups to be identified from

the OASIS primary diagnosis field

(M0230) should never be reported as

primary diagnoses, according to ICD–9–

CM coding rules and official coding

guidelines. These diagnoses must be

used with a higher-coded diagnosis that

indicates the etiology. The affected ICD–

9–CM category codes are 711, 712, 713,

720, 730, 731, 320, 321, 323, 330, 331,

334, 336, 337, 357, and 358.

Response: In accordance with this

comment, we have listed the affected

codes (not code categories) in Table 8 as

either primary or secondary diagnoses at

the applicable four- or five-digit level.

We will recognize these diagnosis codes

in the case-mix adjuster only if the

following conditions are met: (1)

Manifestation codes (that is, codes that

can never be used as the primary

diagnosis) must appear as the first

secondary diagnosis (line b, under

‘‘other diagnoses’’ in OASIS M0240) and

must appear with all digits required by

ICD–9–CM coding rules. (2) Remaining

codes from the affected categories must

appear as the primary diagnosis (line a,

under OASIS M0230) and must appear

with all digits required by ICD–9–CM

coding rules. The requirement to report

manifestation codes as the first

secondary diagnosis is consistent with

our intention to recognize the primary

diagnosis for case-mix purposes. In this

circumstance, the primary diagnosis is

indicated by the combination of the

manifestation code preceded by the

underlying disease code in the primary

field.

Structure of the Case-Mix System

Comment: Several commenters

suggested adding a fifth level of severity

to the clinical dimension, in view of the

large score range in the fourth and

highest severity level. In contrast, other

commenters suggested that 80 groups

was too large a number; they

recommended greatly reducing the

number of groups. A related question

was why some groups with a small

incidence of episodes warranted

establishment of an HHRG.

Response: At this time, we have not

changed the basic structure resulting in

80 groups. Adding a fifth clinical

severity level would increase the

number of groups to 100. Reducing the

number of groups may obfuscate the

clinical logic we used to help shape the

system. Also, we feel it is prudent at

this early stage of the model’s

application to avoid imposing

additional structural streamlining before

larger data sets become available

allowing exploration of refinements to

the model.

Comment: A commenter stated that

the case-mix system should have as

many episodes at the high end of the

scale as the low end.

Response: We disagree. It is more

important for the structure of the groups

to differentiate episodes with similar

severity and costliness. Severity and

costliness are not evenly distributed in

the population of episodes. The most

resource intensive episodes are

infrequently encountered.

Comment: A commenter criticized the

use of a scoring range from 27 to 160 for

the highest level of severity in the

clinical dimension, saying it is too

broad.

Response: In response to several

comments on the adequacy of payment

for severe wound cases, we have revised

the severity score intervals along with

making additions to elements in the

clinical dimension. We discuss changes

to the case-mix system in section IV.G.1.

Comment: It was suggested that the

case-mix assignment be made at the end

of the episode, because of difficulties

agencies may have in obtaining accurate

information about patient status early in

the episode.

Response: OASIS data collected as

part of the comprehensive assessment

must be collected within 5 days of the

start of care. After collection, agencies

have 7 days to ‘‘lock’’ the assessment.

Therefore, agencies have a maximum of

12 days to establish the case-mix

assignment. We think this time period is

adequate to resolve uncertainties about

the health and functional status items

on the OASIS. Further, the therapy

threshold used in the case-mix system is

projected at the start of care, and is

updated by the end of the episode to

determine the final case-mix adjusted

payment.

Omission of Time Spent Outside the

Home From the Calculation of Resource

Costs

Comment: We received comments

faulting the case-mix adjuster for

limiting the measurement of resource

costs to time spent in the home.

Commenters argued that time spent

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41155

outside of the home, travel time, and

resource costs of equipment and

supplies should be included. One

commenter maintained that failure to

account for medical supplies leads to

two inconsistent reimbursement

methodologies, one for services and the

other for supplies. In the case of wound

patients using very expensive dressings

and supplies, commenters argued the

resource cost is seriously

underestimated.

Response: We acknowledge the

underlying concern from the commenter

but we are limited in our ability to

address this comment in the near term.

Variation in costs other than visit time

is a subject for careful empirical study

that will take time. Were we to adopt

imprecise estimates in a hasty attempt

to rectify perceived errors in the

payment weights, we would risk

introducing other errors and potential

inequities into the payment system. The

model as developed to date assumes

that the omitted resource costs are

directly proportional to time spent in

the home. In future years, we plan to

consider methods for testing this

assumption. Studies to directly account

for costs beyond time spent in the home

pose significant challenges in terms of

their feasibility, cost, and reliability.

The Abt study did not attempt to

measure non-home resource costs

because it was believed the complexity

of the necessary measurement

procedures would jeopardize agency

recruitment and data accuracy.

Use of OASIS Data To Validate the CaseMix System

Comment: Several commenters

advised us against using early OASIS

data to validate the case-mix grouping

system. They believe that the data are

flawed because agency personnel are

still learning how to conduct

assessments. A couple of commenters

sought confirmation that we validated

the system, and requested information

about how we validated the system.

Response: It is not possible to use the

OASIS data for complete system

validation, because validation requires

information about resource cost as well

as patient characteristics. OASIS data

provide only patient characteristics.

However, as discussed in the proposed

rule, we did validate the case-mix

grouping system using a split sample

methodology with the Abt case-mix data

(see Abt Associates, Second Interim

Report, September 24, 1999).

Our primary purpose for using the

OASIS data was for payment allocation

during the first year of PPS. Specifically,

we hoped the OASIS data could be used

to estimate the distribution of case-mix

in the population, which is information

needed to accurately establish the

standardized payment amount. As

described elsewhere in this regulation,

we used OASIS data to achieve this

purpose.

Comment: A few commenters

recommended allowing therapy

assistant services and rehabilitation

nurse services to count towards the

therapy threshold.

Response: We do not believe that any

changes to the current coverage rules

governing the coverage of physical

therapy, occupational therapy, and

speech-language pathology services

under the Medicare home health benefit

is warranted at this time. If we believe

coverage revisions are necessary for

future refinements to the HHA PPS, we

may consider revisiting the coverage

guidelines at that later time. Under the

case mix methodology, patients with

intense therapeutic needs are classified

in higher payment groups. A physical

therapist, occupational therapist or

speech-language pathologist would have

to diagnose the therapeutic needs of the

patient. If significant assistant

substitution occurs under PPS, we may

focus medical review efforts or reprice

the case-mix groups. Rehabilitation

nurses have never met the personnel

qualifications or coverage criteria for

physical therapy, occupational therapy

or speech-language pathology services

under the Medicare home health

benefit.

Other Comments

Comment: A commenter stated that

we should add more variables to the

case-mix system to increase the Rsquared.

Response: In an effort to better

capture resource cost for severe wound

patients, we have added several more

variables as explained in the discussion

of changes to the case-mix system in

section IV.G. The R-squared has

increased. Future refinement activities

may result in more additions and better

ways to use existing variables.

Comment: A few commenters asserted

that an R-squared (proportion of

variation explained) of .32 for the casemix system is too low, and one asked

whether the system was validated.

Response: We used a split sample

methodology to validate the case-mix

system. The R-squared for the validation

sample changed little. The R-squared for

the initial case-mix system is

comparable to that for other case-mix

systems in their early stages. We should

expect future research, using better data

(such as improved diagnosis coding)

and more observations, to result in

higher predictive power.

Comment: Some commenters

recommended that we add to the casemix model OASIS items measuring such

nonclinical factors as safety hazards and

other environmental variables, and

socioeconomic status variables.

Response: OASIS includes these

variables to use as risk factors in

analyses of the outcomes of home health

care. But as we discussed in the

proposed rule, we do not believe they

are appropriate factors in determining

payment.

Comment: Some commenters

disagreed with our decision to exclude

items dealing with signs and symptoms

such as fluid retention and diet, on the

grounds that these are important clinical

changes with a direct relationship to

care quality and outcomes.

Response: As we noted in the

proposed rule, we are concerned about

the vulnerability to manipulation for

payment maximization of some possibly

transient clinical items. Our statistical

analysis also suggests weakness in their

scientific reliability. Moreover,

inclusion of these items would require

a change to the OASIS data collection

procedure, causing additional burden

on home health agencies. Lastly, after

all other elements are included in the

model, they do not make any

independent contribution to explaining

variation in resource use.

Comment: A commenter stated that

patients with low or moderate scores

who need to be observed and assessed,

and taught how to manage their

medication and diagnosis, would not

receive adequate reimbursement. A

couple of other commenters suggested

adding variables concerning multiple

medications.

Response: During the early phases of

model development, there were

indications that a variable measuring

multiple medications would be useful,

but as it was not an OASIS variable we

sought to substitute similar OASIS

items. We found substitutes in the two

OASIS variables measuring the patient’s

ability to manage oral and injectable

medications. Statistical results suggest

only one of these variables (injectable

medications management) contributes

independently to explaining resource

variation after accounting for the other

variables in the case-mix model.

However, we believe using this variable

makes the case-mix system vulnerable

to manipulation, and have decided

against including it at this time. As we

refine the case-mix system, we will

continue to look for ways to capture

nursing functions mentioned in the

comment.

Comment: Two commenters

responded critically to the absence of

41156 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

respiratory treatments from the clinical

dimension.

Response: This variable was excluded

from the model because it was

statistically insignificant and inversely

related to resource cost.

Comment: Several commenters stated

that the system should specifically

allocate points for limitations affecting

medication management, meal

preparation, feeding, and the ability to

structure time.

Response: Measures of medication

administration, meal preparation, and

feeding dependence were tested but did

not contribute significantly to

explaining home health resource use.

We note the case-mix system recognizes

patients with memory deficit, impaired

decision-making and behavior

problems.

Comment: Stating that patients with

multiple treatments at home

(intravenous infusion, parenteral/enteral

therapies, OASIS M0250) are often

observed in home care, a commenter

asked why these patients are not

assigned the sum of scores for each

treatment.

Response: At this time the case-mix

model does not assign the sum of two

scores when patients are receiving

multiple treatments. In terms of care

quality, we are concerned about the

potential incentive to make patients’

care more complex if scores for this

OASIS item are additive. Currently,

patients who receive both intravenous

infusion and enteral nutrition, the most

plausible combination, would receive

24 points for enteral nutrition, the

highest score possible among the three

treatments and the second-highest

single score in the clinical dimension.

Given our understanding of the needs

these patients may present, this score

seems appropriate pending further

review of data for multiple-treatment

patients. The Abt sample did not

contain any patients receiving more

than one of these treatments. As these

treatments do not appear to produce

additive work, we believe it is prudent

to wait until more-reliable scores for

multiple-treatment patients can be

developed during refinement activities

using larger data sets.

Comment: Commenters also criticized

us for omitting types of specific OASIS

items or response categories that

indicate lower severity than items/

categories currently in the case-mix

model. For example, one commenter

stated, the presence of ‘‘any pain’’

would affect the plan of care. The pain

response categories that are allocated

points are ‘‘daily but not constantly’’

and ‘‘all of the time’.

Response: We understand the

commenter’s recommendation for more

specificity in the case-mix system. We

note that generally, the case-mix model

captures levels of severity that were

reliably associated with variations in

resource use. Constructing variables for

the model involved both statistically

based decisions as well as judgments

about how many grades of distinction

are desirable from clinical, policy, and

structural points of view. For example,

in response to comments about wound

care patients, we have elaborated certain

wound variables to capture finer

distinctions in wound status, while

retaining statistical reliability for the

clinical dimension. We have traded off

some structural parsimony for slightly

increased accuracy. As larger data sets

become available to refine the case-mix

system, we may have an opportunity to

incorporate still more detailed variable

levels, but we will continue to evaluate

them in light of their clinical, policy,

and structural implications.

Comment: A commenter wondered

whether listing M0530 (when does

urinary incontinence occur?) rather than

M0520 (urinary incontinence or urinary

catheter presence) in the clinical

dimension was a typographical error.

Response: No, it is not. As we noted

in the proposed rule, we avoided M0520

because of concern that using it might

promote negative practice patterns.

M0530 is a stronger measure of the

impact of incontinence on home care

because it takes timed voiding into

account.

Comment: A couple of commenters

stated that the case-mix adjuster should

identify patients with urostomy because

services and teaching requirements

exceed those for bowel ostomy patients.

Response: OASIS does not currently

allow identification of urostomy

patients. We will consider this

suggestion for future OASIS studies.

Comment: A commenter asked why

hearing status is not included, while

vision status is.

Response: We tested hearing problems

as part of a set of neurological,

cognitive, sensory, and behavioral

impairments during our development of

the case-mix system. Few of these

variables contributed meaningfully to

the case-mix model, and for some types

of clinically severe patients these

impairments were inversely related to

resource cost. We were ultimately able

to include both vision problems

(M0390) and behavioral problems

(M0610) in the clinical dimension as

statistically significant variables

positively related to resource cost.

Comment: One commenter suggested

that we change OASIS item M0390 on

vision status to identify patients who

have difficulty accommodating to

distance.

Response: We will consider testing

this change in research on modifications

to OASIS.

Comment: A commenter requested

clarification of the definition in the

vision status item (M0390).

Response: All OASIS items, including

this item, are discussed in the OASIS

Implementation Manual available on the

HCFA Web site.

Comment: A commenter stated that

OASIS functional items are not sensitive

to patient progression, so that the

patient who improves is still rated at the

same level after improvement. The

commenter cited the case of the patient

who is dependent in bathing in bed, and

progresses to independent in bathing in

bed.

Response: This comment appears to

address the use of OASIS items for

outcome measurement. During the

testing of outcome measures for use in

home health care, it was necessary to

balance several competing demands.

One of these demands was for sufficient

‘‘rigor’’ in the outcome measures and

data items, including the data item’s

likelihood of consistent application by

the clinicians making the assessment.

Another demand was a more practical

one—would the home health agency’s

staff be able to use the item in its dayto-day functioning? Because every

OASIS item that now has several levels

of a scale could most likely be expanded

to many more scale levels, several

questions must be asked as part of the

evaluation of OASIS items. For

example, would the item be perceived

as practical for use by clinicians? Would

the resulting outcome measures be

valuable in evaluating quality of care

across agencies? Would the item have a

high incidence of consistent

application? These are among the

evaluation criteria we would apply as

the outcome measures and the OASIS

items continue to evolve over time.

Comment: A commenter said the

system should recognize medically

underserved patients.

Response: The OASIS assessment

does not clearly identify medically

underserved patients. However, a

variable relating to Medicaid status is

reported on the OASIS assessment and

can be considered a proxy indicator.

During our system development work

on the Abt sample we tested the

Medicaid variable (which indicates

whether Medicaid was among the

patient’s payment sources). We found

that it did not contribute to explaining

variation in resource use.

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41157

Comment: A commenter stated that

home health aide supervisory visits

should be included in the case rates,

and the agency should be able to bill for

those visits.

Response: Time spent in the home,

including time spent on supervisory

visits, was recorded in the visit log data

submitted to Abt Associates by agencies

participating in the case-mix research.

This means that the case-mix relative

weights should reflect any case-mix

group differences in supervisory time.

Supervisory visits are also in the cost

base for the average cost per-visit

computations used in the PPS episode

rates. We are making no changes in

payment policy regarding billing for

supervisory visits.

Comment: A commenter, stating that

the case-mix system inadequately

accounts for costs of behavioral patients,

asked how well such patients were

represented in the Abt sample.

Response: We believe these patients

were adequately represented.

Approximately 4.5 percent of the Abt

sample had a primary diagnosis code of

a mental disorder. Approximately 2.6

percent received psychiatric nursing

services at home. About 14 percent were

classifiable as having chronic cognitive,

mental, or behavioral problems.

Approximately one-quarter of the

sample had current problems due to one

or more of the behaviors listed in OASIS

M0610.

Comment: A commenter suggested

that refinement activities include

examining outliers to see whether the

case-mix categories involved are

improperly weighted.

Response: We plan to examine the

data as suggested.

Comment: One commenter questioned

whether we examined the validity of the

relative weights. A related

recommendation was to validate the

relative weights on a large national data

set after the first year of PPS.

Response: We examined various

measures of fit of the case-mix model to

episode-cost data to judge the model’s

performance and, by implication, the

validity of the relative case-mix weights

derived from it. Most of these fit

measures are reported and discussed in

the Abt Associates Second Interim

Report (September 24, 1999). As

explained in the proposed rule, we

derived the relative weights from a

straightforward regression equation that

estimates the average addition to

resource cost due to each severity level

above the lowest-severity case-mix

group (C0F0S0). This regression

equation, estimated from the Abt sample

data, performed well. We used casemix-group means estimated from the

coefficients of the regression equation to

compute the relative case-mix weights.

We plan to re-examine the accuracy of

the relative weights periodically.

Comment: A commenter asked

whether the mean or median was used

to calculate the relative case-mix

weights.

Response: We used the mean

estimated from the regression equation

described in the previous response.

Comment: A commenter requested

that we disclose the computations for

independent review.

Response: In the section of the rule

regarding the calculation of the case-mix

relative weights, we show the regression

equation coefficients and the mean

resource cost calculated for each casemix group from the regression

coefficients.

Comment: A commenter stated that

we should release data showing the

incidence of cases in the groups used to

define the relative weights.

Response: Appendix C in the Abt

Associates Second Interim Report

(available on the HCFA website) shows

the incidence of cases in each case-mix

group in the sample.

Comment: A commenter questioned

whether hospital-based agencies were

adequately represented in the sample

used to develop the case-mix system.

Response: We believe that hospitalbased agencies were adequately

represented in the sample. About onethird of the 90 agencies participating in

the Abt study were hospital-based and

one-third of the episodes in the Abt

analytic sample came from hospitalbased agencies. The hospital-based

agencies were distributed across the

four census regions, urban and rural

locations, and represented varying

practice patterns. The total development

sample included more than 9,000

episodes (Abt Associates Second

Interim Report, September 24, 1999).

The sample for deriving case-mix

weights in the final rule included more

than 26,500 episodes.

Phase II Per-Episode PPS Demonstration

Comment: One commenter asked

whether demonstration agencies

deliberately avoided higher-acuity

patients while participating in the

demonstration project.

Response: The demonstration

evaluation study examined this

question. Analyses suggested that PPS

agencies were no less likely than nonPPS agencies to admit a patient with a

serious medical condition, limitations

in activities of daily living, or other

conditions predictive of higher-thanaverage service needs. Furthermore, the

demonstration did not appear to affect

the admission of patients expected to

have relatively high costs per visit.

Comment: A commenter wanted to

know why data on pages 58143 and

58150 in the proposed rule showed

different percentages of discharges at 60

days and 120 days. Page 58143 cites

completion rates of 60 percent and 73

percent in 60 and 120 days,

respectively. Page 58150 cites

completion rates of 46 percent and 62

percent, respectively.

Response: Data cited on page 58143

were completion rates for 39 agencies

paid prospectively under the Phase II

per-episode prospective payment

demonstration in the first year of the

demonstration (1995-96). Data cited on

page 58150 are national averages from

an episode file constructed from 1997

paid claims. Research would suggest

that the differences stem mainly from

the incentives of prospective payment.

L. Episode Rate Methodology

Comment: Several commenters

suggested that we include the amounts

for new billing and financial systems in

the PPS episode rate.

Response: We do not foresee any

major changes to the billing and

financial systems for home health

agencies that would justify an increase

in the rate amount. Home health

agencies will still use and submit the

same claim forms that are currently

being used under IPS. With only

minimal changes in bill content we will

be furnishing free grouping software to

all HHAs. If an HHA elects to purchase

different or more deluxe software from

its vendors, that would be an individual

business decision of the HHA. It is

primarily the fiscal intermediaries

systems that will require changes in

order to process home health claims

under PPS. We will not reimburse

agencies for modifications to their

internal billing and financial systems

beyond what is already included as

overhead costs reported on the cost

report.

Comment: Several commenters

requested that we not use the most

current data for developing the home

health PPS episode rates in order to

avoid incorporating the effects of IPS.

Response: In developing the final PPS

episode payment rate, the primary

influence for the final amount is the

budget neutrality target. The statute

requires that the total amounts payable

under HHA PPS be equal to the total

amount that would have been made if

HHA PPS had not been in effect. This

numeric value is based on actuarial

estimates of future home health

spending and utilization in the

aggregate. Since the projected spending

41158 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

is based on historical trends derived

using the most recent data available, IPS

cannot be ignored. Using data prior to

the implementation of IPS would not

reflect current home health utilization

and spending.

Comment: One commenter suggested

that we revise the computations of the

average cost per visit to only apply the

cost limit adjustment factor to those

disciplines that were over the per-visit

cost limits.

Response: The per-visit cost limit has

been applied on an aggregate basis, not

on a per-discipline basis. Separating the

disciplines proved too difficult to

achieve and would be of questionable

worth. The cost limit adjustment factor

was determined by dividing the

aggregate cost limit amount by the

aggregate reasonable cost amount. If the

factor was less that 1.0, then the factor

was applied across all disciplines. If we

had only applied it to the disciplines

that were over the limits, then we would

not have recognized the actual impact of

the cost limits.

M. Audited Cost Report Sample

Comment: Several commenters

questioned the accuracy and use of the

statutorily required most current

audited cost report data available to the

Secretary to calculate the PPS rates.

Commenters questioned whether better,

more accurate data may exist than the

1997 audited cost report data set forth

in the proposed rule.

Response: For the proposed rule, data

from audited cost reports received by an

HCFA determined deadline date were

used for the calculation of the proposed

HHA PPS rates. Even though all audited

cost reports were not available (for

reasons such as, suspensions,

investigations, natural disasters, etc.),

HCFA had to set a cut-off date to meet

the stringent time constraints for

completing the proposed rule. Any

additional audited cost report data files

that were received by HCFA Central

Office (CO) beyond the deadline were

not included in the rate calculations for

the proposed rule. Since then, audited

cost reports from the sample may have

been appealed, reopened, and revised

resulting in an updated version of the

cost report data available for calculation

of the rates for the final rule. Even after

the publication of the proposed rule, we

required fiscal intermediaries to

resubmit any reopened audited cost

reports and have that more recent,

accurate data available for final rule

calculations through the first week of

January, 2000. This process resulted in

an additional seven providers for which

we now have audited cost reports for FY

1997. Additionally, during the abovedescribed additional time period, we

received 23 reopened audited cost

reports with newer and more accurate

data for use in the final rule

calculations.

Comment: Commenters were

concerned with pre-IPS cost data being

used and that 1997 data may not be an

adequate time period to reflect the cost

of providing care today.

Response: HCFA is required, in its

development of a PPS for home health

agencies, to use the most current

audited cost report data available. At

present, 1997 audited cost reports are

the most current audited cost reports

available of a representative sample of

HHAs. The 1997 audited cost data is

updated by the market basket in order

to make it more reflective of the cost of

providing care today.

Comment: Commenters were

concerned that not all types of HHAs,

with respect to their being considered

large, small, urban, rural, for profit, notfor-profit, for example, were adequately

represented in the audited cost report

sample used to construct the PPS rates.

Response: The sample was designed

to be representative of the home health

industry, including census region, urban

versus rural location, and large versus

small agencies. The sample included

each provider type (freestanding not-forprofit, freestanding for-profit,

freestanding governmental, and

provider-based), which are referred to as

strata in sampling terms. The design of

the sample then took into account the

number of providers and the variation

in cost and beneficiaries in each

stratum, resulting in a representative

sample of the home health industry.

Comment: A few commenters were

concerned with the sample design

which excluded ‘‘very small’’ agencies.

Response: Agencies with fewer than

50 Medicare beneficiaries were

excluded from the sample list of

agencies for development of the home

health PPS. These agencies were judged

to be atypical in their costs and

utilization. This would particularly be

the case if the agency is a large agency

that happens to have only a small

Medicare business. Prior PPS

demonstrations also excluded these

low-volume providers from

participation for similar reasons.

Comment: Commenters raised

concern about rebasing for FY 2002

based on a 100 percent sample of cost

reports. Commenters further

recommended that if the future PPS data

varies from the FY 2001 base year or

their proposed revised approach to

rebase for FY 2002, that adjustments be

made to the standards on which the

system is based.

Response: HCFA has no statutory

authority to rebase the home health PPS

on 100 percent cost report data. We will

continue to monitor the effects of the

policies governing the PPS system.

N. Cost Outlier Payments

Comment: Commenters generally

supported the outlier policy but often

disagreed with specific aspects of the

proposed policy. Many commenters

stated that protection from the financial

risk of catastrophic cases was important.

These commenters frequently identified

severe wound care patients and non-self

injecting diabetics as the types of

patients that pose the greatest financial

risk because of the concern that the

HHRG system may not adequately

recognize their costs. In addition,

commenters tended to support greater

financial protection against large losses,

favoring a greater concentration of

outlier payments on the most expensive

cases, which can be accomplished by

using a higher fixed dollar loss amount

and a higher loss sharing ratio. Several

commenters wanted provisions totally

incompatible with the statutory

constraint that total outlier payments be

no greater than 5 percent of total

payments including outliers, such as no

fixed dollar loss and a higher loss

sharing ratio, or even full cost

reimbursement of outlier cases.

However, several commenters argued

that if greater catastrophic protection

could not be provided, 5 percent higher

episode payments for all episodes

would be preferable to the proposed

outlier policy.

Response: As stated in the proposed

rule, the provision for outlier payments

is optional under section 1895(b)(5) of

the Act. However, if outlier payments

are included in the PPS, the statute

requires that total outlier payments be

no more than 5 percent of total

payments, including outlier payments.

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

requires that the episode payment

amounts be adjusted to effectively pay

for outlier payments within the same

level of estimated total spending. These

statutory requirements place rather

strict limits upon the additional

payments that can be directed to

unusually expensive cases.

Before deciding to exercise our

discretionary authority to include a

home health PPS outlier policy in this

final rule, we carefully considered the

arguments presented in the public

comments. We have decided that the

benefit to the home health community

of adopting an outlier policy consistent

with the statute outweighs no outlier

policy. However, based on the majority

of public comments, we have decided to

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41159

increase the loss sharing ratio from the

60 percent set forth in the proposed rule

to 80 percent, the same ratio that is used

in the inpatient hospital PPS.

Accordingly, the fixed dollar loss

amount has also been changed. Our

preliminary estimates reported in the

proposed rule indicated that a losssharing ratio of .80 was consistent with

a fixed dollar loss amount equal to 1.35

times the standard episode amount.

However, estimates based on the most

recent data indicate that the fixed dollar

loss amount should be changed to 1.13

times the standard episode amount.

Among the commenters supporting a

higher loss sharing ratio, while no one

suggested a loss sharing ratio lower than

.75; some stated that the ratio should be

the same as in the inpatient hospital

PPS (.80), and others stated that the

ratio should be .80 or even .90.

Comment: Several commenters argued

that the proposed outlier policy was not

sufficient to cover the costs of patients

with intensive service needs and would

result in inadequate home care being

provided to patients with the greatest

needs. Some commenters cited the

effects of the fixed dollar loss and the

loss sharing ratio in severely limiting

the additional payment that would be

made to outlier cases. Another

commenter stated that the outlier

threshold should be based on medical

necessity without any qualifying

financial loss being suffered by the

provider, and others stated, in effect,

that there should be no fixed dollar loss.

Yet another commenter questioned the

sufficiency of 5 percent for these types

of cases.

Response: As noted above, section

1895(b)(5) of the Act limits the total

amount of outlier payments that can be

targeted to outlier cases to no more than

5 percent of estimated total payments. It

is impossible to eliminate the fixed

dollar loss and to pay the full estimated

cost in excess of the episode payment.

To do so would result in outlier

payments far in excess of the 5 percent

allowed by the statute. It is also

inconsistent with a basic premise of the

episode based payment, which is based

on average episode costs, and

anticipates that ‘‘underpayment’’ of

some episodes will tend to be balanced

by ‘‘overpayment’’ of other episodes.

Given the constraint on total outlier

payments, we were presented with

determining how to beneficially

distribute the limited amount of

additional payments among the

expensive cases. If only the very most

expensive of the costly cases qualify for

outlier payments, a higher proportion of

the total costs of those cases can be

paid. Alternatively, if a larger number of

costly cases qualify for outlier

payments, it is necessary to pay a lower

proportion of their total costs. If the

fixed dollar loss were eliminated, so

that all cases whose estimated costs

exceeded the episode amount qualified

for outlier payments, the amount of the

outlier payment per case would of

necessity be so small that there would

be little or no benefit for the expensive

cases.

As discussed in another comment, we

have chosen a loss-sharing ratio of .80

for the final rule instead of the .60 set

forth in the proposed rule. We believe

that a loss-sharing ratio of 1.00 would go

too far in concentrating outlier

payments on the most expensive cases.

It would further limit the number of

cases that could receive any outlier

payment and would provide no

incentive for agencies to attempt to

provide care cost-effectively for outlier

cases.

Comment: A number of commenters

raised concerns regarding the method

used to estimate the cost of an episode

in determining outlier payments.

Several commenters stated that the

‘‘outlier-standardized per-visit rates’’ do

not reflect the real cost of visits.

Another commenter appeared to

misunderstand that we would use pervisit costs for each of the six home

health disciplines.

Response: In this final rule, we are

revising proposed § 484.240 to modify

the per-visit rate used to estimate pervisit costs. We will now use the average

cost per visit from the PPS audit sample

including the average cost for

nonroutine medical supplies and the

average OASIS adjustment costs. The

only standardization applied to these

per-visit costs will be the wage index

standardization factor. See Table 6 of

the proposed rule (64 FR 58169) and

Table 6 in section IV.C. of this final rule.

The wage index standardization factor

is included in the per-visit cost because

the estimated episode cost will be

adjusted by the wage index, just as is

the episode payment amount. As a

result of these changes from the

proposed rule, our estimated cost of an

episode will be higher, and more

episodes will qualify for higher outlier

payments than would have occurred

under the originally proposed method.

This change in cost methodology will

require increasing the fixed dollar loss

in order to stay within the 5 percent

constraint.

The estimated cost of an episode will

be calculated by multiplying the pervisit cost of each discipline by the

number of visits in the discipline and

computing the total cost for all

disciplines.

We understand that the estimated cost

will not necessarily accurately measure

the actual cost of any individual episode

or the actual costs of any single agency.

Our method of cost estimation will

measure differences among episodes in

three factors: the total number of visits,

the skill mix of those visits, and the

wage costs of the geographical area

where the care was provided. This

methodology will assume an equitable

and timely application of outlier

payments among HHAs without

introducing the complex and

idiosyncratic elements of individual

agency cost finding using cost report

analysis.

Comment: Several commenters

suggested that we consider reimbursing

reasonable costs for outlier cases. Other

commenters stated that the estimated

cost does not include the cost of nonroutine medical supplies provided

during each outlier episode, and that if

we estimated costs in the same manner

that is used in the inpatient hospital

PPS, we could include the costs of nonroutine medical supplies.

Response: It is correct that while the

total costs of non-routine medical

supplies were included in the episode

payment amount, the non-routine

medical supplies of an individual

episode are not accounted for in

calculating the payment for an episode

or in outlier calculations. In the

inpatient hospital PPS, costs of outlier

cases are estimated by multiplying total

charges for the services provided during

the hospital stay by a hospital-specific

cost-to-charge ratio that is determined

from the Medicare hospital cost report.

Applying this method to the home

health PPS would provide a means of

including the cost of non-routine

medical supplies in the estimated cost

of an episode. However, there are two

major reasons why we believe that using

the estimated visit cost method is

necessary. First, we do not have charges

for non-routine medical supplies or

agency cost-to-charge ratios in the Abt

case-mix data that we are using to

estimate the outlier policy for the first

year of the PPS. Therefore, we are

unable to use the cost-to-charge ratio

method at this time. Second, we would

like to avoid making the Medicare cost

report a necessary part of determining

an agency’s payments under the home

health PPS. In particular, we would like

to make the new system independent of

the burdensome and idiosyncratic costfinding process of the previous,

reasonable cost-based payment system.

Comment: Some commenters

indicated a misunderstanding about the

application of the wage index in

calculating outlier payments. The

41160 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

confusion was whether the fixed dollar

loss was adjusted by the wage index.

Response: The fixed dollar loss

amount is wage-adjusted in exactly the

same manner that the standard episode

payment is wage-adjusted. As a result,

the fixed dollar loss will be the same

proportion of the episode payment in all

wage index areas. In nominal dollars,

the outlier threshold for an episode in

a low wage index area is lower than the

outlier threshold for an episode in the

same HHRG in a high wage index area.

The outlier payment is also wageadjusted. Hence, the outlier payment for

an episode will be the same proportion

of the total payment for that episode

whether the episode of care is provided

in a low or a high wage index area.

Comment: Several commenters asked

operational questions about the outlier

policy and how outlier payments would

actually be made. For example, one

commenter asked us to clarify how and

when outlier payments would be made.

Another asked who initiates an outlier

request and whether it would be

automated. Others asked how the 5

percent would be determined and how

information on outlier payments would

be communicated to agencies. Another

commenter asked what our policy

would be if total outlier payments are

significantly different than the 5 percent

amount. Another commenter asked how

outlier payments would be tracked and

capped nationally and how agencies

would know when the outlier pool had

been exhausted. Finally, there was the

question whether the 5 percent applied

to individual agencies or all agencies in

the aggregate.

Response: Outlier payments will be

made automatically by RHHI through

the normal claims processing system.

When the RHHI determines the final

episode payment based on the claim

submitted by the agency, as part of

determining the appropriate payment

for the episode, the RHHI system

estimates the imputed cost of the

episode under the outlier methodology.

If the cost exceeds the outlier threshold

for the HHRG to which the episode is

assigned, then an outlier payment will

automatically be calculated for the

episode. The agency will know when it

receives an outlier payment for an

episode because it will be part of the

final payment for the episode and noted

on the remittance advice.

It is important to understand that,

according to section 1895(b)(5) of the

Act, the 5 percent constraint applies to

estimated total payments, not actual

total payments. Each year, we will

establish, the loss-sharing ratio and the

fixed dollar loss values that will be used

throughout the next fiscal year to

calculate outlier payments. There will

be no reconciliation of actual outlier

payments to the 5 percent target either

during a current fiscal year or in any

subsequent fiscal years. If actual outlier

payments during a given year exceed 5

percent of actual total payments, there

will be no attempt to recoup the

difference. Similarly, if total outlier

payments in a year fall short of 5

percent of actual total payments, there

will be no additional payments made to

agencies. Such information will,

however, be part of the analysis

conducted for setting the appropriate

threshold in subsequent years.

Finally, there is no direct relationship

between the 5 percent limit on total

outlier payments and the percent of

outlier payments that an individual

agency may receive. Depending on the

agency’s caseload during the year, the

percentage of outlier payment to its total

payments as outlier payments will

likely vary. The 5 percent constraint

applies to all agencies in the aggregate

and not to individual agencies.

Comment: One commenter questioned

why we have no outlier policy for LUPA

episodes.

Response: No additional payments

will be made for LUPA episodes beyond

the LUPA payment. However, it should

be noted that in this final rule, we have

changed the per-visit costs to be used in

computing the LUPA payment so that

the same per-visit amounts will be used

for the LUPA payment as that used in

estimating the cost of a regular 60-day

episode.

Comment: A commenter stated that

we should implement a payment ceiling

for outlier cases (such as 175 percent of

the HHRG payment) and use a 15

percent adjustment to fund the outlier

pool.

Response: Since a basic objective of

outlier payments is to increase

payments to the most costly cases, we

do not think that outlier payments

should be limited to some percent of the

HHRG payment. The effect of such a

ceiling would be to allow other less

costly cases to receive higher relative

outlier payments. As to the latter

comment, a 15 percent outlier

adjustment is not permitted by the

statute, which sets 5 percent of total

estimated payments as the maximum

amount of outlier payments.

Comment: One commenter suggested

that we eliminate outliers and

recalculate the case-mix to include long

stay cases as part of the HHRG system.

Response: ‘‘Long stay’’ cases are as

much a part of the HHRG system as

shorter term cases, and will not

necessarily become outlier cases. As the

system provides for unlimited 60-day

periods, provided that patients continue

to be eligible for Medicare home health

services for each 60-day period, HHAs

will receive additional episode

payments based on the assigned HHRG

for each episode. Thus, length of stay is

not a factor leading to underpayments.

The purpose of the outlier policy is to

provide additional payments to cases

requiring unusually intensive services

within a 60-day episode.

Comment: One commenter stated that

a transition policy would be a preferable

alternative to the proposed outlier

policy.

Response: As discussed previously,

we have decided against implementing

a transition policy. However, we note

that a transition policy could serve some

of the same purposes as an outlier

policy early in system implementation.

For example, a transition policy bases a

proportion of the episode payment on

the estimated cost (using the same

method as we apply in the outlier

policy) and the rest of the episode

payment on the case-mix and wage

adjusted episode amount. Such a policy

could provide higher total payments to

episodes whose estimated cost exceeds

the episode payment. However, for all

cases whose estimated cost is less than

the episode payment, this blended

payment would be lower than the

episode payment. Because it would

potentially change the payment to all

episodes, a transition policy has a

greater impact on total payments than

that of the outlier policy. Whereas the

outlier policy is self-financing under the

terms of the statute, a broader transition

policy would require a different and

possibly greater adjustment for budget

neutrality. Finally, a transition policy is,

as the name indicates, intended to be

temporary, and intended to allow

providers time to adjust to a new

system. In contrast, we intend the

outlier policy to be a permanent feature

of the payment system.

Comment: One commenter urged us

to carefully monitor the impact of the

outlier policy and stressed the

importance of maintaining an

appropriate balance between the total

number of outlier patients and the

payment per outlier case. Another

commenter expressed a preference for

refinement of the case-mix system as an

alternative to the outlier policy.

Response: We fully agree with the

suggestion of both commenters. We will

monitor the impact of the outlier policy

with the intention of refining it where

possible. We will also explore case-mix

refinements as we gather the data

needed to support the necessary

analyses. We are also hopeful that, over

time, case-mix refinement may reduce

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41161

the need for an outlier policy. We will

examine the issue in the future when

more information is available.

Comment: Three commenters raised

concern about the impact of outliers on

specific types of home health agencies.

They expressed concern for financial

losses that would be incurred by rural

agencies, a provider of ‘‘last resort’’

whose cases are in need of intensive

services, and agencies in States where

there are no other publicly funded home

and community based services. In

addition, a commenter stated that the

wage adjusted per-visit costs would be

significantly less than the actual pervisit costs in a particular geographical

area.

Response: These comments suggest

that the outlier policy might be tailored

to increase outlier payments for specific

agencies on the basis of their location or

case-mix. The outlier policy set forth in

this rule provides greater compensation

for agencies based on the imputed cost

of an agency’s episodes. There is no data

available to us which objectively

identifies providers for whom, on some

basis, additional payments would be

warranted. We believe the PPS system

with its various adjustments provides a

sound basis for distributing payment in

accordance with patient need.

Comment: Some commenters

suggested that we apply different outlier

criteria to different types of cases. For

example, one commenter stated that the

outlier payments should be restricted to

the 40 non-therapy HHRGs.

Response: We believe that estimated

total cost is the best measure we have

for identifying outlier cases. The fact

that the fixed dollar loss is the same for

all cases means that the estimated loss

that must be incurred is the same for all

cases and thus achieves equity. Even

though a therapy case receives a higher

episode payment than a non-therapy

case, the estimated loss that must be

incurred before it qualifies for outlier

payments will be the same.

Comment: One commenter

recommended a lower fixed dollar loss

for wound care cases than for other

outlier cases.

Response: We note that a lower fixed

dollar loss for wound care cases than for

other cases would direct a greater

proportion of outlier payments to

wound care cases. We have decided

against adopting such a policy at this

time. As indicated in a previous

response, we believe that it is more

equitable to let the estimated cost of

each episode determine the amount of

outlier payments without singling out

specific types of cases for special

treatment.

Comment: One commenter seemed to

argue that a fixed dollar loss equal to or

greater than the episode payment

amount was impossible empirically and

resulted from assumptions we made

about episode costs and payments.

Response: This commenter seemed to

misunderstand the method we used to

estimate the fixed dollar loss amount

and the loss-sharing ratio. The estimates

of fixed dollar loss amounts and losssharing ratios presented in the proposed

rule and in this final rule were not

based on any assumptions about

internal data relationships. As described

in the proposed rule, the estimates were

derived from modeling simulated

payments and estimated costs for the

episodes included in the Abt case-mix

data set. For this final rule, we

conducted the simulations again using

an updated Abt data set. We were

unable to perform simulations using

early OASIS data from the OASIS

national repository, because data lags

prevented us from linking OASIS data

to claims such that they could be

included in this final rule. However, we

were able to perform a variety of casemix comparisons between the national

OASIS data and the Abt sample data.

These comparisons indicated a high

degree of conformity between the two

data sources. Further, we were able to

compare the 1998 episode file

developed from Medicare claims and

the Abt data to determine how well the

distribution of expensive cases matched

in the two files. This analysis also

supported the use of the Abt data.

O. Budget Neutrality

Comment: A number of commenters

raised concerns regarding the budget

neutrality target. A few commenters

were concerned about the budget target

of IPS limits reduced by 15 percent.

Another felt expenditures should be

based on the Congressional Budget

Office projection of expenditures.

Response: Section 302 of BBRA of

1999 amended the statute to delay the

15 percent reduction in spending until

one year after the implementation of

PPS and further requires the Secretary

to report to Congress within 6 months

after implementation of PPS on the need

for the 15 percent reduction. The statute

also requires the budget target to be

based on the Secretary’s estimate of

spending in FY 2001, not the

Congressional Budget Office estimate.

Comment: Some commenters asked if

we intend to re-evaluate the budget

neutrality factor in the future.

Response: Re-evaluating the

experience over the next few years and

adjusting the rates accordingly could be

beneficial. However, the statute does not

provide for any adjustment in the

budget neutrality factor nor an

adjustment to change the program

budget target.

Comment: Several commenters were

concerned about our projection of the

number of episodes in FY 2001. Some

mentioned specific reasons for declining

episodes such as the changes in

venipuncture rules.

Response: Since the time we

published the preliminary notice, we

have obtained more meaningful data

about home health spending and

utilization changes. We now have two

consecutive year’s episode files and

have clarified issues related to spending

projections such as unsubmitted claims

and sequential billing. We are no longer

projecting the same number of episodes

as we had in CY 1997. Utilization has

dropped substantially since that time.

However, the reasons for the drop, such

as venipuncture changes, cannot be

quantified. We have a two-year

comparison relating the drop in

episodes to the drop in visits within an

episode. Based upon the most recent

data, we are dropping the projected

number of episodes substantially.

Comment: Several commenters took

issue with the data to be used as the

basis for the rate setting. They felt that

we should not use the 1998 data to

establish rates as the low utilization

associated with IPS would be built into

this analysis.

Response: Because the law requires us

to establish a PPS that is budget neutral

to what would have been paid under

IPS, we need the most recent data to

help us develop a model of what would

have happened under IPS in 2001. Since

utilization did drop so dramatically, we

feel that it is important to know how the

mix of services changed. Use of 1997

data or 1998 data does not necessarily

have a direct effect on the level of

payment because of the budget

neutrality requirement. For example,

using 1998 data, with a lower number

of visits in an episode than 1997 data,

will result in less of an adjustment to

obtain budget neutrality to reach

projected FY 2001 spending.

Comment: Some commenters

suggested that we increase the budget

target to reflect the cost of Part B

therapies that were provided outside the

home health benefit that will now be

covered by the PPS rate.

Response: We determined how much

of this type of therapy is being provided

to current beneficiaries receiving home

health services. We added this amount

to the target for spending.

Comment: One commenter believed

that we should have performed an

impact study for rural areas because

41162 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

such an analysis would have shown the

need for separate budget neutrality

factors for rural versus urban areas.

Response: We did look at costs per

visits in several different types of rural

areas versus urban areas. There was no

significant difference, therefore we did

not create distinct rates for urban versus

rural.

Comment: Several commenters argued

that we did not provide support for the

behavioral adjustment assumed about

the percentage of LUPA payments.

Response: Analysis of the 1998

episode file showed that when home

health services were broken into 60-day

blocks, for 16 percent of the time either

a beneficiary had 1 to 4 visits extending

outside a continuous period of service

or that a beneficiary simply had only 1

to 4 visits within a 60-day period. Of

this 16 percent, only 26 percent or 4

percent of the total were cases where

only 1 to 4 visits were provided in a

single 60-day, non-contiguous period.

This four percent would clearly classify

as LUPA episodes. It is not clear that

those visits simply falling outside the 60

days would, under PPS, qualify as an

episode. A plan of care would probably

simply include those straggler visits

with the preceding episode in many

cases. The episode file was created to

help us determine the average number

of visits and the mix of visits in an

episode. The file was not meant to fully

reflect a system where payments are

made prospectively. The incentives and

the management of care under the

prospective system we have designed

have many differences from a cost-based

reimbursement system. Our assumption

about the percentage of LUPA episodes

is not so much a reflection of a

behavioral change but a clarification of

how the episode file was constructed. It

would not be reasonable to assume that

the distribution of visits under PPS will

replicate that of IPS. Our assumption

that 5 percent of episodes will be LUPA

is based on the actuaries’ best estimate

of what will actually happen under PPS.

Comment: One commenter suggested

that we include appropriate

assumptions regarding the PEP in the

budget neutrality adjustment.

Response: We developed the PEP and

the SCIC to benefit both agencies and

beneficiaries. The SCIC was created so

that beneficiaries whose condition had

changed since the start of the episode

could continue to be cared for by the

same agency. There is a cost to the

payment system in allowing this change

in condition. Because we do not have

adequate data to estimate this cost, our

rate setting assumptions could not

incorporate the increased cost of

changing to a higher case-mix midepisode. There are some slight savings

from using an end date to the PEP

which does not equal the start date of

the next episode. Again, we did not

specifically account for this in

determining the budget neutrality factor

because as in the case of the SCIC, we

do not have concrete data on which to

base any cost estimate. We feel that the

cost of the SCIC will outweigh any

savings from the PEP. This being the

case, the rates are not lower than they

should be because of assumptions about

the PEP.

P. Discharge Issues

Comment: Several commenters raised

concern over possible impacts of

discharge policies under the new PPS.

Commenters requested clarification of

our policy governing the situations of

patients who are discharged because

they are no longer homebound and

therefore ineligible for the Medicare

home health benefit during the 60-day

episode, the patient refuses services or

is discharged because of safety, abuse,

non-compliance concerns, or dies.

Response: We believe the documented

and legitimate event of a patient’s death

would result in a full episode payment

for the HHA. Therefore, if a patient dies

on day 35 of an episode, the HHA

would receive a full episode payment

for that individual. There would be no

proportional payment adjustments to

the full episode payment. If a patient is

discharged because he or she becomes

no longer homebound and therefore

ineligible for the home health benefit,

refuses services, or becomes a

documented safety, abuse or noncompliance discharge during the 60-day

episode, the HHA would receive a full

60-day episode payment unless the

patient became subsequently eligible for

the home health benefit during the same

60-day episode and later transferred to

another HHA or returned to the same

HHA, then the latter situation would

result in a PEP adjustment.

Comment: Commenters requested

clarification of discharge policies

governing an intervening hospital, SNF

or hospice admission.

Response: We believe that HHAs

should be given the option to discharge

the patient within the scope of its own

operating policies; however, an HHA

discharging a patient as a result of

hospital admission during the 60-day

episode will not be recognized by

Medicare as a discharge for billing and

payment purposes. An intervening

hospital stay will result in either an

applicable SCIC adjustment or, if the

Resumption of Care OASIS assessment

upon return to home health does not

indicate a change in case-mix level, a

full 60-day episode payment will be

provided spanning the home health

episode start of care date prior to the

hospital admission, through and

including the days of the hospital

admission, and ending with the 59th

day from the original start of care date.

Comment: Several commenters asked

whether a patient could be discharged

before the end of the 60-day episode and

whether the final bill could be

submitted upon discharge before the

end of the 60-day episode.

Response: The claim may be

submitted upon discharge before the

end of the 60-day episode. However,

subsequent adjustments to any payment

based on the claim may be made due to

an intervening event resulting in a PEP

adjustment, such as a transfer to another

HHA prior to the end of the 60-day

episode or discharge and return to the

same HHA prior to the end of the 60-

day episode.

Comment: A commenter requested

clarification of the situation where an

HMO fails to notify the HHA of a

transfer of coverage, asking whether the

HHA would be responsible for that

portion of the PPS payment deducted by

Medicare.

Response: The common working file

data base includes enrollment data that

should inform the HHA of the

enrollment status of patients under a

home health plan of care with their

agency. If the beneficiary becomes HMO

eligible mid-episode, the 60-day episode

payment will be proportionally adjusted

with a PEP adjustment. The episode

payment will be proportionally adjusted

using the span of days based on the

billable visit date that the beneficiary

was under the care of the HHA prior to

the beneficiary transfer to an HMO.

Q. Consolidated Billing

Comment: Several commenters

requested clarification of the services

governed by the statutorily required

consolidated billing requirements under

sections 1842(b)(6)(F) and 1862(a) of the

Act as amended by section 305 of

BBRA. Some commenters were

concerned with possible False Claims

Act violations.

Response: Section 1842(b)(6)(F) of the

Act, enacted by the BBA , and amended

by the BBRA, requires the consolidated

billing of all covered home health

services listed in section 1861(m) of the

Act, except for DME covered as a

Medicare home health service. Section

305 of BBRA revised the statute to

exclude DME covered under the

Medicare home health benefit from the

consolidated billing requirements.

Under PPS, HHAs will be required to

bill and receive payment for all covered

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41163

home health services listed in section

1861(m) of the Act, except DME during

the 60-day episode. Under the current

system, issues concerning the False

Claims Act are within the purview of

the Inspector General who will review

any possible claims violation.

Comment: Commenters requested

reassurance that parenteral and enteral

nutrition was not included in the

consolidated billing requirements

governing home health PPS.

Response: Perenteral and enteral

nutrition services are currently not a

covered home health service. Therefore,

perenteral and enteral nutrition services

are not subject to the consolidated

billing requirements and are not

included in the PPS episode rate.

Comment: Several commenters

requested the elimination of non-routine

medical supplies, osteoporosis drugs

and the therapies from the consolidated

billing requirements governing PPS.

Response: The statute requires all

covered home health services listed in

section 1861(m) of the Act, except for

DME, to be governed by the

consolidated billing requirements.

HHAs cannot unbundle non-routine

medical supplies that are currently

covered as a Medicare home health

service that may coincidentally have a

duplicate Part B payment code for

payment. In addition, HHAs cannot

unbundle the osteoporosis drug or

therapies covered under the Medicare

home health benefit. Although the

osteoporosis drug covered under the

Medicare home health benefit is not

included in the PPS rate, it is still

governed by the statutorily required

consolidated billing requirements.

Comment: Commenters suggested that

we remove the requirement for

consolidated billing of intern and

resident services unless it is a choice of

the hospital and the HHAs. Commenters

suggested a separate payment amount to

those HHAs that will bill for their intern

and resident services.

Response: To the extent these services

were paid on a reasonable cost basis and

covered under the home health benefit,

there cannot be separate payment for

these services under home health PPS.

These services will be subject to the

consolidated billing requirements.

However, the HHA PPS rates and

consolidated billing requirements do

not affect Medicare payments to

hospitals for graduate medical

education or billing requirements.

Comment: Commenters suggested that

we establish, at a minimum, a partial

episode payment to a nonprimary HHA

that can demonstrate they followed the

recommended Common Working File

(CWF) procedures for CWF verification

of home health status before providing

care, but received incorrect information

about the episode status of the

beneficiary.

Response: We believe that HCFA

systems will provide the appropriate

information in a timely manner so that

HHAs may establish primacy for

purposes of consolidated billing and

corresponding payment. In future

refinements to the system we will

certainly not rule out the feasibility of

this proposal if the data shows that this

situation occurs frequently.

Comment: Commenters requested

clarification of the procedures HHAs

and other providers will follow to

communicate the necessary charges of

DME and the osteoporosis drug.

Response: The current

communication level that is necessary

to effectively meet the DME and

osteoporosis drug needs of home health

patients will continue under PPS. Both

DME and the osteoporosis drug are paid

outside of the PPS rates. As DME

covered as a home health service, is no

longer subject to the consolidated

billing requirements governing home

health PPS, the status quo for the

provision of DME will continue under

PPS. The osteoporosis drug is subject to

the consolidated billing provisions

although it is paid outside of the PPS

rates. HHAs will no longer be able to

unbundle the osteoporosis drug to a Part

B supplier. The HHA will have to bill

Medicare directly for the osteoporosis

drug and any applicable supplier will

have to look to the HHA for payment.

Comment: Commenters requested

clarification of consolidated billing

requirements governing billings and

payments for services at hospitals,

skilled nursing facilities, and

rehabilitation centers when they include

equipment too cumbersome to bring to

the home.

Response: Payments for services at

hospitals, SNFs, and rehabilitation

centers when they include equipment

too cumbersome to bring to the home

have been incorporated into the baseline

cost data used to develop the PPS rates

and are included in those rates. Those

services are also subject to the

consolidated billing requirements.

Therefore, the HHA cannot unbundle

the services to a Part B supplier. The

HHA must provide the services either

directly or under arrangement and bill

Medicare directly for payment.

R. Physician Certification of the HHRG

(§ 484.22)

Comment: Several commenters

requested the elimination of the

proposed requirement governing

physician certification of the HHRG. In

general, commenters objected to the

burden associated with this requirement

and questioned its logic. Commenters

also argued that physicians would not

be able to comply with the requirement

of certification of the HHRG.

Response: We proposed to require the

physician to certify the appropriate

case-mix weight/HHRG as part of the

required physician certification of the

plan of care. This was an attempt to

have the physician more involved in the

decentralized delivery of home health

services. However, based on the number

of negative responses from commenters

and our reevaluation of this issue, we

have decided to eliminate this

requirement and focus our attention on

physician certification efforts and

education in order to better involve the

physician in the delivery of home health

services. In this final rule, we are

deleting proposed § 424.22(a)(1)(v) to

remove this requirement from our

regulations.

S. Small Rural Providers

Comment: Several commenters

suggested that we recognize several

small rural exceptions to the national

episode payment rate and LUPA policy

that would more appropriately

recognize the special needs of small

rural providers. Commenters suggested

that the payment rates are inadequate to

meet the special travel needs and

potential economy of scale challenges

that commenters believe small rural

HHAs encounter. Commenters believed

the data used to develop the PPS did not

include or adequately reflect the

behavior of small rural HHAs, and

therefore believed it would be difficult

to predict the impact of PPS on small

rural HHAs. Conversely, other

commenters specifically recommended

no exception for small rural HHAs.

Response: In our re-examination of

the small rural impact issue, we did not

find data to support the rural

differentiation suggested in the

comments submitted. Our analysis

included the subcategorization of data

into increasing degrees of rural

remoteness. As demonstrated in the

analysis below, the subcategories did

not yield a significant differentiation in

costs associated with resource needs

and service delivery in rural areas. We

do not believe that rural providers will

be disadvantaged under HHA PPS.

However, we will continue to look at

alternatives regarding beneficiary access

to Medicare home health services in

remote areas. We will continue to

analyze this complex issue with new

data under HHA PPS. If and when an

adjustment is justified, we will refine

the system accordingly.

41164 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

RURAL CONTINUUM CODE STATUS TABLE

Provider type Continuum

code 1

Average cost

per beneficiary

1997 2

Average cost

per beneficiary

2001 3

Free Standing For Profit Agencies .............................................................................................. 0 $6,622 $4,079

Free Standing For Profit Agencies .............................................................................................. 1 12,632 3,939

Free Standing For Profit Agencies .............................................................................................. 2 7,367 5,397

Free Standing For Profit Agencies .............................................................................................. 3 7,965 6,577

Free Standing For Profit Agencies .............................................................................................. 4 6,400 5,330

Free Standing For Profit Agencies .............................................................................................. 5 7,014 5,997

Free Standing For Profit Agencies .............................................................................................. 6 6,367 4,230

Free Standing For Profit Agencies .............................................................................................. 7 7,671 4,333

Free Standing For Profit Agencies .............................................................................................. 8 5,838 4,971

Free Standing For Profit Agencies .............................................................................................. 9 4,871 4,266

Free Standing Governmental Agencies ...................................................................................... 0 3,758 2,589

Free Standing Governmental Agencies ...................................................................................... 1 2,325 2,370

Free Standing Governmental Agencies ...................................................................................... 2 4,117 2,938

Free Standing Governmental Agencies ...................................................................................... 3 4,054 3,407

Free Standing Governmental Agencies ...................................................................................... 4 3,683 2,975

Free Standing Governmental Agencies ...................................................................................... 5 4,459 3,495

Free Standing Governmental Agencies ...................................................................................... 6 3,204 2,375

Free Standing Governmental Agencies ...................................................................................... 7 3,905 3,253

Free Standing Governmental Agencies ...................................................................................... 8 3,046 2,572

Free Standing Governmental Agencies ...................................................................................... 9 3,170 2,477

Free Standing Non-Profit Agencies ............................................................................................. 0 5,341 3,035

Free Standing Non-Profit Agencies ............................................................................................. 1 4,258 3,871

Free Standing Non-Profit Agencies ............................................................................................. 2 4,897 2,991

Free Standing Non-Profit Agencies ............................................................................................. 3 4,069 3,162

Free Standing Non-Profit Agencies ............................................................................................. 4 3,279 2,810

Free Standing Non-Profit Agencies ............................................................................................. 5 6,124 4,630

Free Standing Non-Profit Agencies ............................................................................................. 6 5,730 3,320

Free Standing Non-Profit Agencies ............................................................................................. 7 5,146 3,638

Free Standing Non-Profit Agencies ............................................................................................. 8 3,620 3,692

Free Standing Non-Profit Agencies ............................................................................................. 9 6,546 4,899

Provider Based Agencies ............................................................................................................ 0 5,488 3,233

Provider Based Agencies ............................................................................................................ 1 4,049 3,498

Provider Based Agencies ............................................................................................................ 2 4,553 3,845

Provider Based Agencies ............................................................................................................ 3 4,418 3,015

Provider Based Agencies ............................................................................................................ 4 2,834 2,757

Provider Based Agencies ............................................................................................................ 5 4,358 3,322

Provider Based Agencies ............................................................................................................ 6 3,973 3,212

Provider Based Agencies ............................................................................................................ 7 4,221 2,938

Provider Based Agencies ............................................................................................................ 8 2,355 1,496

Provider Based Agencies ............................................................................................................ 9 4,553 3,580

1Source: Bureau of Census’ urban and rural classification of populations.

2Source: Audited Cost Report Sample Data.

3Source: Audited Cost Report Sample Data updated to FY 2001.

CODE DEFINITIONS*

0 Central counties of metro areas of 1 million population or more

1 Fringe counties of metro areas of 1 million population or more

2 Counties in metro areas of 250,000 to 1 million population

3 Counties in metro areas of fewer than 250,000 population

4 Urban population of 20,000 or more, adjacent to a metro area

5 Urban population of 20,000 or more, not adjacent to a metro area

6 Urban population of 2,500 to 19,999, adjacent to a metro area

7 Urban population of 2,500 to 19,999, not adjacent to a metro area

8 Completely rural or fewer than 2,500 urban population, adjacent to a metro area

9 Completely rural or fewer than 2,500 urban population, not adjacent to a metro area

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41165

RURAL FRONTIER STATUS TABLE

Provider type Frontier

status 1

Average cost

per beneficiary

1997 2

Average cost

per beneficiary

2001 3

Free Standing For Profit Agencies ................................................................................................ No ............... $6,858 $4,664

Free Standing For Profit Agencies ................................................................................................ Yes .............. 4,179 4,620

Free Standing Governmental Agencies ......................................................................................... No ................ 3,579 2,803

Free Standing Governmental Agencies ......................................................................................... Yes .............. 2,450 1,758

Free Standing Non-Profit Agencies ............................................................................................... No ................ 4,921 3,118

Free Standing Non-Profit Agencies ............................................................................................... Yes .............. 6,926 2,785

Provider Based Agencies ............................................................................................................... No ............... 4,500 3,344

Provider Based Agencies ............................................................................................................... Yes .............. 3,999 2,942

1Frontier Status is defined as 6 or fewer persons per square mile.

Source: ‘‘Definitions of Rural: A Handbook for Health Policy Makers and Researchers (HRSA).’’

2Source: Audited Cost Report Sample Data.

3Source: Audited Cost Report Sample Data updated to FY 2001.

T. Wage Index

Comment: We received several

comments regarding the wage index that

is used to standardize and adjust the

rates. The commenters suggested that

the hospital wage index might not

adequately represent wages paid by

HHAs. Many commenters suggested the

development of a home health specific

wage index. Several of the commenters

that suggested the home health specific

wage index believed the hospital wage

index did not adequately represent the

cost of rural wages. A few commenters

expressed concern with our proposed

approach that continues to apply the

wage index adjustment based on the site

of service of beneficiaries rather than

the location of the parent office. Several

commenters suggested that a few wage

index values included in Table 4 of the

proposed rule were incorrect. A

commenter suggested the application of

the latest hospital wage index with

exclusion of physician and resident

costs and hours from the calculation.

Several commenters were concerned

with the application of the wage index

when the patient transfers mid-episode

or relocates during the episode.

Response: As indicated in the

proposed rule, we are using the latest

pre-floor and pre-reclassified hospital

wage index. We used the latest pre-floor

and pre-reclassified hospital wage index

that was available at the time of

publication of the proposed rule.

While we appreciate the intent of a

home health specific wage index, we

want to point out that our previous

efforts in developing such an index

resulted in weights that the industry

immediately repudiated because it was

viewed less favorable than the pre-floor

and pre-reclassified hospital wage

index. The industry had concerns with

the methodology used to develop a

home health specific wage index. These

concerns coupled with our lack of

applicable home health specific data

resulted in our adoption of the hospital

wage index in our approach to adjusting

the labor portion of the formulas. In

future refinements to the PPS we will

certainly not rule out the feasibility of

this recommendation.

We have decided to continue basing

the application of the wage index on the

site of service of the beneficiary under

PPS. We believe this is the most

equitable recognition of the wage

component for service delivery. Based

on commenters concerns with incorrect

values included in Table 4 of the

proposed rule, we re-examined our data.

Based on the data available at the time

of publication of the proposed rule, both

Tables 4A and B in the proposed rule

are correct. We use, and will continue

to use the pre-floor and pre-reclassified

hospital wage index values which are

not published in the annual inpatient

hospital PPS notice. We believe this

may be the source of some confusion

reflected in the comments.

If there is a PEP adjustment, whether

it is a transfer or discharge and return

to the same HHA during the 60-day

episode, the patients site of service is

the location of application of the

appropriate wage index value. The wage

index based on the beneficiary site of

service adjusts the labor portion of the

original proportional payment and will

also adjust the labor portion of the new

60-day episode payment resulting from

the intervening event. The PEP

adjustment is viewed as two discrete

situations: (1) The labor adjustment of

the original proportional payment and

(2) the labor adjustment of the new 60-

day episode payment resulting from the

intervening event. If a beneficiary

changes locations during the episode

(for example, moves in with a family

member), then the MSA or non-MSA at

the start of the episode governs the labor

adjustment of the episode payment for

the balance of the episode. The new

MSA or non-MSA corresponding to the

new location would begin with the

subsequent episode.

U. Market Basket

Comment: One commenter requested

further clarification of the market basket

used to update the cost data for

inflation.

Response: We believe the market

basket update was adequately described

in the proposed rule (64 FR 58149). See

section IV.B.2. of this rule for further

clarification on the home health market

basket. We are available to answer

specific questions any commenters may

have on an individual basis.

V. Alternative Methods of Care

Comment: Some commenters

suggested the need to recognize

alternative methods of care under PPS

such as telemedicine or other

innovations. Commenters recommended

such alternative methods as a way to

improve service delivery to patients and

promote efficiencies.

Response: While we appreciate the

intent of this comment, at this point the

modality of telemedicine has not been

adequately defined nor are there

established safety and effectiveness

standards across the continuum of

products. Thus, we do not intend to

change the current definition of a visit

governed by § 409.48(c) which states,

‘‘A visit is an episode of personal

contact with the beneficiary by staff of

the HHA or others under arrangements

with the HHA for the purpose of

providing a covered service.’’ There is

nothing to preclude an HHA from

adopting telemedicine or other

technologies that they believe promote

efficiencies, but those untested

technologies will not be specifically

recognized and reimbursed by Medicare

under the home health benefit.

W. Discrimination

Comment: A few commenters argued

that the PPS as proposed discriminates

41166 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

against States, provider types, classes of

patients, and the impoverished and

poorly educated due to their

disproportionate numbers in certain

States and regions of the country.

Response: The PPS was developed

based on national norms and is

intended to eliminate previous patterns

of care that never related to patient

need. We believe the case-mix

methodology, significant change in

condition adjustment, and cost outlier

payments as developed in the system,

treats all patients across the country

equitably in relation to their condition.

X. Other Federal Requirements

Comment: A few commenters

suggested that HHAs should not be

required to comply with new

Occupational Safety and Health

Administration standards or any other

new Federal requirements prior to PPS

implementation.

Response: While we appreciate the

concerns of the commenters, it is

beyond the scope of our authority to

place a moratorium on the application

of regulations from other Federal

agencies or other statutory Medicare

requirements.

Y. OASIS Assessment and Plan of Care

Certification Transition Concerns

Comment: Several commenters

requested clarification of requirements

governing OASIS assessments and plan

of care certifications for implementation

October 1, 2000. Commenters raised

concerns regarding burden and costs

associated with complying with the

requirement that all patients be grouped

into appropriate case-mix classifications

and plan of care certifications for the

October 1, 2000 implementation date.

Response: We addressed this concern

in the proposed rule. We proposed to

provide a one-time grace period in order

to ease the transition to PPS for patients

under an established OASIS assessment

and certified plan of care prior to PPS

implementation on October 1, 2000. We

proposed if a beneficiary is under a

home health plan of care before October

1, 2000 and the HHA has completed a

Start of Care or Follow-Up OASIS

assessment earlier than September 1,

2000, the HHA must complete a onetime additional Follow-up OASIS

assessment using the modified OASIS

B–1(8/2000) at least 5 days before

October 1, 2000 for purposes of casemix classification. The modified OASIS

B–1(8/2000) is available on the HCFA

Internet site at: http://www.hcfa.gov. If

a beneficiary is under an established

home health plan of care before October

1, 2000, and the HHA completed a Start

of Care or Follow-Up OASIS assessment

using the modified OASIS data set B–

1(8/2000) on or after September 1, 2000

and does not wish to do a one-time

OASIS at the inception of PPS, the HHA

may use the earlier OASIS assessment.

We proposed a similar one-month

grace period for physician certifications

of the plan of care. In the October 28,

1999 proposed rule (64 FR 58195), we

proposed, ‘‘If a beneficiary is under an

established home health plan of care

before October 1, 2000 and the

certification date is on or after

September 1, 2000 and the HHA in

conjunction with a certifying physician

does not wish to do a one-time

additional recertification of the plan of

care at the inception of PPS, the HHA

may use the recertification date

(September 1, 2000 through September

30, 2000) from the earlier version of the

plan of care. This is a one time grace

period.’’ We believe it is important to

allow a one time grace period for plan

of care certifications to ease transition

concerns.

A beneficiary under an established

plan of care as of September 1, 2000,

may have a one-time implementation

grace period for the plan of care

certification requirements for a

maximum period of up to 90 days

(September 1, 2000 through and

including November 29, 2000). This

one-time grace period to alleviate

implementation burden must be done in

conjunction with a certifying physician.

The regulatory requirements governing

the Medicare home health benefit before

implementation of PPS would apply to

the certification period up to and

including September 30, 2000. Home

health agencies in conjunction with a

certifying physician will have to

document a break in ordered services

for the pre-PPS physician ordered

services (September 1, 2000 through and

including September 30, 2000) and all

post-PPS physician ordered services as

of PPS implementation on October 1,

2000. The documented break in services

during the one-time implementation

grace period for the plan of care

certification requirements for a

maximum period of up to 90 days is

required in order to ensure the

alignment of all certified episodes and

OASIS assessments as of PPS

implementation on October 1, 2000.

For example, a Medicare home health

eligible patient is under a physician’s

plan of care and the first billable visit

date/start of care date in the plan of care

is September 15, 2000. The one-time

implementation grace period would

reflect a plan of care that specifies

physician orders for services furnished

both before and after implementation of

HHA PPS. The physician orders in the

plan of care would reflect services from

September 15, 2000 through and

including September 30, 2000. All

current coverage and payment rules

would apply to the services provided on

September 15, 2000 through and

including September 30, 2000. The plan

of care would also specify any services

ordered on October 1, 2000 through and

including November 29, 2000. The plan

of care would reflect the break in

services both before and after

implementation of HHA PPS. The start

of care date/first billable visit date for

this patient under PPS in the plan of

care is October 1, 2000. The one-time

implementation grace period would

require the documentation of services in

the plan of care that were furnished

both before and after implementation of

HHA PPS and the documentation of the

new PPS start of care date under PPS.

Many commenters raised concern

about the potential burden associated

with patients who are under a plan of

care prior to October 1, 2000, but due

to timing, their OASIS schedule did not

fall in the post September 1, 2000 grace

period time frame. These patients would

require OASIS reassessment during the

last 5 days of September in order to

group the patients for purposes of casemix classification for the October 1,

2000 PPS effective date. For some

HHAs, this could potentially pose a

significant implementation burden.

Thus, we are revising our proposed

approach to permit the completion of

the next scheduled OASIS follow-up

assessment for those patients under an

established home health plan of care

prior to September 1, 2000, but on or

after August 1, 2000, to be completed at

the HHA’s discretion during the month

of September. Therefore, if the patient is

under a home health plan of care that

overlaps the month of August 2000, the

HHA will have the discretion to

complete the next scheduled Follow-Up

OASIS Assessment during the month of

September. Under the one-time

transition grace period, we are not

requiring that the OASIS assessment be

completed during the required time

frame during the last 5 days of the

episode certification requirement for

August and September 2000. The

requirement that the OASIS assessment

must be completed during the last 5

days of the certification period in order

to case-mix adjust the patient for a

subsequent episode certification will

resume with PPS implementation

effective October 1, 2000. If the patient

is under an established certified home

health plan of care as of August 1, 2000

through and including August 31, 2000,

then the HHA may complete the next

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scheduled OASIS follow-up assessment

anytime during the month of September

2000. For patients under an established

home health plan of care on September

1, 2000 through and including

September 30, 2000, then the HHA may

use the most recent start of care or

follow-up assessment on file for the

month of September 2000 to group

patients for purposes of case-mix PPS

implementation on October 1, 2000.

Z. Billing Issues

Comment: Several commenters

requested clarification regarding the

billing instructions governing the new

PPS.

Response: Due to the highly technical

nature of these comments, we will not

address those comments in this final

rule. However, we will release

operational billing instructions to

accompany the publication of this final

rule.

AA. Cost Reporting Under PPS

Comment: Several commenters

recommended that the requirement for

an HHA cost report end with PPS

implementation.

Response: Cost reporting

requirements for HHAs will not end

with PPS. As with all other PPS systems

there is continued demand for this data.

Importantly, the data may be used to

monitor, refine, and improve PPS in the

future.

Comment: Several commenters

requested clarification of the cost

reporting requirements governing the

October 1, 2000 PPS implementation

date. Commenters were concerned with

cost reporting periods that do not

parallel the implementation date of PPS,

October 1, 2000.

Response: All providers will file a full

12-month cost report regardless of their

specific cost reporting year. There will

be a statistical break in the cost report

based on Medicare statistics up through

and including September 30, 2000.

Under PPS, the cost report will capture

all statistical data for both costs and

statistics for all subsequent periods. A

provider’s cost reporting year will not

be affected by the implementation of

PPS. We will provide more detailed

instructions on PPS cost reporting

instructions in subsequent program

instructions and revisions to the

Provider Reimbursement Manual.

Comment: Commenters requested

clarification of the application of the

interim payment system cost limits for

the period of a cost reporting period that

may overlap the date of implementation

of PPS. Commenters wanted

clarification on whether or not the

interim payment system cost limits will

be prorated.

Response: The interim payment

system cost limits (per-visit limit and

per-beneficiary limit) will not be

prorated. Full application of the limits

will apply to the cost reporting year

subject to the interim payment system

limits.

Comment: A commenter suggested a

cost reporting mechanism for the

identification of nontraditional home

health services and their costs.

Response: Currently, there is no cost

reporting mechanism for the separate

identification of non-traditional

Medicare costs. At their own option,

providers may accumulate detailed

statistics within their own accounting

system.

BB. OASIS Data and Grouper Issues

Many of the OASIS comments were

highly technical or not within the

parameters of this final rule. Interested

parties can get assistance with their

queries on an individual basis as well as

through the RHHIs and on HCFA’s

home page. We have provided general

responses to the following OASIS data

comments:

Comment: A few commenters

reported that State OASIS personnel are

stating that payments to HHAs under

PPS will be based upon actual bills

submitted.

Response: This information is

incorrect. We have provided State

OASIS Educational Coordinators (OEC)

with the authority and responsibility to

educate HHA providers about the

implementation of the clinical aspects

of the OASIS data set in their agency,

and with the reporting and transmission

requirements of the data set needed to

go from the agency to the State system.

They are not trained to answer

questions about reimbursement. The

RHHIs have the background and

knowledge to educate HHA providers

on the reimbursement aspect of HHA

PPS. HHAs are free to contact their

RHHI on questions concerning

reimbursement under HHA PPS.

Comment: One commenter requested

that we use the criteria of

hospitalization as an indicator for a PEP

adjustment due to concerns with the

impact on outcome tracking.

Response: As discussed previously in

our response to comments concerning

the PEP adjustment, we have reexamined our approach due to

intervening hospitalizations and

potential discharge concerns. We have

provided consistency to the extent

possible to ensure adequate payment

levels and corresponding outcome

tracking for quality purposes.

Comment: A few commenters

requested clarification of the payment

approach for pre- and post-partum

Medicare disability patients who are not

required to have an OASIS assessment.

Response: While the OASIS data set

was not designed for the assessment of

the clinical needs of the maternity

patient, and the maternity patient is

excluded by regulation from the

collection of the data set, the

reimbursement system will require a

home health resource group (HHRG) to

be submitted on the claim. In the rare

case of a pre-or post-partum Medicare

maternity patient, the HHA will need to

complete the comprehensive

assessments at the specified time points,

which are required for production of the

HHRG. The HHA can place that HHRG

group case-mix number on the claim to

receive payment. The HHA is not

required to transmit the assessments to

the State Agency, but must include

those assessments in the clinical record

at the agency.

We believe the majority of this type of

maternity patient will be held at the

LUPA level. If, in the rare instance the

patient requires more than four visits,

we would suggest the HHA complete an

OASIS in order to ensure adequate

payment levels. We believe this would

be true for the Medicare disabled

population under 18. If the patient was

at the LUPA level, in all likelihood he

or she would be classified into the

lowest HHRG level and ultimately paid

at the LUPA level at the end of the

episode.

Comment: A few commenters

requested clarification on the proper

OASIS schedule that should be used for

a private pay or Medicaid patient who

is in a current OASIS assessment period

that becomes eligible for Medicare home

health benefits during that period.

Response: All Medicare cases require

a new Start of Care OASIS assessment

to group the patient for payment

purposes and assess the patient for care

planning at the time the patient

becomes Medicare eligible.

Comment: Several commenters

requested access to the grouper prior to

the publication of the final rule.

Response: We provided draft grouper

software on the HHA PPS HCFA website

during the comment period of the

proposed rule. Providers could

download the grouper software in a PC

EXCEL format. We plan to also provide

the final grouper on the HCFA HHA PPS

website.

Comment: Some commenters

questioned the affect untimely reporting

of OASIS date or the absence of it would

have on payment.

41168 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

Response: An HHRG cannot be

generated without a completed OASIS.

The RHHI will not accept a billed HHRG

unless the OASIS that supports the

billed case-mix classification is encoded

by the agency, electronically transmitted

and accepted by the State’s OASIS

repository.

Comment: A few commenters were

concerned with potential

implementation costs associated with

the OASIS schedules used to group

patients for case-mix purposes.

Response: In section IV.C. of this rule,

we set forth the payment methodology

for the first year of PPS one-time

adjustment reflecting implementation

costs associated with revised OASIS

schedules needed to classify patients

into appropriate categories for payment.

We have provided clarification of the

proper OASIS assessment schedule used

to group patients for case-mix based on

the patient’s episode status. Further

clarification will be provided in

subsequent program instructions.

Type of episode or adjustment OASIS assessment: M0100 & M0825 response selection

1. Initial, whether first or new 60-day episode resulting from PEP Adjustment.Start of Care:

(M0100) RFA 1 and (M0825) select 0—No or 1—Yes *

2. SCIC with intervening Hospital Stay during current episode ............... Resumption of Care:

(M0100) RFA 3 and (M0825) is 0—No or 1—Yes *

If a patient was transferred to the hospital without agency discharge

during the current episode, the required assessment upon return to

home is the Resumption of Care assessment (RFA 3). The Resumption of Care assessment is required within 48 hours of the patient’s

return from the inpatient facility. The Resumption of Care assessment (RFA 3) also serves to determine the appropriate new casemix assignment for the SCIC adjustment.

3. SCIC with intervening Hospital Stay at the end of an episode ........... Resumption of Care:

(M0100) RFA 3 and (M0825) is 0—No or 1—Yes *

and Follow up (M0100) RFA4 and (M0825) is 0—No or 1—Yes *

If a patient was transferred to the hospital without agency discharge,

the required assessment upon return to home is the Resumption of

Care assessment (RFA 3). The Resumption of Care assessment is

required within 48 hours of the patient’s return from the inpatient facility. The recertification (Follow-up, RFA 4) comprehensive assessment is required in the last five days of the certification period; for

payment purposes, this assessment is used to determine the casemix assignment for the subsequent 60-day period. If the second part

of the SCIC adjustment occurs in the last five days of the certification period, two comprehensive assessments are required. One

assessment will be done for the resumption of care (RFA 3) and

(M0825) select 0—No or 1—Yes; the other will be done for the recertification (Follow-up) assessment (RFA4) and (M0825) select 0—

No or 1—Yes.* The reason two assessments are required is that

therapy need must be predicted and reported on the OASIS record

for each discrete 60 day episode.

4. SCIC without intervening Hospital Stay ............................................... Other Follow-Up Assessment:

(M0100) RFA 5 and (M0825) select 0—No or 1—Yes *

5. Subsequent 60-day episode due to the need for continuous home

health care after an initial 60-day episode.

Recertification (Follow-up):

(M0100) RFA 4 and (M0825) select 0—No or 1—Yes *

* (M0825) = NA is applicable only when response (M0150)—response 1 (traditional Medicare fee-for-service) is not selected.

CC. Medical Review Under PPS

Comment: A number of commenters

expressed concerns pertaining to the

initiation of medical review activities

for home health claims under the

prospective payment system and

suggested there should be a moratorium

on or a delay of medical review. Others

proposed a limit on the amount of and/

or the kind of medical review

performed.

Response: We believe it is important

to implement medical review activities

at the start-up of the new prospective

payment system. As problems with

specific home health claims are

identified, contractors will be able to

educate the home health agencies to

prevent future billing errors. We have

been working hard to develop an

effective medical review strategy that

will guard against program

vulnerabilities unique to the PPS

environment, be fair to home health

providers, and meet the goal of paying

claims correctly.

Comment: Commenters asked that we

clarify the medical review process. One

commenter asked if the RHHIs will

change the case-mix assignment based

on the medical review determination,

and if so, asked what appeals process

will be available to the agencies.

Response: For the most part, medical

reviewers will continue to perform the

same types of reviews that were

conducted prior to implementation of

PPS. For example, they will review to

ensure that the beneficiary meets the

requirements for Medicare home health

coverage, and that services provided

were reasonable and necessary and

appropriately documented. One

additional aspect of the review strategy

will focus on the OASIS information

and whether it is supported by

documentation in the medical record. If

the RHHI determines that a case-mix

assignment is not appropriate, they will

adjust the case-mix group accordingly.

Agencies will continue to have all

appeal rights currently associated with

home health claims.

Comment: A commenter suggested

that we impose time limits on

contractors to complete medical review

activities within a prescribed amount of

time after receiving requested medical

documentation.

Response: We have not prescribed

specific contractor medical review time

frames. We agree that this may be an

issue that warrants further

consideration; however, it is beyond the

scope of this regulation and we will

revisit this issue if warranted.

Comment: Several commenters

expressed concerns about cash flow

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41169

issues if providers are placed on focused

medical review and recommended that

we prohibit sequential billing. Other

commenters asked how medical review

of an episode would affect subsequent

episodes.

Response: We are sensitive to

provider cash flow concerns and desires

to balance legitimate provider concerns

with Medicare’s stewardship

responsibilities. Sequential billing is not

a requirement in the home health PPS,

therefore medical review of one episode

will not automatically delay payment

for subsequent episodes. However, we

may reduce or disapprove requests for

anticipated payments in those situations

in which protecting Medicare program

integrity warrants these actions.

Comment: Several commenters

expressed concerns about

vulnerabilities presented by the

prospective payment system.

Response: We recognize that there are

unique program vulnerabilities related

to the prospective payment

environment. However, we believe we

have identified possible vulnerabilities

and random review will assist us in

assessing vulnerabilities and problems

on an ongoing basis. We are working

with the RHHIs and home health

providers to address them as we

develop the medical review strategy.

Comment: A commenter

recommended that RHHIs review the

patient’s plan of care (POC) and all visit

documentation before determining

whether or not patients qualify for full

episode payments or therapy thresholds.

Response: We agree, and for claims

selected for medical review, RHHIs will

consider all available information from

the agency for the episode billed in

determining payment. That information

may include all visit information such

as nursing and therapy notes, treatment

and flow charts, and vital sign records,

weight charts, and medication records.

In addition, the solicited information

may also include the OASIS, the

patient’s POC, physician orders,

hospital discharge summaries and

transfer forms.

Comment: One commenter asked if

HCFA expects significant changes in the

numbers of denials under PPS.

Response: It is our goal to reduce

payment errors. Because this is a new

payment methodology, it is difficult to

predict whether there will be changes in

the denial rate for home health claims.

We believe that education and early

intervention is key to ensure proper

billing under the new payment

methodology, and can help reduce both

denials and errors by increasing

compliance.

DD. Quality Under PPS

Comment: We received a few

comments requesting clarification of the

quality improvement approach

proposed under PPS.

Response: Efforts are currently

underway to develop systems to

generate outcome based quality

improvement reports based on the

OASIS that can be used to assess the

quality of care at home health agencies,

assist the States in their survey and

certification responsibility, and provide

information to home health agencies to

assist them in ongoing quality

improvement. Part of this effort is the

implementation of the Home Health

Outcome Based Quality Improvement

System pilot project where the Peer

Review Organizations (PROs) will act in

a supportive role to assess and support

quality improvement efforts in home

health agencies. The Home Health

Outcome Based Quality Improvement

(HH OBQI) System is being

implemented as a pilot project in five

States through the PRO program. The

HH OBQI system will explore the

feasibility of providing assistance to

HHAs in their efforts to implement and

manage new programs for quality

improvement. After a competitive

solicitation to all PROs, HCFA selected

the Maryland PRO, the Delmarva

Foundation for Medical Care, Inc., as

the lead or Home Health PRO (HH PRO).

As the HH PRO, Delmarva will oversee

the implementation of the project,

coordinate the efforts of the four pilot

PROs, and also serve as the fifth pilot

PRO. The PROs for Michigan, New

York, Rhode Island, and Virginia have

also been selected as pilot PROs. The

HH PRO will distribute information and

guidance to the pilot PROs based on

OASIS outcome reports, and its own

analysis of OASIS data obtained from

the national OASIS repository. The pilot

PROs will, in turn, provide education

and consultation to home health

agencies to assist them in developing

and managing their outcome based

quality improvement programs. The

pilot PROs will also provide

consultation to State agencies, RHHIs

and HCFA components in interpreting

and using the outcome reports to assess

home health quality.

EE. Medicare Secondary Payor (MSP)

Under PPS

Comment: A few commenters raised

concerns regarding the treatment of

MSP under home health PPS.

Response: The statute governing home

health PPS was silent regarding the

treatment of MSP. The current

requirements governing MSP will

continue under the home health PPS

environment. If warranted, further

technical clarification will be provided

in operational program instructions.

FF. Appeal Rights Under PPS

Comment: Several commenters

requested clarification of provider

appeal rights under home health PPS.

Response: Under the home health

PPS, HHAs will have appeal rights

comparable to the current environment.

They will not be able to appeal the

request for anticipated payment of the

initial percentage payment for the

episode, but they will be able to appeal

a denial or down-coding by the

intermediary where items or services

were found as to be noncovered

custodial care or were not reasonable

and necessary AND where the

intermediary finds that the beneficiary

or provider should have known that

they were excluded from coverage

under the program (42 CFR

§ 405.704(c)).

Comment: Some commenters asked

about beneficiary appeal rights under

home health PPS, specifically demand

billing procedures.

Response: We are currently reviewing

demand billing procedures to determine

whether they must be modified to take

into account differences between HHA

reasonable cost billing and the HHA

PPS.

GG. Suggestions for HCFA

Comment: Several commenters sent

comments on other regulations that

were outside the scope of this rule. In

addition, some commenters requested

changes to the current statutorily

required eligibility requirements, plan

of care certification requirements, other

coverage requirements that were not set

forth in the proposed rule and the

request to publish aspects of the final

regulation on a faster publication track.

Response: These comments cannot be

addressed in this rule, as this rule does

not pertain to current law governing

eligibility or plan of care certification

requirements and therefore, we cannot

amend these requirements as requested

by the commenters. Due to tight

timeframes for publication of this rule,

we were unable to publish any portion

of this rule in a separate rule under a

quicker timeframe.

Comment: Several commenters

recommended that we review all

regulations and manual instructions for

consistency.

Response: We have reviewed and will

continue to review all current

instructions and provide corresponding

manual revisions and operational

41170 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

instructions that reflect the final

policies set forth in this rule.

Comment: Several commenters

suggested the need for formal quarterly

meetings with industry representatives

or other industry groups to develop the

final rule and provide a forum of open

communication.

Response: We will continue to strive

to keep the lines of communication

open with our external environment.

There are several requirements that

govern the rulemaking process that

inhibit consultation with outside

groups. However, we will continue to

ensure that we are available to clarify

concerns and listen to our stakeholders

throughout the process.

IV. Overview of Final Regulation

This final rule sets forth the

methodology for the national PPS

applicable to all Medicare home health

services covered under both Part A and

Part B. This final rule incorporates a

national 60-day episode payment for all

of the reasonable costs of services

furnished to an eligible beneficiary

under a Medicare home health plan of

care. This section describes the

components of the national 60-day

episode payment and the methodology

and data used in computation.

A. Costs and Services Covered by the

Payment

The prospective payment applies to

all home health services set forth in

section 1861(m) of the Act that are

covered and paid on a reasonable cost

basis under the Medicare home health

benefit (except osteoporosis drugs as

defined in 1861(kk) which are paid

outside PPS) as of the date of the

enactment of the BBA, including

medical supplies. DME is a covered

home health service that is not currently

paid on a reasonable cost basis, but is

paid on a fee schedule basis when

covered as a home health service under

the Medicare home health benefit.

Under the HHA PPS, DME covered as a

home health service as part of the

Medicare home health benefit will

continue to be paid under the DME fee

schedule. A separate payment amount

in addition to the prospective payment

amount for home health services will be

made for DME currently covered as a

home health service under the PPS.

Although the covered osteoporosis drug

under the home health benefit is

currently paid on a reasonable cost

basis, section 4603(c)(2)(A) of the BBA

amended section 1833(a)(2)(A) of the

Act to specifically exclude it from the

prospective payment rate. In addition,

unlike DME which is now excluded

from the statutorily required

consolidated billing requirement, the

osteoporosis drug is included in the

consolidated billing requirements.

B. Data Sources Used for the

Development of the Payment

1. Audited Cost Report Data

Audit Sample Methodology: As

discussed in the response to comments

section, we provided an additional time

period for intermediaries serving

providers in the audited sample to

resubmit audited cost reports ending in

FY 1997 if the cost reports had been

appealed and reopened. This provided

us with the opportunity to include

revised data in the calculation of the

final rates if any of the audited cost

reports in the original sample had been

appealed, reopened or revised as of

January 2000. The result was that we

added an additional seven providers

from whom we have audited cost report

data for FY 1997, resulting in a total of

574 cost reports that have been used in

the final rate calculations in this rule.

The ‘‘window of opportunity’’ resulted

in an additional seven audited cost

reports. Although the new total number

of audited cost reports increased to 574,

however, we used only 563 of the 574

providers in the developing of the

impacts. From 1997 to 1998, 11 of the

574 providers either closed or merged

with another provider. As stated above,

we are using CY 1998 utilization data in

the PPS rate calculation. There was not

1998 utilization data to match to the

audited cost report data for the 11

providers that closed or merged.

• Updating to September 30, 2001.

Before computing the average cost per

visit for each discipline that would be

used to calculate the prospective

payment rate, we adjusted the costs

from the audit sample by the latest

available market basket factors to reflect

expected cost increases occurring

between the cost reporting periods

ending in FY 1997 to September 30,

2001. Multiplying nominal dollars for a

given FY end by their respective

inflation adjustment factor will express

those dollars in the dollar level for the

FY ending September 30, 2001.

Therefore, we multiplied the total costs

for each provider by the appropriate

inflation factor shown in the table

below. See section IV.B.2. of this

regulation for a detailed description of

the market basket.

• Nonroutine Medical Supplies Paid

on a Reasonable Cost Basis Under a

Home Health Plan of Care. Before

computing the average cost per episode

for non-routine medical supplies paid

on a reasonable cost basis under a home

health plan of care, we also adjusted the

audited cost report data for nonroutine

medical supplies using the latest market

basket factors to reflect expected cost

increases occurring between the cost

reporting periods ending in FY 1997 to

September 30, 2001.

• Adjusting Costs for Providers

Impacted by the Per-Visit Limits. For

cost reporting periods ending in FY

1997, Medicare recognized reasonable

costs as the lower of the provider’s

actual costs or the per-visit limit applied

in the aggregate for the six disciplines.

Because some providers’ costs were

higher than the per-visit limits applied

in the aggregate for the six disciplines,

it was necessary to adjust their costs in

order to reflect only those costs on

which the provider’s payment was

based. The adjustment factor was

calculated by dividing a provider’s total

visit limit by the total Medicare costs,

but only if the total visit limit was less

than the total Medicare costs. For those

providers who were not impacted by the

visit limit, (that is, those subject to their

actual reasonable costs) no adjustment

was necessary and the adjustment factor

was set equal to one. The adjustment

factor was applied to each provider’s

total costs for each discipline. Summing

each provider’s updated, weighted, and

adjusted total costs by the sum of visits

for each discipline results in the nonstandardized, updated, weighted, and

visit limit adjusted average cost per visit

by discipline.

2. Home Health Agency Market Basket

Index

The data used to develop the HHA

PPS payments were adjusted using the

latest available market basket factors to

reflect expected cost increases occurring

between cost reporting periods

contained in our database and

September 30, 2001. The following

inflation factors were used in

calculating the HHA PPS:

FACTORS FOR INFLATING DATABASE

DOLLARS TO SEPTEMBER 30, 2001

FY end 1996 1997

October 31 ................ 1.15736 ................

November 30 ............ 1.15468 ................

December 31 ............ 1.15203 ................

January 31 ................ ................ 1.14946

February 28 .............. ................ 1.14697

March 31 ................... ................ 1.14451

April 30 ..................... ................ 1.14203

May 31 ...................... ................ 1.13952

June 30 ..................... ................ 1.13693

July 31 ...................... ................ 1.13420

August 31 ................. ................ 1.13132

September 30 ........... ................ 1.12841

For each of fiscal years 2002 and

2003, section 1895(b)(3)(B)(ii) of the Act

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41171

requires the standard prospective

payment amounts to be increased by a

factor equal to the home health market

basket minus 1.1 percentage points. In

addition, for any subsequent fiscal

years, the statute requires that the rates

be increased by the applicable home

health market basket index change.

3. Claims Data

We also conducted analysis on an

episode database created from the 1997

and 1998 National Claims History Files

using 60-day episodes to define episode

lengths. These data were based on use

of home health services under the

current system. We built a CY 1998

episode data base parallel to the

construction of the CY 1997 episode

data base set forth in the proposed rule

at 64 FR 58149.

Table 1 illustrates the comparison of

the distribution of consecutive 60-day

episodes that occurred in calendar years

1997 and 1998.

Total number of consecutive 60-day episodes

Distribution based

on only 60-day

episodes that

occurred in the

CY 1997 period

(percent)

Distribution based

on only 60-day

episodes that

occurred in the

CY 1998 period

(percent)

1 ................................................................................................................................................................... 51 59.5

2 ................................................................................................................................................................... 18 19.3

3 ................................................................................................................................................................... 8 7.7

4 ................................................................................................................................................................... 5 4.1

5 ................................................................................................................................................................... 4 2.5

6 ................................................................................................................................................................... 3 1.7

7 ................................................................................................................................................................... 10 5.2

Table 2 is a comparison of the average

number of visits per episode for each

discipline for CY 1997 and CY 1998 and

Episodes in CY 1997 and CY 1998 with

five or more visits.

Average number of visits by discipline

Average

based on only

60-day

episodes that

fell into the CY

1997 period

Average

based on only

60-day

episodes that

fell into the CY

1997 period

with visit >4

Average based

on only 60-day

episodes that

fell into the CY

1998 period

Average based

on only 60-day

episodes that

fell into the CY

1998 period

with visit >4

Skilled Nursing Services .............................................................................. 12.55 14.69 12.1 14.08

Physical Therapy Services .......................................................................... 2.35 2.74 2.59 3.05

Occupational Therapy Services ................................................................... 0.41 0.48 0.45 0.53

Speech Pathology Services ......................................................................... 0.15 0.18 0.15 0.18

Medical Social Services ............................................................................... 0.31 0.36 0.28 0.32

Home Health Aide Services ........................................................................ 14.59 17.59 11.28 13.4

Total for all Disciplines ................................................................................ 30.36 36.04 26.85 31.56

Table 3 provides analysis of the

distribution of disciplines across a

series of 60-day episodes in CY 1998.

Total number of 60-day episodes

Episode

number

within series

of 60-day

episodes

Percent of

skilled

nursing

services

Percent of

home health

aide

services

Percent of

occupational

therapy

services

Percent of

speech

pathology

services

Percent of

medical

social

services

Percent of

physical

therapy

services

1 ............................................................... 1 50 24 3 1 2 20

2 ............................................................... 1 46 34 3 1 1 15

2 ............................................................... 2 46 37 2 1 1 13

3 ............................................................... 1 46 38 2 1 1 11

3 ............................................................... 2 45 41 2 1 1 10

3 ............................................................... 3 46 42 2 1 1 9

4 ............................................................... 1 45 43 2 1 1 8

4 ............................................................... 2 45 46 1 1 1 7

4 ............................................................... 3 45 46 1 0 1 7

4 ............................................................... 4 46 45 1 0 1 6

5 ............................................................... 1 45 46 1 0 1 6

5 ............................................................... 2 44 48 1 0 1 5

5 ............................................................... 3 44 49 1 0 1 5

5 ............................................................... 4 44 49 1 0 1 5

5 ............................................................... 5 45 47 1 0 1 5

6 ............................................................... 1 44 48 1 0 1 6

41172 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

Total number of 60-day episodes

Episode

number

within series

of 60-day

episodes

Percent of

skilled

nursing

services

Percent of

home health

aide

services

Percent of

occupational

therapy

services

Percent of

speech

pathology

services

Percent of

medical

social

services

Percent of

physical

therapy

services

6 ............................................................... 2 43 50 1 0 1 5

6 ............................................................... 3 43 51 1 0 1 4

6 ............................................................... 4 43 51 1 0 1 4

6 ............................................................... 5 44 50 1 0 1 4

6 ............................................................... 6 45 49 1 0 1 4

7 ............................................................... 1 40 56 1 0 1 3

7 ............................................................... 2 41 55 0 0 1 3

7 ............................................................... 3 41 56 0 0 1 3

7 ............................................................... 4 41 56 0 0 1 2

7 ............................................................... 5 41 55 0 0 1 2

7 ............................................................... 6 42 55 0 0 1 2

7 ............................................................... 7 42 55 0 0 0 2

8 ............................................................... 1 42 53 1 0 1 4

8 ............................................................... 2 42 54 1 0 1 3

8 ............................................................... 3 42 53 0 0 1 3

8 ............................................................... 4 43 54 0 0 1 3

8 ............................................................... 5 43 54 0 0 0 3

8 ............................................................... 6 43 53 0 0 0 3

8 ............................................................... 7 44 53 0 0 0 3

8 ............................................................... 8 44 52 0 0 0 3

National Part B Claims History File—

Medical Supplies. Nonroutine medical

supplies are also a covered home health

service listed in section 1861(m)(5) of

the Act. The law governing PPS requires

medical supplies to be included in the

prospective payment rate and to be

subject to the consolidated billing

requirements. As discussed in the

proposed rule, before PPS

implementation, HHAs were not

required to bundle all home health

services. Specifically, nonroutine

medical supplies that have a duplicate

Part B code could have been furnished

by a supplier rather than the HHA and

paid under Part B prior to PPS. Under

the current IPS, some HHAs may have

chosen to unbundle those non-routine

medical supplies that had a

corresponding Part B payment. In order

to determine the scope of the nonroutine medical supplies that could

have been unbundled under the current

system, we identified 199 HCPCs codes

representing those items that would fall

into the possible ‘‘unbundled

nonroutine medical supply’’ category.

As discussed in the response to

comment section of this rule, based on

several comments we re-examined our

approach to the original list of 199

codes. Our analysis yielded a payment

approach to non-routine medical

supplies included in the PPS rates that

uses 178 Part B codes that could have

possibly been unbundled to Part B

before PPS. We performed the same data

analysis on the CY 1998 claims data and

the revised list of 178 Part B codes to

develop the appropriate payment

adjustment amount for non-routine

medical supplies that could possibly be

unbundled to Part B before PPS that is

added to the non-standardized episode

payment.

We pulled all claims with the

corresponding HCPCs codes from the

Part B national claims history file. In

order to determine whether the HCPCs

codes were related to the beneficiary

receiving home health services under a

home health plan of care, we linked

every Part B claim with one or more of

the 199 HCPCs codes to home health

episodes from our episode database for

both CY 1997 and CY 1998 by

beneficiary and dates of service. If a

beneficiary received home health

services during a 60-day episode and

there was a corresponding Part B claim

with one of the 178 HCPCs codes that

was billed during the same 60-day

episode, we identified the item as

related to the home health stay. We

proposed an additional payment

amount of $6.08 to the 60-day episode

base rate for those nonroutine medical

supplies with corresponding Part B

codes that may have been unbundled

under the interim payment system.

National Part B Claims History File—

Therapies. As discussed above in

section III. of this final rule. Analysis

and Responses to Public Comments, we

conducted a parallel analysis of Part B

therapy claims that could possibly be

related to a home health stay during CY

1997 and CY 1998. Prior to consolidated

billing requirements governing PPS,

HHAs may have unbundled therapy

services to Part B. We believe that this

was a rare occurrence. Under PPS,

HHAs will be responsible for providing

physical therapy, speech language

pathology services and occupational

therapy either directly or under

arrangement. Under subsequent

analysis, based upon comments

received, we believe that there is a need

to recognize these therapy services that

could have been unbundled to Part B

before PPS in the PPS rates. We

conducted claims analysis similar to our

approach to identify those non-routine

medical supplies that could have been

unbundled to Part B. We identified the

three therapy services in both Part B

outpatient and Part B physician/

supplier claims data.

HCFA identified 54 HCPCs codes that

represent those services that could fall

into the possible ‘‘unbundled therapy

related services’’ category under Part B

Physician/Supplier claims for patients

under a home health plan of care before

implementation of PPS. We also

identified under Part B, therapy services

that could have been unbundled and

provided in an hospital outpatient

setting to patients under a home health

plan of care before implementation of

PPS. We identified the 17 revenue

center code ranges for physical,

occupational, and speech therapy

services that could have been billed

under Part B in a hospital outpatient

setting for patients under a home health

plan of care before implementation of

PPS. HCFA pulled all claims from the

Part B Physician/Supplier claims with

the corresponding 54 codes above and

all claims from the Part B hospital

outpatient claims with the

corresponding 17 revenue center code

ranges. As with our analysis of

nonroutine medical supplies that could

have been unbundled to Part B before

implementation of PPS, HCFA matched

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41173

claims for a beneficiary receiving home

health services under a home health

plan of care by linking the Part B claims

to home health episodes from our 1998

episode database, by beneficiary and

dates of service. If a beneficiary received

home health services during a 60-day

episode and there was a corresponding

part B claim with either one of the 54

HCPCs or a revenue center code within

one of the 17 revenue center code ranges

for therapy services, we identified the

Part B service as related to the home

health stay.

As a result of our therapy analysis, we

are recognizing an additional

adjustment to the 60-day nonstandardized episode amount for

therapy services that could have been

unbundled to Part B before

implementation of PPS. The per episode

possible unbundled therapy related

service amounts billed under Part B

included in the PPS rate were calculated

by summing the allowed charges for the

54 HCPCs for physician/supplier and

the costs for the 17 therapy revenue

center code ranges for hospital

outpatient in calendar year 1998 for

beneficiaries under a home health plan

of care. That total was divided by the

total number of episodes in calendar

year 1998 from the episode database.

The methodology for the adjustment is

set forth in section IV.C. of this

regulation.

4. Hospital Wage Index

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

of the Act, require the Secretary to

establish area wage adjustment factors

that reflect the relative level of wages

and wage-related costs applicable to the

furnishing of health services and to

provide appropriate adjustments to the

episode payment amounts under PPS to

account for area wage differences. The

wage adjustment factors may be the

factors used by the Secretary for

purposes of section 1886(d)(3)(E) of the

Act. The statute allows the Secretary to

use the area where the services are

furnished or such area as the Secretary

may specify for the wage index

adjustment. To be consistent with the

wage index adjustment under the

current interim payment system, we

proposed and will retain applying the

appropriate wage index value to the

labor portion of the PPS rates based on

the geographic area in which the

beneficiary received home health

services.

In addition, section 1895(b)(3)(A)(i) of

the Act requires the Secretary to

standardize the cost data used in

developing the PPS payment amount for

wage levels among different HHAs in a

budget-neutral manner. The wage index

adjustment to the PPS rates must be

made in a manner that does not result

in aggregate payments that are greater or

less than those that would have

otherwise been made if the PPS rates

were not adjusted by the wage index.

Each HHA’s labor market area is

determined based on definitions of

Metropolitan Statistical Areas (MSAs)

issued by the Office of Management and

Budget (OMB). In establishing the final

HHA PPS rates, we used the most recent

pre-floor and pre-reclassified hospital

wage index without regard to whether

these hospitals have been classified to a

new geographic area by the Medicare

Geographic Reclassification Board. As

stated in the response to comments, we

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

results in an appropriate adjustment to

the labor portion of costs as required by

law.

TABLE 4A.—FY 2000 WAGE INDEX

FOR RURAL AREAS—PRE-FLOOR

AND PRE-RECLASSIFIED

Nonurban area Wage

Index

Alabama .......................................... 0.7391

Alaska ............................................. 1.2058

Arizona ............................................ 0.8545

Arkansas ......................................... 0.7236

California ......................................... 0.9952

Colorado ......................................... 0.8814

Connecticut ..................................... 1.2414

Delaware ......................................... 0.9167

Florida ............................................. 0.8987

Georgia ........................................... 0.8095

Guam .............................................. 0.7268

Hawaii ............................................. 1.0728

Idaho ............................................... 0.8652

Illinois .............................................. 0.8048

Indiana ............................................ 0.8397

Iowa ................................................ 0.7927

Kansas ............................................ 0.7461

Kentucky ......................................... 0.8043

Louisiana ........................................ 0.7382

Maine .............................................. 0.8640

Maryland ......................................... 0.8632

Massachusetts ................................ 1.1370

Michigan ......................................... 0.8815

Minnesota ....................................... 0.8670

Mississippi ...................................... 0.7307

Missouri .......................................... 0.7724

Montana .......................................... 0.8396

Nebraska ........................................ 0.8008

Nevada ........................................... 0.9098

New Hampshire .............................. 0.9906

New Jersey 1 ................................... ..............

New Mexico .................................... 0.8379

New York ........................................ 0.8637

North Carolina ................................ 0.8290

North Dakota .................................. 0.7648

Ohio ................................................ 0.8650

Oklahoma ....................................... 0.7256

Oregon ............................................ 0.9868

Pennsylvania .................................. 0.8525

Puerto Rico ..................................... 0.4249

Rhode Island 1 ................................ ..............

South Carolina ................................ 0.8264

TABLE 4A.—FY 2000 WAGE INDEX

FOR RURAL AREAS—PRE-FLOOR

AND PRE-RECLASSIFIED—Continued

Nonurban area Wage

Index

South Dakota .................................. 0.7577

Tennessee ...................................... 0.7651

Texas .............................................. 0.7471

Utah ................................................ 0.8907

Vermont .......................................... 0.9408

Virginia ............................................ 0.7904

Virgin Islands .................................. 0.6389

Washington ..................................... 1.0447

West Virginia .................................. 0.8069

Wisconsin ....................................... 0.8760

Wyoming ......................................... 0.8860

1All counties within the State are classified

as urban.

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED

MSA Urban area

(constituent counties)

Wage

index

0040 .... Abilene, TX ................... 0.8180

Taylor, TX

0060 .... Aguadilla, PR ................ 0.3814

Aguada, PR

Aguadilla, PR

Moca, PR

0080 .... Akron, OH ..................... 1.0164

Portage, OH

Summit, OH

0120 .... Albany, GA .................... 1.0373

Dougherty, GA

Lee, GA

0160 .... Albany-SchenectadyTroy, NY.0.8755

Albany, NY

Montgomery, NY

Rensselaer, NY

Saratoga, NY

Schenectady, NY

Schoharie, NY

0200 .... Albuquerque, NM .......... 0.8500

Bernalillo, NM

Sandoval, NM

Valencia, NM

0220 .... Alexandria, LA .............. 0.7870

Rapides, LA

0240 .... Allentown-BethlehemEaston, PA.1.0228

Carbon, PA

Lehigh, PA

Northampton, PA

0280 .... Altoona, PA ................... 0.9343

Blair, PA

0320 .... Amarillo, TX .................. 0.8381

Potter, TX

Randall, TX

0380 .... Anchorage, AK .............. 1.2860

Anchorage, AK

0440 .... Ann Arbor, MI ............... 1.1484

Lenawee, MI

Livingston, MI

Washtenaw, MI

0450 .... Anniston, AL ................. 0.8463

Calhoun, AL

0460 .... Appleton-OshkoshNeenah, WI.0.8913

41174 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Calumet, WI

Outagamie, WI

Winnebago, WI

0470 .... Arecibo, PR ................... 0.4815

Arecibo, PR

Camuy, PR

Hatillo, PR

0480 .... Asheville, NC ................ 0.8885

Buncombe, NC

Madison, NC

0500 .... Athens, GA ................... 0.9705

Clarke, GA

Madison, GA

Oconee, GA

0520 .... Atlanta, GA ................... 1.0051

Barrow, GA

Bartow, GA

Carroll, GA

Cherokee, GA

Clayton, GA

Cobb, GA

Coweta, GA

DeKalb, GA

Douglas, GA

Fayette, GA

Forsyth, GA

Fulton, GA

Gwinnett, GA

Henry, GA

Newton, GA

Paulding, GA

Pickens, GA

Rockdale, GA

Spalding, GA

Walton, GA

0560 .... Atlantic-Cape May, NJ .. 1.1311

Atlantic, NJ

Cape May, NJ

0580 .... Auburn-Opelka, AL ....... 0.9619

Lee, AL

0600 .... Augusta-Aiken, GA–SC 0.9014

Columbia, GA

McDuffie, GA

Richmond, GA

Aiken, SC

Edgefield, SC

0640 .... Austin-San Marcos, TX 0.9082

Bastrop, TX

Caldwell, TX

Hays, TX

Travis, TX

Williamson, TX

0680 .... Bakersfield, CA ............. 0.9531

Kern, CA

0720 .... Baltimore, MD ............... 0.9892

Anne Arundel, MD

Baltimore, MD

Baltimore City, MD

Carroll, MD

Harford, MD

Howard, MD

Queen Anne’s, MD

0733 .... Bangor, ME ................... 0.9610

Penobscot, ME

0743 .... Barnstable-Yarmouth,

MA.

1.3303

Barnstable, MA

0760 .... Baton Rouge, LA .......... 0.8708

Ascension, LA

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

East Baton Rouge, LA

Livingston, LA

West Baton Rouge, LA

0840 .... Beaumont-Port Arthur,

TX.

0.8624

Hardin, TX

Jefferson, TX

Orange, TX

0860 .... Bellingham, WA ............ 1.1395

Whatcom, WA

0870 .... Benton Harbor, MI ........ 0.8458

Berrien, MI

0875 .... Bergen-Passaic, NJ ...... 1.2029

Bergen, NJ

Passaic, NJ

0880 .... Billings, MT ................... 1.0039

Yellowstone, MT

0920 .... Biloxi-GulfportPascagoula, MS.0.7868

Hancock, MS

Harrison, MS

Jackson, MS

0960 .... Binghamton, NY ............ 0.8751

Broome, NY

Tioga, NY

1000 .... Birmingham, AL ............ 0.8995

Blount, AL

Jefferson, AL

St. Clair, AL

Shelby, AL

1010 .... Bismarck, ND ................ 0.7759

Burleigh, ND

Morton, ND

1020 .... Bloomington, IN ............ 0.8593

Monroe, IN

1040 .... Bloomington-Normal, IL 0.8994

McLean, IL

1080 .... Boise City, ID ................ 0.9060

Ada, ID

Canyon, ID

1123 .... Boston-Worcester-Lawrence-Lowell-Brockton, MA–NH.1.1359

Bristol, MA

Essex, MA

Middlesex, MA

Norfolk, MA

Plymouth, MA

Suffolk, MA

Worcester, MA

Hillsborough, NH

Merrimack, NH

Rockingham, NH

Strafford, NH

1125 .... Boulder-Longmont, CO 0.9945

Boulder, CO

1145 .... Brazoria, TX .................. 0.8517

Brazoria, TX

1150 .... Bremerton, WA ............. 1.1012

Kitsap, WA

1240 .... Brownsville-HarlingenSan Benito, TX.0.9213

Cameron, TX

1260 .... Bryan-College Station,

TX.

0.8510

Brazos, TX

1280 .... Buffalo-Niagara Falls,

NY.

0.9605

Erie, NY

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Niagara, NY

1303 .... Burlington, VT ............... 1.0559

Chittenden, VT

Franklin, VT

Grand Isle, VT

1310 .... Caguas, PR .................. 0.4561

Caguas, PR

Cayey, PR

Cidra, PR

Gurabo, PR

San Lorenzo, PR

1320 .... Canton-Massillon, OH ... 0.8772

Carroll, OH

Stark, OH

1350 .... Casper, WY .................. 0.9200

Natrona, WY

1360 .... Cedar Rapids, IA .......... 0.9019

Linn, IA

1400 .... Champaign-Urbana, IL .. 0.9164

Champaign, IL

1440 .... Charleston-North

Charleston, SC.

0.8989

Berkeley, SC

Charleston, SC

Dorchester, SC

1480 .... Charleston, WV ............. 0.9096

Kanawha, WV

Putnam, WV

1520 .... Charlotte-Gastonia-Rock

Hill, NC–SC.

0.9434

Cabarrus, NC

Gaston, NC

Lincoln, NC

Mecklenburg, NC

Rowan, NC

Stanly, NC

Union, NC

York, SC

1540 .... Charlottesville, VA ........ 1.0575

Albemarle, VA

Charlottesville City, VA

Fluvanna, VA

Greene, VA

1560 .... Chattanooga, TN–GA ... 0.9732

Catoosa, GA

Dade, GA

Walker, GA

Hamilton, TN

Marion, TN

1580 .... Cheyenne, WY .............. 0.8176

Laramie, WY

1600 .... Chicago, IL .................... 1.0874

Cook, IL

DeKalb, IL

DuPage, IL

Grundy, IL

Kane, IL

Kendall, IL

Lake, IL

McHenry, IL

Will, IL

1620 .... Chico-Paradise, CA ...... 1.0391

Butte, CA

1640 .... Cincinnati, OH–KY–IN .. 0.9419

Dearborn, IN

Ohio, IN

Boone, KY

Campbell, KY

Gallatin, KY

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41175

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Grant, KY

Kenton, KY

Pendleton, KY

Brown, OH

Clermont, OH

Hamilton, OH

Warren, OH

1660 .... Clarksville-Hopkinsville,

TN–KY.

0.8090

Christian, KY

Montgomery, TN

1680 .... Cleveland-Lorain-Elyria,

OH.

0.9689

Ashtabula, OH

Cuyahoga, OH

Geauga, OH

Lake, OH

Lorain, OH

Medina, OH

1720 .... Colorado Springs, CO .. 0.9218

El Paso, CO

1740 .... Columbia, MO ............... 0.8905

Boone, MO

1760 .... Columbia, SC ................ 0.9358

Lexington, SC

Richland, SC

1800 .... Columbus, GA–AL ........ 0.8511

Russell, AL

Chattahoochee, GA

Harris, GA

Muscogee, GA

1840 .... Columbus, OH .............. 0.9908

Delaware, OH

Fairfield, OH

Franklin, OH

Licking, OH

Madison, OH

Pickaway, OH

1880 .... Corpus Christi, TX ........ 0.8702

Nueces, TX

San Patricio, TX

1890 .... Corvallis, OR ................. 1.1088

Benton, OR

1900 .... Cumberland, MD–WV ... 0.8802

Allegany, MD

Mineral, WV

1920 .... Dallas, TX ..................... 0.9607

Collin, TX

Dallas, TX

Denton, TX

Ellis, TX

Henderson, TX

Hunt, TX

Kaufman, TX

Rockwall, TX

1950 .... Danville, VA .................. 0.9062

Danville City, VA

Pittsylvania, VA

1960 .... Davenport-Moline-Rock

Island, IA–IL.

0.8707

Scott, IA

Henry, IL

Rock Island, IL

2000 .... Dayton-Springfield, OH 0.9461

Clark, OH

Greene, OH

Miami, OH

Montgomery, OH

2020 .... Daytona Beach, FL ....... 0.8988

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Flagler, FL

Volusia, FL

2030 .... Decatur, AL ................... 0.8680

Lawrence, AL

Morgan, AL

2040 .... Decatur, IL .................... 0.8322

Macon, IL

2080 .... Denver, CO ................... 1.0190

Adams, CO

Arapahoe, CO

Denver, CO

Douglas, CO

Jefferson, CO

2120 .... Des Moines, IA ............. 0.8755

Dallas, IA

Polk, IA

Warren, IA

2160 .... Detroit, MI ..................... 1.0422

Lapeer, MI

Macomb, MI

Monroe, MI

Oakland, MI

St. Clair, MI

Wayne, MI

2180 .... Dothan, AL .................... 0.7799

Dale, AL

Houston, AL

2190 .... Dover, DE ..................... 0.9336

Kent, DE

2200 .... Dubuque, IA .................. 0.8521

Dubuque, IA

2240 .... Duluth-Superior, MN–WI 1.0166

St. Louis, MN

Douglas, WI

2281 .... Dutchess County, NY ... 1.0553

Dutchess, NY

2290 .... Eau Claire, WI .............. 0.8958

Chippewa, WI

Eau Claire, WI

2320 .... El Paso, TX ................... 0.8948

El Paso, TX

2330 .... Elkhart-Goshen, IN ....... 0.9380

Elkhart, IN

2335 .... Elmira, NY ..................... 0.8534

Chemung, NY

2340 .... Enid, OK ....................... 0.7954

Garfield, OK

2360 .... Erie, PA ......................... 0.9024

Erie, PA

2400 .... Eugene-Springfield, OR 1.0604

Lane, OR

2440 .... Evansville-Henderson,

IN–KY.

0.8304

Posey, IN

Vanderburgh, IN

Warrick, IN

Henderson, KY

2520 .... Fargo-Moorhead, ND–

MN.

0.8621

Clay, MN

Cass, ND

2560 .... Fayetteville, NC ............ 0.8495

Cumberland, NC

2580 .... Fayetteville-SpringdaleRogers, AR.0.7774

Benton, AR

Washington, AR

2620 .... Flagstaff, AZ–UT ........... 1.0349

Coconino, AZ

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Kane, UT

2640 .... Flint, MI ......................... 1.1021

Genesee, MI

2650 .... Florence, AL ................. 0.7928

Colbert, AL

Lauderdale, AL

2655 .... Florence, SC ................. 0.8619

Florence, SC

2670 .... Fort Collins-Loveland,

CO.

1.0303

Larimer, CO

2680 .... Ft. Lauderdale, FL ........ 1.0173

Broward, FL

2700 .... Fort Myers-Cape Coral,

FL.

0.8951

Lee, FL

2710 .... Fort Pierce-Port St.

Lucie, FL.

0.9999

Martin, FL

St. Lucie, FL

2720 .... Fort Smith, AR–OK ....... 0.7844

Crawford, AR

Sebastian, AR

Sequoyah, OK

2750 .... Fort Walton Beach, FL .. 0.8714

Okaloosa, FL

2760 .... Fort Wayne, IN ............. 0.9097

Adams, IN

Allen, IN

DeKalb, IN

Huntington, IN

Wells, IN

Whitley, IN

2800 .... Forth Worth-Arlington,

TX.

0.9836

Hood, TX

Johnson, TX

Parker, TX

Tarrant, TX

2840 .... Fresno, CA .................... 1.0263

Fresno, CA

Madera, CA

2880 .... Gadsden, AL ................. 0.8689

Etowah, AL

2900 .... Gainesville, FL .............. 1.0103

Alachua, FL

2920 .... Galveston-Texas City,

TX.

0.9733

Galveston, TX

2960 .... Gary, IN ........................ 0.9391

Lake, IN

Porter, IN

2975 .... Glens Falls, NY ............. 0.8607

Warren, NY

Washington, NY

2980 .... Goldsboro, NC .............. 0.8334

Wayne, NC

2985 .... Grand Forks, ND–MN ... 0.9098

Polk, MN

Grand Forks, ND

2995 .... Grand Junction, CO ...... 0.9189

Mesa, CO

3000 .... Grand Rapids-Muskegon-Holland, MI.1.0136

Allegan, MI

Kent, MI

Muskegon, MI

Ottawa, MI

3040 .... Great Falls, MT ............. 1.0460

41176 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Cascade, MT

3060 .... Greeley, CO .................. 0.9723

Weld, CO

3080 .... Green Bay, WI .............. 0.9133

Brown, WI

3120 .... Greensboro-WinstonSalem-High Point, NC.0.9038

Alamance, NC

Davidson, NC

Davie, NC

Forsyth, NC

Guilford, NC

Randolph, NC

Stokes, NC

Yadkin, NC

3150 .... Greenville, NC .............. 0.9501

Pitt, NC

3160 .... Greenville-SpartanburgAnderson, SC.0.9189

Anderson, SC

Cherokee, SC

Greenville, SC

Pickens, SC

Spartanburg, SC

3180 .... Hagerstown, MD ........... 0.8843

Washington, MD

3200 .... Hamilton-Middletown,

OH.

0.8947

Butler, OH

3240 .... Harrisburg-LebanonCarlisle, PA.0.9918

Cumberland, PA

Dauphin, PA

Lebanon, PA

Perry, PA

3283 .... Hartford, CT 1 2 .............. 1.1716

Hartford, CT

Litchfield, CT

Middlesex, CT

Tolland, CT

3285 .... Hattiesburg, MS ............ 0.7634

Forrest, MS

Lamar, MS

3290 .... Hickory-MorgantonLenoir, NC.0.9113

Alexander, NC

Burke, NC

Caldwell, NC

Catawba, NC

3320 .... Honolulu, HI .................. 1.1477

Honolulu, HI

3350 .... Houma, LA .................... 0.7837

Lafourche, LA

Terrebonne, LA

3360 .... Houston, TX .................. 0.9388

Chambers, TX

Fort Bend, TX

Harris, TX

Liberty, TX

Montgomery, TX

Waller, TX

3400 .... Huntington-Ashland,

WV–KY–OH.

0.9758

Boyd, KY

Carter, KY

Greenup, KY

Lawrence, OH

Cabell, WV

Wayne, WV

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

3440 .... Huntsville, AL ................ 0.8823

Limestone, AL

Madison, AL

3480 .... Indianapolis, IN ............. 0.9793

Boone, IN

Hamilton, IN

Hancock, IN

Hendricks, IN

Johnson, IN

Madison, IN

Marion, IN

Morgan, IN

Shelby, IN

3500 .... Iowa City, IA ................. 0.9608

Johnson, IA

3520 .... Jackson, MI ................... 0.8841

Jackson, MI

3560 .... Jackson, MS ................. 0.8387

Hinds, MS

Madison, MS

Rankin, MS

3580 .... Jackson, TN .................. 0.8601

Madison, TN

Chester, TN

3600 .... Jacksonville, FL ............ 0.8958

Clay, FL

Duval, FL

Nassau, FL

St. Johns, FL

3605 .... Jacksonville, NC ........... 0.7853

Onslow, NC

3610 .... Jamestown, NY ............. 0.7858

Chautauqua, NY

3620 .... Janesville-Beloit, WI ...... 0.9657

Rock, WI

3640 .... Jersey City, NJ .............. 1.1676

Hudson, NJ

3660 .... Johnson City-KingsportBristol, TN–VA.0.8854

Carter, TN

Hawkins, TN

Sullivan, TN

Unicoi, TN

Washington, TN

Bristol City, VA

Scott, VA

Washington, VA

3680 .... Johnstown, PA .............. 0.8641

Cambria, PA

Somerset, PA

3700 .... Jonesboro, AR .............. 0.7232

Craighead, AR

3710 .... Joplin, MO ..................... 0.7679

Jasper, MO

Newton, MO

3720 .... Kalamazoo-Battlecreek,

MI.

0.9982

Calhoun, MI

Kalamazoo, MI

Van Buren, MI

3740 .... Kankakee, IL ................. 0.8599

Kankakee, IL

3760 .... Kansas City, KS–MO .... 0.9322

Johnson, KS

Leavenworth, KS

Miami, KS

Wyandotte, KS

Cass, MO

Clay, MO

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Clinton, MO

Jackson, MO

Lafayette, MO

Platte, MO

Ray, MO

3800 .... Kenosha, WI ................. 0.9034

Kenosha, WI

3810 .... Killeen-Temple, TX ....... 0.9933

Bell, TX

Coryell, TX

3840 .... Knoxville, TN ................. 0.9200

Anderson, TN

Blount, TN

Knox, TN

Loudon, TN

Sevier, TN

Union, TN

3850 .... Kokomo, IN ................... 0.8919

Howard, IN

Tipton, IN

3870 .... La Crosse, WI–MN ....... 0.8934

Houston, MN

La Crosse, WI

3880 .... Lafayette, LA ................. 0.8340

Acadia, LA

Lafayette, LA

St. Landry, LA

St. Martin, LA

3920 .... Lafayette, IN ................. 0.8810

Clinton, IN

Tippecanoe, IN

3960 .... Lake Charles, LA .......... 0.7967

Calcasieu, LA

3980 .... Lakeland-Winter Haven,

FL.

0.8816

Polk, FL

4000 .... Lancaster, PA ............... 0.9256

Lancaster, PA

4040 .... Lansing-East Lansing,

MI.

0.9978

Clinton, MI

Eaton, MI

Ingham, MI

4080 .... Laredo, TX .................... 0.8323

Webb, TX

4100 .... Las Cruces, NM ............ 0.8591

Dona Ana, NM

4120 .... Las Vegas, NV–AZ ....... 1.1259

Mohave, AZ

Clark, NV

Nye, NV

4150 .... Lawrence, KS ............... 0.8900

Douglas, KS

4200 .... Lawton, OK ................... 09533

Comanche, OK

4243 Lewiston-Auburn, ME ... 0.8900

Androscoggin, ME

4280 .... Lexington, KY ............... 0.8532

Bourbon, KY

Clark, KY

Fayette, KY

Jessamine, KY

Madison, KY

Scott, KY

Woodford, KY

4320 .... Lima, OH ....................... 0.8906

Allen, OH

Auglaize, OH

4360 .... Lincoln, NE ................... 0.9671

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41177

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Lancaster, NE

4400 .... Little Rock-North Little

Rock, AR.

0.8615

Faulkner, AR

Lonoke, AR

Pulaski, AR

Saline, AR

4420 .... Longview-Marshall, TX 0.8739

Gregg, TX

Harrison, TX

Upshur, TX

4480 .... Los Angeles-Long

Beach, CA.

1.2052

Los Angeles, CA

4520 .... Louisville, KY–IN ........... 0.9382

Clark, IN

Floyd, IN

Harrison, IN

Scott, IN

Bullitt, KY

Jefferson, KY

Oldham, KY

4600 .... Lubbock, TX .................. 0.8412

Lubbock, TX

4640 .... Lynchburg, VA .............. 0.8815

Amherst, VA

Bedford, VA

Bedford City, VA

Campbell, VA

Lynchburg City, VA

4680 .... Macon, GA .................... 0.8531

Bibb, GA

Houston, GA

Jones, GA

Peach, GA

Twiggs, GA

4720 .... Madison, WI .................. 0.9730

Dane, WI

4800 .... Mansfield, OH ............... 0.8476

Crawford, OH

Richland, OH

4840 .... Mayaguez, PR .............. 0.4675

Anasco, PR

Cabo Rojo, PR

Hormigueros, PR

Mayaguez, PR

Sabana Grande, PR

San German, PR

4880 .... McAllen-Edinburg-Mission, TX.0.8121

Hidalgo, TX

4890 .... Medford-Ashland, OR ... 1.0493

Jackson, OR

4900 .... Melbourne-TitusvillePalm Bay, FL.0.9297

Brevard, FL

4920 .... Memphis, TN–AR–MS .. 0.8245

Crittenden, AR

DeSoto, MS

Fayette, TN

Shelby, TN

Tipton, TN

4940 .... Merced, CA ................... 1.0278

Merced, CA

5000 .... Miami, FL ...................... 1.0234

Dade, FL

5015 .... Middlesex-SomersetHunterdon, NJ.1.1123

Hunterdon, NJ

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Middlesex, NJ

Somerset, NJ

5080 .... Milwaukee-Waukesha,

WI.

0.9846

Milwaukee, WI

Ozaukee, WI

Washington, WI

Waukesha, WI

5120 .... Minneapolis-St. Paul,

MN–WI.

1.0930

Anoka, MN

Carver, MN

Chisago, MN

Dakota, MN

Hennepin, MN

Isanti, MN

Ramsey, MN

Scott, MN

Sherburne, MN

Washington, MN

Wright, MN

Pierce, WI

St. Croix, WI

5140 .... Missoula, MT ................ 0.9086

Missoula, MT

5160 .... Mobile, AL ..................... 0.8268

Baldwin, AL

Mobile, AL

5170 .... Modesto, CA ................. 1.0112

Stanislaus, CA

5190 .... Monmouth-Ocean, NJ ... 1.1259

Monmouth, NJ

Ocean, NJ

5200 .... Monroe, LA ................... 0.8222

Ouachita, LA

5240 .... Montgomery, AL ........... 0.7704

Autauga, AL

Elmore, AL

Montgomery, AL

5280 .... Muncie, IN ..................... 1.0835

Delaware, IN

5330 .... Myrtle Beach, SC .......... 0.8530

Horry, SC

5345 .... Naples, FL .................... 0.9840

Collier, FL

5360 .... Nashville, TN ................ 0.9450

Cheatham, TN

Davidson, TN

Dickson, TN

Robertson, TN

Rutherford, TN

Sumner, TN

Williamson, TN

Wilson, TN

5380 .... Nassau-Suffolk, NY ...... 1.4076

Nassau, NY

Suffolk, NY

5483 .... New Haven-BridgeportStamford-WaterburyDanbury, CT.1.2357

Fairfield, CT

New Haven, CT

5523 .... New London-Norwich,

CT.

1.2429

New London, CT

5560 .... New Orleans, LA ........... 0.9090

Jefferson, LA

Orleans, LA

Plaquemines, LA

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

St. Bernard, LA

St. Charles, LA

St. James, LA

St. John The Baptist, LA

St. Tammany, LA

5600 .... New York, NY ............... 1.4519

Bronx, NY

Kings, NY

New York, NY

Putnam, NY

Queens, NY

Richmond, NY

Rockland, NY

Westchester, NY

5640 .... Newark, NJ ................... 1.1647

Essex, NJ

Morris, NJ

Sussex, NJ

Union, NJ

Warren, NJ

5660 .... Newburgh, NY–PA ........ 1.0910

Orange, NY

Pike, PA

5720 .... Norfolk-Virginia BeachNewport News, VA–

NC.

0.8441

Currituck, NC

Chesapeake City, VA

Gloucester, VA

Hampton City, VA

Isle of Wight, VA

James City, VA

Mathews, VA

Newport News City, VA

Norfolk City, VA

Poquoson City, VA

Portsmouth City, VA

Suffolk City, VA

Virginia Beach City, VA

Williamsburg City, VA

York, VA

5775 .... Oakland, CA ................. 1.5059

Alameda, CA

Contra Costa, CA

5790 .... Ocala, FL ...................... 0.9616

Marion, FL

5800 .... Odessa-Midland, TX ..... 0.8874

Ector, TX

Midland, TX

5880 .... Oklahoma City, OK ....... 0.8588

Canadian, OK

Cleveland, OK

Logan, OK

McClain, OK

Oklahoma, OK

Pottawatomie, OK

5910 .... Olympia, WA ................. 1.0933

Thurston, WA

5920 .... Omaha, NE–IA .............. 1.0456

Pottawattamie, IA

Cass, NE

Douglas, NE

Sarpy, NE

Washington, NE

5945 .... Orange County, CA ...... 1.1591

Orange, CA

5960 .... Orlando, FL ................... 0.9796

Lake, FL

Orange, FL

41178 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Osceola, FL

Seminole, FL

5990 .... Owensboro, KY ............. 0.8105

Daviess, KY

6015 .... Panama City, FL ........... 0.9170

Bay, FL

6020 .... Parkersburg-Marietta,

WV–OH.

0.8415

Washington, OH

Wood, WV

6080 .... Pensacola, FL ............... 0.8443

Escambia, FL

Santa Rosa, FL

6120 .... Peoria-Pekin, IL ............ 0.8350

Peoria, IL

Tazewell, IL

Woodford, IL

6160 .... Philadelphia, PA–NJ ..... 1.1161

Burlington, NJ

Camden, NJ

Gloucester, NJ

Salem, NJ

Bucks, PA

Chester, PA

Delaware, PA

Montgomery, PA

Philadelphia, PA

6200 .... Phoenix-Mesa, AZ ........ 0.9465

Maricopa, AZ

Pinal, AZ

6240 .... Pine Bluff, AR ............... 0.7698

Jefferson, AR

6280 .... Pittsburgh, PA ............... 0.9635

Allegheny, PA

Beaver, PA

Butler, PA

Fayette, PA

Washington, PA

Westmoreland, PA

6323 .... Pittsfield, MA ................. 1.0256

Berkshire, MA

6340 .... Pocatello, ID ................. 0.8974

Bannock, ID

6360 .... Ponce, PR ..................... 0.4971

Guayanilla, PR

Juana Diaz, PR

Penuelas, PR

Ponce, PR

Villalba, PR

Yauco, PR

6403 .... Portland, ME ................. 0.9476

Cumberland, ME

Sagadahoc, ME

York, ME

6440 .... Portland-Vancouver,

OR–WA.

1.0976

Clackamas, OR

Columbia, OR

Multnomah, OR

Washington, OR

Yamhill, OR

Clark, WA

6483 .... Providence-WarwickPawtucket, RI.1.0691

Bristol, RI

Kent, RI

Newport, RI

Providence, RI

Washington, RI

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

6520 .... Provo-Orem, UT ........... 0.9819

Utah, UT

6560 .... Pueblo, CO ................... 0.8854

Pueblo, CO

6580 .... Punta Gorda, FL ........... 0.9509

Charlotte, FL

6600 .... Racine, WI .................... 0.9217

Racine, WI

6640 .... Raleigh-Durham-Chapel

Hill, NC.

0.9545

Chatham, NC

Durham, NC

Franklin, NC

Johnston, NC

Orange, NC

Wake, NC

6660 .... Rapid City, SD .............. 0.8364

Pennington, SD

6680 .... Reading, PA .................. 0.9537

Berks, PA

6690 .... Redding, CA ................. 1.1265

Shasta, CA

6720 .... Reno, NV ...................... 1.0656

Washoe, NV

6740 .... Richland-KennewickPasco, WA.1.1225

Benton, WA

Franklin, WA

6760 .... Richmond-Petersburg,

VA.

0.9546

Charles City County, VA

Chesterfield, VA

Colonial Heights City,

VA

Dinwiddie, VA

Goochland, VA

Hanover, VA

Henrico, VA

Hopewell City, VA

New Kent, VA

Petersburg City, VA

Powhatan, VA

Prince George, VA

Richmond City, VA

6780 .... Riverside-San

Bernardino, CA.

1.1211

Riverside, CA

San Bernardino, CA

6800 .... Roanoke, VA ................. 0.8139

Botetourt, VA

Roanoke, VA

Roanoke City, VA

Salem City, VA

6820 .... Rochester, MN .............. 1.1430

Olmsted, MN

6840 .... Rochester, NY .............. 0.9185

Genesee, NY

Livingston, NY

Monroe, NY

Ontario, NY

Orleans, NY

Wayne, NY

6880 .... Rockford, IL .................. 0.8784

Boone, IL

Ogle, IL

Winnebago, IL

6895 .... Rocky Mount, NC .......... 0.8735

Edgecombe, NC

Nash, NC

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

6920 .... Sacramento, CA ........... 1.2285

El Dorado, CA

Placer, CA

Sacramento, CA

6960 .... Saginaw-Bay City-Midland, MI.0.9287

Bay, MI

Midland, MI

Saginaw, MI

6980 .... St. Cloud, MN ............... 0.9422

Benton, MN

Stearns, MN

7000 .... St. Joseph, MO ............. 0.8944

Andrew, MO

Buchanan, MO

7040 .... St. Louis, MO–IL ........... 0.9053

Clinton, IL

Jersey, IL

Madison, IL

Monroe, IL

St. Clair, IL

Franklin, MO

Jefferson, MO

Lincoln, MO

St. Charles, MO

St. Louis, MO

St. Louis City, MO

Warren, MO

7080 .... Salem, OR .................... 0.9950

Marion, OR

Polk, OR

7120 .... Salinas, CA ................... 1.4711

Monterey, CA

7160 .... Salt Lake City-Ogden,

UT.

0.8855

Davis, UT

Salt Lake, UT

Weber, UT

7200 .... San Angelo, TX ............ 0.7846

Tom Green, TX

7240 .... San Antonio, TX ........... 0.8318

Bexar, TX

Comal, TX

Guadalupe, TX

Wilson, TX

7320 .... San Diego, CA .............. 1.1931

San Diego, CA

7360 .... San Francisco, CA ........ 1.4002

Marin, CA

San Francisco, CA

San Mateo, CA

7400 .... San Jose, CA ................ 1.3610

Santa Clara, CA

7440 .... San Juan-Bayamon, PR 0.4658

Aguas Buenas, PR

Barceloneta, PR

Bayamon, PR

Canovanas, PR

Carolina, PR

Catano, PR

Ceiba, PR

Comerio, PR

Corozal, PR

Dorado, PR

Fajardo, PR

Florida, PR

Guaynabo, PR

Humacao, PR

Juncos, PR

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41179

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Los Piedras, PR

Loiza, PR

Luguillo, PR

Manati, PR

Morovis, PR

Naguabo, PR

Naranjito, PR

Rio Grande, PR

San Juan, PR

Toa Alta, PR

Toa Baja, PR

Trujillo Alto, PR

Vega Alta, PR

Vega Baja, PR

Yabucoa, PR

7460 .... San Luis ObispoAtascadero-Paso

Robles, CA.

1.0471

San Luis Obispo, CA

7480 .... Santa Barbara-Santa

Maria-Lompoc, CA.

1.0820

Santa Barbara, CA

7485 .... Santa Cruz-Watsonville,

CA.

1.3929

Santa Cruz, CA

7490 .... Santa Fe, NM ............... 1.0438

Los Alamos, NM

Santa Fe, NM

7500 .... Santa Rosa, CA ............ 1.3001

Sonoma, CA

7510 .... Sarasota-Bradenton, FL 0.9906

Manatee, FL

Sarasota, FL

7520 .... Savannah, GA .............. 0.9954

Bryan, GA

Chatham, GA

Effingham, GA

7560 .... Scranton—WilkesBarre—Hazleton, PA.0.8373

Columbia, PA

Lackawanna, PA

Luzerne, PA

Wyoming, PA

7600 .... Seattle-Bellevue-Everett,

WA.

1.1291

Island, WA

King, WA

Snohomish, WA

7610 .... Sharon, PA ................... 0.8284

Mercer, PA

7620 .... Sheboygan, WI ............. 0.8203

Sheboygan, WI

7640 .... Sherman-Denison, TX .. 0.9330

Grayson, TX

7680 .... Shreveport-Bossier City,

LA.

0.9050

Bossier, LA

Caddo, LA

Webster, LA

7720 .... Sioux City, IA–NE ......... 0.8549

Woodbury, IA

Dakota, NE

7760 .... Sioux Falls, SD ............. 0.8777

Lincoln, SD

Minnehaha, SD

7800 .... South Bend, IN ............. 0.9794

St. Joseph, IN

7840 .... Spokane, WA ................ 1.0800

Spokane, WA

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

7880 .... Springfield, IL ................ 0.8689

Menard, IL

Sangamon, IL

7920 .... Springfield, MO ............. 0.7992

Christian, MO

Greene, MO

Webster, MO

8003 .... Springfield, MA ............. 1.0678

Hampden, MA

Hampshire, MA

8050 .... State College, PA ......... 0.9139

Centre, PA

8080 .... Steubenville-Weirton,

OH–WV.

0.8815

Jefferson, OH

Brooke, WV

Hancock, WV

8120 .... Stockton-Lodi, CA ......... 1.0519

San Joaquin, CA

8140 .... Sumter, SC ................... 0.8239

Sumter, SC

8160 .... Syracuse, NY ................ 0.9413

Cayuga, NY

Madison, NY

Onondaga, NY

Oswego, NY

8200 .... Tacoma, WA ................. 1.1479

Pierce, WA

8240 .... Tallahassee, FL ............ 0.8485

Gadsden, FL

Leon, FL

8280 .... Tampa-St. PetersburgClearwater, FL.0.9045

Hernando, FL

Hillsborough, FL

Pasco, FL

Pinellas, FL

8320 .... Terre Haute, IN ............. 0.8571

Clay, IN

Vermillion, IN

Vigo, IN

8360 .... Texarkana, AR-Texarkana, TX.0.8136

Miller, AR

Bowie, TX

8400 .... Toledo, OH ................... 0.9816

Fulton, OH

Lucas, OH

Wood, OH

8440 .... Topeka, KS ................... 0.9327

Shawnee, KS

8480 .... Trenton, NJ ................... 1.0103

Mercer, NJ

8520 .... Tucson, AZ ................... 0.8743

Pima, AZ

8560 .... Tulsa, OK ...................... 0.8087

Creek, OK

Osage, OK

Rogers, OK

Tulsa, OK

Wagoner, OK

8600 .... Tuscaloosa, AL ............. 0.8065

Tuscaloosa, AL

8640 .... Tyler, TX ....................... 0.9370

Smith, TX

8680 .... Utica-Rome, NY ............ 0.8299

Herkimer, NY

Oneida, NY

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

8720 .... Vallejo-Fairfield-Napa,

CA.

1.3347

Napa, CA

Solano, CA

8735 .... Ventura, CA .................. 1.1456

Ventura, CA

8750 .... Victoria, TX ................... 0.8379

Victoria, TX

8760 .... Vineland-Millville-Bridgeton, NJ.1.0518

Cumberland, NJ

8780 .... Visalia-Tulare-Porterville, CA.1.0412

Tulare, CA

8800 .... Waco, TX ...................... 0.8076

McLennan, TX

8840 .... Washington, DC–MD–

VA–WV.

1.1055

District of Columbia, DC

Calvert, MD

Charles, MD

Frederick, MD

Montgomery, MD

Prince Georges, MD

Alexandria City, VA

Arlington, VA

Clarke, VA

Culpeper, VA

Fairfax, VA

Fairfax City, VA

Falls Church City, VA

Fauquier, VA

Fredericksburg City, VA

King George, VA

Loudoun, VA

Manassas City, VA

Manassas Park City, VA

Prince William, VA

Spotsylvania, VA

Stafford, VA

Warren, VA

Berkeley, WV

Jefferson, WV

8920 .... Waterloo-Cedar Falls, IA 0.8518

Black Hawk, IA

8940 .... Wausau, WI .................. 0.9446

Marathon, WI

8960 .... West Palm Beach-Boca

Raton, FL.

1.0013

Palm Beach, FL

9000 .... Wheeling, WV–OH ........ 0.7644

Belmont, OH

Marshall, WV

Ohio, WV

9040 .... Wichita, KS ................... 0.9422

Butler, KS

Harvey, KS

Sedgwick, KS

9080 .... Wichita Falls, TX ........... 0.7653

Archer, TX

Wichita, TX

9140 .... Williamsport, PA ........... 0.8450

Lycoming, PA

9160 .... Wilmington-Newark,

DE–MD.

1.1275

New Castle, DE

Cecil, MD

9200 .... Wilmington, NC ............. 0.9708

New Hanover, NC

41180 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 4B.—WAGE INDEX FOR URBAN

AREAS—FY 2000 PRE-FLOOR AND

PRE-RECLASSIFIED—Continued

MSA Urban area

(constituent counties)

Wage

index

Brunswick, NC

9260 .... Yakima, WA .................. 1.0333

Yakima, WA

9270 .... Yolo, CA ........................ 0.9720

Yolo, CA

9280 .... York, PA ........................ 0.9310

York, PA

9320 .... Youngstown-Warren,

OH.

0.9997

Columbiana, OH

Mahoning, OH

Trumbull, OH

9340 .... Yuba City, CA ............... 1.0663

Sutter, CA

Yuba, CA

9360 .... Yuma, AZ ...................... 0.9925

Yuma, AZ

C. Methodology Used for the Calculation

of the 60-Day Episode Payment Amount

The methodology used to compute the

standardized national 60-day episode

payment rates was a multistep process

combining each of the data sources

described above. As stated above,

section 1895(b)(3)(A)(i) of the Act

requires that—(1) the computation of a

standard prospective payment amount

that includes all costs of home health

services covered and paid for on a

reasonable-cost basis be initially based

on the most recent audited cost report

data available to the Secretary, and (2)

the prospective payment amounts be

standardized to eliminate the effects of

case-mix and wage levels among HHAs.

The budget neutrality provision, with

the 15-percent reduction and

contingency reduction to IPS, originated

from the BBA, was delayed by OCESAA,

and further amended by BBRA to delay

the 15 percent reduction by one year,

while eliminating the contingency

reduction to IPS. The data used to

develop the HHA PPS rates were

adjusted using the latest available

market basket increases occurring

between the cost reporting periods

contained in our database and

September 30, 2001.

With data described above, we

calculated the standard average

prospective payment amount for the 60-

day episode using the following

formula:

• We multiply the national mean cost

per visit updated for inflation for each

of the six disciplines (skilled nursing,

physical therapy, occupational therapy,

speech-language pathology services,

medical social services, and home

health aide services) in a 60-day episode

by the national mean utilization for each

of the six disciplines in a 60-day

episode summed in the aggregate. We

add to the figure derived from the above

calculation, amounts for—

++ Nonroutine medical supplies paid

on a reasonable-cost basis under a home

health plan of care;

++ Nonroutine medical supplies that

could have been unbundled to Part B

that will be included under the PPS

rate;

++ Therapy services that could have

been unbundled to Part B that will be

included under the PPS rate;

++ An OASIS adjustment to pay

HHAs for estimated ongoing OASIS

assessment reporting costs; and

++ A one-time implementation

adjustment to pay HHAs for estimated

costs associated with implementing the

revisions to the OASIS assessment

schedules in order to classify patients

into the appropriate case-mix categories

for payment for the first year of PPS.

• Nonroutine Medical Supplies. The

per-episode nonroutine medical supply

amounts, paid on a reasonable cost basis

under a home health plan of care, were

calculated by summing the nonroutine

medical supply costs for all of the

providers in the audited cost report

sample weighted to represent the

national population and updated to FY

2001. That total was divided by the

number of episodes for the providers in

the audited cost report sample weighted

to represent the national population and

updated to FY 2001.

The per-episode possible unbundled

nonroutine medical supply amounts

billed under Part B included in the PPS

rate were calculated by summing the

allowed charges for the revised 178

HCPCs codes (described in sections II.B

and IV.) in calendar year 1998 for

beneficiaries under a home health plan

of care. That total was divided by the

total number of episodes in calendar

year 1998 from the episode database.

• Possible unbundled therapies billed

to Part B that will be included under the

PPS Rate. As discussed in the response

to comments and section III. of this

regulation, prior to consolidated billing

requirements governing PPS, HHAs may

have been unbundled therapy services

to Part B. Although this was a rare

occurrence, we re-examined our

approach to calculating the PPS rate.

There is an additional therapy

adjustment to the nonstandardized 60-

day episode. For further detail, see

section IV.B.3. The rate methodology is

provided in Table 5 below.

• Ongoing OASIS Cost Adjustments.

In the August 11, 1998 IPS Per-Visit and

Per-Beneficiary Limitations notice (63

FR 42912) HCFA discussed a proposed

adjustment for HHAs for the agency

collection of the Outcome Assessment

Information Set (OASIS) Data.

Collecting and reporting OASIS is a

condition of Medicare participation for

HHAs. As we stated in the August 11,

1998 IPS notice, we believe there will be

no permanent ongoing incremental costs

associated with OASIS collection.

Additionally, we believe that there will

be no further one-time, start-up, OASIS

reporting costs beyond those recognized

at the inception of OASIS collection

under IPS. However, we do believe that

ongoing costs are associated with

reporting OASIS data. Our proposed

adjustment for the ongoing costs

associated with OASIS reporting is

based on information from the ongoing

Medicare Quality and Improvement

Demonstration, as well as the OASIS

demonstration data. We assume, for

purposes of deriving the OASIS

proposed adjustment, that the typical

HHA has 486 admissions and 30,000

visits per year and an 18 person staff.

OASIS reporting adjustments are unlike

the one-time OASIS collection

adjustments published in the August 11,

1998 Federal Register which were based

only on the number of skilled visits.

These reporting adjustments are based

on total Medicare visits. The following

are HCFA’s estimates of costs that a

typical HHA will incur for OASIS

reporting which form the basis of the

per-visit OASIS reporting adjustment

and the per-episode OASIS adjustment.

The first descriptive chart below shows

the base OASIS reporting costs for an

HHA which include the following:

audits to ensure data accuracy; data

entry, editing and auditing; supplies;

and telephone costs. We estimate these

ongoing OASIS costs to total $.101228

per visit. The second descriptive chart

shows the OASIS personal computer

costs for those HHAs that are unable to

run OASIS because they lack the

requisite hardware needed to support

automation of the assessment tool. We

estimate this percentage to be 50 percent

(64 FR 3759). These costs consist of the

depreciation of a personal computer and

printer. For years one through three,

HHAs are able to depreciate both their

personal computer and printer. We

estimate this OASIS cost to be $.026778

per visit. For years four and five, HHAs

can only depreciate their printer. We

estimate this OASIS cost to be $.004 per

visit. In order for HHAs to keep pace

with the ever evolving computing

standards, to include enhancements to

computer hardware and software, as

well as future versions of Haven’s

OASIS software, this process of the

depreciation of computer hardware is

one that would repeat itself every five

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41181

years. Similarly, a yearly average

computer hardware depreciation

adjustment was computed to yield an

OASIS adjustment for each of the five

years. This was accomplished by

multiplying the first three years’

computer hardware depreciation

adjustment of $.026778 by 3,

multiplying the following two years’

computer hardware depreciation

adjustment of $.004 by 2, summing

those two factors, and dividing that sum

by the total number of depreciable years

(five), to get a yearly average for the

computer hardware depreciation

adjustment of $.017667. This yearly

average for computer hardware

depreciation adjustments ($.017667),

when added to the base OASIS

adjustment ($.101228), results in a total

OASIS adjustment of $.118895 rounded

to $.12 per visit.

For purposes of calculating the

ongoing OASIS adjustment for the 60-

day episode payment, we multiplied the

average number of visits per 60-day

episode (36 visits) by the total rounded

per-visit OASIS adjustment ($.12 per

visit). The calculation resulted in a perepisode OASIS adjustment of $4.32 for

each 60-day episode under HHA PPS.

The home health prospective payment

calculation is provided in Table 5.

We calculated the ongoing OASIS

adjustment for the low utilization

payment adjustments by adding the

total rounded per-visit OASIS

adjustment ($.12 per visit) to the

national standardized average cost per

visit by discipline for each of the four

or fewer visits provided in the episode.

The low utilization payment adjustment

calculation is provided in Table 6.

CONTINUOUS OASIS ADJUSTMENT: BASE

[For data reporting]

Type of adjustment Source Formula Cost per

visit

Audits to ensure data accuracy ................ University of Colorado (CHPR), BLS Occupational Employment Survey (1996),

1994 & 1995 HCFA Cost Report Data.

(((((10 records per month * 12 months)) *

.25 hrs) * $25.42) / 30,000 avg visits)...professional staff.

$.02542

Data entry, editing, & auditing .................. University of Colorado(CHPR), Estimated

average salary for clerical staff, 1994 &

1995 HCFA Cost Report Data.

((((8.5 hrs per month * 12) + (5 hrs per

month * 12) + (1 hr per month * 12) +

(5 hrs per year)) * $10 per hour) /

30,000 avg visits).

.059667

Supplies .................................................... HCFA–3006–IFC OASIS Reporting (64

FR 3748), 1994 & 1995 HCFA Cost

Report Data.

$250 avg cost / 30,000 avg visits ............. .008333

Ongoing telephone costs .......................... Bell Atlantic, 1994 & 1995 HCFA Cost

Report Data (for average size HHA).

(((($13.14 per month, per line) + ($ 6.38

per month subscriber fee)) * 12

months) / 30,000 avg visits).

.007808

Total ................................................... ................................................................... ................................................................... .101228

CONTINUOUS OASIS ADJUSTMENT: 5 YEAR DEPRECIATION AVERAGING

[For data reporting]

Type of adjustment Source Formula Cost per

visit

Computer Hardware .................................. American Hospital Association’s, Health

Data & Coding Standards Group’s, Estimated Useful Lives of Depreciable

Hospital Assets {revised 1998}.

Computer ........................................... Average cost for PC with minimal acceptable standards 1994 & 1995 HCFA

Cost Report Data.

$2050 computer depreciated over 3 years

(($2050/3) / 30,000 avg visits.

$.022778

Printer ................................................ Average cost for printer with minimal acceptable standards 1994 & 1995 HCFA

Cost Report Data.

$600 printer cost depreciated over 5

years (($600/5) / 30,000 avg visits.

.004

First 3 Year’s Adjustment ......................... *Note: computer & printer depreciation .... .026778

Next 2 Year’s Adjustment ......................... *Note: printer ONLY depreciation ............. .004

5-Year Average Adjustment ..................... ((($.026777 * 3) + ($.004 * 2)) / 5) ........... .017667

PERSONAL COMPUTER MINIMAL SPECIFICATIONS

Description Minimal specifications

Warranty ................................................................................................................... Minimum 3 year.

Processor .................................................................................................................. Pentium II Processor running at 400 MHz w/512 Cache.

Operating System ..................................................................................................... 32-bit operating system with Graphical User Interface.

Hard Drive ................................................................................................................. 3 Gb Hard drive minimum.

Memory ..................................................................................................................... 32 MB minimum.

CD ROM ................................................................................................................... 14–32 X, IDE, integrated sound.

Floppy Drive .............................................................................................................. 3.5′′ 1.44 MB diskette drive.

Fax Modem ............................................................................................................... 56K v.90 Data/Fax.

Monitor ...................................................................................................................... 17′′ Color Monitor.

Graphics .................................................................................................................... MB AGP.

41182 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

PERSONAL COMPUTER MINIMAL SPECIFICATIONS—Continued

Description Minimal specifications

Mouse ....................................................................................................................... Wheel mouse.

Keyboard ................................................................................................................... 104 key ergonomic keyboard.

Anti Virus .................................................................................................................. Anti Virus Software.

Management Software .............................................................................................. System management client software/license.

Printer ....................................................................................................................... 600 dpi Laser printer with cable.

OASIS ADJUSTMENT: ‘‘ONE-TIME’’

[For data reporting]

Type of adjustment Source Formula Cost per

visit

Training of Data Entry Staff ...................... BLS Employer Provided Training (Hrs of

Training 1995) & an estimated average

salary for clerical personnel 1994 &

1995 HCFA Cost Report Data.

(24 hrs * $10)/30,000 avg visits ............... $.008

Telephone installation ............................... Bell Atlantic ...............................................

Bell Atlantic 1994 & 1995 HCFA Cost Report Data.

($28 processing fee) .................................

+

($40 per line connect fee)/30,000 avg visits.

.002266

Total One Time Adjustment ............... ................................................................... ................................................................... .010266

• First Year of PPS One-Time

Adjustment Reflecting Implementation

Costs Associated with Revised OASIS

Assessment Schedules needed to

Classify Patients into Appropriate CaseMix Categories for Payment.

As set forth in the home health PPS

proposed rule published in the Federal

Register on October 28, 1999, (64 FR

58134) all data necessary to classify a

patient to one of the 80 HHRG categories

are contained in the OASIS–B

supplemented, as applicable, by one

additional item regarding projected

therapy use in a given 60-day episode.

Under PPS, HHAs are required to use

the collection and reporting

requirements for the OASIS data

elements published in the Federal

Register on January 25, 1999,

supplemented by one additional therapy

item as applicable. We set forth the

proposed changes to the OASIS

schedules in the home health PPS

proposed rule. We also stated that we

expect that the software programs,

called grouper software, that use the

OASIS–B supplemented by the

projected therapy variable and assign

patients to the appropriate groups, will

be available from many software

vendors. The version we use will be

available at no cost from our HCFA

website on PPS. We proposed the option

to build the grouper logic into the

HAVEN software, which is currently

used for the transmission of OASIS data

for purposes of quality via the State

system.

As stated in the Interim Payment

System Notice published in the Federal

Register on August 11, 1998, (63 FR

42912) we set forth the methodology for

the one-time offset adjustment for the

implementation of the home health

OASIS. The one-time offset adjustment

methodology provided financial relief to

HHAs for costs associated with

integrating the OASIS collection into

their overall approach to comprehensive

assessment of patients. The costs

recognized in the one-time offset

adjustment methodology included three

types of costs associated with training

staff, increases in assessment time

during the initial implementation, and

staff to revise assessment forms and

integrate OASIS elements.

In response to commenters concern

with costs associated with

implementing the OASIS-based casemix methodology, we believe there will

be a modified one-time adjustment for

HHAs to implement the revised

schedules for the start of care and follow

up assessments for PPS implementation.

We are providing a refined methodology

for the one-time adjustment for OASIS

scheduling changes required by the

case-mix adjustment methodology for

the first year of PPS implementation.

This is a one-time one year

implementation adjustment. This

methodology is a refined version of the

offset adjustment set forth in the August

11, 1998 Interim Payment System

Notice. The total offset adjustment

described in the August 11, 1998 notice

was applied by—

• First, multiplying the labor portion

of the per-visit limitation for skilled

nursing, physical therapy, speech

language pathology, and occupational

therapy by the factor of 1.003513 for

training and forms revision;

• Secondly, adding the non-labor

portion to the adjusted labor portion;

and

• Thirdly, adding one cent for

printing costs.

Under PPS, we are applying the same

formula to the non-standardized average

number and average cost per-visit

amounts for episodes containing 5 or

more visits for skilled nursing services,

physical therapy services, speechlanguage pathology services, and

occupational therapy services. That

aggregate non-standardized amount will

then be adjusted by an OASIS

scheduling adjustment factor.

As part of the formal OMB clearance

process (see section VI. of this

regulation for OMB approval number),

we requested the following

modifications to the current Version

Start of Care/Resumption of Care

Version Form HCFA–R245A approved

6/99, Follow-Up Version Form HCFA–

R245B approved 6/99 for purposes of

case-mix adjusting patients under home

health PPS.

• Modification to the Version Start of

Care/Resumption of Care Version Form

HCFA–R245A approved 6/99.

(1) New Therapy Threshold Question

discussed in the background section

of this package.

MO825 Therapy Need: Does the care

plan of the Medicare payment

period for which this assessment

will define a case-mix group

indicate a need for therapy

(physical, occupational, or speech

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41183

therapy) that meets the threshold

for a Medicare high-therapy casemix group?

0—No

1—Yes

NA—not applicable

• Modification to the Follow-Up

Version Form HCFA–R245B approved

6/99.

(1) Must add the following already

approved OASIS items to the

Follow-Up schedule:

MO230 Home Care Diagnosis

M0240 Other Diagnosis

MO390 Vision

(2) Must modify and add the current

approved OASIS item MO170

regarding hospital discharge or

nursing home care discharge within

the past 14 days.

(3) Must add the therapy threshold

variable (M0825) to the Follow-Up

OASIS Form and Schedule.

We believe there will be a modified

one-time adjustment for HHAs to

implement the revised schedules for the

start of care and follow up assessments

as follows:

Visit by discipline

Average number of

visits

(A)

Average cost per

visit

(B)

Aggregate total

((A) * (B))

SK Nursing ............................................................................................................... 14.08 $94.96 $1,337.04

PT ............................................................................................................................ 3.05 104.05 317.35

SPL .......................................................................................................................... .18 113.26 20.39

OT ............................................................................................................................ .53 104.76 55.52

Total .................................................................................................................. ................................ .............................. 1730.30

Approach:

(1) Total = $1730.30

(2) Labor Portion = 1730.30 × .77668

= 1343.89, Non-Labor Portion =

1730.30 × .22332 = 386.41

(3) Adjusted Labor Portion = 1343.89

× 1.003513 = 1348.61

(4) Adjusted Labor Portion 1348.61 +

Non-Labor Portion 386.41 = 1735.02

(5) .01 for printing + 1735.02 =

$1735.03

(6) 1735.03/80 (80 OASIS items) =

$21.69

(7) 21.69/4 (4 types of OASIS

Schedules) = $5.42

(8) We believe $5.42 reflects the cost

for a new item added to a new

schedule. Therefore, $5.42 is the

figure used to reflect the need to

add the new therapy variable to

Start of Care/Resumption of Care

Assessment Schedules to case-mix

adjust the initial episodes as part of

the implementation adjustment to

the 60-day non-standardized

episode amount.

We must then add the cost of adding

the new therapy variable to the FollowUp Assessment Schedule as well as

three already approved OASIS items. As

set forth in the approach on the

previous page, adding the new therapy

variable to an assessment schedule is

projected to cost $5.42 for the first year

of implementation. In addition to the

new therapy variable, three of the

already approved OASIS items need to

be added to the Follow-up OASIS. We

estimated that adding a new item to the

OASIS schedule would cost $5.42. We

are applying an adjustment factor to that

amount to account for the three

additional already approved OASIS

items to the Follow-Up Assessment

schedule. We multiply the 5.42 for the

new therapy variable by 3/80 (3 of the

total 80 OASIS items). (We are applying

a scheduling adjustment factor of 3/80

to the $5.42 amount to recognize that

the three OASIS items are already

approved and are only added to a new

assessment schedule.) The Follow-Up

Assessment schedule will now include

the new therapy variable ($5.42) and the

three already approved OASIS items

($5.42 * 3/80). The formula for the costs

associated with the one-time first year

implementation of the Scheduling

Changes to the Follow-Up Assessment is

as follows: $5.42 for the new therapy

variable plus an additional $0.20 ($ 5.42

× .0375 or (3/80)) = $5.62 per patient per

Follow-Up assessment used to case-mix

adjust subsequent episodes for

continuing home health care.

The non-standardized 60-day episode

amount for each Start of Care 60-day

episode will be adjusted to offset the

one-time implementation cost and

burden associated with the OASIS

scheduling modifications required to

implement the case-mix methodology

for the first year of HHA PPS. The nonstandardized 60-day episode amount for

each follow-up assessment used to casemix adjust subsequent episodes will

also be adjusted. These adjustments will

be combined and reflected as

proportional adjustments.

Our research upon which we are

basing the national PPS rate indicates

that about 60 percent of episodes are

completed within 60-days. We are using

the following approach to reflect the one

time transition:

Start of Care Assessments used for

initial episodes (.60 × $5.42) + FollowUp Assessments used for subsequent

episodes (.40 × $5.62) = an adjustment

of $5.50 for each non-standardized 60-

day episode for the first year of PPS.

The nonstandardized average

prospective payment amount must be

then standardized to eliminate the

effects of case-mix and wage levels

among HHAs. The standard average

prospective payment amount for the 60-

day episode equals the nonstandardized

average prospective payment amount for

a 60-day episode divided by the

standardization factor. The

standardization factor is discussed in

section IV.C.4 of this regulation. Once

the payment rate is standardized, that

amount is multiplied by the budgetneutrality factor. The budget-neutrality

factor is discussed in section IV.C.5 of

this regulation. The standardized

budget-neutral amount is divided by

1.05 to account for outlier payments

capped at 5 percent of total estimated

outlays under PPS.

The actual national 60-day episode

payment amount that will be paid to

HHAs incorporates the standard average

prospective payment amount adjusted

to account for case-mix and wage index.

All of the elements incorporated into

the national 60-day episode payment

amounts (the standard average

prospective payment amount adjusted

to account for case-mix and wage index)

must be budget neutral to the interim

payment system limitation amounts.

Table 5 illustrates the home health

prospective payment calculation.

41184 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 5.—HOME HEALTH PROSPECTIVE PAYMENT CALCULATION

Home health discipline type

Total costs for all

providers in the

PPS audit sample (weighted,

updated to FY

2001, and visit

limit adjusted)

Total visits for

all providers in

the PPS audit

sample

(weighted)

Average cost

per visit from

the PPS audit

sample

Average number of visits for

episodes with

>4 visits from

the CY 1998

episode file

Home health

prospective

payment rate

Home Health Aide Services ............................................. 5,915,395,602 141,682,907 $41.75 13.4 $559.45

Medical Social Services ................................................... 458,571,353 2,985,588 153.59 .32 49.15

Occupational Therapy Services ....................................... 444,691,130 4,244,901 104.76 .53 55.52

Physical Therapy Services .............................................. 2,456,109,303 23,605,011 104.05 3.05 317.35

Skilled Nursing Services .................................................. 12,108,884,714 127,515,950 94.96 14.08 1,337.04

Speech Pathology Services ............................................. 223,173,331 1,970,399 113.26 .18 20.39

Total Non Standardized Prospective Payment Amount Per 60-Day Episode For FY 2001 .............................................................. 2,338.90

Average Cost per Episode for Non Routine Medical Supplies included in the home health benefit and reported as costs on the

Cost Report ...................................................................................................................................................................................... 43.54

Average Payment per Episode for Non Routine Medical Supplies possibly unbundled and billed separately to Part B .................. 6.08

Average Payment per Episode for Part B Therapies .......................................................................................................................... 17.67

Average Payment per Episode for OASIS One Time Adjustment for form changes ......................................................................... 5.50

Average Payment per Episode for Ongoing OASIS Adjustment Costs .............................................................................................. 4.32

Total Non Standardized Prospective Payment Amount Per 60-Day Episode For FY 2001 Plus Medical Supplies & Ongoing

OASIS .............................................................................................................................................................................................. 2,416.01

Total non standardized

prospective payment

amount per 60-day episode for FY 2001

Standardization factor for

wage index and case-mix 1 Budget neutrality factor 2 Outlier adjustment factor 3

Final standardized and

budget neutral prospective

payment amount per 60-

day episode for FY 2001

$2,416.01 .96184 .88423 1.05 $2115.30

1 (Based on 100% episode wage indicies with therapy/nontherapy factors based on ABT data).

2 (Budget neutral to current IPS).

3 (Adjustment to PPS rate to account for 5% of total payments to outlier episodes).

CALCULATION FOR NON ROUTINE MEDICAL SUPPLIES PER EPISODE AMOUNT INCLUDED IN THE HOME HEALTH BENEFIT

Non routine medical supplies included in the home

health benefit and reported

as costs on the cost report 1

Total number of episodes

for those providers in the

audited cost report sample 2

Average cost per episode

for non routine medical

supplies included in the

home health benefit and

reported as costs on the

cost report

Market basket update factor to FY 2001 3

Average cost per episode

for non routine medical

supplies included in the

home health benefit and

reported as costs on the

cost report

$234,547,615 5,733,010 $40.91 1.0643 $43.54

1Source: Audited Cost Report Data from the audit sample updated to FY 2001 and weighted to National Totals.

2Source: Calendar Year 1998 Episode file.

3 Cumulative Market Basket Update Factor for years 1999–2001.

CALCULATION FOR NON ROUTINE MEDICAL SUPPLIES POSSIBLY UNBUNDLED AND BILLED UNDER PART B

Non routine medical supplies possibly unbundled

and billed separately to

part B and reimbursed on

the fee schedule 1

Total number of episodes

for all providers in the calendar year 1998 file adjusted for estimated total

episodes in FY 2001 2

Average payment per episode for non routine medical supplies possibly

unbundled and billed separately to part B

DME fee schedule update

to FY 2001 3

Updated average payment

per episode for non routine

medical supplies possibly

unbundled and billed separately to part B

$37,526,132.26 6,170,887 $6.08 1.0 $6.08

1Source: 1998 National Claims History Part B file extract for 178 codes matched to the 60-day episode file by beneficiary and dates of service. 2Source: Calendar Year 1998 Episode file.

3There exists no update to the DME Fee Schedule affecting Non Routine Medical Supplies for years 1999–2001.

CALCULATION FOR THE PART B THERAPIES

Therapy services billed

separately to part B

Total number of episodes

for all providers in the calendar year 1998 file adjusted for estimated total

episodes in FY 2001 2

Average payment per episode for part B therapiesPhysician fee schedule updates to FY 2001 3

Updated average payment

per episode for part B

therapies

$94,200,316.08 6,170,887 $15.27 1.157 $17.67

1Source: 1998 National Claims History Part B extract file for 57 CPT therapy codes for Physician/Supplier claims and for the physical therapy,

occupational therapy, and speech therapy revenue center codes matched to the 60 Day episode file by beneficiary and dates of service.

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41185

2Source: Calendar Year 1998 Episode file.

3 Cumulative Update Factor for Part B Therapies based on Physician Fee Schedule Updates for years 1999–2001.

Each component of the methodology

is discussed below.

1. Cost Data—60-Day Episode Payment

The audited cost data is discussed

above in detail in section IV. of this

regulation. The data source used in

developing the national mean cost per

visit for a 60-day episode is the audited

cost report sample database. We

calculated the national mean cost per

visit for each of the six disciplines

(skilled nursing, physical therapy,

occupational therapy, speech-language

pathology services, medical social

services, and home health aide services)

used in a 60-day episode. The data

source in developing the average cost

per episode for nonroutine medical

supplies paid on a reasonable-cost basis

under a home health plan of care is the

audited cost report sample database also

discussed in section III. this regulation.

2. Utilization Data—60-Day Episode

Payment

As discussed above, developing the

national mean number of visits for each

of the six disciplines in a 60-day

episode resulted from the thorough

analysis of the national claims history.

3. Updating the Data

The HHA market basket index reflects

changes over time in the prices of an

appropriate mix of goods and services

included in covered HHA services. The

HHA market basket index is used to

develop the national 60-day episode

payment rates. The data used to develop

the HHA PPS rates were adjusted using

the latest available market basket

increases occurring between the cost

reporting periods contained in our

database and September 30, 2001. For

each of fiscal years 2002 and 2003,

section 1895(b)(3)(B)(ii) of the Act

requires the standard prospective

payment amounts be increased by a

factor equal to the home health market

basket minus 1.1 percentage points. In

addition, for any subsequent fiscal

years, the statute further requires the

rates to be increased by the applicable

home health market basket index

change. A complete discussion

concerning the design and application

of the HHA market basket index and the

factors used in developing the 60-day

episode payment rates is discussed in

section IV.B.2. of the regulation.

4. Standardization Factor

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

requires that the prospective payment

amounts be standardized to eliminate

the effects of variation in wage levels

and case-mix among HHAs. The

objective of standardization is to ensure

that the wage-index and case-mix

adjustments to the episode payment

amount do not alter the aggregate

payments that would occur in the

absence of these adjustments. All the

estimates described in this section are

based on episodes with more than four

visits since only those episodes will be

paid on a per-episode basis.

Several types of information are

required for standardization. To account

for wage differences, the proportion of

labor and nonlabor components of HHA

costs must be identified. These

proportions are based on the relative

importance of the different components

of the HHA market basket index. As

calculated, the labor-related portion of

cost is 77 percent and the nonlaborrelated portion is 23 percent. Wage

differences are measured using the

hospital wage index. In standardizing

the episode payment amount, we used

the pre-floor and pre-reclassified FY

2000 hospital wage index, which is

based on FY 1996 hospital wage data.

For application of the wage index, the

statute allows us to use the service area

or any other area we specify. As noted

in the proposed rule, to be consistent

with the current interim payment

system, the wage index value that will

be applied to the labor portion of the

episode amount will be the appropriate

wage index for the geographic area

where the beneficiary received home

health services. The best source of data

on wage-index variation among 60-day

episodes that was available for

standardization was the episode data set

that we constructed from 1998 Medicare

home health claims.

To account for case-mix differences, it

is necessary to have information on the

distribution of 60-day home health

episodes among the 80 groups of the

HHRG case-mix system. For this final

rule, we were able to examine more data

on case-mix variation than was available

for the proposed rule. For the proposed

rule, the only available data on episodes

classified by HHRG was the Abt data set

that was used to develop the HHRG

case-mix classification system. For the

final rule, we had access to an updated

(and larger) Abt data set, early data from

the OASIS national repository, and the

1998 episode file constructed from

Medicare claims to which we were able

to assign average therapy and nontherapy HHRG weights.

We first compared the Abt data to the

data from the OASIS national

repository. We compared the

distributions of the responses to the

OASIS items used in constructing the

HHRGs. In addition, we compared the

distributions of the HHRGs for both of

these data sets. This comparison had to

be made using only 40 of the 80 HHRGs

as therapy assignments could not be

made from the national OASIS data.

(Time lags in the receipt of claims for

episodes corresponding to the OASIS

from the national repository prevented

us from making therapy assignments for

the national OASIS data.) Despite this

limitation, the comparisons we were

able to make showed a high degree of

similarity between the two data sources

and increased our confidence that the

Abt data set is representative of national

case-mix variation.

We next compared the Abt data to the

1998 episode data set derived from

Medicare claims. In particular, we

compared the distributions of estimated

cost for the two data sets. Cost was

estimated by multiplying the national

per-visit costs for each discipline by the

number of visits in each discipline and

summing the total. Cost distributions

were constructed for the Abt data using

both samples, with and without

applying the population weights

described in the proposed rule. We

found that the cost distribution of the

unweighted Abt data matched the 1998

episode data much more closely than

did the weighted Abt data. From this

analysis, we concluded that the

unweighted Abt data provided a good

basis for comparison of standardization

factors.

To make full use of the available data,

we developed the following strategy for

standardizing the episode amount:

• First, we estimated three

standardization factors using the Abt

data set. The first one accounts only for

variation in wage index values; the

second accounts for wage index and

case-mix variation, using all 80 HHRGs;

the third accounts for wage index and

case-mix variation, using HHRG weights

collapsed to therapy and non-therapy

averages. All three Abt standardization

factors are very similar: .97510, .97945,

and .97888, respectively.

• Then, we estimated two

standardization factors using the 1998

national claims episode data: a wageonly factor and a wage and two case-mix

groups factor. The wage-only

standardization factor was .95808,

compared to .97510 for the

41186 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

corresponding factor using the Abt data.

The wage index and two case-mix

groups standardization factor was

.96183, compared to .97887 for the

corresponding factor from the Abt data.

For several reasons, we decided to use

the wage index and two case-mix groups

factor from the 1998 national claims

data as the final standardization factor

for this rule.

• First, the national claims data

provides the most reliable estimate of

the effects of wage index variation;

• Second, there was hardly any

difference in the wage and case-mix

standardization factors based on the Abt

data using either 80 HHRGs or the

collapsed two-groups;

• Third, overall there was a high

degree of similarity of values obtained

from all of the various methods.

Each of the estimates of the

standardization factor was calculated in

the following manner:

• For each episode (or in the case of

the Abt data, the number of episodes

represented by each sample episode),

the appropriate wage index value was

multiplied by the labor-related

proportion of cost (.77668) and added to

the nonlabor-related proportion (.22332)

to obtain a wage-adjustment factor;

• In turn, the wage-adjustment factor

was multiplied by the HHRG relative

weight;

• The product of the wage and casemix factors was summed over all

episodes in the database, yielding a

case-mix and wage-adjusted episode

sum;

• Dividing the case-mix and wageadjusted episode sum by the total

number of episodes (the unadjusted

episode sum) yields the standardization

factor, a ratio that indicates how the

combined effects of wage and case-mix

variation impact aggregate payments;

• If the standardization factor is

greater than one, the unstandardized

episode cost must be reduced to account

for the aggregate payment effect of the

case-mix and wage index payment

adjustments;

• If the factor is less than one, then

the unstandardized episode cost must

be increased to accomplish the same

objective. The standardized episode

amount is equal to the unstandardized

episode cost divided by the

standardization factor. Note that all

three of our estimates were less than

one, which implies that the

standardization factor increases the

standard episode amount. Our final

standardization factor produces an

increase of about 4.7 percent.

5. Budget-Neutrality Factor

To determine the budget neutrality

adjustment, we use our most current

estimate of incurred costs for home

health expenditures in FY 2001 under

the interim payment system (IPS).

Under the President’s FY 2001 Budget

assumptions, we are projecting this

amount to be $11,273 million. This

amount includes the medical supplies

which were billed separately under IPS

but will be bundled under PPS. Our best

estimate of what would be spent in FY

2001 on Part B therapies not currently

included in the home health benefit but

which will be covered by the benefit

under PPS is $109 million. We did not

include this in the home health

spending for the FY 2001 budget

because we had not yet determined it

needed to be added to the spending

target. We are adding $109 million to

the $11,273 million to determine the

total spending target for home health

PPS spending, $11,382 million. We are

estimating that there would have been

137,271,000 visits incurred in FY 2001.

The following table outlines the

variables used to determine the

adjustment:

Period

(1)

Visits

(2)

Visits/per episode

(3)

Number of episodes

(4)

CY 1997 ....................................................................................... 280,569,000 30.99 9,054,000

CY 1998 ....................................................................................... 163,208,000 26.88 6,072,000

FY 2001 ....................................................................................... 137,271,000 ........................................ ........................................

Column (2) represents the actuaries’

best estimate of the number of visits

incurred in each of the time periods.

These numbers differ from the number

of visits in the episode files. The

episode files were created to analyze

visits per episode and were not meant

to be the basis for the actual number of

visits incurred in calendar years 1997

and 1998.

Column (3) was determined from the

episode files we had created. Column

(4) was determined by dividing Column

(2) by Column (3) and rounding to the

nearest thousand. From these numbers

we need to determine the number of

visits per episodes we would have if we

had an episode file created for 2001.

This would then allow us to determine

the number of episodes there will be in

2001.

From the table, we can see that the

number of visits declined by about 42

percent from CY 1997 to CY 1998. The

episode file analysis showed that onethird of this decline was due to a

decline in the number of visits per

episode. Between CY 1998 and FY 2001,

we are projecting a further 16 percent

decline in the number of visits. We are

assuming that one-third of this decline

will be attributable to the decline in the

number of visits per episode. This

results in number of visits per episode

of 25.5. Dividing 137,271,000 visits by

25.5 results in 5,383,000 episodes. This

would be the number of expected

episodes if episodes were not all starting

on October 1, 2001. Because all patients

being served at the beginning of the

fiscal year will be starting a new episode

on October 1, we will be making more

episode payments in that first year. We

will be paying for an increased number

of episodes in FY 2001 compared to

what would have been paid if patients

entered PPS only after their current

period of home health care ended. To

account for this first-year anomaly, we

increased the number of episodes by

3.66 percent over the 5,383,000

determined above. This results in a

projected number of episodes of

5,580,000 incurred in FY 2001. In fiscal

years 2002 and later we will be adding

$79 to the episode payment since this

anomaly will no longer exist in those

years.

These 5,580,000 episodes need to be

split into full episodes and LUPA

episodes since our current number of

projected visits includes both. We

estimate that 5 percent of episodes will

be ones with four or fewer visits.

Therefore, 95 percent will receive a full

episode payment. The 1998 episode file

showed that 16 percent of episodes

would have received a LUPA payment.

Of this 16 percent, only 26 percent or

4 percent of the total were cases where

only 1 to 4 visits were provided in a

single 60-day, non-contiguous period.

These cases would clearly receive LUPA

payments under PPS. Twelve percent of

total episodes have less than five visits

but were episodes which fell at the end

of a series of prior episodes. Under a

plan of care established for PPS these

‘‘episode end’’ visits may not exist.

Because of the nature of how the

episode file created LUPA episodes, we

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41187

feel that LUPA payments will make up

a smaller portion of payments than was

shown in the episode file. The

determination of this adjustment factor

to the episode payment is as follows:

Number of LUPA episodes Average LUPA

payment Number of full episodes (non-LUPA)

Average full episode (non-LUPA)

payment

5,580,000 × .05 = 279,000 $205.20 5,580,000 × .95 = 5,301,000 $2,416.01

LUPA Full episode

Projected Payments Before Neutrality (279,000 × $205.20) + (5,301,000 × $2,416.01)

= $57.25 million = $12,807 million

Projected Incurred Spending in FY 2001: $11,382 million

Budget Neutrality Adjustment Factor = (11,382–57.25)/ 12,807 = 0.88423

After applying this adjustment to the

full episode payments, we expect to

have the following incurred payments

in FY 2001: $57.25 million for LUPA

payments plus 5,301 × $2,416.01 ×

.88423 = $11,325 million in full episode

payments, totaling $11,382 million.

D. Methodology Used for LowUtilization Payments

As discussed above, section

1895(b)(1) of the Act requires the

development of the definition of the

unit of payment or episode to take into

consideration the number, type,

duration, mix, and cost of visits

provided within the unit of payment. As

a result of our analysis, we determined

the need to also recognize a lowutilization payment under HHA PPS.

Low-utilization payment would reduce

the 60-day episode payments, PEP

adjustment or the SCIC adjustment to

those HHAs that provide minimal

services to patients during a 60-day

episode.

Payments for low-utilization episodes

will be made on a per-visit basis using

the cost per-visit rates by discipline

determined from the audited cost report

sample for calculation of the standard

episode amount. Included in these pervisit amounts are amounts for (1)

nonroutine medical supplies paid under

a home health plan of care, (2)

nonroutine medical supplies possibly

unbundled to Part B, (3) a per-visit

ongoing OASIS reporting adjustment as

discussed above, and (4) a one-time one

year adjustment reflecting costs

associated with OASIS assessment

schedule refinements needed to

implement the case-mix methodology in

section IV.G. of this regulation. We did

not add a per-visit rate adjustment for

therapies possibly unbundled to Part B

as we did for the per-episode payments.

Based on the analysis of the Part B

therapy date, we found that blending

the higher and lower therapy per-visit

amounts creates an anomalous result.

We know the per-visit amounts

provided in Table 6 are appropriate.

These per-visit ‘‘prices’’ would be

updated in the same manner as the

standard episode amount. However, as

discussed in the responses to comment

section, we have revised our approach

to the calculation of the amount paid for

each visit price per discipline. We are

retaining the four or fewer visit

threshold for the LUPA, but are

increasing the proposed amount by

using the standardized wage adjusted

national average cost per visit by

discipline amounts updated by the

market basket to FY 2001. See the

response to comment in section III. of

this rule for further clarification.

For low-utilization payments, they

would be adjusted by the wage index in

the same manner as the standard

episode amount. However, the lowutilization payments are not case-mix

adjusted. The standardization factor

used to adjust the LUPAs was calculated

using national claims data for episodes

containing four or fewer visits. This

standardization factor includes

adjustments only for the wage index.

The ‘‘savings’’ from the reduced episode

payments would be redistributed to all

episodes.

Below is Table 6 which presents the

home health low-utilization provider

adjustment payment calculation.

TABLE 6.—HOME HEALTH LOW-UTILIZATION PROVIDER ADJUSTMENT PAYMENT CALCULATION

Home health discipline type

Average

cost per

visit from

the PPS

audit sample

Average

cost per

visit for

non routine

medical

supplies

reported

as costs

on the cost

report

Average

cost per

visit for

non routine

medical

supplies

possibly

unbundled

and billed

separately

to part B

and reimbursed on

the fee

schedule

Average

cost per

visit for ongoing

OASIS adjustment

costs 3

Ave cost

per visit for

one-time

OASIS

scheduling

implementation

change

Standardization factor for

wage

index 1

Outlier adjustment

factor 2

Final wage

standardized per

visit payment

amounts

per 60-day

episode for

FY 2001

Home Health Aide Services ............. $41.75 $1.71 $0.23 $0.12 $.21 .96674 1.05 $43.37

Medical Social Services ................... 153.59 1.71 0.23 0.12 .21 .96674 1.05 153.55

Occupational Therapy. Services ...... 104.76 1.71 0.23 0.12 .21 .96674 1.05 105.44

41188 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 6.—HOME HEALTH LOW-UTILIZATION PROVIDER ADJUSTMENT PAYMENT CALCULATION—Continued

Home health discipline type

Average

cost per

visit from

the PPS

audit sample

Average

cost per

visit for

non routine

medical

supplies

reported

as costs

on the cost

report

Average

cost per

visit for

non routine

medical

supplies

possibly

unbundled

and billed

separately

to part B

and reimbursed on

the fee

schedule

Average

cost per

visit for ongoing

OASIS adjustment

costs 3

Ave cost

per visit for

one-time

OASIS

scheduling

implementation

change

Standardization factor for

wage

index 1

Outlier adjustment

factor 2

Final wage

standardized per

visit payment

amounts

per 60-day

episode for

FY 2001

Physical Therapy Services .............. 104.05 1.71 0.23 0.12 .21 .96674 1.05 104.74

Skilled Nursing Services .................. 94.96 1.71 0.23 0.12 .21 .96674 1.05 95.79

Speech Pathology Services ............. 113.26 1.71 0.23 0.12 .21 .96674 1.05 113.81

1 (Based on 100% episode for episodes with 4 or fewer visits and wage index only standardization factor)

2 (Adjustment to PPS rate to account for 5% of total payments to outlier episodes)

3 (See Section II.A.3 for description of calculation of OASIS Adjustment cost)

CALCULATION FOR NON ROUTINE MEDICAL SUPPLIES PER-VISIT AMOUNT INCLUDED IN THE HOME HEALTH BENEFIT

Non routine medical supplies included in the home

health benefit and reported

as costs on the cost report 1

Total number of visits for

those providers in the audited cost report sample 2

Average cost per visit for

non routine medical supplies included in the home

health benefit and reported

as costs on the cost report

Market basket update factor to FY 2001 3

Updated average cost per

visit for non routine medical supplies included in

the home health benefit

and reported as costs on

the cost report

$234,547,615 145,658,396 $1.61 1.0643 $1.71

1Source: Audited Cost Report Data from the audit sample updated to FY 2001 and weighted to National Totals.

2Source: Calendar Year 1998 Episode file.

3 Cumulative Market Basked Update Factor for years 1999–2001.

CALCULATION FOR NON ROUTINE MEDICAL SUPPLIES PER-VISIT AMOUNT POSSIBLY UNBUNDLED AND BILLED UNDER PART

B

Non routine medical supplies possibly unbundled

and billed separately to

part B and reimbursed on

the fee schedule 1

Total number of visits for

all providers in the calendar year 1998 file 2

Average payment per visits for non routine medical

supplies possibly

unbundled and billed separately to part B

DME fee schedule update

to FY 2001 3

Updated average payment

per visits for non routine

medical supplies possibly

unbundled and billed separately to part B

$37,526,132.26 163,208,000 $0.23 1.0 $0.23

1Source: 1998 National Claims History Part B file extract for 178 codes matched to the 60-day episode file by beneficiary and dates of service. 2Source: Calendar Year 1998 Episode file.

3There exists no update to the DME Fee Schedule affecting Non Routine Medical Supplies for years 1999–2001.

CALCULATION FOR ONE-TIME OASIS SCHEDULING IMPLEMENTATION FOR FORM CHANGES

Total cost for OASIS scheduling implementation change 1Total number of visits for all providers in the

calendar year 1998 file 2

Average payment per visits for part B therapies possibly unbundled and billed separately

to part B physician/supplier

$33,939,878 .50 163,208,000 $0.21

1Episode Rate for OASIS Scheduling Implementation Change ($5.50) / the total number of episodes in 1998 (6,170,887).

2 Calendar year 1998 Episode File.

E. Methodology Used for Outlier

Payments

As discussed above, while we are not

statutorily required to make provisions

for outlier payments, we are establishing

outlier payments. Outlier payments are

payments made in addition to regular

60-day case-mix-adjusted episode

payments for episodes that incur

unusually large costs due to patient

home health care needs. Outlier

payments are made for episodes whose

estimated cost exceeds a threshold

amount for each HHRG. The outlier

threshold for each HHRG is defined as

the 60-day episode payment for the

HHRG plus a fixed dollar loss amount

that is the same for all case-mix groups.

Outlier payments are made for 60-day

episode payments that reflect a PEP

adjustment or SCIC adjustment. The

PEP adjustment results in a truncated

episode period and a SCIC adjustment

results in a total of the proportional

payments over a 60-day episode, but

these periods could still incur unusually

large costs. The outlier threshold for the

PEP adjustment is the PEP adjustment

plus the fixed dollar loss. The outlier

threshold for the SCIC adjustment

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41189

equals the total SCIC payment plus a

fixed dollar loss. The wage adjusted

component discussed below will be

applied consistently for the 60-day

episode payment, the PEP adjustment,

and the total SCIC adjustment. The

outlier payment is defined to be a

proportion of the wage adjusted

estimated costs beyond the wage

adjusted threshold. The threshold

amount is the sum of the wage and casemix adjusted PPS episode amount and

the wage-adjusted fixed dollar loss

amount. The proportion of additional

costs paid as outlier payments is

referred to as the loss-sharing ratio.

The fixed dollar loss amount and the

loss-sharing ratio are chosen so that

estimated total outlier payments are 5

percent of total episode payments. The

5 percent constraint on total outlier

payments creates a tradeoff between the

values selected for the fixed dollar loss

amount and the loss-sharing ratio. For a

given level of outlier payments, a higher

fixed dollar loss amount reduces the

number of cases that receive outlier

payments, but makes it possible to

select a higher loss-sharing ratio and,

therefore, increase outlier payments per

episode. Alternatively, a lower fixed

dollar loss amount means that more

episodes qualify for outlier payments,

but outlier payments per episode must

be lower. Therefore, setting these two

parameters involves policy choices

about the number of outlier cases and

their rate of payment.

We initially proposed a loss sharing

ratio of .60 and a fixed dollar loss of

1.07 times the national standard episode

payment amount. For the proposed rule,

we estimated that with these variables,

7.5 percent of total episodes would have

qualified for an outlier payment while

holding total outlier outlays at 5 percent

of outlays in a given fiscal year. In

response to comments, we are

increasing the loss sharing ratio from

0.60 to 0.80 to provide greater

compensation for the episodes that

qualify for outlier payments. We believe

that this change is appropriate and will

continue to monitor the impacts of the

outlier policy under PPS

implementation.

The simulations conducted for the

proposed rule found that a loss sharing

ratio of 0.80 would require a fixed dollar

loss ratio of 1.35. We have rerun these

simulations using the expanded and

updated Abt data and are making some

refinements in our simulation methods.

The new simulations also reflect the

refinements for wound cases that have

been incorporated into the case-mix

system. The results of the new

simulations indicate that a fixed dollar

loss ratio of 1.13 is consistent with a

loss sharing ratio of 0.80. With these

parameters, we estimate that about 6.8

percent of episodes would qualify for

outlier payments with total outlier

outlays equal to the required 5 percent.

In estimating the final outlier policy

parameters, we examined OASIS data

from the national repository, an episode

data set created from 1998 Medicare

home health claims, and an updated

and expanded data set from the Abt

case-mix study. As noted in our

discussion of standardization, we

compared the OASIS and the Abt data

in terms of the responses to the 18

OASIS items used for case-mix

classification and in terms of the

distribution of episodes across the

HHRGs. We also compared the Abt and

the 1998 episode data and found that

the estimated cost distribution based on

the pattern of visits within episodes was

very similar in both sets of data. These

comparisons increased our confidence

in using the Abt data to simulate the

outlier policy parameters. In addition,

the Abt data is the most complete data

currently available for estimating outlier

policy variables. It contains information

on all 80 HHRGs and a measure of

resource cost for each episode. The Abt

data set used for the final outlier policy

is about 15 percent larger than the data

set that was used for the estimates in the

proposed rule.

The fixed dollar loss estimate was

based on simulations that calculated

PPS payments and costs for each

episode in the data set. Payments were

calculated twice, once for a PPS without

outlier payments and again for a PPS

with outlier payments. For the payment

system with outlier payments, the LUPA

and episode payment amounts were

deflated by 1.05. Using a loss sharing

ratio of 0.80, the simulation was

repeated until a fixed dollar loss ratio

was found that resulted in (1) equal total

payments for the PPS with and without

outlier payments, and (2) total outlier

payments equal to 5 percent of total

payments, including outlier payments.

In addition, payment amounts were set

to equate total payments and total costs.

Because the Abt data does not represent

all wage areas of the country, the

simulations did not apply the wage

index adjustments that will be applied

to actual outlier payments. It was not

possible to account for PEP or SCIC

adjustments in the simulations.

Simulations were performed to obtain

the most reasonable estimates possible

of the fixed dollar loss ratio consistent

with the 5 percent outlier payment

target. Based on the experience of the

Phase II per-episode prospective

payment demonstration and the interim

payment system, we were concerned

that agencies may reduce utilization for

high-cost episodes in response to the

budget neutral episode payment rate. If

our simulations failed to account for

such reductions, the simulations might

overestimate agencies’ losses and lead

us to set the fixed dollar loss amount

higher than necessary to meet the 5

percent target. We incorporated

estimates of cost reduction into our

simulations that resulted in a lower

fixed dollar loss ratio lower than would

have been chosen otherwise. In general,

we assumed that any reduction in

payment rates below the level of the

mean cost would be matched by a cost

reduction of equal percentage.

Simulations were also performed to

test the sensitivity of the fixed dollar

loss to alternative proportions of LUPA

episodes. LUPAs can affect the fixed

dollar loss ratio consistent with a 0.8

loss sharing ratio. Because they are paid

much less than regular episodes,

substantial differences in their

frequency can affect estimated total

payments. Due to the asymmetric

impacts on outlier and total payments,

variations in the frequency of LUPAs

could potentially lead to either

overestimation or underestimation of

the 5 percent outlier target.

LUPAs comprise 11.6 percent of the

episodes in the Abt data used for the

outlier simulations. Given the

incentives under the PPS to obtain the

60-day episode payment rather than the

LUPA payment, we believe that 11.6

percent overestimates the frequency of

LUPAs that are likely to occur under

PPS. As a result, we simulated the

outlier policy under alternative

percentage of LUPA episodes.

It is also worth noting that the casemix refinements for wound cases

improved regular episode payments and

reduced the need for outlier payments

for these cases.

The following is a case for illustrative

purposes only. An HHA serves a

Medicare beneficiary in State College

PA. The HHA determines the patient is

in HHRG C2F2S2. The patient had

physician orders for and received 55

skilled nursing visits and 40 home

health aide visits during the 60-day

episode.

1. Calculation of the Wage-Adjusted

Outlier Threshold

The Wage-Adjusted Outlier Threshold

Amount is the sum of the Wage and

Case-Mix Adjusted 60-Day Episode

Amount and the Wage-Adjusted Fixed

Dollar Loss Amount.

a. Calculate Case-Mix and WageAdjusted Episode = $3,855.31

Case-Mix Weight = 1.9532

41190 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

Standard 60-Day Prospective Episode

Payment Amount = $2,115.30

Calculate the Case-Mix Adjusted

Episode Payment

Multiply the Standard 60-Day

Prospective Episode Payment

Amount by the Applicable CaseMix Weight = (1.9532 * $2,115.30)

= $4,131.60

Divide the Case-Mix Adjusted Episode

Payment into the Labor and NonLabor Portions

Labor Portion = (.77668 * $4131.60) =

$3,208.93

Wage-Adjust the Labor Portion by

Multiplying the Labor Portion by

the Wage Index Factor (.9139 *

$3,208.93) = $2,932.64

Calculate Non-Labor Portion = (.22332 *

$4,131.60) = $922.67

Add Wage-Adjusted Labor Portion to

Non-Labor Portion to Calculate the

Total Case-Mix and Wage-Adjusted

Episode Payment = (2,932.64 +

$922.67) = $3,855.31

b. Calculate Wage-Adjusted Fixed Dollar

Loss Amount = $2,230.45

Fixed Dollar Loss Amount = Standard

60-Day Episode Payment Multiplied

by 1.13 ($2115.30 * 1.13) =

$2,390.29

Divide Fixed Dollar Loss Amount into

Labor and Non Labor Portions:

Calculate Labor Portion of Fixed Dollar

Loss Amount = (.77668 * $2,390.29)

= $1,856.49

Wage Adjust the Labor Portion by

Multiplying the Labor Portion of the

Fixed Dollar Loss by Multiplying

the Labor Portion of the Fixed

Dollar Loss Amount by the Wage

Index (.9139 * $1,856.49) =

$1,696.65

Calculate Non-Labor Portion of Fixed

Dollar Loss Amount = (.22332 *

$2,390.29) = $533.80

Calculate Total Wage Adjusted Fixed

Dollar Loss Amount by adding the

wage adjusted portion of the fixed

dollar loss amount to the non labor

portion of the fixed dollar loss

amount ($1,696.65 + $533.80) =

$2,230.45

Wage-Adjusted Outlier Threshold =

Case-Mix and Wage-Adjusted

Episode Amount + Wage Adjusted

Fixed Dollar Loss Amount =

($3,855.31 + $2,230.45) = $6,085.76

2. Calculate the Wage-Adjusted Imputed

Cost of the Episode

Multiply the total number of visits by

the national average per-visit

amounts listed in Table 6.

55 skilled nursing visits * $95.79

(national average per skilled

nursing visit cost) = $5,268.45

40 home health aide visits * $43.37

(national average per home health

aide visit cost) = $1,734.80

Calculate the wage-adjusted labor and

non-labor portions for the imputed

skilled nursing visit costs

Labor Portion = ($5,268.45* .77668) =

$4,091.90

Adjust the labor portion by the wage

index

Wage Adjusted Skilled Nursing Labor

Portion = ($4,091.90 * .9139) =

$3,739.59

Wage Adjusted Skilled Nursing Labor

Portion = $3,739.59

Calculate the Skilled Nursing Non-Labor

Portion

Non-Labor Portion = ($5,268.45 *

.22332) = $1,176.55

Non-Labor Skilled Nursing Portion =

$1,176.55

Total Wage Adjusted Imputed Costs for

Skilled Nursing Visits = $4,916.14

(Wage Adjusted Skilled Nursing Labor

Portion of $3,739.59 + Non-Labor

Skilled Nursing Portion of

$1,176.55) = $ 4,916.14

Calculate the wage adjusted labor and

non-labor portions for the imputed

home health aide visit costs

Labor Portion = ($1,734.80 * .77668) =

$1,347.38

Adjust the labor portion by the wage

index

Wage Adjusted Home Health Aide Labor

Portion = ($1,347.38 * .9139) =

$1,231.37

Wage Adjusted Home Health Aide Labor

Portion = $1,231.37

Calculate the Home Health Aide NonLabor Portion

Non-Labor Portion = ($1,734.80 *

.22332) = $387.42

Non-Labor Home Health Aide Portion =

$387.42

Total Wage Adjusted Imputed Costs for

Home Health Aide Visits =

$1,618.79

(Wage Adjusted Home Health Aide

Labor Portion of $1,231.37 + NonLabor Home Health Aide Portion of

$387.42) = $ 1,618.79

Total Wage Adjusted Imputed Costs for

Skilled Nursing and Home Health

Visits During the 60 Day Episode =

($4,916.14 + $1,618.79) = $ 6,534.93

3. Calculate the Amount Absorbed by

the HHA in Excess of the Outlier

Threshold Subtract the Outlier

Threshold from the Total Wage

Adjusted Imputed Per-Visit Costs for the

Episode

$6534.93 (Total Imputed Wage Adjusted

Per-Visit Costs)—$6,085.76 (Outlier

Threshold) = $449.17

Imputed Amount in Excess of the

Outlier Threshold = $449.17

4. Calculate Outlier Payment by

Multiplying the Imputed Amount in

Excess of the Outlier Threshold

Absorbed by the HHA By the Loss

Sharing Ratio (80%)

($449.17 (Imputed Amount in Excess of

the Outlier Threshold Absorbed by

the HHA * .80 (Risk Sharing Ratio)

= $359.34

Outlier Payment = $359.34

The HHA in this illustrative example

would receive the total case-mix

and wage adjusted 60-day episode

payment of $3,855.31 plus the

additional outlier payment of

$359.34

Total Payment (Episode & Outlier

Payment) = ($3,855.31 + 359.34) =

$4,214.65

F. Examples of National Standardized

60-Day Episode Payment Amounts and

Low-Utilization Payment Adjustments

For any HHRG group, to compute a

case-mix and wage-adjusted 60-day

episode prospective payment amount,

the standardized prospective payment

rate for FY 2001 (see Table 5 of this

regulation) is multiplied by the case-mix

index from Table 9 for that HHRG

group. To compute a wage-adjusted

national 60-day episode payment, the

labor-related portion of the 60-day

national prospective payment rate for

FY 2001 is multiplied by the HHA’s

appropriate wage index factor listed in

Table 4A or 4B. The product of that

calculation is added to the

corresponding nonlabor-related

component. The resulting amount is the

national case-mix and wage-adjusted 60-

day episode prospective payment rate

for FY 2001.

Example 1. An HHA is providing services to a Medicare beneficiary in State College, PA. The HHA determines

the beneficiary is in HHRG C2F2S2.

COMPUTATION OF CASE-MIX AND WAGE ADJUSTED PROSPECTIVE PAYMENT AMOUNT

Case-mix index from Table 9 for case-mix group ................................................................................... 1.9532

Standardized Prospective Payment Rate for FY 2001 ........................................................................... $2,115.30

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41191

COMPUTATION OF CASE-MIX AND WAGE ADJUSTED PROSPECTIVE PAYMENT AMOUNT—Continued

Calculate the Case-Mix adjusted Prospective Payment Rate for FY 2001 ............................................ (1.9532 * $2,115.30) $4,131.60

Calculate the Labor portion of the Prospective Payment Rate for FY 2001 .......................................... (.77668 * $4,131.60) $3,208.93

Apply wage index factor from Table 4B for patient in State College, PA ............................................... (0.9139 * $3,208.93) $2,932.64

Calculate the Non-Labor portion of the Prospective Payment Rate for FY 2001 ................................... (.22332 * $4,131.60) $922.67

Calculate Total Prospective Payment Rate for FY 2001 by adding the labor and non labor portion of

the case-mix and wage index amounts ............................................................................................... ($2,932.64 + $922.67) $3,855.31

Example 2. An HHA serves a beneficiary who resides in Lake Placid, NY. The HHA determines the patient is

in HHRG C1F4S3.

COMPUTATION OF CASE-MIX AND WAGE ADJUSTED PROSPECTIVE PAYMENT AMOUNT

Case-mix index from Table 9 for case-mix group ................................................................................... 2.2360

Standardized Prospective Payment Rate for FY 2001 ........................................................................... $2,115.30

Calculate the Case-Mix adjusted Prospective Payment Rate for FY 2001 ............................................ (2.2360 * $2,115.30) $4,729.81

Calculate the Labor portion of the Prospective Payment Rate for FY 2001 .......................................... (.77668 * $4,729.81) $3,673.55

Apply wage index factor from Table 4A for patient in Lake Placid, NY .................................................. (0.8637 * $3,673.55) $3,172.85

Calculate the Nonlabor portion of the Prospective Payment Rate for FY 2001 ..................................... (.22332 * $4,729.81) $1,056.26

Calculate Total Prospective Payment Rate for FY 2001 by adding the labor and nonlabor portion of

the case-mix and wage index amounts ............................................................................................... ($3,172.85 + $1,056.26) $4,229.11

Example 3. HHA serves a beneficiary who resides in Fort Collins, CO. The HHA determines the beneficiary is

in HHRG C3F0S0.

COMPUTATION OF CASE-MIX AND WAGE ADJUSTED PROSPECTIVE PAYMENT AMOUNT

Case-mix index from Table 9 for case-mix group ................................................................................... 1.1973

Standardized Prospective Payment Rate for FY 2001 ........................................................................... $2,115.30

Calculate the Case-Mix adjusted Prospective Payment Rate for FY 2001 ............................................ (1.1973 * $2,115.30) $2,532.65

Calculate the Labor portion of the Prospective Payment Rate for FY 2001 .......................................... (.77668 * $2,532.65) $1,967.06

Apply wage index factor from Table 4B for patient in Fort Collins, CO .................................................. (1.0303 * $1,967.06) $2,026.66

Calculate the Non-Labor portion of the Prospective Payment Rate for FY 2001 ................................... (.22332 * $2,532.65) $565.59

Calculate Total Prospective Payment Rate for FY 2001 by adding the labor and non labor portion of

the case-mix and wage index amounts ............................................................................................... ($2,026.66 + $565.59) $2,592.25

Example 4. HHA serves a beneficiary who resides in Grand Forks, ND. The HHA determines the beneficiary is

in HHRG C0F3S1.

COMPUTATION OF CASE-MIX AND WAGE ADJUSTED PROSPECTIVE PAYMENT AMOUNT

Case-mix index from Table 9 for case-mix group ................................................................................... .8438

Standardized Prospective Payment Rate for FY 2001 ........................................................................... $2,115.30

Calculate the Case-Mix adjusted Prospective Payment Rate for FY 2001 ............................................ (.8438 * $2,115.30) $1,784.89

Calculate the Labor portion of the Prospective Payment Rate for FY 2001 .......................................... (.77668 * $1,784.89) $1,386.29

Apply wage index factor from Table 4B for patient in Grand Forks, ND ................................................ (0.9098 * $1,386.29) $1,261.25

Calculate the Non-Labor portion of the Prospective Payment Rate for FY 2001 ................................... (.22332 * $1,784.89) $398.60

Calculate Total Prospective Payment Rate for FY 2001 by adding the labor and non labor portion of

the case-mix and wage index amounts ............................................................................................... ($1,261.25 + $398.60) $1,659.85

Example 5. An HHA in Baltimore, MD assigns a patient to an HHRG at the start of a 60-day episode. The claim

for the patient indicates that only two visits (one skilled nursing and one home health aide) were furnished during

the 60-day episode. The HHA would be paid the low-utilization payment adjustment. Any necessary adjustment to

the request for advance payment for the episode would be made on subsequent claims for the HHA.

COMPUTATION OF WAGE INDEX ADJUSTED LOW UTILIZATION PAYMENT

Number and visit discipline type

Final wage

standardized

and budget

neutral pervisit payment

amounts per

60-day episode for FY

2001 1

1 Skilled Nursing Visit ....................................................................................................................................................................... $95.791

2 Home Health Aide Visit .................................................................................................................................................................. 43.371

1See Table 6 for the Calculation of Final Wage Standardized and Budget Neutral Per-Visit Payment Amounts Per 60-Day Episode for FY

2001.

41192 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

Calculate the labor portion of the Standardized Budget Neutral Per-Visit Payment Amount for 1

Skilled Nursing Visit ............................................................................................................................. (.77668 * $95.79) $74.40

Apply wage index factor from Table 4B for Baltimore, MD ..................................................................... (.9892 * $74.40) 73.60

Calculate the non-labor portion of the Standardized Budget Neutral Per-Visit Payment Amount for 1

Skilled Nursing Visit ............................................................................................................................. (.22332 * $95.79) 21.39

SUBTOTAL—Low Utilization Payment for 1 Wage Adjusted Skilled Nursing Visit rendered in a 60-

day episode .......................................................................................................................................... ($73.60 + $21.39) 94.99

Calculate the labor portion of the Standardized Budget Neutral Per-Visit Payment Amount for 1

home health aide visit .......................................................................................................................... (.77668 * $43.37) 33.69

Apply wage index factor from Table 4B for Baltimore, MD ..................................................................... (.9892*$33.69) 33.33

Calculate the non-labor portion of the Standardized Budget Neutral Per-Visit Payment Amount for 1

home health aide visit .......................................................................................................................... (.22332 * $43.37) 9.69

SUBTOTAL—Low Utilization Payment for 1 wage adjusted home health aide visit rendered in a 60-

day episode .......................................................................................................................................... ($33.33 + $9.69) 43.02

Calculate Total Low Utilization Payment Adjustment for 2 visits provided during the 60-day episode

by adding the wage adjusted skilled nursing visit and the wage adjusted home health aide visit ..... ($94.99 + $43.02) 138.01

G. Design and Methodology for CaseMix Adjustment of 60-Day Episode

Payments

1. Revisions to the Case-Mix

Classification System

In the proposed rule, we described a

home health case-mix system developed

under a research contract with Abt

Associates, Inc., of Cambridge,

Massachusetts. The case-mix system

uses selected data elements from the

OASIS assessment instrument and an

additional data element measuring

receipt of at least 10 visits for therapy

services. The data elements are

organized into three dimensions to

capture clinical severity factors,

functional severity factors, and services

utilization factors influencing case-mix.

In the clinical and functional

dimensions, each data element is

assigned a score value derived from

multiple regression analysis of the Abt

research data. The score value measures

the impact of the data element on total

resource use. Scores are also assigned to

data elements in the services utilization

dimension. To find a patient’s case-mix

group, the case-mix grouper sums the

patient’s scores within each of the three

dimensions. The resulting sum is used

to assign the patient to a severity level

on each dimension. There are four

clinical severity levels, five functional

severity levels, and four services

utilization severity levels. Thus, there

are 80 possible combinations of severity

levels across the three dimensions. Each

combination defines one of the 80

groups in the case-mix system. For

example, a patient with high clinical

severity, moderate functional severity,

and low services utilization severity is

placed in the same group with all other

patients whose summed scores place

them in the same set of severity levels

for the three dimensions.

The initial Abt Associates sample

used to develop the system described in

the proposed rule was subsequently

augmented for a first round of

refinements, as described in the

proposed rule. Following publication of

the proposed rule, we augmented the

Abt Associates sample with the

remaining outstanding data from the 90

participating agencies, with the

intention of re-estimating the case-mix

relative weights based on the latest,

most complete data available. We also

pursued another round of refinements to

the system using the augmented data, in

response to public comments we

received. The sample for this phase of

refinements consisted of 19,204 initial

episodes from the 90 agency

participants.

The public comments on case-mix are

summarized with our responses

elsewhere in the rule. Below we

describe the process we used to revise

the case-mix system and the results. The

revised case-mix model and scoring

system are summarized in Table 7,

‘‘Home Health Resource Group Casemix Classification Decision Tree Logic.’’

Test of newly added data. Before

pursuing statistical modeling in

response to comments, we checked the

data newly added from the participating

agencies for consistency with the

previous data base. This involved reestimating the regression equations that

determined the scores, adding

observations from the augmented, final

sample. The results were consistent

with the scores in the proposed rule.

Additionally, we retested a short list of

variables that were eliminated from the

case-mix model at the end of the first

round of refinements because of

statistical insignificance. Upon

retesting, they were still found to be

statistically insignificant.

Investigation of wound-related

variables. In response to comments from

the public, indicating that certain

wound care patients had costs higher

than predicted by the case-mix model,

we returned to the wound-related

variables available on the OASIS for reinvestigation. We used the learning

subsample from the final, augmented

sample. We tested three types of

changes: Re-defining wound variables,

adding more wound-related variables,

and adding variables to represent

interactions of wound variables with

other variables. Interactions capture

additional potential sources of severity

or cost impact associated with certain

types of wound patients. For example,

patients who have certain diagnoses

may be more susceptible to slow-healing

wounds.

The statistical results suggested we

could make meaningful score

distinctions and create additional levels

for the variables measuring the status of

stasis ulcers and surgical wounds. In the

proposed rule, the clinical dimension

distinguished two statuses for the most

problematic observable stasis ulcer—not

healing (score=24) and all other statuses

including no ulcer (score=0). The

refined definition defines three

statuses—early/partial granulation

(score=14), not healing (score=22), and

all other statuses including no

observable ulcer (score=0). The

proposed rule defined two statuses for

the most problematic observable

surgical wound—early/partial

granulation or not healing (score=10)

and all other statuses including no

observable surgical wound (score=0).

The refined definition defines three

statuses—early/partial granulation

(score=7), not healing (score=15), and

all other statuses including no

observable surgical wound (score=0).

We also retested the variables

measuring pressure ulcers. We found no

contribution to the model from adding

variables measuring the status of

pressure ulcers when the stage of the

most problematic observable pressure

ulcer was already in the model. We also

determined that defining status levels

beyond the three included in the

proposed rule did not produce

meaningful differences in the scores.

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41193

Therefore, the final rule model

continues to define three levels: stage 1

or 2 (score=15), stage 3 or 4 (score=36),

and all other (including no pressure

ulcer and no observable pressure ulcer)

(score=0). In addition, we tested

whether the number of pressure ulcers

made an independent contribution to

explaining resource use. We found that

having more than one pressure ulcer

was a significant predictor of resource

use when the multiple ulcers were stage

3 or 4. Therefore, the model in the final

rule includes a variable adding 17

points if the patient has two or more

stage 3 or 4 pressure ulcers.

We tested a general variable that

measured the presence of any kind of

open wound, decubitus ulcer, stasis

ulcer, or surgical wound, based on an

affirmative answer to M0445 (does

patient have a pressure ulcer?), M0468

(does patient have a stasis ulcer?),

M0482 (does patient have a surgical

wound), or reporting of wound

diagnosis codes in M0230 (primary

home care diagnosis). This variable did

not contribute statistically significant

explanatory power when added to the

model containing the other wound

variables. However, we also tested

separately a variable identifying burn or

trauma patients with skin lesions or

open wounds, identified from M0230

(primary diagnosis) and M0440 (does

this patient have a skin lesion or an

open wound?). This variable did

contribute significantly and has been

added to the model. The score for this

variable is 21. The burn and trauma

diagnosis code categories are shown in

Table 8B.

In addition, we examined the impact

of selected diagnoses that may be

associated with difficult-to-heal

wounds, including diabetes,

atherosclerosis, peripheral vascular

disease, and heart failure. We tested

whether patients with these diagnoses

should be assigned a higher score for

their wound severity. Most results were

not statistically significant. A few

results were inconsistent across

measures of wound severity. We also

tested a variable measuring whether

limited mobility results in higher cost

impact for severe pressure ulcers, but

this variable did not contribute

significantly to the model after all other

variables were included. The reasons for

the weak results and inconsistency are

unclear, and we did not make any of

these changes to the clinical dimension.

We will continue to study these types of

issues during further refinement work

on larger samples with more detailed

diagnostic data.

Differences between the clinical

dimension scores in the proposed rule

and the final rule are generally small.

Differences that do exist are attributable

to our use of an augmented sample and

the use of new variables related to

wounds. In our model-building

methodology, the scores in the

functional dimension depend on results

of the regression for deriving the clinical

dimension scores. New scores for the

functional dimension are very similar to

the proposed-rule functional scores.

Differences that do exist are attributable

to the above-mentioned changes to the

clinical dimension. The changes in

functional scoring lead to a slightly

different set of severity-score level

intervals compared to the functional

scoring in the proposed rule. The

functional severity-score intervals are

now minimal severity: 0–2; low

severity: 3–15; moderate severity: 16–

23; high severity: 24–29; maximum

severity: 30+. The frequency

distribution of the sample observations

across the functional severity levels is

essentially unchanged.

We validated the revised scoring for

the clinical and functional dimensions

using the validation subsample of the

final, augmented sample. The results

supported the scoring system developed

with the learning subsample.

Re-examination of severity levels in

clinical dimension. In response to

several comments on wound-care

patients, we refined the severity-score

intervals in the clinical dimension to

better differentiate patients who are

clinically most severe from remaining

patients. The revised score intervals are

as follows: minimal severity: 0–7; low

severity: 8–19; moderate severity: 20–

40; high severity: 41+. To determine the

refined severity-score intervals, we used

the same process we followed in

developing the case-mix system

initially. We examined the array of

scores for natural clustering and the

impact of alternative sets of intervals on

the proportion of variation explained by

the model (R-squared). We also

considered increases in the imbalance of

the population across severity levels.

The refined severity score intervals do

result in more imbalance. The relative

frequencies in the Abt sample for the

revised clinical severity levels are 30

percent, 36 percent, 28 percent, 6

percent, for minimal, low, moderate,

and high clinical severity, respectively.

In contrast, the previous model’s

corresponding percentages were 30

percent, 30 percent, 23 percent, 17

percent. However, this change has also

generally resulted in higher case-mix

relative weights for the case-mix groups

involving moderate and high clinical

severity, where the most severe wound

patients are likely to be found. It has

also resulted in a wider range of weights

for therapy-threshold case-mix groups

and non-therapy-threshold case-mix

groups.

Comparison with the earlier model.

All combined, the refinements made to

the case-mix model cause a modest

improvement in explanatory power. The

proportion of variation explained (Rsquared) is now .34, compared to .32 for

the model in the proposed rule. The

model now provides for more adequate

payment for wound care patients. Some

of these high-cost patients would have

been assigned to a different group under

the model we presented in the proposed

rule. Their removal from those earlier

groups potentially results in a lower

average cost, and lower case-mix

weight, for those groups. We examined

the impact on the array of relative casemix weights across the case-mix groups.

For the most part, we find generally

small changes in the individual weights

other than the weights for groups

involving the moderate and high

clinical severity levels.

The case-mix system will continue to

be studied and refined in future years.

Larger and better data resources, and

information accumulated from users

like those who commented, will both

contribute to the evolution of the

system.

2. Diagnosis Coding Changes in the

Revised Case-Mix Model

When we published the proposed

rule, we listed ICD–9–CM three-digit

diagnosis category codes to identify

orthopedic, neurologic, and diabetes

diagnoses recognized in the clinical

dimension. The scores associated with

these diagnoses were based on analysis

of the OASIS primary diagnosis item

(M0230). A commenter pointed out that

certain diagnoses within the category

codes we listed should never be

reported as primary diagnoses,

according to ICD–9–CM coding rules

and official coding guidelines. These

diagnoses must be used with a highercoded diagnosis that indicates the

underlying disease. The affected

category codes are 711, 712, 713, 720,

730, 731, 320, 321, 323, 330, 331, 334,

336, 337, 357, 358.

Accordingly, we have revised the

diagnosis coding list. The revised list

shows the complete code for the

affected category codes, and is divided

into two sections, one for primary

diagnoses and one for secondary

diagnoses (see Table 8A). The case-mix

system will recognize the appropriate

score for a diagnosis that should never

be reported as a primary diagnosis,

provided that the diagnosis appears as

the first OASIS secondary diagnosis

41194 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

(line b, under OASIS M0240) and that

the code shows all digits required by

ICD–9–CM coding guidelines.

Remaining diagnoses from the affected

categories must appear as the primary

diagnosis (line a, under OASIS M0230)

and the code must show all digits

required by ICD–9–CM coding rules.

The case-mix system will not recognize

remaining diagnoses from the affected

categories if they appear as a secondary

diagnosis on the OASIS record. Nor will

it recognize diagnoses that must never

be reported as primary if they are placed

on the primary diagnosis line (line a,

M0230).

The refined case-mix system

recognizes burns and trauma primary

diagnoses, if the OASIS item M0440

shows the patient has a skin lesion or

open wound. The diagnosis code

categories for burns and trauma

diagnoses included in the case-mix

system are shown in Table 8B.

A lack of specificity in diagnosis code

assignment may be a hindrance to casemix refinement. Agencies that

voluntarily code all diagnoses to the

complete four- or five-digit level in

accordance with ICD–9–CM coding

rules would help us in subsequent

review and examination of the case-mix

methodology.

TABLE 7.—HOME HEALTH RESOURCE GROUP CASE-MIX CLASSIFICATION DECISION TREE LOGIC

Clinical severity domain

OASIS+ Item Description Value Scoring

M0230/M0240 ......................... Primary home care diagnosis

(or initial secondary diagnosis ONLY for selected

ICD-9 manifestation codes).

—credit only the single highest value:

If Orthopedic diagnostic group (DG)*, add 11 to score

If Diabetes DG*, add 17 to score

If Neurological DG*, add 20 to score

Min = 0–7

Low = 8–19

Mod = 20–40

High = 41+

M0250 ..................................... IV/Infusion/Parenteral/Enteral

Therapies.

—credit only the single highest value:

If box 1, add 14 to score

If box 2, add 20 to score

If box 3, add 24 to score

M0390 ..................................... Vision ..................................... If box 1 or 2, add 6 to score

M0420 ..................................... Pain ........................................ If box 2 or 3, add 5 to score

M0440 ..................................... Wound/Lesion ........................ If box 1 and M0230 is Burn/Trauma DG*, add 21 to score

M0450 ..................................... Multiple pressure ulcers ......... If 2 or more stage 3 or 4 pressure ulcers, add 17 to score

M0460 ..................................... Most problematic pressure

ulcer stage.

If box 1 or 2, add 15 to score

If box 3 or 4, add 36 to score

M0476 ..................................... Stasis ulcer status ................. If box 2, add 14 to score

If box 3, add 22 to score

M0488 ..................................... Surgical wound status ........... If box 2, add 7 to score

If box 3, add 15 to score

M0490 ..................................... Dyspnea ................................. If box 2, 3 or 4, add 5 to score

M0530 ..................................... Urinary incontinence .............. If box 1 or 2, add 6 to score

M0540 ..................................... Bowel incontinence ................ If box 2–5, add 9 to score

M0550 ..................................... Bowel ostomy ........................ If box 1 or 2, add 10 to score

M0610 ..................................... Behavioral Problems .............. If box 1–6, add 3 to score

*See table for ICD9–CM codes included in each diagnosis group (DG)

Functional status domain

OASIS+ Item Description Value Scoring

M0650 (current) .......................

M0660 (current)

Dressing ................................. If M0650 = box 1, 2 or 3

Or " add 4 to score

M0660 = box 1, 2 or 3

Min = 0–2

Low = 3–15

Mod = 16–23

M0670 (current) ....................... Bathing ................................... If box 2, 3, 4 or 5 add 8 to score High = 24–29

M0680 (current) ....................... Toileting ................................. If box 2–4, add 3 to score Max = 30+

M0690 (current) ....................... Transferring ............................ If box 1, add 3 to score

If box 2–5, add 6 to score

M0700 (current) ....................... Locomotion ............................ If box 1 or 2, add 6 to score

.................................................. ................................................ If box 3–5, add 9 to score

Service utilization domain

Variable Description Value Scoring

M0170—line 1 ......................... No Hospital discharge past 14

days.

If box 1 IS BLANK, add 1 to score Min = 0–2

M0170—line 2 or 3 ................. Inpatient rehab/SNF discharge past 14 days.If box 2 or 3, add 2 to score Low = 3

Receipt of Therapy .................. 10 or more therapy visits ....... If yes, add 4 to score Mod = 4–6

High = 7

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41195

TABLE 8A.—DIAGNOSIS GROUPS IN THE CLINICAL DIMENSION

[Note: Codes shown at the 3-digit level include all the related 4- and 5-digit codes. Diagnoses coded with 4 or 5 digits must be coded as shown

to receive a score in the clinical dimension.]

Diagnosis group ICD–9–CM Code Description

Primary Diagnoses

DM .............................................................................................................. 250 DIABETES MELLITUS

NEURO ....................................................................................................... 013 CNS TUBERCULOSIS

NEURO ....................................................................................................... 045 ACUTE POLIOMYELITIS

NEURO ....................................................................................................... 046 CNS SLOW VIRUS INFECTION

NEURO ....................................................................................................... 047 ENTEROVIRAL MENINGITIS

NEURO ....................................................................................................... 048 OTH ENTEROVIRAL CNS DIS

NEURO ....................................................................................................... 049 OTH NONARTHROPOD CNS VIR

NEURO ....................................................................................................... 191 MALIGNANT NEOPLASM BRAIN

NEURO ....................................................................................................... 192 MAL NEO NERVE NEC/NOS

NEURO ....................................................................................................... 225 BENIGN NEO NERVOUS SYST

NEURO ....................................................................................................... 320.0 HEMOPHILUS MENINGITIS

NEURO ....................................................................................................... 320.1 PNEUMOCOCCAL MENINGITIS

NEURO ....................................................................................................... 320.2 STREPTOCOCCAL MENINGITI

NEURO ....................................................................................................... 320.3 STAPHYLOCOCC MENINGITIS

NEURO ....................................................................................................... 320.81 ANAEROBIC MENINGITIS

NEURO ....................................................................................................... 320.82 MNINGTS GRAM-NEG BCT NEC

NEURO ....................................................................................................... 320.89 MENINGITIS OTH SPCF BAC

NEURO ....................................................................................................... 320.9 BACTERIAL MENINGITIS NOS

NEURO ....................................................................................................... 322 MENINGITIS, UNSPECIFIED

NEURO ....................................................................................................... 323.5 POSTIMMUNIZAT ENCEPHALI

NEURO ....................................................................................................... 323.8 ENCEPHALITIS NEC

NEURO ....................................................................................................... 323.9 ENCEPHALITIS NOS

NEURO ....................................................................................................... 324 CNS ABSCESS

NEURO ....................................................................................................... 325 PHLEBITIS INTRCRAN SINU

NEURO ....................................................................................................... 326 LATE EFF CNS ABSCESS

NEURO ....................................................................................................... 330.0 LEUKODYSTROPHY

NEURO ....................................................................................................... 330.1 CEREBRAL LIPIDOSES

NEURO ....................................................................................................... 330.8 CEREB DEGEN IN CHILD NEC

NEURO ....................................................................................................... 330.9 CEREB DEGEN IN CHILD NOS

NEURO ....................................................................................................... 331.0 ALZHEIMER’S DISEASE

NEURO ....................................................................................................... 331.1 PICK’S DISEASE

NEURO ....................................................................................................... 331.2 SENILE DEGENERAT BRAIN

NEURO ....................................................................................................... 331.3 COMMUNICAT HYDROCEPHALU

NEURO ....................................................................................................... 331.4 OBSTRUCTIV HYDROCEPHALU

NEURO ....................................................................................................... 331.81 REYE’S SYNDROME

NEURO ....................................................................................................... 331.89 CEREB DEGENERATION NEC

NEURO ....................................................................................................... 331.9 CEREB DEGENERATION NOS

NEURO ....................................................................................................... 332 PARKINSON’S DISEASE

NEURO ....................................................................................................... 333 EXTRAPYRAMIDAL DIS NEC

NEURO ....................................................................................................... 334.0 FRIEDREICH’S ATAXIA

NEURO ....................................................................................................... 334.1 HERED SPASTIC PARAPLEGI

NEURO ....................................................................................................... 334.2 PRIMARY CEREBELLAR DEGE

NEURO ....................................................................................................... 334.3 CEREBELLAR ATAXIA NEC

NEURO ....................................................................................................... 334.8 SPINOCEREBELLAR DIS NEC

NEURO ....................................................................................................... 334.9 SPINOCEREBELLAR DIS NOS

NEURO ....................................................................................................... 335 ANT HORN CELL DISEASE

NEURO ....................................................................................................... 336.0 SYRINGOMYELIA

NEURO ....................................................................................................... 336.1 VASCULAR MYELOPATHIES

NEURO ....................................................................................................... 336.8 MYELOPATHY NEC

NEURO ....................................................................................................... 336.9 SPINAL CORD DISEASE NOS

NEURO ....................................................................................................... 337.0 IDIOPATH AUTO NEUROPATH

NEURO ....................................................................................................... 337.20 UNSP RFLX SYMPTH DYSTRP

NEURO ....................................................................................................... 337.21 RFLX SYM DYSTRPH UP LIM

NEURO ....................................................................................................... 337.22 RFLX SYM DYSTRPH LWR LM

NEURO ....................................................................................................... 337.29 RFLX SYM DYSTRPH OTH ST

NEURO ....................................................................................................... 337.3 AUTONOMIC DYSREFLEXIA

NEURO ....................................................................................................... 337.9 AUTONOMIC NERVE DIS NEC

NEURO ....................................................................................................... 340 MULTIPLE SCLEROSIS

NEURO ....................................................................................................... 341 OTHER CNS DEMYELINATION

NEURO ....................................................................................................... 342 HEMIPLEGIA

NEURO ....................................................................................................... 343 INFANTILE CEREBRAL PALSY

NEURO ....................................................................................................... 344 OTH PARALYTIC SYNDROMES

NEURO ....................................................................................................... 347 CATAPLEXY AND NARCOLEPS

NEURO ....................................................................................................... 348 OTHER BRAIN CONDITIONS

NEURO ....................................................................................................... 349 CNS DISORDER NEC/NOS

NEURO ....................................................................................................... 352 DISORDER CRAN NERVE NEC

NEURO ....................................................................................................... 356 HERED PERIPH NEUROPATHY

NEURO ....................................................................................................... 357.0 AC INFECT POLYNEURITIS

41196 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 8A.—DIAGNOSIS GROUPS IN THE CLINICAL DIMENSION—Continued

[Note: Codes shown at the 3-digit level include all the related 4- and 5-digit codes. Diagnoses coded with 4 or 5 digits must be coded as shown

to receive a score in the clinical dimension.]

Diagnosis group ICD–9–CM Code Description

NEURO ....................................................................................................... 357.5 ALCOHOLIC POLYNEUROPATH

NEURO ....................................................................................................... 357.6 NEUROPATHY DUE TO DRUGS

NEURO ....................................................................................................... 357.7 NEURPTHY TOXIC AGENT NEC

NEURO ....................................................................................................... 357.8 INFLAM/TOX NEUROPTHY NEC

NEURO ....................................................................................................... 357.9 INFLAM/TOX NEUROPTHY NOS

NEURO ....................................................................................................... 358.0 MYASTHENIA GRAVIS

NEURO ....................................................................................................... 358.2 TOXIC MYONEURAL DISORDE

NEURO ....................................................................................................... 358.8 MYONEURAL DISORDERS NEC

NEURO ....................................................................................................... 358.9 MYONEURAL DISORDERS NOS

NEURO ....................................................................................................... 392 RHEUMATIC CHOREA

NEURO ....................................................................................................... 430 SUBARACHNOID HEMORRHAGE

NEURO ....................................................................................................... 431 INTRACEREBRAL HEMORRHAG

NEURO ....................................................................................................... 432 INTRACRANIAL HEM NEC/NOS

NEURO ....................................................................................................... 433 PRECEREBRAL OCCLUSION

NEURO ....................................................................................................... 434 CEREBRAL ARTERY OCCLUS

NEURO ....................................................................................................... 435 TRANSIENT CEREB ISCHEMIA

NEURO ....................................................................................................... 436 CVA

NEURO ....................................................................................................... 437 OTH CEREBROVASC DISEASE

NEURO ....................................................................................................... 741 SPINA BIFIDA

NEURO ....................................................................................................... 742 OTH NERVOUS SYSTEM ANOM

NEURO ....................................................................................................... 851 CEREBRAL LACER/CONTUSION

NEURO ....................................................................................................... 852 MENINGEAL HEM FOLLOW INJ

NEURO ....................................................................................................... 853 OTH TRAUMATIC BRAIN HEM

NEURO ....................................................................................................... 854 OTHER BRAIN INJURY

NEURO ....................................................................................................... 907 LATE EFF NERV SYSTEM INJ

NEURO ....................................................................................................... 950 INJ OPTIC NERV/PATHWAYS

NEURO ....................................................................................................... 951 CRANIAL NERVE INJURY NEC

NEURO ....................................................................................................... 952 SPINAL CORD INJ W/O FX

NEURO ....................................................................................................... 953 INJ NERVE ROOT/SPIN PLEX

NEURO ....................................................................................................... 954 INJURY OTH TRUNK NERVE

NEURO ....................................................................................................... 955 INJ PERIPH NERV SHLD/ARM

NEURO ....................................................................................................... 956 INJ PERIPH NERV PELV/LEG

ORTHO ....................................................................................................... 170 MAL NEO BONE/ARTIC CART

ORTHO ....................................................................................................... 171 MAL NEO SOFT TISSUE

ORTHO ....................................................................................................... 213 BEN NEO BONE/ARTIC CART

ORTHO ....................................................................................................... 274 GOUT

ORTHO ....................................................................................................... 710 DIFF CONNECTIVE TISS DIS

ORTHO ....................................................................................................... 711.00 PYOGEN ARTHRITIS—UNSPEC

ORTHO ....................................................................................................... 711.01 PYOGEN ARTHRITIS—SHLDER

ORTHO ....................................................................................................... 711.02 PYOGEN ARTHRITIS—UP/ARM

ORTHO ....................................................................................................... 711.03 PYOGEN ARTHRITIS—FOREAR

ORTHO ....................................................................................................... 711.04 PYOGEN ARTHRITIS—HAND

ORTHO ....................................................................................................... 711.05 PYOGEN ARTHRITIS—PELVIS

ORTHO ....................................................................................................... 711.06 PYOGEN ARTHRITIS—L/LEG

ORTHO ....................................................................................................... 711.07 PYOGEN ARTHRITIS—ANKLE

ORTHO ....................................................................................................... 711.08 PYOGEN ARTHRITIS NEC

ORTHO ....................................................................................................... 711.09 PYOGEN ARTHRITIS—MULT

ORTHO ....................................................................................................... 711.90 INF ARTHRITIS NOS—UNSPE

ORTHO ....................................................................................................... 711.91 INF ARTHRITIS NOS—SHLDE

ORTHO ....................................................................................................... 711.92 INF ARTHRITIS NOS—UP/AR

ORTHO ....................................................................................................... 711.93 INF ARTHRIT NOS—FOREARM

ORTHO ....................................................................................................... 711.94 INF ARTHRIT NOS—HAND

ORTHO ....................................................................................................... 711.95 INF ARTHRIT NOS—PELVIS

ORTHO ....................................................................................................... 711.96 INF ARTHRIT NOS—L/LEG

ORTHO ....................................................................................................... 711.97 INF ARTHRIT NOS—ANKLE

ORTHO ....................................................................................................... 711.98 INF ARTHRIT NOS—OTH SIT

ORTHO ....................................................................................................... 711.99 INF ARTHRITIS NOS—MULT

ORTHO ....................................................................................................... 712.80 CRYST ARTHROP NEC—UNSPE

ORTHO ....................................................................................................... 712.81 CRYST ARTHROP NEC—SHLDE

ORTHO ....................................................................................................... 712.82 CRYST ARTHROP NEC—UP/AR

ORTHO ....................................................................................................... 712.83 CRYS ARTHROP NEC—FOREAR

ORTHO ....................................................................................................... 712.84 CRYST ARTHROP NEC—HAND

ORTHO ....................................................................................................... 712.85 CRYST ARTHROP NEC—PELVI

ORTHO ....................................................................................................... 712.86 CRYST ARTHROP NEC—L/LEG

ORTHO ....................................................................................................... 712.87 CRYST ARTHROP NEC—ANKLE

ORTHO ....................................................................................................... 712.88 CRY ARTHROP NEC—OTH SIT

ORTHO ....................................................................................................... 712.89 CRYST ARTHROP NEC—MULT

ORTHO ....................................................................................................... 712.90 CRYST ARTHROP NOS—UNSPE

ORTHO ....................................................................................................... 712.91 CRYST ARTHROP NOS—SHLDR

ORTHO ....................................................................................................... 712.92 CRYST ARTHROP NOS—UP/AR

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41197

TABLE 8A.—DIAGNOSIS GROUPS IN THE CLINICAL DIMENSION—Continued

[Note: Codes shown at the 3-digit level include all the related 4- and 5-digit codes. Diagnoses coded with 4 or 5 digits must be coded as shown

to receive a score in the clinical dimension.]

Diagnosis group ICD–9–CM Code Description

ORTHO ....................................................................................................... 712.93 CRYS ARTHROP NOS—FOREAR

ORTHO ....................................................................................................... 712.94 CRYST ARTHROP NOS—HAND

ORTHO ....................................................................................................... 712.95 CRYST ARTHROP NOS—PELVI

ORTHO ....................................................................................................... 712.96 CRYST ARTHROP NOS—L/LEG

ORTHO ....................................................................................................... 712.97 CRYST ARTHROP NOS—ANKLE

ORTHO ....................................................................................................... 712.98 CRY ARTHROP NOS—OTH SIT

ORTHO ....................................................................................................... 712.99 CRYST ARTHROP NOS—MULT

ORTHO ....................................................................................................... 714 OTH INFLAMM POLYARTHROP

ORTHO ....................................................................................................... 716 ARTHROPATHIES NEC/NOS

ORTHO ....................................................................................................... 717 INTERNAL DERANGEMNT KNEE

ORTHO ....................................................................................................... 718 OTHER JOINT DERANGEMENT

ORTHO ....................................................................................................... 720.0 ANKYLOSING SPONDYLITIS

ORTHO ....................................................................................................... 720.1 SPINAL ENTHESOPATHY

ORTHO ....................................................................................................... 720.2 SACROILIITIS NEC

ORTHO ....................................................................................................... 720.89 INFLAM SPONDYLOPATHY NEC

ORTHO ....................................................................................................... 720.9 INFLAM SPONDYLOPATHY NOS

ORTHO ....................................................................................................... 721 SPONDYLOSIS ET AL

ORTHO ....................................................................................................... 722 INTERVERTEBRAL DISC DIS

ORTHO ....................................................................................................... 723 OTHER CERVICAL SPINE DIS

ORTHO ....................................................................................................... 724 BACK DISORDER NEC & NOS

ORTHO ....................................................................................................... 725 POLYMYALGIA RHEUMATICA

ORTHO ....................................................................................................... 728 DIS OF MUSCLE/LIG/FASCIA

ORTHO ....................................................................................................... 730.00 AC OSTEOMYELITIS—UNSP

ORTHO ....................................................................................................... 730.01 AC OSTEOMYELITIS—SHLDER

ORTHO ....................................................................................................... 730.02 AC OSTEOMYELITIS—UP/ARM

ORTHO ....................................................................................................... 730.03 AC OSTEOMYELITIS—FOREAR

ORTHO ....................................................................................................... 730.04 AC OSTEOMYELITIS—HAND

ORTHO ....................................................................................................... 730.05 AC OSTEOMYELITIS—PELVIS

ORTHO ....................................................................................................... 730.06 AC OSTEOMYELITIS—L/LEG

ORTHO ....................................................................................................... 730.07 AC OSTEOMYELITIS—ANKLE

ORTHO ....................................................................................................... 730.08 AC OSTEOMYELITIS NEC

ORTHO ....................................................................................................... 730.09 AC OSTEOMYELITIS—MULT

ORTHO ....................................................................................................... 730.10 CHR OSTEOMYELITIS—UNSP

ORTHO ....................................................................................................... 730.11 CHR OSTEOMYELIT—SHLDER

ORTHO ....................................................................................................... 730.12 CHR OSTEOMYELIT—UP/ARM

ORTHO ....................................................................................................... 730.13 CHR OSTEOMYELIT—FOREARM

ORTHO ....................................................................................................... 730.14 CHR OSTEOMYELIT—HAND

ORTHO ....................................................................................................... 730.15 CHR OSTEOMYELIT—PELVIS

ORTHO ....................................................................................................... 730.16 CHR OSTEOMYELIT—L/LEG

ORTHO ....................................................................................................... 730.17 CHR OSTEOMYELIT—ANKLE

ORTHO ....................................................................................................... 730.18 CHR OSTEOMYELIT NEC

ORTHO ....................................................................................................... 730.19 CHR OSTEOMYELIT—MULT

ORTHO ....................................................................................................... 730.20 OSTEOMYELITIS NOS—UNSPE

ORTHO ....................................................................................................... 730.21 OSTEOMYELITIS NOS—SHLDE

ORTHO ....................................................................................................... 730.22 OSTEOMYELITIS NOS—UP/AR

ORTHO ....................................................................................................... 730.23 OSTEOMYELIT NOS—FOREARM

ORTHO ....................................................................................................... 730.24 OSTEOMYELITIS NOS—HAND

ORTHO ....................................................................................................... 730.25 OSTEOMYELITIS NOS—PELVI

ORTHO ....................................................................................................... 730.26 OSTEOMYELITIS NOS—L/LEG

ORTHO ....................................................................................................... 730.27 OSTEOMYELITIS NOS—ANKLE

ORTHO ....................................................................................................... 730.28 OSTEOMYELIT NOS—OTH SIT

ORTHO ....................................................................................................... 730.29 OSTEOMYELITIS NOS—MULT

ORTHO ....................................................................................................... 730.30 PERIOSTITIS—UNSPEC

ORTHO ....................................................................................................... 730.31 PERIOSTITIS—SHLDER

ORTHO ....................................................................................................... 730.32 PERIOSTITIS—UP/ARM

ORTHO ....................................................................................................... 730.33 PERIOSTITIS—FOREARM

ORTHO ....................................................................................................... 730.34 PERIOSTITIS—HAND

ORTHO ....................................................................................................... 730.35 PERIOSTITIS—PELVIS

ORTHO ....................................................................................................... 730.36 PERIOSTITIS—L/LEG

ORTHO ....................................................................................................... 730.37 PERIOSTITIS—ANKLE

ORTHO ....................................................................................................... 730.38 PERIOSTITIS NEC

ORTHO ....................................................................................................... 730.39 PERIOSTITIS—MULT

ORTHO ....................................................................................................... 730.90 BONE INFEC NOS—UNSP SIT

ORTHO ....................................................................................................... 730.91 BONE INFECT NOS—SHLDER

ORTHO ....................................................................................................... 730.92 BONE INFECT NOS—UP/ARM

ORTHO ....................................................................................................... 730.93 BONE INFECT NOS—FOREARM

ORTHO ....................................................................................................... 730.94 BONE INFECT NOS—HAND

ORTHO ....................................................................................................... 730.95 BONE INFECT NOS—PELVIS

ORTHO ....................................................................................................... 730.96 BONE INFECT NOS—L/LEG

ORTHO ....................................................................................................... 730.97 BONE INFECT NOS—ANKLE

41198 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 8A.—DIAGNOSIS GROUPS IN THE CLINICAL DIMENSION—Continued

[Note: Codes shown at the 3-digit level include all the related 4- and 5-digit codes. Diagnoses coded with 4 or 5 digits must be coded as shown

to receive a score in the clinical dimension.]

Diagnosis group ICD–9–CM Code Description

ORTHO ....................................................................................................... 730.98 BONE INFECT NOS—OTH SIT

ORTHO ....................................................................................................... 730.99 BONE INFECT NOS—MULT

ORTHO ....................................................................................................... 731.0 OSTEITIS DEFORMANS NOS

ORTHO ....................................................................................................... 731.2 HYPERTROPH OSTEOARTHROP

ORTHO ....................................................................................................... 732 OSTEOCHONDROPATHIES

ORTHO ....................................................................................................... 781 NERV/MUSCULSKEL SYS SYMP

ORTHO ....................................................................................................... 800 SKULL VAULT FRACTURE

ORTHO ....................................................................................................... 801 SKULL BASE FRACTURE

ORTHO ....................................................................................................... 802 FRACTURE OF FACE BONES

ORTHO ....................................................................................................... 803 OTHER SKULL FRACTURE

ORTHO ....................................................................................................... 804 MULT FX SKULL W OTH BONE

ORTHO ....................................................................................................... 805 VERTEBRL FX W/O CORD INJ

ORTHO ....................................................................................................... 806 VERTEBRAL FX W CORD INJ

ORTHO ....................................................................................................... 807 FX RIB/STERN/LARYN/TRACH

ORTHO ....................................................................................................... 808 PELVIC FRACTURE

ORTHO ....................................................................................................... 809 FRACTURE OF TRUNK BONES

ORTHO ....................................................................................................... 810 CLAVICLE FRACTURE

ORTHO ....................................................................................................... 811 SCAPULA FRACTURE

ORTHO ....................................................................................................... 812 HUMERUS FRACTURE

ORTHO ....................................................................................................... 813 RADIUS & ULNA FRACTURE

ORTHO ....................................................................................................... 814 CARPAL FRACTURE

ORTHO ....................................................................................................... 815 METACARPAL FRACTURE

ORTHO ....................................................................................................... 816 FRACTURE PHALANGES, HAND

ORTHO ....................................................................................................... 817 MULTIPLE HAND FRACTURES

ORTHO ....................................................................................................... 818 FRACTURE ARM MULT/NOS

ORTHO ....................................................................................................... 819 FX ARMS W RIB/STERNUM

ORTHO ....................................................................................................... 820 FRACTURE NECK OF FEMUR

ORTHO ....................................................................................................... 821 OTHER FEMORAL FRACTURE

ORTHO ....................................................................................................... 822 PATELLA FRACTURE

ORTHO ....................................................................................................... 823 TIBIA & FIBULA FRACTURE

ORTHO ....................................................................................................... 824 ANKLE FRACTURE

ORTHO ....................................................................................................... 825 FX OF TARSAL/METATARSAL

ORTHO ....................................................................................................... 827 LOWER LIMB FRACTURE NEC

ORTHO ....................................................................................................... 828 FX LEGS W ARM/RIB

ORTHO ....................................................................................................... 831 SHOULDER DISLOCATION

ORTHO ....................................................................................................... 832 ELBOW DISLOCATION

ORTHO ....................................................................................................... 833 WRIST DISLOCATION

ORTHO ....................................................................................................... 835 DISLOCATION OF HIP

ORTHO ....................................................................................................... 836 DISLOCATION OF KNEE

ORTHO ....................................................................................................... 837 DISLOCATION OF ANKLE

ORTHO ....................................................................................................... 838 DISLOCATION OF FOOT

ORTHO ....................................................................................................... 846 SPRAIN SACROILIAC REGION

ORTHO ....................................................................................................... 847 SPRAIN OF BACK NEC/NOS

ORTHO ....................................................................................................... 887 TRAUMATIC AMPUT ARM/HAND

ORTHO ....................................................................................................... 896 TRAUMATIC AMPUTAT FOOT

ORTHO ....................................................................................................... 897 TRAUMATIC AMPUTATION LEG

ORTHO ....................................................................................................... 927 CRUSHING INJ UPPER LIMB

ORTHO ....................................................................................................... 928 CRUSHING INJURY OF LEG

Secondary Diagnoses

The following diagnoses should never be used as primary diagnoses, according to ICD–9–CM coding guidelines. The case-mix system will

recognize them in the clinical dimension if they appear as the first secondary diagnosis (line b, M0240 on the OASIS record). Diagnoses coded

with 4 or 5 digits must be coded as shown to be recognized in the clinical dimension.

NEURO ....................................................................................................... 320.7 MENINGITIS IN OTH BAC

NEURO ....................................................................................................... 321.0 CRYPTOCOCCAL MENINGITIS

NEURO ....................................................................................................... 321.1 MENING IN OTH FUNGAL DI

NEURO ....................................................................................................... 321.2 MENING IN OTH VIRAL DIS

NEURO ....................................................................................................... 321.3 TRYPANOSOMIASIS MENINGI

NEURO ....................................................................................................... 321.4 MENINGIT D/T SARCOIDOSI

NEURO ....................................................................................................... 321.8 MENING IN OTH NONBAC DI

NEURO ....................................................................................................... 323.0 ENCEPHALIT IN VIRAL DIS

NEURO ....................................................................................................... 323.1 RICKETTSIAL ENCEPHALITI

NEURO ....................................................................................................... 323.2 PROTOZOAL ENCEPHALITIS

NEURO ....................................................................................................... 323.4 OTH ENCEPHALIT D/T INFE

NEURO ....................................................................................................... 323.6 POSTINFECT ENCEPHALITIS

NEURO ....................................................................................................... 323.7 TOXIC ENCEPHALITIS

NEURO ....................................................................................................... 330.2 CEREB DEGEN IN LIPIDOSI

NEURO ....................................................................................................... 330.3 CERB DEG CHLD IN OTH DI

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41199

TABLE 8A.—DIAGNOSIS GROUPS IN THE CLINICAL DIMENSION—Continued

[Note: Codes shown at the 3-digit level include all the related 4- and 5-digit codes. Diagnoses coded with 4 or 5 digits must be coded as shown

to receive a score in the clinical dimension.]

Diagnosis group ICD–9–CM Code Description

NEURO ....................................................................................................... 331.7 CEREB DEGEN IN OTH DIS

NEURO ....................................................................................................... 334.4 CEREBEL ATAX IN OTH DIS

NEURO ....................................................................................................... 336.2 COMB DEG CORD IN OTH DI

NEURO ....................................................................................................... 336.3 MYELOPATHY IN OTH DIS

NEURO ....................................................................................................... 337.1 AUT NEUROPTHY IN OTH DI

NEURO ....................................................................................................... 357.1 NEURPTHY IN COL VASC DI

NEURO ....................................................................................................... 357.2 NEUROPATHY IN DIABETES

NEURO ....................................................................................................... 357.3 NEUROPATHY IN MALIG DIS

NEURO ....................................................................................................... 357.4 NEUROPATHY IN OTHER DIS

NEURO ....................................................................................................... 358.1 MYASTHENIA IN OTH DIS

ORTHO ....................................................................................................... 711.10 REITER ARTHRITIS—UNSPEC

ORTHO ....................................................................................................... 711.11 REITER ARTHRITIS—SHLDER

ORTHO ....................................................................................................... 711.12 REITER ARTHRITIS—UP/ARM

ORTHO ....................................................................................................... 711.13 REITER ARTHRITIS—FOREAR

ORTHO ....................................................................................................... 711.14 REITER ARTHRITIS—HAND

ORTHO ....................................................................................................... 711.15 REITER ARTHRITIS—PELVIS

ORTHO ....................................................................................................... 711.16 REITER ARTHRITIS—L/LEG

ORTHO ....................................................................................................... 711.17 REITER ARTHRITIS—ANKLE

ORTHO ....................................................................................................... 711.18 REITER ARTHRITIS NEC

ORTHO ....................................................................................................... 711.19 REITER ARTHRITIS—MULT

ORTHO ....................................................................................................... 711.20 BEHCET ARTHRITIS—UNSPEC

ORTHO ....................................................................................................... 711.21 BEHCET ARTHRITIS—SHLDER

ORTHO ....................................................................................................... 711.22 BEHCET ARTHRITIS—UP/ARM

ORTHO ....................................................................................................... 711.23 BEHCET ARTHRITIS—FOREAR

ORTHO ....................................................................................................... 711.24 BEHCET ARTHRITIS—HAND

ORTHO ....................................................................................................... 711.25 BEHCET ARTHRITIS—PELVIS

ORTHO ....................................................................................................... 711.26 BEHCET ARTHRITIS—L/LEG

ORTHO ....................................................................................................... 711.27 BEHCET ARTHRITIS—ANKLE

ORTHO ....................................................................................................... 711.28 BEHCET ARTHRITIS NEC

ORTHO ....................................................................................................... 711.29 BEHCET ARTHRITIS—MULT

ORTHO ....................................................................................................... 711.30 DYSENTER ARTHRIT—UNSPEC

ORTHO ....................................................................................................... 711.31 DYSENTER ARTHRIT—SHLDER

ORTHO ....................................................................................................... 711.32 DYSENTER ARTHRIT—UP/ARM

ORTHO ....................................................................................................... 711.33 DYSENTER ARTHRIT—FOREAR

ORTHO ....................................................................................................... 711.34 DYSENTER ARTHRIT—HAND

ORTHO ....................................................................................................... 711.35 DYSENTER ARTHRIT—PELVIS

ORTHO ....................................................................................................... 711.36 DYSENTER ARTHRIT—L/LEG

ORTHO ....................................................................................................... 711.37 DYSENTER ARTHRIT—ANKLE

ORTHO ....................................................................................................... 711.38 DYSENTER ARTHRIT NEC

ORTHO ....................................................................................................... 711.39 DYSENTER ARTHRIT—MULT

ORTHO ....................................................................................................... 711.40 BACT ARTHRITIS—UNSPEC

ORTHO ....................................................................................................... 711.41 BACT ARTHRITIS—SHLDER

ORTHO ....................................................................................................... 711.42 BACT ARTHRITIS—UP/ARM

ORTHO ....................................................................................................... 711.43 BACT ARTHRITIS—FOREARM

ORTHO ....................................................................................................... 711.44 BACT ARTHRITIS—HAND

ORTHO ....................................................................................................... 711.45 BACT ARTHRITIS—PELVIS

ORTHO ....................................................................................................... 711.46 BACT ARTHRITIS—L/LEG

ORTHO ....................................................................................................... 711.47 BACT ARTHRITIS—ANKLE

ORTHO ....................................................................................................... 711.48 BACT ARTHRITIS NEC

ORTHO ....................................................................................................... 711.49 BACT ARTHRITIS—MULT

ORTHO ....................................................................................................... 711.50 VIRAL ARTHRITIS—UNSPEC

ORTHO ....................................................................................................... 711.51 VIRAL ARTHRITIS—SHLDER

ORTHO ....................................................................................................... 711.52 VIRAL ARTHRITIS—UP/ARM

ORTHO ....................................................................................................... 711.53 VIRAL ARTHRITIS—FOREARM

ORTHO ....................................................................................................... 711.54 VIRAL ARTHRITIS—HAND

ORTHO ....................................................................................................... 711.55 VIRAL ARTHRITIS—PELVIS

ORTHO ....................................................................................................... 711.56 VIRAL ARTHRITIS—L/LEG

ORTHO ....................................................................................................... 711.57 VIRAL ARTHRITIS—ANKLE

ORTHO ....................................................................................................... 711.58 VIRAL ARTHRITIS NEC

ORTHO ....................................................................................................... 711.59 VIRAL ARTHRITIS—MULT

ORTHO ....................................................................................................... 711.60 MYCOTIC ARTHRITIS—UNSPE

ORTHO ....................................................................................................... 711.61 MYCOTIC ARTHRITIS—SHLDE

ORTHO ....................................................................................................... 711.62 MYCOTIC ARTHRITIS—UP/AR

ORTHO ....................................................................................................... 711.63 MYCOTIC ARTHRIT—FOREARM

ORTHO ....................................................................................................... 711.64 MYCOTIC ARTHRITIS—HAND

ORTHO ....................................................................................................... 711.65 MYCOTIC ARTHRITIS—PELVI

ORTHO ....................................................................................................... 711.66 MYCOTIC ARTHRITIS—L/LEG

ORTHO ....................................................................................................... 711.67 MYCOTIC ARTHRITIS—ANKLE

ORTHO ....................................................................................................... 711.68 MYCOTIC ARTHRITIS NEC

ORTHO ....................................................................................................... 711.69 MYCOTIC ARTHRITIS—MULT

41200 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

TABLE 8A.—DIAGNOSIS GROUPS IN THE CLINICAL DIMENSION—Continued

[Note: Codes shown at the 3-digit level include all the related 4- and 5-digit codes. Diagnoses coded with 4 or 5 digits must be coded as shown

to receive a score in the clinical dimension.]

Diagnosis group ICD–9–CM Code Description

ORTHO ....................................................................................................... 711.70 HELMINTH ARTHRIT—UNSPEC

ORTHO ....................................................................................................... 711.71 HELMINTH ARTHRIT—SHLDER

ORTHO ....................................................................................................... 711.72 HELMINTH ARTHRIT—UP/ARM

ORTHO ....................................................................................................... 711.73 HELMINTH ARTHRIT—FOREAR

ORTHO ....................................................................................................... 711.74 HELMINTH ARTHRIT—HAND

ORTHO ....................................................................................................... 711.75 HELMINTH ARTHRIT—PELVIS

ORTHO ....................................................................................................... 711.76 HELMINTH ARTHRIT—L/LEG

ORTHO ....................................................................................................... 711.77 HELMINTH ARTHRIT—ANKLE

ORTHO ....................................................................................................... 711.78 HELMINTH ARTHRIT NEC

ORTHO ....................................................................................................... 711.79 HELMINTH ARTHRIT—MULT

ORTHO ....................................................................................................... 711.80 INF ARTHRITIS NEC—UNSPE

ORTHO ....................................................................................................... 711.81 INF ARTHRITIS NEC—SHLDE

ORTHO ....................................................................................................... 711.82 INF ARTHRITIS NEC—UP/AR

ORTHO ....................................................................................................... 711.83 INF ARTHRIT NEC—FOREARM

ORTHO ....................................................................................................... 711.84 INF ARTHRITIS NEC—HAND

ORTHO ....................................................................................................... 711.85 INF ARTHRITIS NEC—PELVI

ORTHO ....................................................................................................... 711.86 INF ARTHRITIS NEC—L/LEG

ORTHO ....................................................................................................... 711.87 INF ARTHRITIS NEC—ANKLE

ORTHO ....................................................................................................... 711.88 INF ARTHRIT NEC—OTH SIT

ORTHO ....................................................................................................... 711.89 INF ARTHRITIS NEC—MULT

ORTHO ....................................................................................................... 712.10 DICALC PHOS CRYST—UNSPE

ORTHO ....................................................................................................... 712.11 DICALC PHOS CRYST—SHLDE

ORTHO ....................................................................................................... 712.12 DICALC PHOS CRYST—UP/AR

ORTHO ....................................................................................................... 712.13 DICALC PHOS CRYS—FOREAR

ORTHO ....................................................................................................... 712.14 DICALC PHOS CRYST—HAND

ORTHO ....................................................................................................... 712.15 DICALC PHOS CRYST—PELVI

ORTHO ....................................................................................................... 712.16 DICALC PHOS CRYST—L/LEG

ORTHO ....................................................................................................... 712.17 DICALC PHOS CRYST—ANKLE

ORTHO ....................................................................................................... 712.18 DICALC PHOS CRY—SITE NE

ORTHO ....................................................................................................... 712.19 DICALC PHOS CRYST—MULT

ORTHO ....................................................................................................... 712.20 PYROPHOSPH CRYST—UNSPEC

ORTHO ....................................................................................................... 712.21 PYROPHOSPH CRYST—SHLDER

ORTHO ....................................................................................................... 712.22 PYROPHOSPH CRYST—UP/ARM

ORTHO ....................................................................................................... 712.23 PYROPHOSPH CRYST—FOREAR

ORTHO ....................................................................................................... 712.24 PYROPHOSPH CRYST—HAND

ORTHO ....................................................................................................... 712.25 PYROPHOSPH CRYST—PELVIS

ORTHO ....................................................................................................... 712.26 PYROPHOSPH CRYST—L/LEG

ORTHO ....................................................................................................... 712.27 PYROPHOSPH CRYST—ANKLE

ORTHO ....................................................................................................... 712.28 PYROPHOS CRYST—SITE NEC

ORTHO ....................................................................................................... 712.29 PYROPHOS CRYST—MULT

ORTHO ....................................................................................................... 712.30 CHONDROCALCIN NOS—UNSPE

ORTHO ....................................................................................................... 712.31 CHONDROCALCIN NOS—SHLDE

ORTHO ....................................................................................................... 712.32 CHONDROCALCIN NOS—UP/AR

ORTHO ....................................................................................................... 712.33 CHONDROCALC NOS—FOREARM

ORTHO ....................................................................................................... 712.34 CHONDROCALCIN NOS—HAND

ORTHO ....................................................................................................... 712.35 CHONDROCALCIN NOS—PELVI

ORTHO ....................................................................................................... 712.36 CHONDROCALCIN NOS—L/LEG

ORTHO ....................................................................................................... 712.37 CHONDROCALCIN NOS—ANKLE

ORTHO ....................................................................................................... 712.38 CHONDROCALC NOS—OTH SIT

ORTHO ....................................................................................................... 712.39 CHONDROCALCIN NOS—MULT

ORTHO ....................................................................................................... 713.0 ARTHROP W ENDOCR/MET DI

ORTHO ....................................................................................................... 713.1 ARTHROP W NONINF GI DIS

ORTHO ....................................................................................................... 713.2 ARTHROPATH W HEMATOL DI

ORTHO ....................................................................................................... 713.3 ARTHROPATHY W SKIN DIS

ORTHO ....................................................................................................... 713.4 ARTHROPATHY W RESP DIS

ORTHO ....................................................................................................... 713.5 ARTHROPATHY W NERVE DIS

ORTHO ....................................................................................................... 713.6 ARTHROP W HYPERSEN REAC

ORTHO ....................................................................................................... 713.7 ARTHROP W SYSTEM DIS NE

ORTHO ....................................................................................................... 713.8 ARTHROP W OTH DIS NEC

ORTHO ....................................................................................................... 720.81 SPONDYLOPATHY IN OTH DI

ORTHO ....................................................................................................... 730.70 POLIO OSTEOPATHY—UNSPEC

ORTHO ....................................................................................................... 730.71 POLIO OSTEOPATHY—SHLDER

ORTHO ....................................................................................................... 730.72 POLIO OSTEOPATHY—UP/ARM

ORTHO ....................................................................................................... 730.73 POLIO OSTEOPATHY—FOREAR

ORTHO ....................................................................................................... 730.74 POLIO OSTEOPATHY—HAND

ORTHO ....................................................................................................... 730.75 POLIO OSTEOPATHY—PELVIS

ORTHO ....................................................................................................... 730.76 POLIO OSTEOPATHY—L/LEG

ORTHO ....................................................................................................... 730.77 POLIO OSTEOPATHY—ANKLE

ORTHO ....................................................................................................... 730.78 POLIO OSTEOPATHY NEC

ORTHO ....................................................................................................... 730.79 POLIO OSTEOPATHY—MULT

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41201

* Intercept value is the average resource cost for

the base group, C0F0S0.

TABLE 8A.—DIAGNOSIS GROUPS IN THE CLINICAL DIMENSION—Continued

[Note: Codes shown at the 3-digit level include all the related 4- and 5-digit codes. Diagnoses coded with 4 or 5 digits must be coded as shown

to receive a score in the clinical dimension.]

Diagnosis group ICD–9–CM Code Description

ORTHO ....................................................................................................... 730.80 BONE INFECT NEC—UNSPEC

ORTHO ....................................................................................................... 730.81 BONE INFECT NEC—SHLDER

ORTHO ....................................................................................................... 730.82 BONE INFECT NEC—UP/ARM

ORTHO ....................................................................................................... 730.83 BONE INFECT NEC—FOREARM

ORTHO ....................................................................................................... 730.84 BONE INFECT NEC—HAND

ORTHO ....................................................................................................... 730.85 BONE INFECT NEC—PELVIS

ORTHO ....................................................................................................... 730.86 BONE INFECT NEC—L/LEG

ORTHO ....................................................................................................... 730.87 BONE INFECT NEC—ANKLE

ORTHO ....................................................................................................... 730.88 BONE INFECT NEC—OTH SIT

ORTHO ....................................................................................................... 730.89 BONE INFECT NEC—MULT

ORTHO ....................................................................................................... 731.1 OSTEITIS DEF IN OTH DIS

ORTHO ....................................................................................................... 731.8 BONE INVOLV IN OTH DIS

TABLE 8B.—BURNS AND TRAUMA

DIAGNOSES

[Note: Codes shown at the 3-digit level include all of the related 4- and 5-digit codes.

Burns and trauma diagnoses are included in

the clinical dimension if the diagnosis is the

primary diagnosis and if box 1 of the OASIS

item M0440 is checked.]

ICD–9–CM

code Description

870 ........... OCULAR ADNEXA OPEN

WOUND

872 ........... OPEN WOUND OF EAR

873 ........... OTHER OPEN WOUND OF

HEAD

874 ........... OPEN WOUND OF NECK

875 ........... OPEN WOUND OF CHEST

876 ........... OPEN WOUND OF BACK

877 ........... OPEN WOUND OF BUTTOCK

878 ........... OPEN WOUND GENITAL

ORGAN

879 ........... OPEN WOUND SITE NEC

880 ........... OPN WND SHOULDR/UPPR

ARM

881 ........... OPEN WOUND OF LOWER

ARM

882 ........... OPEN WOUND OF HAND

883 ........... OPEN WOUND OF FINGER

884 ........... OPEN WOUND ARM MULT/

NOS

885 ........... TRAUM AMPUTATION THUMB

886 ........... TRAUM AMPUTATION FINGER

890 ........... OPEN WOUND OF HIP/THIGH

891 ........... OPEN WND KNEE/LEG/ANKLE

892 ........... OPEN WOUND OF FOOT

893 ........... OPEN WOUND OF TOE

894 ........... OPEN WOUND OF LEG NEC

895 ........... TRAUMATIC AMPUTATION

TOE

941 ........... BURN OF HEAD/FACE/NECK

942 ........... BURN OF TRUNK

943 ........... BURN OF ARM

944 ........... BURN OF HAND & WRIST

945 ........... BURN OF LEG

946 ........... BURN OF MULTIPLE SITE

948 ........... BURN BY % BODY SURFACE

949 ........... BURN UNSPECIFIED

3. Determining the Case-Mix Indices

Calculation of the case-mix relative

weights. We derived the relative weights

for the case-mix groups from a

straightforward multiple regression

analysis. The data for the regression

came from the Abt sample episodes

with more than four visits (the same

sample used to develop and validate the

case-mix model).

The coefficients that resulted from the

regression equation are shown below.

The multiple regression coefficients are

estimates of the average addition to

resource cost due to each severity level

above the lowest-severity case-mix

group (C0F0S0). For each case-mix

group, the average resource cost is

calculated from the sum of the

appropriate regression coefficients. In

the example below, the average resource

cost for case-mix group C3F0S3 is the

sum of the average resource cost for the

base group (C0F0S0) plus the average

additional cost due to C3 plus the

average additional cost due to S3. We

then used the computed case-mix-group

average resource costs to find the

relative case-mix weights. Specifically,

the case-mix group averages (that is,

sum of appropriate regression

coefficients) are divided by the overall

average resource cost. The case-mix

weights are shown in Table 9.

The methodology for calculating the

case-mix weights is the same one we

used to find the case-mix weights in the

proposed rule, except that we did not

use weighted regression for the final

rule. We determined that the

distribution of the unweighted Abt

Associates data better resembled the

1998 episode file distribution than did

the weighted Abt Associates data. Thus,

unweighted regression was the

appropriate methodology. As stated in

the proposed rule, we plan to refine the

case-mix weights to adjust for changes

in patient population, actual changes in

home health care practice patterns, and

changes in the coding or classification

of patients that do not reflect real

changes in case-mix.

Regression Coefficients for Calculating

Case-Mix Relative Weights

Intercept*—$1,271.95

C1—$230.98

C2—$652.42

C3—$1,620.75

F1—$229.14

F2—$479.30

F3—$571.20

F4—$976.08

S1—$195.53

S2—$2,315.15

S3—$2,923.22

Example:

Calculate case-mix relative weight for

group C3F0S3

Overall average resource cost (scaled to

national average episode cost):

$2,416.00

Relative weight = average resource cost

for group C3F0S3 divided by

overall average resource cost = (base

group cost +C3 increment +S3

increment)/overall average resource

cost = (1271.95 + 1620.75 +

2923.22)/2416.00 = 2.4073

Below we show the average resource

cost calculated from the regression

coefficients for each case-mix group.

Regression coefficient Average

resource cost

C0F0S0 ................................. $1,271.95

C0F0S1 ................................. 1,467.48

C0F0S2 ................................. 3,587.10

C0F0S3 ................................. 4,195.17

C0F1S0 ................................. 1,501.09

C0F1S1 ................................. 1,696.62

C0F1S2 ................................. 3,816.24

C0F1S3 ................................. 4,424.31

C0F2S0 ................................. 1,751.25

C0F2S1 ................................. 1,946.77

C0F2S2 ................................. 4,066.40

C0F2S3 ................................. 4,674.46

C0F3S0 ................................. 1,843.15

C0F3S1 ................................. 2,038.68

C0F3S2 ................................. 4,158.30

41202 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

Regression coefficient Average

resource cost

C0F3S3 ................................. 4,766.37

C0F4S0 ................................. 2,248.03

C0F4S1 ................................. 2,443.56

C0F4S2 ................................. 4,563.18

C0F4S3 ................................. 5,171.25

C1F0S0 ................................. 1,502.93

C1F0S1 ................................. 1,698.46

C1F0S2 ................................. 3,818.08

C1F0S3 ................................. 4,426.15

C1F1S0 ................................. 1,732.07

C1F1S1 ................................. 1,927.60

C1F1S2 ................................. 4,047.22

C1F1S3 ................................. 4,655.29

C1F2S0 ................................. 1,982.23

C1F2S1 ................................. 2,177.75

C1F2S2 ................................. 4,297.38

C1F2S3 ................................. 4,905.45

C1F3S0 ................................. 2,074.13

C1F3S1 ................................. 2,269.66

C1F3S2 ................................. 4,389.28

C1F3S3 ................................. 4,997.35

C1F4S0 ................................. 2,479.01

C1F4S1 ................................. 2,674.54

Regression coefficient Average

resource cost

C1F4S2 ................................. 4,794.16

C1F4S3 ................................. 5,402.23

C2F0S0 ................................. 1,924.37

C2F0S1 ................................. 2,119.90

C2F0S2 ................................. 4,239.52

C2F0S3 ................................. 4,847.59

C2F1S0 ................................. 2,153.51

C2F1S1 ................................. 2,349.04

C2F1S2 ................................. 4,468.66

C2F1S3 ................................. 5,076.73

C2F2S0 ................................. 2,403.67

C2F2S1 ................................. 2,599.19

C2F2S2 ................................. 4,718.82

C2F2S3 ................................. 5,326.89

C2F3S0 ................................. 2,495.57

C2F3S1 ................................. 2,691.10

C2F3S2 ................................. 4,810.72

C2F3S3 ................................. 5,418.79

C2F4S0 ................................. 2,900.45

C2F4S1 ................................. 3,095.98

C2F4S2 ................................. 5,215.61

C2F4S3 ................................. 5,823.67

C3F0S0 ................................. 2,892.70

Regression coefficient Average

resource cost

C3F0S1 ................................. 3,088.23

C3F0S2 ................................. 5,207.85

C3F0S3 ................................. 5,815.92

C3F1S0 ................................. 3,121.84

C3F1S1 ................................. 3,317.37

C3F1S2 ................................. 5,436.99

C3F1S3 ................................. 6,045.06

C3F2S0 ................................. 3,372.00

C3F2S1 ................................. 3,567.52

C3F2S2 ................................. 5,687.15

C3F2S3 ................................. 6,295.22

C3F3S0 ................................. 3,463.91

C3F3S1 ................................. 3,659.43

C3F3S2 ................................. 5,779.06

C3F3S3 ................................. 6,387.12

C3F4S0 ................................. 3,868.79

C3F4S1 ................................. 4,064.31

C3F4S2 ................................. 6,183.94

C3F4S3 ................................. 6,792.00

Construction of the Relative Weights for

the HHRGs

TABLE 9.—RELATIVE CASE-MIX WEIGHTS CORRESPONDING TO HOME HEALTH RESOURCE GROUPS

HHRG group HHRG description Case-mix

weight

C0F0S0 .......................................................................... ‘‘Clinical=Min, Functional=Min, Service=Min’’ ............................................. 0.5265

C0F0S1 .......................................................................... ‘‘Clinical=Min, Functional=Min, Service=Low’’ ............................................ 0.6074

C0F0S2 .......................................................................... ‘‘Clinical=Min, Functional=Min, Service=Mod’’ ............................................ 1.4847

C0F0S3 .......................................................................... ‘‘Clinical=Min, Functional=Min, Service=High’’ ........................................... 1.7364

C0F1S0 .......................................................................... ‘‘Clinical=Min, Functional=Low, Service=Min’’ ............................................ 0.6213

C0F1S1 .......................................................................... ‘‘Clinical=Min, Functional=Low, Service=Low’’ ........................................... 0.7022

C0F1S2 .......................................................................... ‘‘Clinical=Min, Functional=Low, Service=Mod’’ ........................................... 1.5796

C0F1S3 .......................................................................... ‘‘Clinical=Min, Functional=Low, Service=High’’ .......................................... 1.8313

C0F2S0 .......................................................................... ‘‘Clinical=Min, Functional=Mod, Service=Min’’ ............................................ 0.7249

C0F2S1 .......................................................................... ‘‘Clinical=Min, Functional=Mod, Service=Low’’ ........................................... 0.8058

C0F2S2 .......................................................................... ‘‘Clinical=Min, Functional=Mod, Service=Mod’’ .......................................... 1.6831

C0F2S3 .......................................................................... ‘‘Clinical=Min, Functional=Mod, Service=High’’ .......................................... 1.9348

C0F3S0 .......................................................................... ‘‘Clinical=Min, Functional=High, Service=Min’’ ........................................... 0.7629

C0F3S1 .......................................................................... ‘‘Clinical=Min, Functional=High, Service=Low’’ .......................................... 0.8438

C0F3S2 .......................................................................... ‘‘Clinical=Min, Functional=High, Service=Mod’’ .......................................... 1.7212

C0F3S3 .......................................................................... ‘‘Clinical=Min, Functional=High, Service=High’’ .......................................... 1.9728

C0F4S0 .......................................................................... ‘‘Clinical=Min, Functional=Max, Service=Min’’ ............................................ 0.9305

C0F4S1 .......................................................................... ‘‘Clinical=Min, Functional=Max, Service=Low’’ ........................................... 1.0114

C0F4S2 .......................................................................... ‘‘Clinical=Min, Functional=Max, Service=Mod’’ ........................................... 1.8887

C0F4S3 .......................................................................... ‘‘Clinical=Min, Functional=Max, Service=High’’ .......................................... 2.1404

C1F0S0 .......................................................................... ‘‘Clinical=Low, Functional=Min, Service=Min’’ ............................................ 0.6221

C1F0S1 .......................................................................... ‘‘Clinical=Low, Functional=Min, Service=Low’’ ........................................... 0.7030

C1F0S2 .......................................................................... ‘‘Clinical=Low, Functional=Min, Service=Mod’’ ........................................... 1.5803

C1F0S3 .......................................................................... ‘‘Clinical=Low, Functional=Min, Service=High’’ .......................................... 1.8320

C1F1S0 .......................................................................... ‘‘Clinical=Low, Functional=Low, Service=Min’’ ........................................... 0.7169

C1F1S1 .......................................................................... ‘‘Clinical=Low, Functional=Low, Service=Low’’ .......................................... 0.7978

C1F1S2 .......................................................................... ‘‘Clinical=Low, Functional=Low, Service=Mod’’ .......................................... 1.6752

C1F1S3 .......................................................................... ‘‘Clinical=Low, Functional=Low, Service=High’’ .......................................... 1.9269

C1F2S0 .......................................................................... ‘‘Clinical=Low, Functional=Mod, Service=Min’’ ........................................... 0.8205

C1F2S1 .......................................................................... ‘‘Clinical=Low, Functional=Mod, Service=Low’’ .......................................... 0.9014

C1F2S2 .......................................................................... ‘‘Clinical=Low, Functional=Mod, Service=Mod’’ .......................................... 1.7787

C1F2S3 .......................................................................... ‘‘Clinical=Low, Functional=Mod, Service=High’’ ......................................... 2.0304

C1F3S0 .......................................................................... ‘‘Clinical=Low, Functional=High, Service=Min’’ .......................................... 0.8585

C1F3S1 .......................................................................... ‘‘Clinical=Low, Functional=High, Service=Low’’ .......................................... 0.9394

C1F3S2 .......................................................................... ‘‘Clinical=Low, Functional=High, Service=Mod’’ ......................................... 1.8168

C1F3S3 .......................................................................... ‘‘Clinical=Low, Functional=High, Service=High’’ ......................................... 2.0684

C1F4S0 .......................................................................... ‘‘Clinical=Low, Functional=Max, Service=Min’’ ........................................... 1.0261

C1F4S1 .......................................................................... ‘‘Clinical=Low, Functional=Max, Service=Low’’ .......................................... 1.1070

C1F4S2 .......................................................................... ‘‘Clinical=Low, Functional=Max, Service=Mod’’ .......................................... 1.9843

C1F4S3 .......................................................................... ‘‘Clinical=Low, Functional=Max, Service=High’’ ......................................... 2.2360

C2F0S0 .......................................................................... ‘‘Clinical=Mod, Functional=Min, Service=Min’’ ............................................ 0.7965

C2F0S1 .......................................................................... ‘‘Clinical=Mod, Functional=Min, Service=Low’’ ........................................... 0.8774

C2F0S2 .......................................................................... ‘‘Clinical=Mod, Functional=Min, Service=Mod’’ .......................................... 1.7548

C2F0S3 .......................................................................... ‘‘Clinical=Mod, Functional=Min, Service=High’’ .......................................... 2.0065

C2F1S0 .......................................................................... ‘‘Clinical=Mod, Functional=Low, Service=Min’’ ........................................... 0.8914

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41203

TABLE 9.—RELATIVE CASE-MIX WEIGHTS CORRESPONDING TO HOME HEALTH RESOURCE GROUPS—Continued

HHRG group HHRG description Case-mix

weight

C2F1S1 .......................................................................... ‘‘Clinical=Mod, Functional=Low, Service=Low’’ .......................................... 0.9723

C2F1S2 .......................................................................... ‘‘Clinical=Mod, Functional=Low, Service=Mod’’ .......................................... 1.8496

C2F1S3 .......................................................................... ‘‘Clinical=Mod, Functional=Low, Service=High’’ ......................................... 2.1013

C2F2S0 .......................................................................... ‘‘Clinical=Mod, Functional=Mod, Service=Min’’ .......................................... 0.9949

C2F2S1 .......................................................................... ‘‘Clinical=Mod, Functional=Mod, Service=Low’’ .......................................... 1.0758

C2F2S2 .......................................................................... ‘‘Clinical=Mod, Functional=Mod, Service=Mod’’ ......................................... 1.9532

C2F2S3 .......................................................................... ‘‘Clinical=Mod, Functional=Mod, Service=High’’ ......................................... 2.2048

C2F3S0 .......................................................................... ‘‘Clinical=Mod, Functional=High, Service=Min’’ .......................................... 1.0329

C2F3S1 .......................................................................... ‘‘Clinical=Mod, Functional=High, Service=Low’’ ......................................... 1.1139

C2F3S2 .......................................................................... ‘‘Clinical=Mod, Functional=High, Service=Mod’’ ......................................... 1.9912

C2F3S3 .......................................................................... ‘‘Clinical=Mod, Functional=High, Service=High’’ ........................................ 2.2429

C2F4S0 .......................................................................... ‘‘Clinical=Mod, Functional=Max, Service=Min’’ ........................................... 1.2005

C2F4S1 .......................................................................... ‘‘Clinical=Mod, Functional=Max, Service=Low’’ .......................................... 1.2814

C2F4S2 .......................................................................... ‘‘Clinical=Mod, Functional=Max, Service=Mod’’ ......................................... 2.1588

C2F4S3 .......................................................................... ‘‘Clinical=Mod, Functional=Max, Service=High’’ ......................................... 2.4105

C3F0S0 .......................................................................... ‘‘Clinical=High, Functional=Min, Service=Min’’ ........................................... 1.1973

C3F0S1 .......................................................................... ‘‘Clinical=High, Functional=Min, Service=Low’’ .......................................... 1.2782

C3F0S2 .......................................................................... ‘‘Clinical=High, Functional=Min, Service=Mod’’ .......................................... 2.1556

C3F0S3 .......................................................................... ‘‘Clinical=High, Functional=Min, Service=High’’ .......................................... 2.4073

C3F1S0 .......................................................................... ‘‘Clinical=High, Functional=Low, Service=Min’’ .......................................... 1.2922

C3F1S1 .......................................................................... ‘‘Clinical=High, Functional=Low, Service=Low’’ .......................................... 1.3731

C3F1S2 .......................................................................... ‘‘Clinical=High, Functional=Low, Service=Mod’’ ......................................... 2.2504

C3F1S3 .......................................................................... ‘‘Clinical=High, Functional=Low, Service=High’’ ......................................... 2.5021

C3F2S0 .......................................................................... ‘‘Clinical=High, Functional=Mod, Service=Min’’ .......................................... 1.3957

C3F2S1 .......................................................................... ‘‘Clinical=High, Functional=Mod, Service=Low’’ ......................................... 1.4766

C3F2S2 .......................................................................... ‘‘Clinical=High, Functional=Mod, Service=Mod’’ ......................................... 2.3540

C3F2S3 .......................................................................... ‘‘Clinical=High, Functional=Mod, Service=High’’ ........................................ 2.6056

C3F3S0 .......................................................................... ‘‘Clinical=High, Functional=High, Service=Min’’ .......................................... 1.4337

C3F3S1 .......................................................................... ‘‘Clinical=High, Functional=High, Service=Low’’ ......................................... 1.5147

C3F3S2 .......................................................................... ‘‘Clinical=High, Functional=High, Service=Mod’’ ........................................ 2.3920

C3F3S3 .......................................................................... ‘‘Clinical=High, Functional=High, Service=High’’ ........................................ 2.6437

C3F4S0 .......................................................................... ‘‘Clinical=High, Functional=Max, Service=Min’’ .......................................... 1.6013

C3F4S1 .......................................................................... ‘‘Clinical=High, Functional=Max, Service=Low’’ ......................................... 1.6822

C3F4S2 .......................................................................... ‘‘Clinical=High, Functional=Max, Service=Mod’’ ......................................... 2.5596

C3F4S3 .......................................................................... ‘‘Clinical=High, Functional=Max, Service=High’’ ......................................... 2.8113

H. Consolidated Billing

1. Background

Under the HHA consolidated billing

requirement established by sections

4603(c)(2)(B) and (c)(2)(C) of the BBA,

the HHA that establishes the home

health plan of care has the Medicare

billing responsibility for all of the

Medicare-covered home health services

listed in section 1861(m) of the Act that

the patient receives and are ordered by

the physician in the plan of care.

Section 305 of BBRA of 1999 amended

the consolidated billing language

governing home health PPS by

eliminating DME covered as a home

health service from the consolidated

billing requirements.

2. HHA Consolidated Billing Legislation

Specific Provisions of the Legislation.

Sections 4603(c)(2)(B) and (c)(2)(C) of

the BBA amend sections 1842(b)(6) and

1862(a) of the Act, respectively, to

require a new consolidated billing and

bundling of all home health services

while a beneficiary is under the plan of

care. The statute now requires payment

for all items and services to be made to

an agency. As stated above, section 305

of BBRA of 1999 excludes DME covered

as a home health service from the

consolidated billing requirements.

Specifically, the law requires, ‘‘in the

case of home health services (including

medical supplies described in section

1861(m)(5), but excluding durable

medical equipment to the extent

provided for in such section) furnished

to an individual who (at the time the

item or service is furnished) is under the

plan of care of a home health agency,

payment shall be made to the agency

(without regard to whether or not the

item or service was furnished by the

agency, by others under arrangement

with them made by the agency, or when

any other contracting or consulting

arrangement, or otherwise).’’

Moreover, there will be separate

payment for DME items and services

provided under the home health benefit,

which are under the DME fee schedule.

As discussed previously, under the

HHA PPS, DME covered as a home

health service as part of the Medicare

home health benefit will continue to be

paid under the DME fee schedule and

will also be excluded from the

consolidated billing requirements. In

addition to the prospective payment

amount for home health services a

separate payment amount will be made

for DME currently covered as a home

health service under the PPS.

3. Types of Services That Are Subject to

the Provision

Under the consolidated billing

requirement, we require that the HHA

must submit all Medicare claims for all

home health services included in

section 1861(m) of the Act (including

medical supplies described in section

1861(m)(5)) of the Act, but excluding

DME to the extent provided for in such

section), while the beneficiary is under

the home health plan of care established

by a physician and eligible for the home

health benefit. The home health services

included in consolidated billing are:

• Part-time or intermittent skilled

nursing care.

• Part-time or intermittent home

health aide services.

• Physical therapy.

• Speech-language pathology.

• Occupational therapy, medical

social services.

41204 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

• Routine and nonroutine medical

supplies.

• A covered osteoporosis drug (as

defined in section 1861(kk) of the Act-

(not paid under PPS rate, see

1833(a)(2)(A)), but excluding other

drugs and biologicals).

• Medical services provided by an

intern or resident- in-training of the

hospital, under an approved teaching

program of the hospital in the case of an

HHA that is affiliated or under common

control with a hospital.

• Services at hospitals, SNFs, or

rehabilitation centers when they involve

equipment too cumbersome to bring to

the home.

4. Effects of This Provision

HHAs will no longer be able to

‘‘unbundle’’ services to an outside

supplier that can then submit a separate

bill directly to the Part B carrier.

Instead, the HHA itself will have to

furnish the home health services (except

DME) either directly or under an

arrangement with an outside supplier in

which the HHA itself, rather than the

supplier, bills Medicare. With the

exception of DME, the outside supplier

must look to the HHA rather than to

Medicare Part B for payment.

Beneficiaries receiving DME prior to

establishment of a home health plan of

care, can continue the relationship with

that same DME supplier. The

consolidated billing requirement

eliminates the potential for duplicative

billings for the same services to the

RHHI by the HHA and to the Part B

carrier by an outside supplier. All

covered home health services listed in

section 1861(m) of the Act, (including

medical supplies described in section

1861(m)(5) of the Act, but excluding

DME to the extent provided in such

section) ordered in the patient’s plan of

care must be billed by the HHA.

As discussed in the proposed rule

published on October 28, 1999, the

responsibility for consolidated billing

moves to the transfer HHA. The

consolidated billing requirement

enhances the HHA’s capacity to meet its

existing responsibility to oversee and

coordinate the Medicare- covered home

health services that each of its patients

receives.

Consistent with SNF PPS

consolidated billing, the beneficiary

exercises his or her freedom of choice

for the entire home health benefit of

services listed in section 1861(m) of the

Act, including medical supplies

described in section 1861(m)(5) of the

Act, but excluding DME as a home

health service by choosing the HHA.

Once a home health patient chooses a

particular HHA, he or she has clearly

exercised freedom of choice with

respect to all items and services

included within the scope of the

Medicare home health benefit (except

DME). The HHA’s consolidated billing

role supersedes all other billing

situations the beneficiary may wish to

establish for home health services

covered under the scope of the home

health benefit during the certified

episode.

Current law is silent regarding the

specific terms of an HHA’s payment to

an outside supplier, and does not

authorize the Medicare program to

impose any requirements in this regard.

We remain concerned, however, over

the potential for the provision of

unnecessary services, and will continue

to evaluate approaches addressing this

concern. One appropriate way to

address any abusive practices would be

through more vigorous enforcement of

existing statutes and regulations (such

as medical review procedures).

Furthermore, since under current law,

an HHA’s relationship with its supplier

is essentially a private contractual

matter, the terms of the supplier’s

payment by the HHA must be arrived

through direct negotiations between the

two parties themselves. Accordingly, we

believe that the most effective way for

a supplier to address any concerns that

it may have about the adequacy or

timeliness of the HHA’s payment would

be for the supplier to ensure that any

terms to which it agrees in such

negotiations satisfactorily address those

concerns. Finally, we note that matters

relating to the enforcement of the

statutory anti-kickback provisions lie

exclusively within the purview of the

Office of the Inspector General, and any

questions or concerns in this area

should be directed to the attention of

that agency.

5. Effective Date for Consolidated

Billing

The effective date for consolidated

billing is October 1, 2000.

V. Provisions of the Final Rule

We are adopting the provisions of the

proposed rule with the following

revisions:

Section 409.43

We revised paragraph (c) to clarify

that the request for anticipated payment

for the initial percentage payment is not

a Medicare claim under the Act and

subject to the requirement that the

physician sign the plan of care before

the HHA bills for the initial percentage

payment. The request for anticipated

payment for the initial percentage

episode payment may be based on

verbal orders that are copied into the

plan of care with the plan of care being

immediately submitted to the physician.

However, the requests for anticipated

payments may be modified or withheld

in order to protect Medicare program

integrity. However, the final percentage

payment is a claim subject to the current

physician signature requirements. We

revised current paragraph (c) governing

physician signature of the plan of care.

Specifically, paragraph (c)(1) of this

section specifies, ‘‘If the physician

signed plan of care is not available, the

request for anticipated payment of the

initial percentage payment must be

based on—

• A physician’s verbal order that—

++ Is recorded in the plan of care;

++ Includes a description of the

patient’s condition and the services to

be provided by the home health agency;

++ Includes an attestation (relating to

the physician’s orders and the date

received) signed and dated by the

registered nurse or qualified therapist

(as defined in 42 CFR 484.4) responsible

for furnishing or supervising the

ordered service in the plan of care; and

++ Is copied into the plan of care and

the plan of care is immediately

submitted to the physician; or

• A referral prescribing detailed

orders for the services to be provided

that is signed and dated by a

physician.’’

In paragraph (c)(2) of this section, we

specify that ‘‘HCFA has the authority to

reduce or disapprove requests for

anticipated payments in situations

when protecting Medicare program

integrity warrants this action. Since the

request for anticipated payment is based

on verbal orders as specified in

paragraphs (c)(1)(i) and/or a prescribing

referral as specified in (c)(1)(ii) of this

section and is not a Medicare claim for

purposes of the Act (although it is a

‘‘claim’’ for purposes of Federal, civil,

criminal, and administrative law

enforcement authorities, including but

not limited to the Civil Monetary

Penalties Law (as defined in 42 U.S.C.

1320a–7a (i) (2)), the Civil False Claims

Act (as defined in 31 U.S.C. 3729(c)),

and the Criminal False Claims Act (18

U.S.C. 287)), the request for anticipated

payment will be canceled and recovered

unless the claim is submitted within the

greater of 60 days from the end of the

episode or 60 days from the issuance of

the request for anticipated payment.’’

Paragraph (c)(3) of this section

specifies that ‘‘The plan of care must be

signed and dated—

• By a physician as described who

meets the certification and

recertification requirements of § 424.22

of this chapter and;

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41205

• Before the claim for each episode

for services is submitted for the final

percentage payment.’’

Paragraph (c)(4) of this section

specifies that ‘‘Any changes in the plan

must be signed and dated by a

physician.’’

Section 409.43

We revised the paragraph (e) of this

section to clarify that the plan of care

must be reviewed by the physician at

least every 60 days or more frequently

when there is a beneficiary elected

transfer, significant change in condition,

or discharge and return to the same

HHA during the same 60-day episode.

We also made a conforming change in

paragraph (f) of this section regarding

the termination of the plan of care by

replacing ‘‘62-day’’ with ‘‘60-day.’’ We

amended this paragraph to specify that

if specific services are not provided to

the beneficiary at least once every 60-

days, the plan of care is terminated

unless the physician documents that the

interval without this care is appropriate

to the treatment of the beneficiary’s

condition.

Sections 409.100(a)(2), 410.150(b)(19),

and 411.15(q)

We revised the regulations at

§§ 409.100(a)(2), 410.150(b)(19), and

411.15(q) to conform to the BBRA

revisions that eliminate DME from the

consolidated billing requirements.

Section 413.64

We revised § 413.1(h) to clarify that

durable medical equipment and the

covered osteoporosis drug as defined in

section 1861(m) of the Act are not

included in the HHA PPS rate.

We deleted § 413.64(h)(2)(iv). This

corresponds to our revision in the

proposed rule to remove Part A and Part

B home health services from

§ 413.64(h)(1). PIP is eliminated for

home health services upon

implementation of PPS.

Section 424.22

We are not adopting proposed

paragraph (a)(1)(v) that would have

required the physician to certify the

correct HHRG.

Section 484.1(a)

We amended this section by adding a

new paragraph (3) to include the

provision under the Act that provides

the basis for establishing the new

prospective payment system for home

health services covered under Medicare.

Section 484.18

We revised the paragraph (b) to clarify

that the plan of care must be reviewed

by the physician at least every 60 days

or more frequently when there is a

beneficiary elected transfer, significant

change in condition, or discharge and

return to the same HHA during the same

60-day episode.

Section 484.55

We revised paragraph (d)(1) to specify

that the update to the comprehensive

assessment is required the last five days

of every 60 days beginning with the start

of care date unless there is an applicable

payment adjustment. This clarification

parallels the current OASIS

requirements governing the timeframe

of the update.

Section 484.202

We amended this section by removing

the term ‘‘clinical model’’ from the list

of definitions because we did not use

the term in this subpart.

Section 484.205

We revised paragraph (a)(1) and (b) to

clarify that the PPS payments are based

on a predetermined rate for a home

health service previously paid on a

reasonable cost basis and that the

osteoporosis drug covered under the

home health benefit is the only home

health service listed in section 1861(m)

of the Act that continues to be paid on

a reasonable cost basis under PPS. The

revised language will read, ‘‘The

national 60-day episode payment

represents payment in full for all costs

associated with furnishing a home

health service paid on a reasonable cost

basis (except the osteoporosis drug

listed in section 1861(m) of the Act as

defined in section 1861(kk) of the Act)

as of August 5, 1997 * * *’’

We also clarify in paragraph (b) that

all payments under this system must be

subject to a medical review adjustment

reflecting beneficiary eligibility, medical

necessity determinations, and the HHRG

assignment.

We added paragraphs (b)(1) and (b)(2)

that provides for the requirements

governing the final split percentage

payment approach. New paragraph

(b)(1) governs the split percentage

payment approach for initial episodes.

The initial percentage payment for

initial episodes is paid at 60 percent of

the case-mix and wage adjusted 60 day

episode rate. The residual final payment

for initial episodes is paid at 40 percent

of the case-mix and wage adjusted 60

day episode rate. New paragraph (b)(2)

governs the split percentage payment

approach for subsequent episodes. The

initial percentage payment for

subsequent episodes is paid at 50

percent of the case-mix and wage

adjusted 60 day episode rate. The

residual final payment for subsequent

episodes is paid at 50 percent of the

case-mix and wage adjusted 60 day

episode rate.

We revised paragraph (d) of this

section to clarify that PEP adjustments

do not apply in situations of transfer

among HHAs of common ownership as

defined in § 424.22. Those situations

would be considered services provided

under arrangement on behalf of the

originating HHA by the receiving HHA

with the common ownership interest for

the balance of the 60-day episode. The

common ownership exception to the

transfer PEP adjustment does not apply

if the beneficiary moves to a different

MSA or Non-MSA during the 60-day

episode before the transfer to the

receiving HHA. The transferring HHA in

situations of transfers among HHAs of

common ownership not only serves as

a billing agent, but must also exercise

professional responsibility over the

arranged-for services in order for

services provided for under

arrangements to be paid.

Section 484.215

We renamed the heading of section

484.215 to clarify that the calculation

reflects the initial establishment of the

PPS rates. Section 484.215 has been

revised to read ‘‘Initial establishment of

the calculation of the national 60-day

episode payment.’’ We revised

paragraph (d)(4) to reflect the amounts

that are added to the nonstandardized

episode amount for the OASIS

adjustment for the one time

implementation costs associated with

assessment scheduling form changes

and amounts for Part B therapies that

could have been unbundled to Part B

prior to PPS implementation.

Section 424.220

We revised § 484.220 to specify that

HCFA adjusts the national 60-day

episode payment rate to account for

geographic differences in wage levels

using an appropriate wage index based

on the site of the service for the

beneficiary.

Section 484.225(c)

We revised paragraph (c) to reflect

that for each of FYs 2002 and 2003 the

rates are updated by the applicable

home health market basket minus 1.1

percentage points.

Section 484.230

We revised the language in this

section to reflect the higher per-visit

amounts that will be used to calculate

the LUPA payments. The amounts will

be referred to as national per-visit

amounts. We also clarified that the wage

41206 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

index are based on the site of service for

the beneficiary.

Section 484.235

We revised paragraph (b) to reflect the

use of billable visit dates as the defining

points for the PEP adjustment. The

following phrase will be added to the

end of the sentence, ‘‘* * * based on

the first billable visit date through and

including the last billable visit date.’’

Section 484.237

We revised paragraphs (b)(1) and

(b)(2) governing the SCIC adjustment to

reflect the use of billable visit dates to

define the span of days used to calculate

the proportional payments both before

and after a patient experiences a

significant change in condition. In

§§ 484.237(b)(1) and (b)(2) we inserted

the phrase ‘‘(the first billable visit date

through and including the last billable

visit date)’’ after the phrase ‘‘span of

days.’’

Section 484.240

We revised paragraph (d) to reflect the

higher per- visit amounts that will be

used to calculate the imputed costs for

each episode for outlier payment

determination. The amounts are referred

to as national per-visit amounts.

Section 484.245

We added new § 484.245 that sets

forth the processes involving

accelerated payment requests by an

HHA under PPS if there is a delay by

the intermediary in making payment.

VI. Collection of Information

Requirements

Under the Paperwork Reduction Act

of 1995, we are required to provide 60-

day notice in the Federal Register and

solicit public comment before a

collection of information requirement is

submitted to the Office of Management

and Budget (OMB) for review and

approval. In order to fairly evaluate

whether an information collection

should be approved by OMB, section

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

Reduction Act of 1995 requires that we

solicit comment on the following issues:

• The need for the information

collection and its usefulness in carrying

out the proper functions of our agency.

• The accuracy of our estimate of the

information collection burden.

• The quality, utility, and clarity of

the information to be collected.

• Recommendations to minimize the

information collection burden on the

affected public, including automated

collection techniques.

However, the requirements

summarized below are currently

approved as indicated by the

appropriate OMB control number.

Section 409.43 Plan of Care

Requirements

Section 409.43(c) states that a plan of

care must be signed and dated by a

physician and meets the certification

and recertification requirements of

§ 424.22 of this chapter, before the

episode claim for services is submitted

for the final percentage payment. This

provision also states that any changes in

the plan must be signed and dated by

the physician. The requirements and

burden associated with the plan of care

are currently approved under OMB

control numbers 0938–0357, with a

current expiration date of 11/30/2000,

0938–0760 with a current expiration

date of 09/30/2000, and 0938–0761 with

a current expiration date of 09/30/2000.

Section 409.43(e) states that a plan of

care must be reviewed, signed, and

dated by the physician who reviews the

plan of care (as specified in

§ 409.42(b))in consultation with agency

professional personnel at least every 60

days. The requirements and burden

associated with the plan of care are

currently approved under OMB control

numbers 0938–0357, with a current

expiration date of 11/30/2000, 0938–

0760 with a current expiration date of

09/30/2000, and 0938–0761 with a

current expiration date of 09/30/2000.

Section 424.22 Requirements for Home

Health Services

Section 424.22(b) states that a

recertification is required at least every

60 days, preferably at the time the plan

is reviewed, and must be signed by the

physician who reviews the plan of care.

The requirements and burden associated

with the plan of care are currently

approved under OMB control numbers

0938–0357, with a current expiration

date of 11/30/2000, 0938–0760 with a

current expiration date of 09/30/2000,

and 0938–0761 with a current

expiration date of 09/30/2000.

Section 484.55 Comprehensive

Assessment of Patients

Section 484.55 states that an HHA

must update the comprehensive

assessment by completing the

appropriate OASIS schedule the last

five days of every 60 days beginning

with the start of care date unless there

is a PEP adjustment or SCIC adjustment.

The new requirement replaces the

current language regarding ‘‘every

second calendar month’’ with every 60

days.’’ The requirements and burden

associated with the plan of care are

currently approved under OMB control

numbers 0938–0357, with a current

expiration date of 11/30/2000, 0938–

0760 with a current expiration date of

09/30/2000, and 0938–0761 with a

current expiration date of 09/30/2000.

Section 484.250 Patient Assessment

Data.

Section 484.250 states that an HHA

must submit OASIS data to HCFA as

described at § 484.55(b)(1) and (d)(1) to

administer the payment rate

methodologies described in §§ 484.215,

484.230, 484.235, and 484.237. The

requirements and burden associated

with the plan of care are currently

approved under OMB control numbers

0938–0357, with a current expiration

date of 11/30/2000, 0938–0760 with a

current expiration date of 09/30/2000,

and 0938–0761 with a current

expiration date of 09/30/2000.

VII. Regulatory Impact Analysis

Section 804(2) of title 5, United States

Code (as added by section 251 of Public

Law 104–121), specifies that a ‘‘major

rule’’ is any rule that the Office of

Management and Budget finds is likely

to result in—

• An annual effect on the economy of

$100 million or more;

• A major increase in costs or prices

for consumers, individual industries,

Federal, State, or local government

agencies, or geographic regions; or

• Significant adverse effects on

competition, employment, investment

productivity, innovation, or on the

ability of United States based

enterprises to compete with foreign

based enterprises in domestic and

export markets.

We estimate, based on a simulation

model, that the redistributional effects

on HHAs participating in the Medicare

program associated with this final rule

would range from a positive $428

million for freestanding not-for-profit

agencies to a negative $363 million for

freestanding for-profit agencies in FY

2001. Therefore, this rule, is a major

rule as defined in Title 5, United States

Code, section 804(2).

We have examined the impacts of this

final rule as required by Executive

Order 12866, the Unfunded Mandates

Reform Act of 1995, (Public Law 104–

4), and the Regulatory Flexibility Act

(RFA) (Public Law 96–354). Executive

Order 12866 directs agencies to assess

all costs and benefits of available

regulatory alternatives and, when

regulation is necessary, to select

regulatory approaches that maximize

net benefits (including potential

economic, environmental, public health

and safety effects, distributive impacts,

and equity). A regulatory impact

analysis (RIA) must be prepared for

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41207

major rules with economically

significant effects ($100 million or more

annually). Section 1895(b)(3)(A)(i) of the

Act requires that the total amounts

payable under the HHA PPS be equal to

the total amount that would have been

paid if this system had not been in

effect. Section 302 of the BBRA amends

section 1895(b)(3)(A)(ii) of the Act and

delays the application of a 15 percent

reduction in HHA PPS payment

amounts until 1 year after its

implementation. Section 306 of the

BBRA amends section 1895(b)(3)(B)(ii)

of the Act to require the standard

prospective payment amounts to be

increased by a factor equal to the home

health market basket minus 1.1

percentage points for each of FYs 2002

and 2003. In addition, for subsequent

fiscal years, the law requires the rates to

be increased by the applicable home

health market basket index change.

Thus, subject to these adjustments, the

statutory construction of this final rule

is budget neutral. However, we are

aware that there would be a number of

organizational accommodations that

must be made by HHAs in order to make

the transition from the cost-based/

interim payment system environment to

a prospective payment environment that

would result in costs to these entities.

On that basis, we are preparing this RIA.

Section 202 of the Unfunded

Mandates Reform Act of 1995 requires

that agencies prepare an assessment of

anticipated costs and benefits for any

rule that may result in an expenditure

by State, local, or tribal governments, in

the aggregate, or by the private sector, of

$100 million in any given year. We

believe that the costs associated with

this final rule that apply to these

governmental sectors would fall below

this threshold. Therefore, the law does

not apply and we have not prepared an

assessment of anticipated costs and

benefits of this final rule.

The RFA requires agencies to analyze

options for regulatory relief of small

businesses. For purposes of the RFA,

small entities include small businesses,

nonprofit organizations, and

governmental agencies. Most HHAs are

considered small entities, either by

nonprofit status or by having revenues

of $5 million or less annually.

Table 10 illustrates the distribution of

HHAs by provider type participating in

Medicare as of March 16, 2000.

TABLE 10.—NUMBER OF HHAS BY

PROVIDER TYPE

HHA Provider Type Number

of HHAs

Visiting Nurse Association .............. 451

TABLE 10.—NUMBER OF HHAS BY

PROVIDER TYPE

HHA Provider Type Number

of HHAs

Combination of Government & Voluntary .......................................... 35

Official Health Agency .................... 910

Rehabilitation Facility Based .......... 0

Hospital Based ............................... 2,278

Skilled Nursing Facility Based ........ 161

Other ............................................... 3,801

Total ......................................... 7,636

Source: HCFA—On Line Survey Certification and Reporting System Standard Report

10—March 16, 2000.

The following RIA/RFA analysis,

together with the rest of this preamble,

explains the rationale for and purposes

of this final rule.

A. Background

This final rule establishes

requirements for the new prospective

payment system for home health

agencies as required by section 4603 of

the Balanced Budget Act of 1997, as

amended by section 5101 of OCESAA

and sections 302, 305, and 306 of BBRA.

The requirements include the

implementation of a prospective

payment system for home health

agencies and a number of other related

changes. The prospective payment

system described in this rule would

replace the retrospective reasonable

cost-based system currently used by

Medicare for the payment of home

health services under Part A and Part B.

This final rule sets forth a prospective

payment system for all costs of home

health services under section 1895 of

the Act.

B. Revisions to the Proposed Rule

Below are listed a number of the

significant changes to the proposed rule

that are reflected in the final rule.

Section 409.100

Section 305 of the BBRA excludes

DME covered as a home health service

from the consolidated billing

requirements. Specifically, the law

requires, ‘‘in the case of home health

services (including medical supplies

described in section 1861(m)(5), but

excluding durable medical equipment to

the extent provided for in such section)

furnished to an individual who (at the

time the item or service is furnished) is

under the plan of care of a home health

agency, payment shall be made to the

agency (without regard to whether or

not the item or service was furnished by

the agency, by others under arrangement

with them made by the agency, or when

any other contracting or consulting

arrangement, or otherwise).’’

However, under HHA PPS there is a

separate payment for DME items and

services currently provided as a home

health service and paid under the DME

fee schedule. As discussed earlier,

under the HHA PPS, DME covered as a

home health service as part of the

Medicare home health benefit will

continue to be paid under the DME fee

schedule. Further, in accordance with

the statue, as amended by section 305 of

BBRA, DME is also excluded from the

consolidated billing requirements. A

separate payment amount in addition to

the prospective payment amount for

home health services will be made for

DME currently covered as a home health

service under the PPS.

HHAs will no longer be able to

‘‘unbundle’’ home health services (other

than DME) to an outside supplier that

can then submit a separate bill directly

to the Part B carrier or DMERC. Instead,

the HHA itself will have to furnish the

home health services (except DME)

either directly or under an arrangement

with an outside supplier in which the

HHA itself, rather than the supplier,

bills Medicare. The outside supplier

must look to the HHA rather than to

Medicare Part B for payment, except in

the case of DME. Beneficiaries receiving

DME prior to establishment of a home

health plan of care can continue the

relationship with that same DME

supplier. The consolidated billing

requirement eliminates the potential for

duplicative billings for the same

services to the RHHI by the HHA and to

the Part B carrier by an outside supplier.

All covered home health services listed

in section 1861(m) (including medical

supplies described in section

1861(m)(5), but excluding DME to the

extent provided in such section) of the

Act under a plan of care must be billed

by the HHA.

Section 484.205

• We revised paragraph (a)(1) and (b)

to clarify that the osteoporosis drug

covered under the home health benefit

is the only home health service listed in

section 1861(m) of the Act that

continues to be paid on a reasonable

cost basis under PPS.

• We added paragraphs (b)(1) and

(b)(2) that provides for the requirements

governing the final split percentage

payment approach. New paragraph

(b)(1) governs the split percentage

payment approach for initial episodes.

The initial percentage payment for

initial episodes is paid at 60 percent of

the case-mix and wage adjusted 60 day

episode rate. The residual final payment

for initial episodes is paid at 40 percent

41208 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

of the case-mix and wage adjusted 60

day episode rate. New paragraph (b)(2)

governs the split percentage payment

approach for subsequent episodes. The

initial percentage payment for

subsequent episodes is paid at 50

percent of the case-mix and wage

adjusted 60 day episode rate. The

residual final payment for subsequent

episodes is paid at 50 percent of the

case-mix and wage adjusted 60 day

episode rate.

Section 484.215

We revised paragraph (d)(4) to reflect

the amounts that are added to the

nonstandardized episode amount for the

OASIS adjustment for the one time

implementation costs associated with

assessment scheduling form changes

and amounts for Part B therapies that

could have been unbundled to Part B

prior to PPS implementation.

Section 484.225

We revised paragraph (c) to reflect

that for each of FYs 2002 and 2003 the

rates are updated by the applicable

home health market basket minus 1.1

percentage points.

Section 484.230

We revised the language in this

section to reflect the higher per-visit

amounts that will be used to calculate

the LUPA payments.

Section 484.235

We revised paragraph (b) to reflect the

use of billable visit dates as the defining

points for the PEP adjustment.

Section 484.237

We revised paragraphs (b)(1) and

(b)(2) governing the SCIC adjustment to

reflect the use of billable visit dates to

define the span of days used to calculate

the proportional payments both before

and after a patient experiences a

significant change in condition.

Section 484.240

We revised paragraph (d) to reflect the

higher per-visit amounts that will be

used to calculate the imputed costs for

each episode for outlier payment

determination.

C. Effects of This Final Rule

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

requires the computation of a standard

prospective payment amount to be

initially based on the most recent

audited cost-report data available to the

Secretary. In accordance with this

section of the Act, the primary data

source in developing the cost basis for

the 60-day episode payments was the

audited cost- report sample of HHAs

whose cost reporting periods ended in

fiscal year 1997 (that is, ending on or

after October 1, 1996 through September

30, 1997). We also adopted the most

current complete utilization data

available from 1998.

Table 11 below illustrates the

proportion of HHAs that are likely to be

affected. This table reflects how

agencies would be paid under PPS

versus how they would be paid under

IPS. The limits under IPS were

determined by updating the per-visit

limits in effect for FY 2000 by the

market basket minus 1.1 percent and

updating each agency’s per-beneficiary

cap for FY 2000 by this same

percentage. For each agency in the

audited cost report data set, we updated

their costs from FY 1997 to FY 2001 by

our best estimate of HHA cost increases

during this period. We then compared

each agency’s FY 2001 costs to the IPS

limits to determine their IPS payment in

FY 2001. To determine each agency’s

payment under PPS, we translated the

cost report data into 60-day episodes

and used the average case-mix for

urban/rural and provider type as a

proxy. We extrapolated the audited cost

report data to reflect the total Medicare

HHA distribution. We obtained average

case-mix values based on the type of

provider and whether the HHA was

urban or rural from the Abt data set. We

then multiplied the agency’s expected

number of episodes in FY 2001 by the

wage-adjusted and case-mix- adjusted

episode payment to obtain the agency’s

expected PPS payment. The PPS

payment was then compared to the IPS

payment.

TABLE 11.—IMPACT OF THE HOME HEALTH PROSPECTIVE PAYMENT AMOUNTS ON HOME HEALTH AGENCIES BY TYPE AND

LOCATION FOR THE 563 AUDITED COST REPORT SAMPLE AGENCIES

Type of agency

Percentage

change from

IPS to PPS

All Agencies ................................................................................................................................................................................... 0.0

By Urban/Rural and Provider Type:

Rural:

Freestanding: For-Profit .................................................................................................................................................. ¥7.50

Governmental ........................................................................................................................................................... 29.98

Non-Profit ................................................................................................................................................................. 13.28

Provider Based ................................................................................................................................................................ 5.31

Urban:

Freestanding: For-Profit .................................................................................................................................................. ¥14.25

Governmental ........................................................................................................................................................... 20.58

Non-Profit ................................................................................................................................................................. 18.89

Provider Based ................................................................................................................................................................ ¥2.50

By Provider Type:

Freestanding: For-Profit .......................................................................................................................................................... ¥12.77

Governmental .................................................................................................................................................................. 26.50

Non-Profit ........................................................................................................................................................................ 17.88

Provider Based ....................................................................................................................................................................... ¥1.03

By Urban/Rural:

Rural Agencies ....................................................................................................................................................................... 5.94

Urban Agencies ...................................................................................................................................................................... ¥0.08

By Region:

Midwest States ....................................................................................................................................................................... 14.77

Northeast States ..................................................................................................................................................................... 15.37

Southern States ...................................................................................................................................................................... ¥16.75

Western States ....................................................................................................................................................................... 17.84

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41209

Table 11 represents the projected

effects of the HHA PPS and is based on

the 563 providers in the audited costreport sample weighted to the national

total of HHAs. This sample has been

adjusted by the most recent market

basket factors to reflect the expected

cost increases occurring between the

cost-reporting periods for the data

contained in the database and

September 30, 2001.

This impact table compares the effect

on categories of HHAs in moving from

the IPS payment methodology to the

PPS payment methodology. These cost

limits have already had the effect of

reducing many extremes in the cost of

the system; therefore, as a result of IPS,

a majority of HHA providers are

currently held at the median national

cost per-beneficiary or below. It should

be noted that HHAs will have had 2 or

more years experience under this

system before PPS implementation. The

effect of IPS payment restraint

combined with the improvements in

this final rule have significantly reduced

the degree of variation between

providers and regions as well as the

overall impact of the rule. Because we

believe it was important that the impact

tables provide the most accurate

representation possible, it was necessary

for us to use the data set drawn upon

from the audited cost report file. This

file of course is nationally

representative and these data become

decreasingly valid when divided into

smaller geographic areas. Thus, the

lowest level of analysis we could

reasonably provide using this data is the

four census regions. Any finer level of

analysis would introduce a level of

statistical error that we believe would be

unacceptable.

Column one of this table divides

HHAs by a number of characteristics

including provider type, region, and

urban versus rural location. For

purposes of this impact table four

regions have been defined: Northeast,

South, Midwest, and West. The

Northeast Region consists of

Connecticut, Massachusetts, Maine,

New Hampshire, New Jersey, New York,

Pennsylvania, Puerto Rico, Rhode

Island, Vermont, and the Virgin Islands.

The South Region consists of Alabama,

Arkansas, the District of Columbia,

Delaware, Florida, Georgia, Kentucky,

Louisiana, Maryland, Mississippi, North

Carolina, Oklahoma, South Carolina,

Tennessee, Texas, Virginia, and West

Virginia. The Midwest Region consists

of Iowa, Illinois, Indiana, Kansas,

Michigan, Minnesota, Missouri, North

Dakota, Nebraska, Ohio, South Dakota,

and Wisconsin. The West Region

consists of Alaska, Arizona, California,

Colorado, Hawaii, Idaho, Montana, New

Mexico, Nevada, Oregon, Utah,

Washington, and Wyoming.

Column two shows the percentage

change in Medicare payments a

particular category of HHAs would

experience in moving from the IPS

payment methodology to the final PPS

payment methodology. Because the

statute requires aggregate payments

under the HHA PPS and HHA IPS

payment methodology to be budget

neutral, the effect on agencies in the

aggregate is zero.

Rural freestanding for-profit HHAs

experience an 7.50 percent decrease in

moving from the IPS payment

methodology to the PPS payment

methodology. Rural freestanding

governmental HHAs experience an

29.98 percent increase in moving from

the IPS payment methodology to the

PPS payment methodology. Rural

freestanding nonprofit HHAs experience

an 13.28 percent increase in moving

from the IPS payment methodology to

the PPS payment methodology. Rural

provider-based HHAs, in the aggregate,

experience an 5.31 percent increase in

moving from the IPS payment

methodology to the PPS payment

methodology. Rural agencies, in the

aggregate, experience an 5.94 percent

increase in moving from the IPS

payment methodology to the PPS

payment methodology.

Urban freestanding for-profit HHAs

experience an 14.25 percent decrease in

moving from the IPS payment

methodology to the PPS payment

methodology. Urban freestanding

governmental HHAs experience an

20.58 percent increase in moving from

the IPS payment methodology to the

PPS payment methodology. Urban

freestanding nonprofit HHAs experience

an 18.89 percent increase in moving

from the IPS payment methodology to

the PPS payment methodology. Urban

provider-based HHAs, in the aggregate,

experience an 2.50 percent decrease in

moving from the IPS payment

methodology to the PPS payment

methodology. Urban agencies, in the

aggregate, experience an 0.08 percent

decrease in moving from the IPS

payment methodology to the PPS

payment methodology.

The current IPS cost limits have been

criticized as providing better financial

treatment of urban providers relative to

rural providers. The HHA PPS system,

which is based on patient

characteristics, tends to level the

playing field; thus, rural providers, in

general, fare relatively better than urban

providers. The largest impact on urban

providers is in the urban freestanding

for-profit category where it can be

argued that historical costs have been

disproportionately high compared to

other providers for reasons unrelated to

the relative needs of the patients they

serve.

Freestanding for-profit HHAs, in the

aggregate, experience an 12.77 percent

decrease in moving from the IPS

payment methodology to the PPS

payment methodology. Freestanding

governmental HHAs, in the aggregate,

experience an 26.50 percent increase in

moving from the IPS payment

methodology to the PPS payment

methodology. Freestanding nonprofit

HHAs, in the aggregate, experience an

17.88 percent increase in moving from

the IPS payment methodology to the

PPS payment methodology. Providerbased HHAs, in the aggregate,

experience an 1.03 percent decrease in

moving from the IPS payment

methodology to the PPS payment

methodology.

It should be noted that governmental

providers fare relatively better under the

HHA PPS system than other types of

providers. In part, this is because the

HHA PPS system is driven primarily by

the needs of patients rather than

utilization incentives. Thus,

governmental providers are less affected

by the IPS payment methodology

because their costs have been

historically lower and visit utilization

per episode is much lower. On average,

governmental agencies have reported

lower average costs per visit as well as

fewer visits per episode. It should be

noted that this category of HHAs

accounts for only 3.8 percent of total

home health expenditures and,

therefore, the large increase attributed to

them has little impact in the aggregate

system costs.

Provider-based agencies historically

tended to have, as a group, higher pervisit costs. As could be anticipated, the

payment differential reflected in this

impact table for provider-based agencies

is in a negative direction, but relatively

modest, probably due to the cost

discipline already in place due to IPS.

HHAs in the Midwest region

experience an 14.77 percent increase in

moving from the IPS payment

methodology to the PPS payment

methodology. HHAs in the Northeast

region experience an 15.37 percent

increase in moving from the IPS

payment methodology to the PPS

payment methodology. HHAs in the

South region experience an 16.75

percent decrease in moving from the IPS

payment methodology to the PPS

payment methodology. HHAs in the

West region experience an 17.84 percent

increase in moving from the IPS

41210 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

payment methodology to the PPS

payment methodology.

We would have preferred to provide

an impact table with more regions;

however, the limitations of our data

prevented us from obtaining provider

data at a lower level than the four major

regions. However, this regional

breakdown does reflect what one might

expect in moving from our current IPS

cost limitations payment methodology

to a national PPS payment methodology.

Medicare payments have historically

varied by region without regard to the

relative needs/conditions of patients;

therefore, that region that had the

highest unexplained costs for home

health services is the most impacted

area (South region). In contrast, the

Midwest, Northeast, and West regions

fare relatively well by comparison. It

must be noted that in a payment

methodology system that is legislatively

required to achieve budget neutrality,

any effort to increase payments to those

regions more affected by a national

payment system necessarily results in a

reduction of payments to those regions

that have historically restrained costs

under home health.

It should be noted that to the degree

that agencies respond to the incentives

of the prospective payment system and

apply resources commensurate with the

measured characteristics of their

patients, the impacts predicted in this

model will further be reduced.

D. Rural Hospital Impact Statement

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 the RFA. For purposes

of section 1102(b) of the Act, we define

a small rural hospital as a hospital that

is located outside of a Metropolitan

Statistical Area and has fewer than 50

beds.

We have not prepared a rural impact

statement since we have determined,

and the Secretary certifies, that this rule

would not have a significant economic

impact on the operations of a substantial

number of small rural hospitals.

In accordance with the provisions of

Executive Order 12866, this regulation

was reviewed by the Office of

Management and Budget.

Federalism

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

compliance costs on State and local

governments, preempts State law, or

otherwise has Federalism implications.

We have reviewed this final rule under

the threshold criteria of Executive Order

13132, Federalism. We have determined

that this final rule would not have

substantial direct effects on the rights,

roles, and responsibilities of States.

List of Subjects

42 CFR Part 409

Health facilities, Medicare.

42 CFR Part 410

Health facilities, Health professions,

Kidney diseases, Laboratories,

Medicare, Rural areas, X-rays.

42 CFR Part 411

Kidney diseases, Medicare, Reporting

and recordkeeping requirements.

42 CFR Part 413

Health facilities, Kidney diseases,

Medicare, Puerto Rico, Reporting and

recordkeeping requirements.

42 CFR Part 424

Emergency medical services, Health

facilities, Health professions, Medicare.

42 CFR Part 484

Health facilities, Health professions,

Medicare, Reporting and recordkeeping

requirements.

For the reasons set forth in the

preamble, 42 CFR chapter IV is

amended as follows:

PART 409—HOSPITAL INSURANCE

BENEFITS

A. Amend part 409 as set forth below:

1. Revise the authority citation for

part 409 to read as follows:

Authority: Secs. 1102 and 1871 of the

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

1395hh).

2. Amend § 409.43 as follows:

A. Revise paragraphs (c) and (e).

B. Amend paragraph (f) by removing

the phrase ‘‘62-day’’ and adding in its

place the phrase ‘‘60-day.’’

§ 409.43 Plan of care requirements.

* * * * *

(c) Physician signature. (1) Request for

Anticipated payment signature

requirements. If the physician signed

plan of care is not available at the time

the HHA requests an anticipated

payment of the initial percentage

prospective payment in accordance with

§ 484.205, the request for the anticipated

payment must be based on—

(i) A physician’s verbal order that—

(A) Is recorded in the plan of care;

(B) Includes a description of the

patient’s condition and the services to

be provided by the home health agency;

(C) Includes an attestation (relating to

the physician’s orders and the date

received) signed and dated by the

registered nurse or qualified therapist

(as defined in 42 CFR 484.4) responsible

for furnishing or supervising the

ordered service in the plan of care; and

(D) Is copied into the plan of care and

the plan of care is immediately

submitted to the physician; or

(ii) A referral prescribing detailed

orders for the services to be rendered

that is signed and dated by a physician.

(2) Reduction or disapproval of

anticipated payment requests. HCFA

has the authority to reduce or

disapprove requests for anticipated

payments in situations when protecting

Medicare program integrity warrants

this action. Since the request for

anticipated payment is based on verbal

orders as specified in paragraph (c)(1)(i)

and/or a prescribing referral as specified

in (c)(1)(ii) of this section and is not a

Medicare claim for purposes of the Act

(although it is a ‘‘claim’’ for purposes of

Federal, civil, criminal, and

administrative law enforcement

authorities, including but not limited to

the Civil Monetary Penalties Law (as

defined in 42 U.S.C. 1320a–7a (i) (2)),

the Civil False Claims Act (as defined in

31 U.S.C. 3729(c)), and the Criminal

False Claims Act (18 U.S.C. 287)), the

request for anticipated payment will be

canceled and recovered unless the claim

is submitted within the greater of 60

days from the end of the episode or 60

days from the issuance of the request for

anticipated payment.

(3) Final percentage payment

signature requirements. The plan of care

must be signed and dated—

(i) By a physician as described who

meets the certification and

recertification requirements of § 424.22

of this chapter; and

(ii) Before the claim for each episode

for services is submitted for the final

percentage prospective payment.

(4) Changes to the plan of care

signature requirements. Any changes in

the plan must be signed and dated by a

physician.

* * * * *

(e) Frequency of review. (1) The plan

of care must be reviewed by the

physician (as specified in § 409.42(b)) in

consultation with agency professional

personnel at least every 60 days or more

frequently when there is a—

(i) Beneficiary elected transfer;

(ii) Significant change in condition

resulting in a change in the case-mix

assignment; or

(iii) Discharge and return to the same

HHA during the 60-day episode.

(2) Each review of a beneficiary’s plan

of care must contain the signature of the

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41211

physician who reviewed it and the date

of review.

* * * * *

3. In § 409.100, revise paragraph (a) to

read as follows:

§ 409.100 To whom payment is made.

(a) Basic rule. Except as provided in

paragraph (b) of this section—

(1) Medicare pays hospital insurance

benefits only to a participating provider.

(2) For home health services

(including medical supplies described

in section 1861(m)(5) of the Act, but

excluding durable medical equipment to

the extent provided for in such section)

furnished to an individual who at the

time the item or service is furnished is

under a plan of care of an HHA,

payment is made to the HHA (without

regard to whether the item or service is

furnished by the HHA directly, under

arrangement with the HHA, or under

any other contracting or consulting

arrangement).

* * * * *

PART 410—SUPPLEMENTARY

MEDICAL INSURANCE (SMI)

BENEFITS

B. Amend part 410 as set forth below:

1. The authority citation for part 410

continues to read as follows:

Authority: Secs. 1102 and 1871 of the

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

1395hh).

2. In § 410.150, republish the

introductory text to paragraph (b) and

add new paragraph (b)(19) to read as

follows:

§ 410.150 To whom payment is made.

* * * * *

(b) Specific rules. Subject to the

conditions set forth in paragraph (a) of

this section, Medicare Part B pays as

follows:

* * * * *

(19) To a participating HHA, for home

health services (including medical

supplies described in section 1861(m)(5)

of the Act, but excluding durable

medical equipment to the extent

provided for in such section) furnished

to an individual who at the time the

item or service is furnished is under a

plan of care of an HHA (without regard

to whether the item or service is

furnished by the HHA directly, under

arrangement with the HHA, or under

any other contracting or consulting

arrangement).

PART 411—EXCLUSIONS FROM

MEDICARE AND LIMITATIONS ON

MEDICARE PAYMENT

C. Amend part 411 as set forth below:

1. The authority citation for part 411

continues to read as follows:

Authority: Secs. 1102 and 1871 of the

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

1395hh).

2. In § 411.15, republish the

introductory text to the section, and add

a new paragraph (q) to read as follows:

§ 411.15 Particular services excluded from

coverage.

The following services are excluded

from coverage:

* * * * *

(q) A home health service (including

medical supplies described in section

1861(m)(5) of the Act, but excluding

durable medical equipment to the extent

provided for in such section) as defined

in section 1861(m) of the Act furnished

to an individual who is under a plan of

care of an HHA, unless that HHA has

submitted a claim for payment for such

services.

PART 413—PRINCIPLES OF

REASONABLE COST

REIMBURSEMENT; PAYMENT FOR

END-STAGE RENAL DISEASE

SERVICES; OPTIONAL

PROSPECTIVELY DETERMINED

PAYMENT RATES FOR SKILLED

NURSING FACILITIES

D. Amend part 413 as set forth below:

1. The authority citation for part 413

continues to read as follows:

Authority: Secs. 1102, 1812(d), 1814(b),

1815, 1833(a),(i) and (n), 1861(v), 1871, 1881,

1883, and 1866 of the Social Security Act (42

U.S.C. 1302, 1395f(b), 1395g, 1395l(a),(i) and

(n), 1395x(v), 1395hh, 1395rr, 1395tt, and

1395ww).

2. In § 413.1, add a new paragraph (h)

to read as follows:

§ 413.1 Introduction.

* * * * *

(h) Payment for services furnished by

HHAs. The amount paid for home

health services as defined in section

1861(m) of the Act (except durable

medical equipment and the covered

osteoporosis drug as provided for in that

section) that are furnished beginning on

or after October 1, 2000 to an eligible

beneficiary under a home health plan of

care is determined according to the

prospectively determined payment rates

for HHAs set forth in part 484, subpart

E of this chapter.

§ 413.64 [Amended]

3. Amend § 413.64 by:

A. Amending paragraph (h)(1) to

remove the phrase ‘‘and for both Part A

and Part B HHA services’’ at the end of

the paragraph.

B. Removing paragraph (h)(2)(iv) and

redesignating paragraphs (h)(2)(v) and

(h)(2)(vi) as paragraphs (h)(2)(iv) and

(h)(2)(v) respectively.

PART 424—CONDITIONS FOR

MEDICARE PAYMENT

E. Amend part 424 as set forth below:

1. 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

1895hh).

2. In § 424.22, revise paragraph (b)(1)

to read as follows:

§ 424.22 Requirements for home health

services.

* * * * *

(b) Recertification. (1) Timing and

signature of recertification.

Recertification is required at least every

60 days, preferably at the time the plan

is reviewed, and must be signed by the

physician who reviews the plan of care.

The recertification is required at least

every 60 days when there is a—

(i) Beneficiary elected transfer; or

(ii) Discharge and return to the same

HHA during the 60-day episode.

* * * * *

PART 484—HOME HEALTH SERVICES

F. Amend part 484 as set forth below:

1. 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), unless otherwise indicated.

2. Revise the heading for part 484 to

read as set forth above.

3. Add a new paragraph (a)(3) to

§ 484.1 to read as follows:

§ 484.1 Basis and scope.

(a) Basis and scope. ***

(3) Section 1895 provides for the

establishment of a prospective payment

system for home health services covered

under Medicare.

* * * * *

§ 484.18 [Amended]

4. In § 484.18, in paragraph (b),

remove the phrase ‘‘62 days’’ and in its

place add the phrase ‘‘60 days or more

frequently when there is a beneficiary

elected transfer; a significant change in

condition resulting in a change in the

case-mix assignment; or a discharge and

return to the same HHA during the 60-

day episode.’’

5. In § 484.55, revise paragraph (d)(1)

to read as follows:

§ 484.55 Condition of participation:

Comprehensive assessment of patients.

* * * * *

41212 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

(d) Standard: Update of the

comprehensive assessment.

* * * * *

(1) The last five days of every 60 days

beginning with the start-of-care date,

unless there is a—

(i) Beneficiary elected transfer;

(ii) Significant change in condition

resulting in a new case-mix assignment;

or

(iii) Discharge and return to the same

HHA during the 60-day episode.

* * * * *

6. Add and reserve a new subpart D.

7. Add a new subpart E to read as

follows:

Subpart E—Prospective Payment

System for Home Health Agencies

Sec.

484.200 Basis and scope.

484.202 Definitions.

484.205 Basis of payment.

484.210 Data used for the calculation of the

national prospective 60-day episode

payment.

484.215 Initial establishment of the

calculation of the national 60-day

episode payment.

484.220 Calculation of the national adjusted

prospective 60-day episode payment rate

for case-mix and area wage levels.

484.225 Annual update of the national

adjusted prospective 60-day episode

payment rate.

484.230 Methodology used for the

calculation of the low-utilization

payment adjustment.

484.235 Methodology used for the

calculation of the partial episode

payment adjustment.

484.237 Methodology used for the

calculation of the significant change in

condition payment adjustment.

484.240 Methodology used for the

calculation of the outlier payment.

484.245 Accelerated payments for home

health agencies.

484.250 Patient assessment data.

484.260 Limitation on review.

Subpart E—Prospective Payment

System for Home Health Agencies

§ 484.200 Basis and scope.

(a) Basis. This subpart implements

section 1895 of the Act, which provides

for the implementation of a prospective

payment system (PPS) for HHAs for

portions of cost reporting periods

occurring on or after October 1, 2000.

(b) Scope. This subpart sets forth the

framework for the HHA PPS, including

the methodology used for the

development of the payment rates,

associated adjustments, and related

rules.

§ 484.202 Definitions.

As used in this subpart—

Case-mix index means a scale that

measures the relative difference in

resource intensity among different

groups in the clinical model.

Discipline means one of the six home

health disciplines covered under the

Medicare home health benefit (skilled

nursing services, home health aide

services, physical therapy services,

occupational therapy services, speechlanguage pathology services, and

medical social services).

Home health market basket index

means an index that reflects changes

over time in the prices of an appropriate

mix of goods and services included in

home health services.

§ 484.205 Basis of payment.

(a) Method of payment. An HHA

receives a national prospective 60-day

episode payment of a predetermined

rate for a home health service

previously paid on a reasonable cost

basis (except the osteoporosis drug

defined in section 1861(kk) of the Act)

as of August 5, 1997. The national 60-

day episode payment is determined in

accordance with § 484.215. The national

prospective 60-day episode payment is

subject to the following adjustments and

additional payments:

(1) A low-utilization payment

adjustment (LUPA) of a predetermined

per-visit rate as specified in § 484.230.

(2) A partial episode payment (PEP)

adjustment due to an intervening event

defined as a beneficiary elected transfer

or a discharge and return to the same

HHA during the 60-day episode, that

warrants a new 60-day episode payment

during an existing 60-day episode, that

initiates the start of a new 60-day

episode payment and a new physician

certification of the new plan of care. The

PEP adjustment is determined in

accordance with § 484.235.

(3) A significant change in condition

(SCIC) payment adjustment due to the

intervening event defined as a

significant change in the patient’s

condition during an existing 60-day

episode. The SCIC adjustment occurs

when a beneficiary experiences a

significant change in condition during a

60-day episode that was not envisioned

in the original plan of care. The SCIC

adjustment is determined in accordance

with § 484.237.

(4) An outlier payment is determined

in accordance with § 484.240.

(b) Episode payment. The national

prospective 60-day episode payment

represents payment in full for all costs

associated with furnishing home health

services previously paid on a reasonable

cost basis (except the osteoporosis drug

listed in section 1861(m) of the Act as

defined in section 1861(kk) of the Act)

as of August 5, 1997 unless the national

60-day episode payment is subject to a

low-utilization payment adjustment set

forth in § 484.230, a partial episode

payment adjustment set forth at

§ 484.235, a significant change in

condition payment set forth at

§ 484.237, or an additional outlier

payment set forth in § 484.240. All

payments under this system may be

subject to a medical review adjustment

reflecting beneficiary eligibility, medical

necessity determinations, and HHRG

assignment. DME provided as a home

health service as defined in section

1861(m) of the Act continues to be paid

the fee schedule amount.

(1) Split percentage payment for

initial episodes. The initial percentage

payment for initial episodes is paid to

an HHA at 60 percent of the case-mix

and wage adjusted 60-day episode rate.

The residual final payment for initial

episodes is paid at 40 percent of the

case-mix and wage adjusted 60-day

episode rate. Split percentage payments

are made in accordance with

requirements at § 409.43(c) of this

chapter.

(2) Split percentage payment for

subsequent episodes. The initial

percentage payment for subsequent

episodes is paid to an HHA at 50

percent of the case-mix and wage

adjusted 60-day episode rate. The

residual final payment for subsequent

episodes is paid at 50 percent of the

case-mix and wage adjusted 60-day

episode rate. Split percentage payments

are made in accordance with

requirements at § 409.43(c) of this

chapter.

(c) Low-utilization payment. An HHA

receives a national 60-day episode

payment of a predetermined rate for

home health services previously paid on

a reasonable cost basis as of August 5,

1997, unless HCFA determines at the

end of the 60-day episode that the HHA

furnished minimal services to a patient

during the 60-day episode. A lowutilization payment adjustment is

determined in accordance with

§ 484.230.

(d) Partial episode payment

adjustment. An HHA receives a national

60-day episode payment of a

predetermined rate for home health

services previously paid on a reasonable

cost basis as of August 5, 1997, unless

HCFA determines an intervening event,

defined as a beneficiary elected transfer,

or discharge and return to the same

HHA during a 60-day episode, warrants

a new 60-day episode payment. The PEP

adjustment would not apply in

situations of transfers among HHAs of

common ownership as defined in

§ 424.22 of this chapter. Those

situations would be considered services

provided under arrangement on behalf

Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations 41213

of the originating HHA by the receiving

HHA with the common ownership

interest for the balance of the 60-day

episode. The common ownership

exception to the transfer PEP adjustment

does not apply if the beneficiary moves

to a different MSA or Non-MSA during

the 60-day episode before the transfer to

the receiving HHA. The transferring

HHA in situations of common

ownership not only serves as a billing

agent, but must also exercise

professional responsibility over the

arranged-for services in order for

services provided under arrangements

to be paid. The discharge and return to

the same HHA during the 60-day

episode is only recognized in those

circumstances when a beneficiary

reached the goals in the original plan of

care. The original plan of care must

have been terminated with no

anticipated need for additional home

health services for the balance of the 60-

day episode. If the intervening event

warrants a new 60-day episode payment

and the new physician certification of a

new plan of care, the initial HHA

receives a partial episode payment

adjustment reflecting the length of time

the patient remained under its care. A

partial episode payment adjustment is

determined in accordance with

§ 484.235.

(e) Significant change in condition

adjustment. The HHA receives a

national 60-day episode payment of a

predetermined rate for home health

services paid on a reasonable cost basis

as of August 5, 1997, unless HCFA

determines an intervening event defined

as a beneficiary experiencing a

significant change in condition during a

60-day episode that was not envisioned

in the original plan of care occurred. In

order to receive a new case-mix

assignment for purposes of payment

during the 60-day episode, the HHA

must complete an OASIS assessment

and obtain the necessary physician

change orders reflecting the significant

change in the treatment approach in the

patient’s plan of care. The total

significant change in condition payment

adjustment is a proportional payment

adjustment reflecting the time both prior

and after the patient experienced a

significant change in condition during

the 60-day episode. A SCIC adjustment

is determined in accordance with

§ 484.237.

(f) Outlier payment. An HHA receives

a national 60-day episode payment of a

predetermined rate for a home health

service paid on a reasonable cost basis

as of August 5, 1997, unless the imputed

cost of the 60-day episode exceeds a

threshold amount. The outlier payment

is defined to be a proportion of the

imputed costs beyond the threshold. An

outlier payment is a payment in

addition to the national 60-day episode

payment. The total of all outlier

payments is limited to 5 percent of total

outlays under the HHA PPS. An outlier

payment is determined in accordance

with § 484.240.

§ 484.210 Data used for the calculation of

the national prospective 60-day episode

payment.

To calculate the national prospective

60-

day episode payment, HCFA uses the

following:

(a) Medicare cost data on the most

recent audited cost report data available.

(b) Utilization data based on Medicare

claims.

(c) An appropriate wage index to

adjust for area wage differences.

(d) The most recent projections of

increases in costs from the HHA market

basket index.

(e) OASIS assessment data and other

data that account for the relative

resource utilization for different HHA

Medicare patient case-mix.

§ 484.215 Initial establishment of the

calculation of the national 60-day episode

payment.

(a) Determining an HHA’s costs. In

calculating the initial unadjusted

national 60-day episode payment

applicable for a service furnished by an

HHA using data on the most recent

available audited cost reports, HCFA

determines each HHA’s costs by

summing its allowable costs for the

period. HCFA determines the national

mean cost per visit.

(b) Determining HHA utilization. In

calculating the initial unadjusted

national 60-day episode payment, HCFA

determines the national mean

utilization for each of the six disciplines

using home health claims data.

(c) Use of the market basket index.

HCFA uses the HHA market basket

index to adjust the HHA cost data to

reflect cost increases occurring between

October 1, 1996 through September 30,

2001.

(d) Calculation of the unadjusted

national average prospective payment

amount for the 60-day episode. HCFA

calculates the unadjusted national 60-

day episode payment in the following

manner:

(1) By computing the mean national

cost per visit.

(2) By computing the national mean

utilization for each discipline.

(3) By multiplying the mean national

cost per visit by the national mean

utilization summed in the aggregate for

the six disciplines.

(4) By adding to the amount derived

in paragraph (d)(3) of this section,

amounts for nonroutine medical

supplies, an OASIS adjustment for

estimated ongoing reporting costs, an

OASIS adjustment for the one time

implementation costs associated with

assessment scheduling form changes

and amounts for Part B therapies that

could have been unbundled to Part B

prior to October 1, 2000. The resulting

amount is the unadjusted national 60-

day episode rate.

(e) Standardization of the data for

variation in area wage levels and casemix. HCFA standardizes—

(1) The cost data described in

paragraph (a) of this section to remove

the effects of geographic variation in

wage levels and variation in case-mix;

(2) The cost data for geographic

variation in wage levels using the

hospital wage index; and

(3) The cost data for HHA variation in

case-mix using the case-mix indices and

other data that indicate HHA case- mix.

§ 484.220 Calculation of the adjusted

national prospective 60-day episode

payment rate for case-mix and area wage

levels.

HCFA adjusts the national

prospective 60-day episode payment

rate to account for—

(a) HHA case-mix using a case-mix

index to explain the relative resource

utilization of different patients; and

(b) Geographic differences in wage

levels using an appropriate wage index

based on the site of service of the

beneficiary.

§ 484.225 Annual update of the unadjusted

national prospective 60-day episode

payment rate.

(a) HCFA updates the unadjusted

national 60-day episode payment rate

on a fiscal year basis.

(b) For fiscal year 2001, the

unadjusted national 60-day episode

payment rate is adjusted using the latest

available home health market basket

index factors.

(c) For fiscal years 2002 and 2003, the

unadjusted national prospective 60-day

episode payment rate is updated by a

factor equal to the applicable home

health market basket minus 1.1

percentage points.

(d) For subsequent fiscal years, the

unadjusted national rate is equal to the

rate for the previous fiscal year

increased by the applicable home health

market basket index amount.

§ 484.230 Methodology used for the

calculation of the low-utilization payment

adjustment.

An episode with four or fewer visits

is paid the national per-visit amount by

41214 Federal Register / Vol. 65, No. 128 / Monday, July 3, 2000 / Rules and Regulations

discipline updated annually by the

applicable market basket for each visit

type. The national per-visit amount is

determined by using cost data set forth

in § 484.210(a) and adjusting by the

appropriate wage index based on the

site of service for the beneficiary.

§ 484.235 Methodology used for the

calculation of the partial episode payment

adjustment.

(a) HCFA makes a PEP adjustment to

the original 60-day episode payment

that is interrupted by an intervening

event described in § 484.205(d).

(b) The original 60-day episode

payment is adjusted to reflect the length

of time the beneficiary remained under

the care of the original HHA based on

the first billable visit date through and

including the last billable visit date.

(c) The partial episode payment is

calculated by determining the actual

days served by the original HHA as a

proportion of 60 multiplied by the

initial 60-day episode payment.

§ 484.237 Methodology used for the

calculation of the significant change in

condition payment adjustment.

(a) HCFA makes a SCIC payment

adjustment to the original 60-day

episode payment that is interrupted by

the intervening event defined in

§ 484.205(e).

(b) The SCIC payment adjustment is

calculated in two parts.

(1) The first part of the SCIC payment

adjustment reflects the adjustment to

the level of payment prior to the

significant change in the patient’s

condition during the 60-day episode.

The first part of the SCIC adjustment is

determined by taking the span of days

(the first billable visit date through and

including the last billable visit date)

prior to the patient’s significant change

in condition as a proportion of 60

multiplied by the original episode

amount.

(2) The second part of the SCIC

payment adjustment reflects the

adjustment to the level of payment after

the significant change in the patient’s

condition occurs during the 60-day

episode. The second part of the SCIC

adjustment is calculated by using the

span of days (the first billable visit date

through and including the last billable

visit date) through the balance of the 60-

day episode.

(c) The initial percentage payment

provided at the start of the 60-day

episode will be adjusted at the end of

the episode to reflect the first and

second parts of the total SCIC

adjustment determined at the end of the

60-day episode.

§ 484.240 Methodology used for the

calculation of the outlier payment.

(a) HCFA makes an outlier payment

for an episode whose estimated cost

exceeds a threshold amount for each

case-mix group.

(b) The outlier threshold for each

case-mix group is the episode payment

amount for that group, the PEP

adjustment amount for the episode or

the total significant change in condition

adjustment amount for the episode plus

a fixed dollar loss amount that is the

same for all case-mix groups.

(c) The outlier payment is a

proportion of the amount of estimated

cost beyond the threshold.

(d) HCFA imputes the cost for each

episode by multiplying the national pervisit amount of each discipline by the

number of visits in the discipline and

computing the total imputed cost for all

disciplines.

(e) The fixed dollar loss amount and

the loss sharing proportion are chosen

so that the estimated total outlier

payment is no more than 5 percent of

total payment under home health PPS.

§ 484.245 Accelerated payments for home

health agencies.

(a) General rule. Upon request, an

accelerated payment may be made to an

HHA that is receiving payment under

the home health prospective payment

system if the HHA is experiencing

financial difficulties because there is a

delay by the intermediary in making

payment to the HHA.

(b) Approval of payment. An HHA’s

request for an accelerated payment must

be approved by the intermediary and

HCFA.

(c) Amount of payment. The amount

of the accelerated payment is computed

as a percentage of the net payment for

unbilled or unpaid covered services.

(d) Recovery of payment. Recovery of

the accelerated payment is made by

recoupment as HHA bills are processed

or by direct payment by the HHA.

§ 484.250 Patient assessment data.

An HHA must submit to HCFA the

OASIS data described at § 484.55(b)(1)

and (d)(1) in order for HCFA to

administer the payment rate

methodologies described in §§ 484.215,

484.230, 484.235, and 484.237.

§ 484.260 Limitation on review.

An HHA is not entitled to judicial or

administrative review under sections

1869 or 1878 of the Act, or otherwise,

with regard to the establishment of the

payment unit, including the national 60-

day prospective episode payment rate,

adjustments and outlier payments. An

HHA is not entitled to the review

regarding the establishment of the

transition period, definition and

application of the unit of payments, the

computation of initial standard

prospective payment amounts, the

establishment of the adjustment for

outliers, and the establishment of casemix and area wage adjustment factors.

(Catalog of Federal Domestic Assistance

Program No. 93.773, Medicare—Hospital

Insurance; and Program No. 93.774,

Medicare—Supplementary Medical

Insurance Program)

Dated: June 19, 2000.

Nancy-Ann Min DeParle,

Administrator, Health Care Financing

Administration.

Dated: June 22, 2000.

Donna E. Shalala,

Secretary.

[FR Doc. 00–16432 Filed 6–28–00; 2:00 pm]

BILLING CODE 4120–01–P