52080 Federal Register / Vol. 71, No. 170 / Friday, September 1, 2006 / Notices 

produce error rates for Medicaid and 

SCHIP fee-for-service and managed care 

improper payments. The Federal 

contractor will review states on a 

rotational basis so that each state will be 

measured for improper payments, in 

each program, once and only once every 

three years. 

Subsequent to the first publication, 

we determined that we will measure 

Medicaid and SCHIP in the same State. 

Therefore, states will measure Medicaid 

and SCHIP eligibility in the same year 

measured for fee-for-service and 

managed care. We believe this approach 

will advantage States through 

economies of scale (e.g. administrative 

ease and shared staffing for both 

programs reviews). We also determined 

that interim case completion timeframes 

and reporting are critical to the integrity 

of the reviews and to keep the reviews 

on schedule to produce a timely error 

rate. An additional revision is that the 

sample sizes were increased slightly in 

order to produce an equal sample size 

per strata each month. Finally, this 

information collection request does, to a 

certain extent, duplicate Medicaid 

eligibility reviews under the Medicaid 

Eligibility Quality Control (MEQC) as 

required by section 1903(u) of the Social 

Security Act (of the Act) and we 

proposed this option in the first 

publication of this information request. 

However, CMS has not finalized its 

analysis of the associated legal and 

policy matters regarding the option to 

use the payment error rate measurement 

(PERM) reviews to satisfy MEQC 

statutory and regulatory requirements. 

We are concerned that using the PERM 

eligibility reviews to satisfy 

requirements for the MEQC program 

under 1903(u) of the Act would 

necessarily require that the data derived 

from the reviews be used to determine 

potential disallowances of Federal funds 

under the MEQC program. Therefore, 

we are still considering whether or not 

to make this option available to States. 

We expect to make a final decision 

before the start of the eligibility reviews 

in FY 2007. However, in response to 

State resource concerns, CMS will 

provide States the option to contract out 

the PERM eligibility reviews to entities 

not actively involved in the state’s 

eligibility determination and enrollment 

activities. The supporting statement 

reflects those changes. 

As outlined in the October 5, 2005, 

interim final rule (70 FR 58260), CMS 

convened an eligibility workgroup 

comprised of the Department of Health 

and Human Services, the Office of 

Management and Budget (OMB) and 

representatives from two states. The 

Office of Inspector General (OIG) 

participated in an advisory capacity. 

The workgroup was charged to make 

recommendations for measuring 

Medicaid and SCHIP improper 

payments based on eligibility errors 

within the confines of current statute, 

with minimal impact on States’

resources and considering public 

comments on the August 27, 2004, 

proposed rule and the October 5, 2005, 

interim final rule. Based on the 

eligibility workgroup’s 

recommendations and public 

comments, we developed an eligibility 

review methodology that we expect will 

provide consistency in the reviews of 

active (i.e., beneficiaries receiving 

Medicaid or SCHIP) and negative cases 

(i.e., beneficiaries whose benefits were 

denied or terminated) as well as achieve 

the confidence and precision 

requirements at the national level 

required by the IPIA. 

Form Number: CMS–10184 (OMB#: 

0938–NEW). 

Frequency: Reporting—On occasion 

and Monthly. 

Affected Public: Business or other forprofit, Not-for-profit institutions. 

Number of Respondents: 34. 

Total Annual Responses: 1,326. 

Total Annual Hours: 535,670. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS Web site 

address at http://www.cms.hhs.gov/ 

PaperworkReductionActof1995, or email your request, including your 

address, phone number, OMB number, 

and CMS document identifier, to 

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office on (410) 786–

1326. 

Written comments and 

recommendations for the proposed 

information collections must be mailed 

or faxed within 30 days of this notice 

directly to the OMB desk officer: OMB 

Human Resources and Housing Branch, 

Attention: Carolyn Lovett, New 

Executive Office Building, Room 10235, 

Washington, DC 20503. Fax Number: 

(202) 395–6974. 

Dated: August 25, 2006. 

Michelle Shortt, 

Director, Regulations Development Group, 

Office of Strategic Operations and Regulatory 

Affairs. 

[FR Doc. 06–7291 Filed 8–31–06; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

[CMS–1535–N] 

RIN 0938–AO26 

Medicare Program; Hospice Wage 

Index for Fiscal Year 2007 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Notice. 

SUMMARY: This notice announces the 

annual update to the hospice wage 

index as required by statute. This fiscal 

year 2007 update is effective from 

October 1, 2006 through September 30, 

2007. The wage index is used to reflect 

local differences in wage levels. The 

hospice wage index methodology and 

values are based on recommendations of 

a negotiated rulemaking advisory 

committee and were originally 

published in the August 8, 1997 Federal 

Register. 

EFFECTIVE DATE: This notice is effective 

on October 1, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Terri Deutsch, (410) 786–9462. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. General 

1. Hospice Care 

Hospice care is an approach to 

treatment that recognizes that the 

impending death of an individual 

warrants a change in the focus from 

curative care to palliative care for relief 

of pain and for symptom management. 

The goal of hospice care is to help 

terminally ill individuals continue life 

with minimal disruption to normal 

activities while remaining primarily in 

the home environment. A hospice uses 

an interdisciplinary approach to deliver 

medical, social, psychological, 

emotional, and spiritual services 

through use of a broad spectrum of 

professional and other caregivers, with 

the goal of making the individual as 

physically and emotionally comfortable 

as possible. Counseling services and 

inpatient respite services are available 

to the family of the hospice patient. 

Hospice programs consider both the 

patient and the family as a unit of care. 

Section 1861(dd) of the Social 

Security Act (the Act) provides for 

coverage of hospice care for terminally 

ill Medicare beneficiaries who elect to 

receive care from a participating 

hospice. Section 1814(i) of the Act 


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provides payment for Medicare 

participating hospices. 

2. Medicare Payment for Hospice Care 

Our regulations at 42 CFR part 418 

establish eligibility requirements, 

payment standards and procedures, 

define covered services, and delineate 

the conditions a hospice must meet to 

be approved for participation in the 

Medicare program. Part 418 subpart G 

provides for payment in one of four 

prospectively determined rate categories 

(routine home care, continuous home 

care, inpatient respite care, and general 

inpatient care) to hospices based on 

each day a qualified Medicare 

beneficiary is under a hospice election. 

B. Hospice Wage Index 

Our regulations at § 418.306(c) require 

each hospice’s labor market to be 

established using the most current 

hospital wage data available, including 

any changes to the Metropolitan 

Statistical Areas (MSAs), definitions 

which are superceded by Core Based 

Statistical Areas (CBSAs). Section 

1814(i)(2)(D) of the Act requires 

Medicare to pay for hospice care 

furnished in an individual’s home on 

the basis of the geographic location 

where the service is furnished. We have 

interpreted this to mean that the wage 

index value used is based upon the 

location of the beneficiary’s home for 

routine home care and continuous home 

care and the location of the hospice 

agency for general inpatient and respite 

care. 

The hospice wage index is used to 

adjust payment rates for hospice 

agencies under the Medicare program to 

reflect local differences in area wage 

levels. The original hospice wage index 

was based on the 1981 Bureau of Labor 

Statistics hospital data and had not been 

updated since 1983. In 1994, because of 

disparity in wages from one 

geographical location to another, a 

committee was formulated to negotiate 

a wage index methodology that could be 

accepted by the industry and the 

government. This committee, 

functioning under a process established 

by the Negotiated Rulemaking Act of 

1990, was comprised of national 

hospice associations; rural, urban, large 

and small hospices; multisite hospices; 

consumer groups; and a government 

representative. On April 13, 1995, the 

Hospice Wage Index Negotiated 

Rulemaking Committee signed an 

agreement for the methodology to be 

used for updating the hospice wage 

index. 

In the August 8, 1997 Federal 

Register (62 FR 42860), we published a 

final rule implementing a new 

methodology for calculating the hospice 

wage index based on the 

recommendations of the negotiated 

rulemaking committee. The committee 

statement was included in the appendix 

of that final rule (62 FR 42883). The 

hospice wage index is updated 

annually. Our most recent annual 

update occurred in the August 4, 2005 

final rule (70 FR 45130), that set forth 

updates to the hospice wage index for 

FY 2006. On September 30, 2005, we 

published a correction notice in the 

Federal Register (70 FR 57174) and a 

subsequent correction notice on 

December 23, 2005 (70 FR 76175), to 

correct technical errors that appeared in 

the August 4, 2005 final rule. 

1. Changes to Core-Based Statistical 

Areas 

The annual update to the hospice 

wage index is published in the Federal 

Register and is based on the most 

current available hospital wage data, as 

well as any changes by the Office of 

Management and Budget (OMB) to the 

definitions of MSAs. The August 4, 

2005 final rule set forth the adoption of 

the changes discussed in the OMB 

Bulletin No. 03–04 (June 6, 2003), 

which announced revised definitions 

for Micropolitan Statistical Areas and 

the creation of MSAs and Combined 

Statistical Areas. In adopting the OMB 

Core-Based Statistical Area (CBSA) 

geographic designations, we provided 

for a 1-year transition with a blended 

wage index for all providers for FY 

2006. For FY 2006, the hospice wage 

index for each provider consisted of a 

blend of 50 percent of the FY 2006 

MSA-based wage index and 50 percent 

of the FY 2006 CBSA-based wage index. 

As discussed in the August 4, 2005 final 

rule, we will use the full CBSA-based 

wage index values as presented in 

Tables A and B of this notice for FY 

2007. 

Furthermore, we continue to use the 

same methodology as discussed in the 

April 29, 2005 proposed rule (70 FR 

22394) and finalized in the August 4, 

2005 final rule to address those 

geographic areas where there were no 

hospitals and, thus, no hospital wage 

index data on which to base the 

calculation of the FY 2007 hospice wage 

index. For FY 2007, those areas consist 

of rural Massachusetts, rural Puerto Rico 

and urban Hinesville-Fort Stewart, 

Georgia. (CBSA–25980). 

2. Raw Wage Index Values 

Raw wage index values (that is, 

inpatient hospital pre-floor and prereclassified wage index values) as 

described in the August 8, 1997 hospice 

wage index final rule (62 FR 42860), are 

subject to either a budget neutrality 

adjustment or application of the wage 

index floor. Raw wage index values of 

0.8 or greater are adjusted by the budget 

neutrality adjustment factor. Budget 

neutrality means that, in a given year, 

estimated aggregate payments for 

Medicare hospice services using the 

updated wage index values will equal 

estimated payments that would have 

been made for these services if the 1983 

wage index values had remained in 

effect. To achieve this budget neutrality, 

the raw wage index is multiplied by a 

budget neutrality adjustment factor. The 

budget neutrality adjustment factor is 

calculated by comparing what we would 

have paid using current rates and the 

1983 wage index to what would be paid 

using current rates and new wage index. 

The budget neutrality adjustment factor 

is computed and applied annually. For 

the FY 2007 hospice wage index, FY 

2006 hospice payment rates were used 

in the budget neutrality adjustment 

factor calculation. 

Raw wage index values below 0.8 are 

adjusted by the greater of: (1) The 

hospice budget neutrality adjustment 

factor; or (2) the hospice wage index 

floor (a 15 percent increase) subject to 

a maximum wage index value of 0.8. For 

example, if County A has a pre-floor, 

pre-reclassified hospital wage index 

(raw wage index value) of 0.4000 we 

would perform the following 

calculations using the budget neutrality 

factor (which for this example is 

0.060988) and the hospice wage index 

floor to determine County A’s hospice 

wage index: 

Raw wage index value below 0.8 

multiplied by the budget neutrality 

adjustment factor: 

(0.4000 × 1.060988 = 0.4244) 

Raw wage index value below 0.8 

multiplied by the hospice wage index 

floor: 

(0.400 × 1.15 = 0.4600) 

Based on these calculations, County 

A’s hospice wage index would be 

0.4600. 

3. Hospice Payment Rates 

Section 4441(a) of the Balanced 

Budget Act of 1997 (BBA) amended 

section 1814(i)(1)(C)(ii) of the Act to 

establish updates to hospice rates for 

FYs 1998 through 2002. Hospice rates 

were to be updated by a factor equal to 

the market basket index, minus 1 

percentage point. However, neither the 

BBA nor subsequent legislation 

specified the market basket adjustment 

to be used to compute payment for FY 

2007. Therefore, payment rates for FY 

2007 will be updated according to 

section 1814(i)(1)(C)(ii)(VII) of the Act, 


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which states that the update to the 

payment rates for subsequent FYs will 

be the market basket percentage for the 

fiscal year. Accordingly, the FY 2007 

update to the payment rates will be the 

full market basket percentage increase 

for FY 2007. This rate update is 

implemented through a separate 

administrative instruction and is not 

part of this notice. Historically, the rate 

update has been published through a 

separate administrative instruction 

issued annually in July to provide 

adequate time to implement system 

change requirements. Providers 

determine their payment rates by 

applying the wage index in this notice 

to the labor portion of the published 

hospice rates. 

II. Provisions of the Notice 

A. Annual Update 

This annual update to the hospice 

wage index is effective October 1, 2006 

through September 30, 2007. In 

accordance with our regulations and the 

agreement signed with other members of 

the Hospice Wage Index Negotiated 

Rulemaking Committee, we are using 

the most current hospital data available 

to us. The FY 2006 hospital wage index 

was the most current hospital wage data 

available when the FY 2007 hospice 

wage index values were calculated. We 

used the FY 2006 pre-reclassified and 

pre-floor hospital area wage index data. 

As noted above, for FY 2007, the 

hospice wage index values will be based 

solely on the adoption of the CBSAbased labor market definitions and its 

wage index. We continue to use the 

most recent pre-floor and prereclassified hospital wage index data 

available (FY 2002 hospital wage data). 

Furthermore, we will continue to use 

the methodology described in the FY 

2006 final rule in the event there are no 

hospital wage data available for urban or 

rural areas, consistent with the rationale 

outlined in the August 5, 2005 final rule 

(70 FR 45135). A detailed description of 

the methodology used to compute the 

hospice wage index is contained in both 

the September 4, 1996 proposed rule (61 

FR 46579) and the August 8, 1997 final 

rule (62 FR 42860). All wage index 

values are adjusted by a budgetneutrality factor of 1.063448 and are 

subject to the wage index floor 

adjustment, if applicable. We have 

completed all of the calculations 

described in section 2.B below and have 

included them in the wage index values 

reflected in Tables A and B of the 

Addendum. Specifically, Table A 

reflects the FY 2007 wage index values 

for urban areas under the CBSA 

designations. Table B reflects the FY 

2007 wage index values for rural areas 

under the CBSA designations. 

B. Other Issues 

1. Proxy for the hospital market basket 

As discussed above, the hospice 

payment rates are adjusted each year 

based upon the full hospital market 

basket. The market basket currently uses 

the Bureau of Labor Statistics’

Employment Cost Indexes (ECIs) as 

proxies for wages, salaries and benefits 

for private industry workers classified 

in Standard Industrial Code (SIC) 806, 

Hospitals. The ECIs were consistently 

used as the data source for wages and 

salaries and other price proxies in the 

market basket. 

Beginning in April 2006, with the 

publication of March 2006 data, the 

BLS’ ECI is using a different 

classification system, the North 

American Industrial Classification 

System (NAICS), instead of the Standard 

Industrial Classification System (SIC), 

which no longer exists. The ECIs have 

consistently been used as the data 

source for wages and salaries and other 

price proxies in the hospital market 

basket. We are not making any changes 

to the usage at this time. However, we 

welcome input on our continued use of 

the BLS ECI data in light of the BLS 

change to the NAICS-based ECI. 

Interested parties who would like to 

provide input on this issue are invited 

to do so by contacting Terri Deutsch 

(please refer to the section entitled FOR

FURTHER INFORMATION CONTACT as the 

beginning of this document). 

2. Nomenclature Changes 

As we described in the August 4, 2005 

final rule, certain names of the CBSAs 

were changed based on OMB Bulletin 

No. 05–02 (November 2004). The name 

changes listed below do not result in 

substantive changes to the CBSA-based 

designations. Tables A and B of the 

addendum reflect the following name 

changes: 

• CBSA 36740—Orlando-Kissimmee, 

FL 

• CBSA 37620—ParkersburgMarietta-Vienna, WV–OH 

• CBSA 42060—Santa Barbara-Santa 

Maria, CA 

• CBSA 13644—BethesdaGaithersburg-Frederick, MD 

• CBSA 32580—McAllen-EdinburgMission, TX 

• CBSA 26420—Houston-Sugar LandBaytown, TX 

• CBSA 35644—New York-White 

Plains-Wayne, NY–NJ 

III. Collection of Information 

Requirements 

This document does not impose 

information collection and record 

keeping requirements. Consequently, it 

need not be reviewed by the Office of 

Management and Budget under the 

authority of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 35). 

IV. Waiver of Proposed Rulemaking 

Under the Administrative Procedure 

Act (5 U.S.C. section (553(b)(B)), we 

may waive notice and comment 

rulemaking procedures if we find good 

cause to do so (that is, notice and 

comment procedures are impracticable, 

unnecessary, or contrary to the public 

interest) and the agency incorporates a 

statement of the finding and the reasons 

for waiver in the notice issued. We are 

waiving notice and comment 

rulemaking before the provisions of this 

notice take effect. 

We find it unnecessary to undertake 

notice and comment rulemaking 

because the methodologies used to 

determine the hospice wage index have 

been previously subjected to public 

comments, and this notice merely 

reflects the application of those 

previously established methodologies. 

In this notice, we are not changing the 

methodologies, but merely performing 

the ministerial function of applying 

methodologies previously subject to 

notice and public comment. Therefore, 

we believe it is unnecessary to engage 

in notice and comment rulemaking and, 

for good cause, we waive notice and 

comment procedures. 

V. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

notice as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

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

the Act, the Unfunded Mandates Reform 

Act of 1995 (Pub. L. 104–4), and 

Executive Order 13132. We estimated 

the impact on hospices, as a result of the 

changes to the FY 2007 hospice wage 

index. As discussed previously, the 

methodology for computing the wage 

index was determined through a 

negotiated rulemaking committee and 

implemented in the August 8, 1997 final 

rule (62 FR 42860). This notice only 

updates the hospice wage index in 

accordance with our regulation and that 

methodology, incorporating the 

adoption of the CBSA designations used 

in the FY 2006 hospital wage index 

data. 


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Federal Register / Vol. 71, No. 170 / Friday, September 1, 2006 / Notices 52083 

• Table 1 categorizes the impact on 

hospices by various geographic and 

provider characteristics. We estimate 

that the total hospice payments will 

increase $2,194,000 as a result of the FY 

2007 wage index values. 

• Table A reflects the FY 2007 wage 

index values for urban areas under the 

CBSA designations. 

• Table B reflects the FY 2007 wage 

index values for rural areas under the 

CBSA designations. 

Executive Order 12866 (as amended 

by Executive Order 13258, which 

merely reassigns responsibility of 

duties) directs agencies to assess all 

costs and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). We 

have determined that this notice is not 

an economically significant rule under 

this Executive Order. 

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 small 

governmental jurisdictions. Most 

hospices and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $6 million to $29 million in any 1 

year (for details, see the Small Business 

Administration’s regulation at 65 FR 

69432, that sets forth size standards for 

health care industries). For purposes of 

the RFA, most hospices are small 

entities. As indicated in Table 1 below, 

there are 2,810 hospices. Approximately 

70 percent of Medicare certified 

hospices are identified as voluntary, 

government, or other agencies and, 

therefore, are considered small entities. 

Because the National Hospice and 

Palliative Care Organization estimates 

that approximately 79 percent of 

hospice patients are Medicare 

beneficiaries, we have not considered 

other sources of revenue in this 

analysis. Furthermore, the wage index 

methodology was previously 

determined by consensus, through a 

negotiated rulemaking committee that 

included representatives of national 

hospice associations; rural, urban, large 

and small hospices; multisite hospices; 

and consumer groups. Based on all of 

the options considered, the committee 

agreed on the methodology described in 

the committee statement, and it was 

adopted into regulation in the August 8, 

1997 final rule. In developing the 

process for updating the wage index in 

the 1997 final rule, we considered the 

impact of this methodology on small 

entities and attempted to mitigate any 

potential negative effects. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside an 

MSA and has fewer than 100 beds. We 

have determined that this notice would 

not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule that may result in expenditure in 

any 1 year by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $110 million or more. 

This notice is not anticipated to have an 

effect on State, local, or tribal 

governments or on the private sector of 

$110 million or more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We have reviewed this notice under the 

threshold criteria of Executive Order 

13132, Federalism, and have 

determined that it would not have an 

impact on the rights, roles, and 

responsibilities of State, local, or tribal 

governments. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

B. Anticipated Effects 

The impact analysis of this notice 

represents the projected effects of the 

changes in the hospice wage index from 

FY 2006 to FY 2007. We estimate the 

effects by estimating payments for FY 

2007 utilizing the FY 2007 wage index 

values and the full implementation of 

the CBSA designations while holding all 

other payment variables constant. 

We note that certain events may 

combine to limit the scope or accuracy 

of our impact analysis, because such an 

analysis is future oriented and, thus, 

susceptible to forecasting errors due to 

other changes in the forecasted impact 

time period. The nature of the Medicare 

program is such that the changes may 

interact, and the complexity of the 

interaction of these changes could make 

it difficult to predict accurately the full 

scope of the impact upon hospices. 

For the purposes of this notice, we 

compared estimated payments using the 

FY 1983 hospice wage index to 

estimated payments using the FY 2007 

wage index and determined the hospice 

wage index to be budget neutral. Budget 

neutrality means that, in a given year, 

estimated aggregate payments for 

Medicare hospice services using the FY 

2007 wage index would equal estimated 

aggregate payments that would have 

been made for the same services if the 

1983 wage index had remained in effect. 

Budget neutrality to 1983 does not 

imply that estimated payments would 

not increase since the budget neutrality 

applies only to the wage index portion 

and not the total payment rate, which 

accommodates inflation. 

As discussed above, we use the latest 

claims file available to us to develop the 

impact table when we issue the annual 

yearly wage index update. For the 

purposes of this notice, we used data 

obtained from the National Claims 

History file of all FY 2005 claims 

processed through March 2006 since 

this was the latest file available. We 

deleted bills from hospices that have 

since closed. This impact analysis 

compares hospice payments using the 

FY 2006 hospice wage index to the 

estimated payments using the FY 2007 

wage index. We note that estimated 

payments for FY 2007 are determined 

by using the wage index for FY 2007 

and payment rates for FY 2006. As 

noted in previous sections, payment 

rates for FY 2007 are published through 

administrative issuance. 

Table 1 demonstrates the results of 

our analysis. In column 1 we indicate 

the number of hospices included in our 

analysis. In column 2 of Table 1, we 

indicate the number of routine home 

care days that were included in our 

analysis, although the analysis was 

performed on all types of hospice care. 

Column 3 estimates payments using the 

FY 2006 transitional wage index values 

and the FY 2006 payment rates. Column 

4 estimates payments using FY 2007 

CBSA based wage index values as well 

as the FY 2006 payment rates. Column 

5, which compares columns 3 and 4, 

shows the percent change in estimated 

hospice payments made based on the 

category of the hospice. 

Table 1 also categorizes hospices by 

various geographic and provider 

characteristics. The first row displays 

the aggregate result of the impact for all 

Medicare-certified hospices. The second 


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and third rows of the table categorize 

hospices according to their geographic 

location (urban and rural). Our analysis 

indicated that there are 1,849 hospices 

located in urban areas and 961 hospices 

located in rural areas. The next two 

groupings in the table indicate the 

number of hospices by census region, 

also broken down by urban and rural 

hospices. The sixth grouping shows the 

impact on hospices based on the size of 

the hospice’s program. We determined 

that the majority of hospice payments 

are made at the routine home care rate. 

Therefore, we based the size of each 

individual hospice’s program on the 

number of routine home care days 

provided in FY 2006. The next grouping 

shows the impact on hospices by type 

of ownership. The final grouping shows 

the impact on hospices defined by 

whether they are provider-based or 

freestanding. As indicated in Table 1 

below, there are 2,810 hospices. 

Approximately 78 percent of Medicarecertified hospices are identified as 

voluntary, government, or other 

agencies and, therefore, are considered 

small entities. Because the National 

Hospice and Palliative Care 

Organization estimates that 

approximately 79 percent of hospice 

patients are Medicare beneficiaries, we 

have not considered other sources of 

revenue in this analysis. Furthermore, 

the wage index methodology was 

previously determined by consensus, 

through a negotiated rulemaking 

committee that included representatives 

of national hospice associations; rural, 

urban, large, and small hospices; 

multisite hospices; and consumer 

groups. Based on all of the options 

considered, the committee agreed on the 

methodology described in the 

committee statement, and it was 

adopted into regulation in the August 8, 

1997 final rule. In developing the 

process for updating the wage index in 

the 1997 final rule, we considered the 

impact of this methodology on small 

entities and attempted to mitigate any 

potential negative effects. 

As stated previously, the following 

discussions are limited to demonstrating 

trends rather than projected dollars. We 

used the CBSA designations and wage 

indices as well as the data from FY 2005 

claims processed through March 2006 in 

developing the impact analysis. For FY 

2007 the wage index and the 

implementation of the CBSA 

designations for geographical variations 

are the variables that differ between the 

FY 2006 payments and the FY 2007 

estimated payments. FY 2006 payment 

rates are used for both FY 2006 actual 

payments and the FY 2007 estimated 

payments. The FY 2007 payment rates 

will be adjusted to reflect the full FY 

2007 hospital market basket, as required 

by section 1814(i)(1)(C)(ii)(VII) of the 

Act. As previously noted, we publish 

these rates through administrative 

issuances. As discussed in the FY 2006 

final rule (70 FR 45129), hospice 

agencies may utilize various wage 

indices to compute their payments 

based on the geographic location of the 

beneficiary for routine and continuous 

home care or the CBSA for the location 

of the hospice agency for respite and 

general inpatient care. For this analysis, 

we use payments to the hospice in the 

aggregate based on the location of the 

hospice. The impact of hospice wage 

index changes have been analyzed 

according to type of hospice, geographic 

location, type of ownership, hospice 

base, and hospice size. 

Our analysis shows that most 

hospices are in urban areas and provide 

the vast majority of routine home care 

days. Most hospices are medium sized 

followed by large hospices. Hospices are 

almost equal in numbers by ownership 

with 1,276 designated as voluntary and 

1,231 as proprietary. The vast majority 

of hospices are freestanding. 

1. Hospice Size 

Under the Medicare hospice benefit, 

hospices can provide four different 

levels of care days. The majority of the 

days provided by a hospice are routine 

home care days (RHC) representing over 

70 percent of the services provided by 

a hospice. Therefore, the number of 

routine home care days can be used as 

a proxy for the size of the hospice, that 

is, the more days of care provided, the 

larger the hospice. As discussed in the 

August 4, 2005 final rule, we currently 

use three size designations to present 

the impact analyses. The three 

categories are: small agencies having 0 

to 3,499 RHC days; medium agencies 

having 3,500 to 19,999 RHC days; and 

large agencies having 20,000 or more 

RHC days. 

Using RHC days as a proxy for size, 

our analysis indicates that the wage 

index update on all hospice agencies by 

size is anticipated to have virtually no 

impact with a slight increase of 0.1 

percent anticipated for medium sized 

hospices while no change is anticipated 

for small or large hospices. 

2. Geographic Location 

Our analysis demonstrates that the FY 

2007 CBSA-based wage index will result 

in little change in estimated payments 

with urban hospices anticipated to 

experience a slight increase of 0.1 

percent while rural hospices are 

anticipated to experience a slight 

decrease of 0.4 percent. The greatest 

increase of 1.0 percent in urban 

hospices is anticipated to be 

experienced by the Pacific region while 

the West North Central is anticipated to 

experience the greatest urban decrease 

of 0.6 percent. Slight decreases are 

anticipated in urban New England, 

South Atlantic, East North Central and 

Mountain regions while increases are 

anticipated in urban Middle Atlantic, 

East South Central, West South Central 

and Puerto Rico. 

For rural hospices, the New England 

region is anticipated to receive the 

highest increase of 2.1 percent followed 

by the Pacific region with a 1.0 percent 

increase in estimated payments. 

Conversely, the mountain region is 

anticipated to receive the greatest 

decrease of 1.8 percent followed by the 

South Atlantic region of 1.0 percent. 

Decreases are also anticipated for rural 

Middle Atlantic, East South Central, 

West North Central and West South 

Central regions. Rural East North 

Central and Puerto Rico are anticipated 

to remain unchanged. 

3. Type of Ownership 

By type of ownership, government 

and proprietary hospices are anticipated 

to experience an increase in anticipated 

payments of 0.4 and 0.1 percent 

respectively. Voluntary hospices are 

anticipated to remain unchanged. 

4. Hospice Base 

For hospice-based facilities, decreases 

in payment are anticipated for skilled 

nursing facility and hospital based 

hospices of 0.7 and 0.1 percent 

respectively. Freestanding and home 

health agency based hospices are 

anticipated to remain unchanged. 

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C. Conclusion 

Our impact analysis compared 

hospice payments by using the FY 2006 

wage index to the estimated payments 

using the FY 2007 wage index. Through 

the analysis, we estimate that total 

hospice payments will increase from FY 

2006 by $2,194,000. Additionally, we 

compared estimated payments using the 

FY 1983 hospice wage index to 

estimated payments using the FY 2007 

wage index and determined the current 

hospice wage index to be budget 

neutral, as required by the negotiated 

rulemaking committee. As noted above, 

the payment rates used reflect the FY 

2006 rates. The FY 2007 payment rates 

will be adjusted to reflect the full FY 

2007 hospital market basket, as required 

by section 1814(i)(1)(C)(ii)(VII) of the 

Act. We publish these rates through 

administrative issuances. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: July 25, 2006. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: August 21, 2006. 

Michael O. Leavitt, 

Secretary. 

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[FR Doc. 06–7293 Filed 8–30–06; 4:00 pm] 

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