68526 Federal Register / Vol. 76, No. 214 / Friday, November 4, 2011 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 409, 424, and 484 

[CMS–1353–F] 

RIN 0938–AQ30 

Medicare Program; Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2012 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule sets forth 

updates to the home health prospective 

payment system (HH PPS) rates, 

including: the national standardized 60- 

day episode rates; the national per-visit 

rates; and the low utilization payment 

amount (LUPA) under the Medicare PPS 

for home health agencies effective 

January 1, 2012. This rule applies a 1.4 

percent update factor to the episode 

rates, which reflects a 1 percent 

reduction applied to the 2.4 percent 

market basket update factor, as 

mandated by the Affordable Care Act. 

This rule also updates the wage index 

used under the HH PPS, and further 

reduces home health payments to 

account for continued nominal growth 

in case-mix which is unrelated to 

changes in patient health status. This 

rule removes two hypertension codes 

from the HH PPS case-mix system, 

thereby requiring recalibration of the 

case-mix weights. In addition, the rule 

implements two structural changes 

designed to decrease incentives to 

upcode and provide unneeded therapy 

services. Finally, this rule incorporates 

additional flexibility regarding face-toface encounters with providers related 

to home health care. 

DATES: Effective Date: These regulations 

are effective on January 1, 2012. 

FOR FURTHER INFORMATION CONTACT:

Elizabeth Goldstein, (410) 786–6665, for 

CAHPS issues. 

Mary Pratt, (410) 786–6867, for quality 

issues. 

Randy Throndset, (410) 786–0131 

(overall HH PPS). 

Table of Contents 

I. Background 

A. Statutory Background 

B. System for Payment of Home Health 

Services 

C. Updates to the HH PPS 

II. Provisions of the Proposed Rule and 

Response to Comments 

A. Case-Mix Measurement 

B. Case-Mix Revision to the Case-Mix 

Weights 

1. Hypertension Diagnosis Coding Under 

the HH PPS 

2. Revision of the Case-Mix Weights 

C. Outlier Policy 

1. Background 

2. Comments and Responses 

D. CY 2012 Rate Update 

1. Home Health Market Basket Update 

2. Home Health Care Quality Reporting 

Program 

a. Background and Quality Reporting 

Requirements 

b. OASIS Data 

c. Claims Data, Requirements and Outcome 

Measure Change 

d. Home Health Care CAHPS Survey 

(HHCAHPS) 

3. Home Health Wage Index 

4. CY 2012 Annual Payment Update 

a. National Standardized 60-Day Episode 

Rate 

b. Updated CY 2012 National Standardized 

60-Day Episode Payment Rate 

c. National Per-Visit Rates Used To Pay 

LUPAs and Compute Imputed Costs 

Used in Outlier Calculations 

d. LUPA Add-On Payment Amount Update 

e. Nonroutine Medical Supply Conversion 

Factor Update 

5. Rural Add-On 

E. Therapy Corrections and Clarification 

F. Home Health Face-to-Face Encounter 

G. Payment Reform: Home Health Study 

and Report 

H. International Classification of Diseases 

10th Edition (ICD–10) Coding 

I. Clarification to Benefit Policy Manual 

Language on ‘‘Confined to the Home’’ 

Definition 

III. Collection of Information Requirements 

IV. Regulatory Impact Analysis 

V. Federalism Analysis 

Regulations Text 

Acronyms 

In addition, because of the many 

terms to which we refer by abbreviation 

in this final rule, the following is an 

alphabetical listing of these 

abbreviations and their corresponding 

terms: 

ADL Activities of daily living 

APA Administrative Procedures Act 

APU Annual payment update 

BBA Balanced Budget Act of 1997, Public 

Law 105–33 

BBRA Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 1999, 

Public Law 106–113 

CR Cost report 

CBSA Core-based statistical area 

CBO Congressional Budget Office 

CMI Case-mix index 

CMS Centers for Medicare and Medicaid 

Services 

CoPs Conditions of participation 

DRA Deficit Reduction Act of 2005, Public 

Law 109–171, enacted February 8, 2006 

FDL Fixed dollar loss 

FI Fiscal intermediaries 

FR Federal Register 

FY Fiscal year 

HCC Hierarchical condition categories 

HCIS Health Care Information System 

HHCAHPS Home Health Care Consumer 

Assessment of Healthcare Providers and 

Systems Survey 

HH PPS Home Health Prospective Payment 

System 

HHAs Home health agencies 

HHRG Home health resource group 

HIPPS Health Insurance Prospective 

Payment System 

IRF Inpatient Rehabilitation Facility 

LTCH Long-Term Care Hospital 

LUPA Low Utilization Payment Amount 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Public Law 108–173, enacted 

December 8, 2003 

MSA Metropolitan statistical area 

MSS Medical social services 

NAHC National Association for Home Care 

and Hospice 

NHLBI National Heart Lung and Blood 

Institute 

NPP Nonphysician practitioner 

NRS Non-routine supplies 

OBRA Omnibus Reconciliation Act of 1981, 

Public Law 97–35, enacted August 13, 

1981 

OCESAA Omnibus Consolidated and 

Emergency Supplemental Appropriations 

Act, Public Law 105–277, enacted October 

21, 1998 

OES Occupational employment statistics 

OIG Office of Inspector General 

OT Occupational therapy 

OMB Office of Management and Budget 

PEP Partial episode payment 

POC Plan of care 

PT Physical therapy 

QAP Quality assurance plan 

PRRB Provider Reimbursement Review 

Board 

RAP Request for anticipated payment 

RFA Regulatory Flexibility Act, Public Law 

96–354 

RHHIs Regional Home Health 

Intermediaries 

RIA Regulatory Impact Analysis 

SLP Speech Language Pathology Therapy 

SNF Skilled Nursing Facility 

UMRA Unfunded Mandates Reform Act of 

1995 

SUPPLEMENTARY INFORMATION:

I. Background 

A. Statutory Background 

The Balanced Budget Act of 1997 

(BBA) (Pub. L. 105–33, enacted August 

5, 1997), significantly changed the way 

Medicare pays for Medicare home 

health (HH) services. Section 4603 of 

the BBA mandated the development of 

the home health prospective payment 

system (HH PPS). Until the 

implementation of a HH PPS on October 

1, 2000, home health agencies (HHAs) 

received payment under a retrospective 

reimbursement system. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered HH services provided 

under a plan of care (POC) that were 

paid on a reasonable cost basis by 

adding section 1895 of the Social 


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Security Act (the Act), entitled 

‘‘Prospective Payment For Home Health 

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

requires the Secretary to establish a HH 

PPS for all costs of HH services paid 

under Medicare. 

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

requires the following: (1) The 

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report (CR) data 

available to the Secretary; and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage levels 

among HHAs. 

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

addresses the annual update to the 

standard prospective payment amounts 

by the HH applicable percentage 

increase. Section 1895(b)(4) of the Act 

governs the payment computation. 

Sections 1895(b)(4)(A)(i) and 

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of an appropriate 

case-mix change adjustment factor for 

significant variation in costs among 

different units of services. 

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

Act requires the establishment of wage 

adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. Under section 

1895(b)(4)(c) of the Act, the wageadjustment factors used by the Secretary 

may be the factors used under section 

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

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

Secretary the option to make additions 

or adjustments to the payment amount 

otherwise paid in the case of outliers 

because of unusual variations in the 

type or amount of medically necessary 

care. Section 3131(b) of the Patient 

Protection and Affordable Care Act of 

2010 (the Affordable Care Act) (Pub. L. 

111–148, enacted March 23, 2010) 

revised section 1895(b)(5) of the Act so 

that estimated total outlier payments in 

a given fiscal year (FY) or year may not 

exceed 2.5 percent of total payments 

projected or estimated. The provision 

also makes permanent a 10 percent 

agency level outlier payment cap. 

In accordance with section 4603(a) of 

the BBA, we published a final rule in 

the July 3, 2000 Federal Register (65 FR 

41128) to implement the HH PPS 

legislation. The July 2000 final rule 

established requirements for the new 

HH PPS for HH services as required by 

section 4603 of the BBA, as 

subsequently amended by section 5101 

of the Omnibus Consolidated and 

Emergency Supplemental 

Appropriations Act (OCESAA) for Fiscal 

Year 1999, (Pub. L. 105–277, enacted 

October 21, 1998); and by sections 302, 

305, and 306 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 

Act (BBRA) of 1999, (Pub. L. 106–113, 

enacted November 29, 1999). The 

requirements include the 

implementation of a HH PPS for HH 

services, consolidated billing 

requirements, and a number of other 

related changes. The HH PPS described 

in that rule replaced the retrospective 

reasonable cost-based system that was 

used by Medicare for the payment of HH 

services under Part A and Part B. For a 

complete and full description of the HH 

PPS as required by the BBA, see the July 

2000 HH PPS final rule (65 FR 41128 

through 41214). 

Section 5201(c) of the Deficit 

Reduction Act of 2005 (DRA) (Pub. L. 

109–171, enacted February 8, 2006) 

added new section 1895(b)(3)(B)(v) to 

the Act, requiring HHAs to submit data 

for purposes of measuring health care 

quality, and links the quality data 

submission to the annual applicable 

percentage increase. This data 

submission requirement is applicable 

for CY 2007 and each subsequent year. 

If an HHA does not submit quality data, 

the HH market basket percentage 

increase is reduced 2 percentage points. 

In the November 9, 2006 Federal 

Register (71 FR 65884, 65935), we 

published a final rule to implement the 

pay-for-reporting requirement of the 

DRA, which was codified at 

§ 484.225(h) and (i) in accordance with 

the statute. 

Section 421(a) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173, enacted December 8, 2003) 

provides an increase of 3 percent of the 

payment amount otherwise made under 

section 1886(d)(2)(D) of the Act for HH 

services furnished in a rural area for 

episodes and visits ending on or after 

April 1, 2010, and before January 1, 

2016. 

B. System for Payment of Home Health 

Services 

Generally, Medicare makes payment 

under the HH PPS on the basis of a 

national standardized 60-day episode 

payment rate that is adjusted for the 

applicable case-mix and wage index. 

The national standardized 60-day 

episode rate includes the six HH 

disciplines (skilled nursing, HH aide, 

physical therapy, speech-language 

pathology, occupational therapy, and 

medical social services). Payment for 

non-routine medical supplies (NRS), is 

no longer part of the national 

standardized 60-day episode rate and is 

computed by multiplying the relative 

weight for a particular NRS severity 

level by the NRS conversion factor (See 

section II.D.4.e). Payment for durable 

medical equipment covered under the 

HH benefit is made outside the HH PPS 

payment system. To adjust for case-mix, 

the HH PPS uses a 153-category casemix classification to assign patients to a 

home health resource group (HHRG). 

The clinical severity level, functional 

severity level, and service utilization are 

computed from responses to selected 

data elements in the OASIS assessment 

instrument and are used to place the 

patient in a particular HHRG. Each 

HHRG has an associated case-mix 

weight which is used in calculating the 

payment for an episode. 

For episodes with four or fewer visits, 

Medicare pays based on a national pervisit rate, adjusted by the discipline(s) 

providing the services; an episode 

consisting of four or fewer visits within 

a 60-day period receives what is referred 

to as a low utilization payment 

adjustment (LUPA). Medicare also 

adjusts the national standardized 60-day 

episode payment rate for certain 

intervening events that are subject to a 

partial episode payment adjustment 

(PEP adjustment). For certain cases that 

exceed a specific cost threshold, an 

outlier adjustment may also be 

available. 

C. Updates to the HH PPS 

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

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. The August 29, 2007 

final rule with comment period set forth 

an update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HHAs for CY 2008. 

The CY 2008 rule included an analysis 

performed on CY 2005 HH claims data, 

which indicated a 12.78 percent 

increase in the observed case-mix since 

2000. The case-mix represented the 

variations in conditions of the patient 

population served by the HHAs. 

Subsequently, a more detailed analysis 

was performed on the 12.78 percent 

increase in case-mix to evaluate if any 

portion of the increase was associated 

with a change in the actual clinical 

condition of HH patients. We examined 

data on demographics, family severity, 

and non-HH Part A Medicare 

expenditures to predict the average 

case-mix weight for 2005. We identified 


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8.03 percent of the total case-mix 

change as real and decreased the 12.78 

percent of total case-mix change by 8.03 

percent to get a final nominal case-mix 

increase measure of 11.75 percent 

(0.1278 * (1¥0.0803) = 0.1175). 

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

underlying change in patient health 

status, we implemented a reduction 

over 4 years in the national 

standardized 60-day episode payment 

rates and the NRS conversion factor. 

That reduction was to be 2.75 percent 

per year for 3 years beginning in CY 

2008 and 2.71 percent for the fourth 

year in CY 2011. 

For CY 2011, we published the 

November 17, 2010 final rule (75 FR 

70372) (hereinafter referred to as the CY 

2011 HH PPS final rule) that set forth 

the update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HH services. 

As discussed in the CY 2011 HH PPS 

final rule, our analysis indicated that 

there was a 19.40 percent increase in 

overall case-mix from 2000 to 2008 and 

that only 10.07 percent of that overall 

observed case-mix percentage increase 

was due to real case-mix change. As a 

result of our analysis, we identified a 

17.45 percent nominal increase in casemix. To fully account for the 17.45 

percent nominal case-mix growth which 

was identified from 2000 to 2008, we 

proposed 3.79 percent payment 

reductions in both CY 2011 and CY 

2012. However, we deferred finalizing a 

payment reduction for CY 2012 until a 

further study of the case-mix data was 

completed. Independent review of the 

case-mix model has been conducted and 

the results were discussed in section 

II.A. of the proposed rule, which was 

issued on July 12, 2011 (76 FR 40988). 

II. Provisions of the Proposed Rule and 

Response to Comments 

A. Case-Mix Measurement 

As stated in the proposed rule issued 

in the July 12, 2011 Federal Register, 

every year, since the HH PPS CY 2008 

proposed rule, we have stated in HH 

PPS rulemaking that we would continue 

to monitor case-mix changes in the HH 

PPS and to update our analysis to 

measure change in case-mix, both real 

changes in case-mix and changes which 

are unrelated to changes in patient 

acuity (nominal). We have continued to 

monitor case-mix changes and our latest 

analysis continues to support the need 

to make payment adjustments to 

account for nominal case-mix growth. 

In the CY 2012 HH PPS proposed rule 

(76 FR 40991), we also stated that in 

response to comments we received on 

our case-mix measurement methodology 

during CY 2011 rulemaking, we 

procured an independent review of our 

methodology by a team at Harvard 

University led by Dr. David Grabowski. 

The review included an examination of 

the predictive regression models and 

data used in CY 2011 rulemaking, and 

further analysis consisting of extensions 

of the model to allow a closer look at 

nominal case-mix growth by 

categorizing the growth according to 

provider types and subgroups of 

patients. The extensions showed a 

similar rate of nominal case-mix growth 

from 2000 to 2008 for the various 

categories and subgroups. In addition, 

when reviewing the model, the Harvard 

team found that overall, our models are 

robust. However, one area of potential 

refinement to our models that the 

Harvard team suggested was to 

incorporate variables derived from 

Hierarchical Condition Categories (HCC) 

data, which is used by CMS to riskadjust payments to managed care 

organizations in the Medicare program. 

Based on Dr. Grabowski and his 

team’s recommendation and our 

previous consideration to incorporate 

HCC data in our models to assess real 

case-mix change, we decided to explore 

the effects of adding HCC patient 

classification data into our models. For 

our analysis of real and nominal casemix growth from 2000 to 2009, we 

incorporated the HCC community 

scores, HCC demographic variables, and 

disease indicator variables into our 

models. 

In addition, for our analysis, we used 

a similar approach to our previous 

methods. The basic method is to 

estimate a prediction model and use 

coefficients from that model along with 

predictor variables from a different year 

to predict the average case-mix for that 

year. It should be noted that we chose 

to enhance our models with HCC data 

starting in 2005 due to the availability 

of HCC data in our analytic files. 

Therefore, we analyzed real case-mix 

change for 3 different periods, from 

2000 to 2005, from 2005 to 2007, and 

from 2007 to 2009. The real case-mix 

change from 2000 to 2005 was assessed 

using the same variables used in the 

model described in last year’s regulation 

(75 FR 43238). The real case-mix change 

from 2005 to 2007 and from 2007 to 

2009 was assessed using additional 

information from the HCC variables. To 

determine the amount of real and 

nominal case-mix change from 2000 to 

2009, we added the change in case-mix 

units for each of the 3 periods and 

compared it to the total change in casemix from 2000 to 2009. Based on the 

results from our models, we estimated 

15.76 percent of the total case-mix 

change as real. When taking into 

account the total case-mix change from 

2000 to 2009 (22.59 percent) and the 

15.76 percent of total case-mix change 

estimated as real from 2000 to 2009, we 

obtained a final nominal case-mix 

change measure of 19.03 percent from 

2000 to 2009 (0.2259 * (1¥0.1576) = 

0.1903). 

In each of the years 2008, 2009, and 

2010, we reduced payment rates by 2.75 

percent and in 2011 we reduced 

payment rates by 3.79 percent to 

account for nominal case-mix change 

from 2000. In the proposed rule, we 

stated that a payment reduction of 5.06 

percent would be needed to account for 

the outstanding amount of nominal 

case-mix change we estimated based on 

the real case-mix change analysis 

updated through 2009 and we proposed 

to implement a 5.06 percent reduction 

to the national standardized 60-day 

episode rates to account for the entire 

residual amount of nominal case-mix 

change through 2009 in one year. 

The following is a summary of the 

comments we received regarding the 

case-mix measurement proposal. 

Comment: Some commenters stated 

that CMS should not implement an 

across-the-board punishment but rather 

target the agencies that have high 

nominal case-mix growth. Other 

commenters stated that all home health 

providers should not be punished for 

the actions of the few. Many 

commenters indicated that their agency 

had case-mix weights below the 

national average and some commenters 

stated that there has been a decline in 

their case-mix over the years. 

Commenters suggested that CMS limit 

the case-mix reductions to certain 

agencies and only apply the reduction 

to agencies whose average case-mix 

weight reflects high nominal case-mix 

growth. 

Response: For a variety of reasons, as 

we have noted in previous regulations, 

we have not proposed targeted 

reductions for nominal case-mix change. 

We have not conducted analysis of how 

and whether individual agencies’ 

coding practices have changed over 

time, because this is not feasible. One 

reason is that many agencies have small 

patient populations, which would make 

it practically impossible to measure 

nominal case-mix change reliably. 

Another reason is that we believe 

changes and improvements in coding 

have been widespread, so that such 

targeting would likely not separate 

agencies clearly into high and low 

coding-change groups. When 

performing an independent review of 


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our case-mix measurement 

methodology, Dr. Grabowski and his 

team at Harvard University agreed with 

our reasons for not proposing targeted 

reductions, stating their concerns about 

the small sample size of many agencies 

and their findings of significant nominal 

case-mix across different classes of 

agencies (please see the report located at 

https://www.cms.gov/center/hha.asp). 

We note that although we have stated 

in past regulations that a targeted 

system would be administratively 

burdensome, the reasons we have just 

presented go beyond administrative 

complexity. Certain comments seem to 

assume that the level of case-mix can 

precisely identify those agencies 

practicing abusive coding. We do not 

agree with the comments which seem to 

assume that agency-specific case-mix 

levels can precisely differentiate 

agencies practicing abusive coding from 

others. System wide, case-mix levels 

have risen over time while patient 

characteristics data indicate little 

change in patient severity over time. 

That is, the main problem is not the 

level of case-mix reached over a period 

of time, but the amount of change in the 

billed case-mix weights not attributable 

to underlying changes in actual patient 

severity. 

In addition, in this final rule, we are 

finalizing a revision to the case-mix 

weights. As described in Section II.B., 

we are removing two hypertension 

codes from our case-mix system which 

are not associated with additional 

resource use and we are reducing 

weights for episodes with high therapy 

while increasing weights for episodes 

with no or low therapy. This revision to 

the case-mix weights should slow future 

nominal case-mix growth and provide a 

more targeted approach for addressing 

overpayment of services, while also 

improving the accuracy of the HH PPS. 

Comment: Some commenters stated 

that the payment cuts will make it 

difficult for small agencies to exist, 

leaving a market that will only be made 

up of large for-profit agencies. Other 

commenters stated that from 2000 to 

2008, for-profit and free-standing 

agencies saw their nominal case-mix 

grow by approximately 3.5 percent to 

4.0 percent more than non-profit, 

government-owned and facility-based 

agencies. Commenters attributed the 

difference in nominal case-mix growth 

to the idea that for-profit agencies ‘‘pick 

and choose’’ their patients while nonprofit and government agencies tend to 

serve all patients needing home health 

care. Commenters requested that CMS 

either forego the proposed 5.06 percent 

adjustment or implement a two-tiered 

adjustment factor, with a much lower 

payment reduction factor for non-profit, 

government-owned and facility-based 

agencies. 

Response: When looking at the casemix growth by agency type, our data 

shows high case-mix growth across all 

agency types. While for-profit agencies’ 

case-mix grew approximately 22.7 

percent, the case-mix average for nonprofit agencies and government agencies 

also grew considerably (17.8 percent 

and 17.5 percent). In addition, agencies 

with less than 99 episodes had a casemix growth of 20.1 percent from 2000 to 

2009 and agencies with 100 or more 

episodes had a case-mix growth of 24.8 

percent from 2000 to 2009. These 

differences are not large enough to 

warrant a tiered approach. We believe 

our proposal to make across the board 

payment reductions is consistent with 

the data, and making distinctions by 

type of agency would be inappropriate. 

In addition, we acknowledge that our 

analyses and the analysis conducted by 

the Harvard team revealed a difference 

in nominal case-mix growth between 

for-profit agencies and non-profit/ 

government agencies, as cited by the 

commenter. However, all categories 

exhibited a large amount of nominal 

case-mix growth, and differences among 

categories were not large enough to 

warrant a tiered approach. In view of 

that fact, making separate adjustments 

according to ownership category is 

inadvisable because of concerns about 

equity and administrative feasibility. 

We will continue to analyze the HH PPS 

to determine where it may inadvertently 

incentivize the sort of selective 

admissions which a commenter 

described and we will continue to 

analyze how we can strengthen the HH 

PPS to increase payment accuracy while 

mitigating risks which would 

incentivize such selective admissions. 

Comment: Commenters stated that we 

should suspend or drop case-mix 

adjustments because they will cause 

financial distress/bankruptcy among 

agencies, particularly ‘‘safety-net’’ 

agencies that take patients other 

agencies reject. Commenters further 

stated that the proposed payment 

reductions will cause ‘‘safety net’’ 

providers to have a ‘‘negative operating 

margin’’ and/or cause not-for-profit 

agencies to go out of business. 

Response: Identifying the agencies 

that commenters call ‘‘safety-net’’ 

agencies is not feasible with our 

administrative data, so we cannot 

provide any evidence either to support 

or refute assertions that safety-net 

agencies are at greatest risk. Our 

analysis of margins of not-for-profit 

agencies shows that they tend to have 

lower margins than for-profit agencies. 

However, we do not agree that not-forprofit agencies will necessarily be more 

likely to exit the home health business 

than a for-profit agency. We believe the 

business decision is a complex one with 

many considerations, such as the 

organization’s mission, the availability 

of alternate sources of funding, and 

whether or not the organization is 

embedded in a larger one. These 

influential factors are not necessarily 

associated with the non-profit or forprofit status of an agency, and therefore, 

we cannot accurately predict the 

business decision of an agency based 

solely on their status. In addition, we 

refer the commenters to section IV 

where we describe the impact of the 

provisions of this rule, including the 

revision of the case-mix weights. 

Section IV shows that when taking into 

account all of the provisions in this final 

rule, non-profit providers should 

experience less of a negative impact 

than for-profit providers. Also, in 

section IV, we describe our rationale 

why we believe access to Medicare 

home health will not be adversely 

affected by our policies, including the 

payment reductions. 

Comment: Commenters stated that by 

implementing an across the board 

payment cut, agencies who have been 

more profitable may survive while 

agencies that have smaller margins may 

fail, thus potentially preserving those 

who may be committing abuse. 

Response: Existing information about 

Medicare margins and the CR data we 

have analyzed suggest that most 

agencies will continue to have positive 

margins on their Medicare business. 

With our revisions to the case-mix 

weights, we expect the weight 

adjustments will reduce the incentive to 

provide more therapy than is clinically 

indicated. To the extent that profits are 

based on abusive behavior, we believe 

these changes will mitigate the risks of 

abusive behavior. We also believe the 

changes will result in more equitable 

revenues and profits. 

Comment: Commenters stated that 

they believe that the case-mix 

measurement methodology takes on the 

approach that all case-mix change is 

nominal unless it can be proved 

otherwise. 

Response: The evidence for nominal 

case-mix change is based on the small 

amount of change in patients’ 

characteristics generally, as measured 

by patient demographics and 

information from the National Claims 

History on home health patients. We 

summarized the change in patients’ 

characteristics in terms of the impact on 

the average case-mix weight. In this 

analysis, the remainder of the change in 


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average case-mix weights is 

unexplained, and it is generally 

believed that coding change is 

responsible. Our method to assess real 

and nominal case-mix change is the 

most effective method available to us at 

this time. We remind the commenter 

that we have presented various types of 

other data in previous rulemaking 

consistent with the model-based 

evidence indicating that home health 

care patients have not changed much 

since the last 12 months of the Interim 

Payment System. 

Comment: A commenter suggested 

that CMS ‘‘adjust out all data from 

active and closed settlement actions’’ in 

their measurement of real and nominal 

case-mix growth. 

Response: We are unclear what the 

commenter is suggesting. As we have 

noted previously, nominal case-mix 

growth is an across the board issue. If 

the commenter is referring to 

recoupments which correspond to 

claims denied after they were reviewed, 

such would typically be reflected in the 

claims data we use in our case mix 

analysis. In the case where a paid-claim 

dispute is still active, this data would 

likely not have much effect on our 

determination of nominal case-mix 

growth. 

Comment: Commenters requested that 

CMS increase its program integrity 

efforts to combat fraud, waste, and 

abuse. Other commenters stated that 

instead of implementing a payment 

reduction, CMS should audit agencies 

that appear to be manipulating the casemix system. Commenters stated that we 

should eliminate the proposed payment 

reductions and rather ‘‘conduct targeted 

claims review and deny payment for 

claims where the case-mix weight is not 

supported by the plan of care.’’ 

Response: We have taken various 

measures to reduce payment 

vulnerabilities and the Federal 

government has launched actions to 

directly identify fraudulent and abusive 

activities. Commenters should be aware 

of tip lines available that can help 

support investigative efforts of the 

Federal government. The Office of the 

Inspector General, Department of Health 

and Human Services Web site at 

http://oig.hhs.gov/fraud/report-fraud/ 

index.asp, provides information about 

how to report fraud. Another Web site, 

http://www.stopmedicarefraud.gov/ 

index.html, is oriented to Medicare 

patients and their families and provides 

information about recognizing fraud. 

In addition, while we appreciate the 

commenters’ suggestion about the 

targeted claims review, we cannot 

perform targeted claim review as 

suggested, because our resources are not 

sufficient to conduct claims review on 

a scale that would be required to 

counteract the broad-based uptrend in 

case-mix weights. 

Comment: A commenter stated that if 

the payment reduction is implemented, 

the base rate will be less than at the start 

of the HH PPS. 

Response: When assessing the impact 

of the payment reductions, one must 

also consider the effects of the case-mix 

weights. Section 1895(b)(3)(B)(iv) of the 

Act requires that payment adjustments 

in response to nominal case-mix change 

be made to the rates. As such, we must 

reduce the base rate to account for 

growth in nominal case-mix. However, 

we note that we have not reduced the 

average case-mix weight and the average 

case-mix weight has increased since the 

beginning of the HH PPS. Therefore, 

even with the payment reductions to 

account for nominal case-mix growth 

since the beginning of the HH PPS, the 

average payment is projected to be 

higher for CY 2012 than the average 

payment at the beginning of the HH 

PPS. 

Comment: Commenters mentioned 

the Affordable Care Act study which is 

investigating access to care issues and 

stated that the payment cuts will only 

further exacerbate access to care issues 

for vulnerable populations. 

Response: We appreciate the 

commenter’s concerns and wish to note 

that our preliminary analysis suggests 

that vulnerable populations are 

associated with case-mix groups 

involving lower levels of therapy, and 

that we have adjusted weights upward 

for those lower-therapy case-mix 

groups. For example, whereas the 

average number of therapy visits for first 

episodes overall is 8.2 in 2009, the 

average for vulnerable groups in various 

classifications (for example, highpoverty counties or rural areas) ranged 

between 7.0 and 7.8. The impact 

analysis of this rule indicates that rural 

agencies will experience a smaller 

reduction overall than urban agencies. 

We note that rural agencies will 

continue to receive a 3 percent payment 

add-on in CY 2012. We anticipate that 

these aspects of the payment proposals 

will mitigate the risk of access issues. 

We also wish to report that the 

Affordable Care Act study is proceeding 

as planned. It will involve additional 

data gathering on vulnerable 

populations and on potential access 

problems that vulnerable beneficiaries 

may encounter in coming years. We will 

continue to monitor for unintended 

consequences and we will seek 

information from other government 

agencies, such as the Office of the 

Inspector General, on access. Finally, 

we will use Open Door Forums and 

other venues to solicit information from 

agencies on any actual access issues 

they witness. 

Comment: Commenters stated that the 

payment cuts will limit access to care 

and hinder the effort to move to more 

community-based care. 

Response: We do not believe this will 

be the case because payment will 

remain adequate. Medicare has 

implemented policies to support 

community-based care in other areas, 

such as hospital-readmissions and 

transition programs authorized by the 

Affordable Care Act. We encourage 

HHAs to partner with providers in their 

community to become a part of these 

efforts, thereby assisting in the 

movement to more community-based 

care. 

Comment: Commenters also thought 

that the payment reductions would 

lower quality of care. 

Response: Commenters did not 

provide specific information about why 

they believe payment reductions would 

lower quality of care. Our simulation of 

margins under the payment policies in 

this rule suggests that margins will 

remain adequate, and thereby support 

current levels of quality. We also believe 

that policymaking in the quality 

improvement area should help to ensure 

quality advances. OASIS–C outcome 

reports and CAHPS data are two 

important recent developments that we 

anticipate will support high-quality 

services. Over time, value-based 

purchasing policies will be developed, 

further enhancing quality-related 

incentives. We encourage agencies to 

work to their full professional potential 

to deliver a high standard of care to 

their patients. 

Comment: Commenters were 

concerned that the proposed cuts would 

impede access to home health care 

because many agencies would be forced 

to close as a result of the lower 

payments. Commenters stated that if the 

proposed cuts are implemented, many 

providers will be operating at a negative 

or zero margins. A commenter stated 

that the reduction to payment rates 

along with other cuts mandated by the 

Affordable Care Act would cause over 

half of HHAs to be paid less than the 

cost of care to Medicare patients. This 

commenter provided a chart which 

forecasts 2012 profit margins for each 

State should the proposed 5.06 percent 

reduction to payments be finalized. The 

commenter further described that six 

States and Guam would have more than 

70 percent of their agencies with 

negative margins in CY 2012 as a result 

of the reduction. Specifically, the 

commenter described the States and the 


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corresponding percent of HHAs which 

would be forced into negative margins 

as: Alaska 80 percent; Idaho 76.9 

percent; North Dakota 91.7 percent; 

Oregon 96.2 percent; Vermont 70 

percent; and Wisconsin 74.5 percent. 

Other commenters stated that the 

payment reductions place more of a 

hardship on certain providers. The 

commenters stated that rural locations 

would be hit the hardest. Commenters 

also stated that if the proposed cuts take 

place, over 45 percent of Minnesota 

providers will be operating at a zero or 

negative margin in 2012 and nearly 60 

percent in 2017. Other commenters 

stated that the Northeast has a 

significantly lower rate of increase in 

case-mix growth than any other region. 

Commenters stated that the payment 

reductions will differentially impact 

different regions of the country and 

urged CMS to do a State-by-State 

analysis. 

Response: As we have noted in prior 

rules, we believe that a policy of varying 

payment levels according to regional 

differences in nominal case-mix change 

would be perceived as inequitable by 

beneficiaries. That is, beneficiaries who 

might have access only to agencies 

subject to larger payment reductions 

might believe Medicare’s policies 

disadvantage them unfairly. 

Regarding the commenters’ concerns 

about the effect of the proposed 

reductions on providers’ viability and 

the resultant access risks, we note that 

in their March 2011 Report to Congress, 

MedPAC projected an average of 14.5 

percent margins for HHAs in 2011, 

when taking into account various 

payment adjustments such as the CY 

2011 payment reduction for nominal 

case-mix growth. We also note that in 

proposing the reductions, we analyzed 

the combined effects of all of the 

policies proposed and believe that a 

5.06 percent reduction would not 

impede access to care. We believe that 

the margin analysis study submitted by 

one of the commenters, which projected 

the impact of the proposed policies on 

HHAs on a State-by-State basis, failed to 

take into account the effects of all of the 

policies in the rule. The payment 

reduction to the base rate is not the only 

policy affecting payment to HHAs 

described in the proposed rule. The 

effects of the payment update, wage 

index update and revision of case-mix 

weights also need to be taken into 

account when assessing the impact of 

the proposed provisions. We also 

believe that the commenter may have 

attempted to factor potential future 

reductions to HH PPS payments into the 

2012 margin forecast. While the 

Affordable Care Act calls for CMS to 

rebase home health payments beginning 

in 2014 and apply a productivity 

adjustment to the yearly inflation 

increases beginning in 2015, the impact 

of these provisions would be impossible 

to accurately project at this time. 

Additionally, provisions that are 

targeted for implementation in 2014 and 

later would have no effect on CY 2012 

provider margins. The following 

discussion describes the impact if we 

were to implement a 5.06 percent 

payment reduction in CY 2012, taking 

into account all of the policies in the 

rule. In the aggregate, HHAs would 

receive 3.52 percent less in payments in 

CY 2012 when compared to CY 2011 

payments, reflecting the net effect of a 

1.4 percent HH PPS payment update 

increase, a 0.03 percent payment 

increase resulting from the wage index 

update, and a 5.06 percent reduction in 

payments to account for nominal casemix growth. We note that not all 

providers would experience a net 3.52 

percent reduction in their payments if a 

5.06 percent reduction in payments was 

finalized for CY 2012. As we described 

in the proposed rule and describe in this 

final rule, the revision of the case-mix 

weights would have a re-distributional 

effect which benefits rural and nonprofit providers, and providers in 

certain areas of the country. For 

example, in aggregate, if a 5.06 percent 

reduction in payments was 

implemented for CY 2012, non-profit 

free-standing providers would 

experience an estimated 0.91 percent 

reduction and for-profit free-standing 

providers would experience an 

estimated 4.72 percent reduction in 

payments. Rural providers would fare 

better than urban providers, as rural 

non-profit freestanding providers would 

see an estimated 0.31 percent increase 

in payments. In response to the 

commenter who was concerned about 

providers in the Northeast, we note that 

New England providers are in an area of 

the country which would benefit from 

the re-distributional effects of the 

recalibration. On average, New England 

providers would experience an increase 

in payments in CY 2012. 

We note that of the six States which 

the commenter contends would have 70 

percent or more providers experiencing 

negative margins as a result of the 

payment reductions, five are in areas of 

the country which would benefit from 

the re-distributional effect of the casemix weight revisions. In Table 1, we 

provide the estimated impact if we were 

to finalize a 5.06 percent payment 

reduction with the other policies in this 

final rule for purposes of addressing this 

comment. 


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As shown in Table 1, the net effect of 

a 5.06 percent payment reduction with 

all of the other provisions of the rule is 

that providers from North Dakota, 

Oregon, and Vermont on average would 

experience an estimated increase in 

payments in CY 2012 of 2.73 percent, 

0.19 percent and 1.45 percent 

respectively, instead of the national 

average, a 3.52 percent reduction in 

payments. Furthermore, the net effect of 

a 5.06 percent payment reduction with 

all of the other provisions of the rule is 

that providers from Guam on average 

would experience an estimated increase 

in payments in CY 2012 of 0.11 percent. 

In addition, the net effect of a 5.06 

percent payment reduction with all of 

the other provisions of the rule is that 

Alaska providers and Wisconsin 

providers in the aggregate would 

experience an estimated reduction in 

payments in CY 2012 of 0.81 percent 

and 2.68 percent respectively, instead of 

the national average, a 3.52 percent 

reduction in payments. 

Table 1 shows that if we were to 

finalize a 5.06 percent payment 

reduction, Idaho would experience an 

estimated 4.54 percent reduction in 

payments in CY 2012, instead of the 

national average, a 3.52 percent 

reduction in payments. However, the 

non-profit providers and the rural 

providers in Idaho would experience an 

estimated reduction in payments in CY 

2012 of 1.37 percent and 2.06 percent 

respectively. Regarding the commenters 

who expressed concern that a provider 

association reported that close to half of 

Minnesota providers would experience 

negative margins as a result of the 

proposed payment reductions, we 

disagree with the provider association’s 

conclusion. The net effect of a 5.06 

percent payment reduction with all of 

the other provisions in the rule is that 

Minnesota providers, on average, would 

experience an estimated 1.19 percent 

reduction in payments in CY 2012, 

instead of the national average, a 3.52 

percent reduction in payments. 

Furthermore, preliminary 2009 CR 

analysis along with MedPAC’s projected 

margin analysis for 2011 suggest that 

providers in these States have margins 

which are strong enough to absorb the 

proposed 5.06 percent payment 

reduction. 

As stated above, we have concerns 

and questions about the commenter’s 

analyses. Specifically, we believe the 

commenter may have not taken into 

consideration all of the provisions of 

this rule and also may have included in 

the analyses potential future reductions 

to HH PPS payments into the 2012 

margin forecast (which are not 

applicable to 2012), and therefore, 

overestimated the negative impact on 

providers. We would like to note that 

industry margins have remained in the 

mid-double digits in recent years, even 

in those years in which we 

implemented similar net payment 

reductions. We also note that in this 

final rule, as we describe in detail in the 

following response to a comment, we 

are implementing the payment 

reduction over 2 years, rather than the 

1 year we originally proposed. We refer 

the commenters to Section IV for the 

impacts of the policies we are finalizing 

in this rule. 

In addition, regarding the 

commenter’s suggestion that we provide 

State-level impacts which reflect the 

provisions of the rule, we again refer the 

commenter to Section IV of this final 

rule where we describe our State-level 

analysis for the policies we are 

finalizing in this final rule. As we 

described in section IV, we believe that 

State-level impacts would be misleading 

unless we also provided breakouts of 

rural-verses-urban and ownership status 

of providers within the State. 

Comment: Commenters described the 

burden which they have experienced as 

a result of recent regulatory and 

legislative changes. Specifically, 

commenters described the financial 

burdens surrounding the Affordable 

Care Act face-to-face encounter mandate 

imposed on HHAs and physicians. The 

commenters stated that HHAs and 

physicians have needed to hire 

additional staff to track the face-to-face 

paperwork. Additionally, commenters 

noted that the staff time spent tracking, 

sending, and routing the required 

documentation, as well as tracking 

appointments has also been costly for 

HHAs to absorb. In addition, 

commenters described administrative 

burdens associated with the CY 2011 

therapy provision which requires a 

qualified therapist, instead of a therapy 

assistant, to perform the needed therapy 

service, as well as assess, measure, and 

document the effectiveness of the 

therapy, at key points during a course of 

therapy treatment. Another commenter 

stated that payment cuts detract from 

agencies’ ability to attract competent 

staff. Other commenters stated that CMS 

should limit any single-year rate 

reductions to no greater than a 

combined 2.5 percent. Some 

commenters suggested CMS phase-in 

the proposed 5.06 percent adjustment 

over a 2- to 3-year period. Commenters 

stated that a 5.06 percent rate reduction 

is the largest ever imposed in a single 

year by CMS and stated that the pay cut 

would have a significant impact as 

earlier payment cuts have decreased 

provider margins. Another commenter 

was concerned that the home health 

community would not be able to absorb 

the cumulative effect of recent 

legislative and regulatory reductions. 

Response: Our simulation analysis 

described in Section II.B, which takes 

into account all of the proposed policies 

for 2012 (such as a 5.06 percent 

payment reduction and the revision of 

the case-mix weights), projects that 

payment will exceed costs for all 

episodes, except for episodes with 20+ 

therapy visits, of which more than 60 

percent would have payment that 

exceeds their costs. We reiterate that 

about 6 percent of episodes nationally 

in 2009 had 20 or more therapy visits. 

Therefore, we believe that the payment 

cuts will not detract from agencies’ 

ability to attract staff. We also believe 

the payments in excess of estimated 

costs will allow agencies to adapt to 

recent legislative and regulatory 

requirements. However, we are sensitive 

to the challenges HHAs may have had 

in adapting to the Affordable Care Act 

provisions which were implemented in 

CY 2011, such as the face-to-face 

encounter provision. We also agree that 

the Affordable Care Act provisions and 

the CY 2011 therapy changes described 

by commenters likely required HHAs to 

incorporate process changes to adhere to 

these new requirements. As such, we 

are finalizing a phased-in 

implementation of a 5.06 percent 

reduction over 2 years, as some 

commenters suggested. We believe that 

by phasing-in the reductions over CY 

2012 and CY 2013, we allow HHAs an 

opportunity to adopt process 

efficiencies associated with the CY 2011 

mandates prior to imposing the full 5.06 

percent payment reduction. 

In CY 2011 rulemaking, we proposed 

to apply a 3.79 percent reduction to 

payments in CY 2011 and an additional 

3.79 percent reduction in CY 2012 to 

account for nominal case-mix growth 

we identified through CY 2008. 

However, we deferred finalizing the CY 

2012 reduction pending an independent 

review of our method for identifying 

real case-mix growth. (That independent 

review has been completed, as we 

reported in the CY 2012 HH PPS 

proposed rule.) Because we believe that 

providers likely expected and planned 

for us to impose a 3.79 percent payment 

reduction in CY 2012, we are finalizing 

a 3.79 percent reduction in CY 2012 and 

a 1.32 percent reduction for CY 2013. 

These reductions enable us to account 

for the nominal case-mix which we have 

identified through CY 2009, to follow 

through with the planned 3.79 percent 

reduction for CY2012, and to allow for 

HHAs’ adopting process efficiencies 

during CY 2012. 


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Comment: Commenters stated that 

HHAs should be allowed to test the 

impact of the rate changes using 2011 

data. 

Response: Given the fact that we 

currently are in CY 2011, there is not a 

full year of data from 2011 and we 

caution HHAs when using a partial 

year’s data in their analysis. In addition, 

due to the lag in receiving claims, we 

did not have full data from 2010 when 

developing the impacts for the CY 2011 

HH PPS proposed rule. Therefore, the 

data used to develop the impacts of our 

proposed policies are from 2009. We 

plan to continue to assess the impacts 

of our policies once new complete data 

are available. HHAs are welcome to test 

the impacts of the rate changes on their 

data; however, when predicting the 

impacts, it should be noted that all of 

the policies in the rule should be taken 

into account (such as the wage index, 

rural add-on, and the revision of the 

case-mix weights, and the payment 

reduction). 

Comment: Commenters stated that the 

rate reductions may adversely affect 

hospital-based HHAs. They stated that 

hospital-based HHAs represent 80.9 

percent of all providers nationwide with 

margins below zero and that the 

Medicare margins which MedPAC 

presents, only represents freestanding 

agencies and that hospital-based 

agencies have lower, negative margins. 

Commenters stated that hospital-based 

home care agencies are currently 

underpaid. 

Response: Medicare CR data for 

hospital-based HHAs does indicate that 

Medicare margins are lower than those 

of freestanding HHAs. However, 

hospital-based HHAs do not account for 

most of home health care, and there are 

data issues hindering understanding of 

hospital-based HHAs’ financial status. 

As stated in their March 2011 Report to 

Congress, MedPAC focuses on 

freestanding agencies because they are 

the majority of providers and because 

their costs do not reflect the sort of 

allocation of overhead costs seen in 

facility-based providers’ Medicare CRs 

(MCR), such as hospital-based HHA 

MCRs. They explain that in the case of 

hospitals, which often provide services 

that are paid for by multiple Medicare 

payment systems, measures of payments 

and costs for an individual sector could 

become distorted because of the 

allocation of overhead costs or 

complementarities of services. Another 

consideration is that Medicare’s 

payment policies should cover the costs 

of efficient providers. Therefore, given 

that the payment system is prospective 

and not based on a provider’s 

reasonable costs, we have reason to 

question whether the problem, as stated 

by the commenter, is that hospital-based 

agencies are underpaid. 

Comment: Commenters stated that for 

those providers who do survive, the cuts 

will hinder their ability to enhance 

technology and move to electronic 

health records. 

Response: A reduction in margins as 

a result of our payment changes may 

have an effect on the availability of 

resources for various types of 

investments. However, our analysis 

indicates that payments will be more 

than adequate under our payment 

changes and would still allow for 

investments. We do not have sufficient 

data to evaluate the effect on 

technology-specific investments from 

the unusually large margins that have 

been in existence under the HH PPS, but 

we welcome information about whether 

the numerous agencies that operated 

with high margins under the HH PPS 

made investments during those years, 

and the nature of those investments. 

Comment: Other commenters stated 

that CMS should suspend further 

nominal case-mix adjustments until the 

rebasing of the HH PPS system required 

by the Affordable Care Act. A 

commenter stated that CMS should 

study the factors driving case-mix 

growth and analyze the differences in 

growth by provider characteristics. 

Response: We are finalizing payment 

reductions intended to account for 

overpayments that were made because 

of nominal case-mix growth. Since our 

analysis indicates that margins will 

remain adequate, and since our analysis 

of rebasing is still in process, we see no 

reason to defer nominal case-mix 

adjustments in this rule. We agree that 

more data could be useful in 

understanding case-mix change, and we 

will continue to solicit suggestions for 

reliable data that can be incorporated in 

our studies. 

Comment: Commenters urged CMS to 

commission studies to more accurately 

estimate real and nominal case weight 

changes and to help refine the case-mix 

to more closely align reimbursement 

with costs and eliminate incentives. 

Commenters stated that CMS should 

work on implementing a proper casemix adjuster which accurately pays for 

all home health services before 

implementing a payment reduction. 

Response: The home health study 

under section 3131(d) of the Affordable 

Care Act allows CMS to not only look 

at access for vulnerable populations, but 

also look at other issues with the 

payment system and payment 

vulnerabilities. In this study, we plan to 

examine issues surrounding nominal 

case-mix growth and ways to better 

align payment with patient needs. The 

Report to Congress describing the 

findings of our study is projected to be 

available March 1, 2014. In the 

meantime, while examining ways to 

better improve the case-mix system, we 

believe that we need to address previous 

nominal case-mix growth, and therefore, 

we plan to implement payment 

reductions. 

Comment: A commenter 

recommended that CMS seek payment 

system reforms that are value-based 

rather than implementing payment 

reductions. The commenter noted that 

CMS should factor in the quality of care 

before implementing payment 

reductions. 

Response: Medicare’s value-based 

purchasing initiatives in home health 

will build upon current efforts in this 

area, including Outcome-Based Quality 

Improvement and CAHPS, and the 

Value-based Purchasing demonstration. 

As we develop and refine measures, and 

incorporate them in payment policies, 

we will involve stakeholders. Further 

developing value-based purchasing will 

take time, but commenters should be 

assured that it is an important goal for 

Medicare. However, we cannot ignore 

nominal case-mix growth in the interim 

and we believe we need to account for 

nominal case-mix growth through 2009. 

Comment: A commenter stated that 

the proposed payment cuts along with 

the proposed case-mix weight changes 

will hinder agencies ability to calculate 

their payment. 

Response: We note that we are not 

making significant, structural changes to 

our case-mix system. We are only 

revising the case-mix weights. Also, we 

plan to implement a payment reduction 

similar to previous payment reductions 

and have described the base rate 

payment in the Regulatory Impact 

Analysis in Section IV of this final rule. 

Therefore, we do not believe that the 

proposed policies will hinder agencies’ 

ability to calculate their payment. 

Comment: Commenters stated that all 

of the payment adjustments are based 

on a false assumption that clinicians 

and agencies have gamed the system. 

Response: As we have stated in 

previous regulations, changes and 

improvements in coding are important 

in bringing about nominal coding 

change. We believe nominal coding 

change results mostly from changed 

coding practices, including improved 

understanding of the ICD–9 coding 

system, more comprehensive coding, 

changes in the interpretation of various 

items on the OASIS and in formal 

OASIS definitions, and other evolving 

measurement issues. Our view of the 

causes of nominal coding change does 


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not emphasize the idea that HHAs or 

clinicians in general gamed the system. 

However, since our goal is to pay 

increased costs associated with real 

changes in patient severity, and nominal 

coding change does not demonstrate 

that underlying changes in patient 

severity occurred, we believe it is 

necessary to exclude nominal case-mix 

effects that cannot be shown to be 

related to changes in patient severity. 

Comment: Commenters stated that 

CMS penalizes providers for improved 

accuracy in patient assessment and 

coding. The commenters contributed the 

increase in case-mix to increased 

accuracy of OASIS answers and 

increased coding accuracy as a result of 

training of their staff and/or the use of 

certified and trained coders. 

Response: Comments referencing 

coding improvements, such as 

increasing accuracy, do not recognize 

that such improvements are an 

inappropriate basis for increased 

payment. We believe that measurable 

changes in patient severity and patient 

need are appropriate bases for changes 

in payment. Our analysis continues to 

find only small changes in patient 

severity and need. 

Comment: Commenters stated that the 

increase in case-mix weights is due to 

HHAs complying with Medicare 

instructions regarding patient coding 

‘‘consistent with the 2008 version of the 

HH PPS.’’ 

Response: This comment is difficult 

to address because the commenter does 

not cite specifically which documents 

constitute CMS-issued Medicare 

instructions ‘‘consistent with the 2008 

version of the HH PPS.’’ Nor does the 

comment explain how the increase in 

case-mix weights was driven by such 

CMS instructions. However, we believe 

our release in late 2008 of a revision of 

Attachment D of the OASIS Instruction 

Manual would not have had the effect 

suggested by the comment. (Attachment 

D was intended to provide guidance on 

diagnosis reporting and coding in the 

context of the HH PPS.) First, 

Attachment D reiterated traditional CMS 

guidance about how to select diagnoses 

in home health. Attachment D did not 

deviate from the fundamental and 

longstanding instruction that reported 

diagnoses must be relevant to the 

treatment plan and the progress or 

outcome of care and be consistent with 

coding guidelines. 

Comment: Commenters stated that 

CMS should look into alternative ways 

to account for nominal case-mix 

changes. Commenters stated that 

coordinated educations efforts can help 

control nominal case-mix growth. 

Response: Section 1895(b)(3)(B)(iv) of 

the Act gives CMS the authority to 

implement payment reductions for 

nominal case-mix growth by applying 

reductions to the base payment. The 

section does not allow CMS the 

authority to account for nominal growth 

in ways other than through payment 

reductions. We continue to explore 

ways to prevent future nominal casemix growth and we welcome any 

suggestions. 

Comment: A commenter stated that 

the CMS methodology does not 

recognize home health care’s increasing 

ability to care for more serious medical 

conditions in the home and ignores 

changes in patient severity. We received 

a number of comments stating that 

home health patients now have more 

complex conditions than previous 

populations of home health patients and 

that such patients previously would 

have been referred to health care 

facilities, but are now being cared for at 

home. Moreover, the commenters stated 

that other healthcare settings have 

developed stricter admission 

requirements, thereby increasing the 

number of HHA patients with high 

severity levels. One commenter cited as 

evidence diversion of patients to home 

care from inpatient rehabilitation 

facilities (IRFs) due to the CMS 60 

percent rule. In addition, the 

commenters cited that there has been a 

nationwide rebalancing of care in favor 

of community care settings leading to a 

higher severity in home care 

admissions. 

Response: Data we presented in the 

CY 2011 HH PPS final rule (75 FR 

70379) indicate that hospital lengths of 

stay have been declining slightly and 

lengths of stay in residential post-acute 

settings before home health admission 

have increased between 2001 and 2008. 

We note that the proportion of initial 

non-LUPA home health episodes 

preceded by acute care within the 

previous 60 days has declined between 

2001 and 2008, from 70.0 percent to 

62.7 percent. This indicates more 

patients are being admitted to HHAs 

from non-institutional settings (for 

example, from the community). Also, 

post-acute institutional utilization data 

perhaps consistent with the comment 

regarding diversion of patients to the 

home care setting suggest a decline in 

IRFs as a source of home health 

patients, but this decline may have been 

partly offset by an increase in SNF 

utilization as a source. For example, the 

proportion of initial episodes preceded 

by an IRF stay that ended sometime 

during the 30 days before home health 

admission declined by more than a 

percentage point in 2005 and declined 

another 1.6 percentage points by 2009, 

while the percentage preceded by a SNF 

stay increased half a percentage point in 

2005 and has remained above the 2005 

level through 2009, the latest year of 

complete data available (based on a 10 

percent beneficiary sample of initial, 

non-LUPA episodes). We also note that 

in CY 2005, when CMS began enforcing 

the IRF 60 percent rule, we initially saw 

an increase in knee joint replacement 

patients admitted to home health 

following hospital discharge. The 60 

percent rule (previously, the 75 percent 

rule), is a criterion used to define IRFs 

for them to receive payment as an IRF. 

The rule requires that in at least 60 

percent of cases an IRF admits must 

have one or more selected conditions 

which have been established as 

requiring the intensity of care provided 

in an IRF. However, more current data 

(2007 and 2009) shows that the 

prevalence of knee joint replacement 

patients in home health has dropped 

from the 2005 levels, though the 

prevalence is slightly higher than in 

2000. The prevalence of hip joint 

replacement patients has dropped since 

2000, as have hip and femur fracture 

patients. Furthermore, we note that 

acute stays, which normally precede 

stays in institutional post-acute care 

settings, are decreasing in the stay 

histories of home health patients. 

Therefore, we question whether there is 

any evidence showing an increase in 

home health patient severity as a result 

of more patients coming to home health 

as a result of diversion from IRF care. 

Comment: Commenters stated that 

patient care capabilities are changing in 

home health services and diagnosticspecific care protocols allow targeting of 

patient populations. Commenters cited 

utilization of interdisciplinary care 

providers to improve patient outcomes 

and to provide best practice 

interventions, such as the prevention of 

falls. The commenters further expanded 

on this idea by stating that there is a 

movement towards a multidisciplinary 

approach to care and utilization of 

broader ranges of therapy services to 

improve outcomes and that evidence 

based best practices have improved 

patient outcome scores. 

Response: To the extent that home 

care agency capabilities are improving, 

we support such developments and we 

hope to see them continue. This is an 

entirely different issue from whether the 

patient population has changed to the 

degree as indicated by the nominal 

coding change we isolate in our 

analysis. 

Comment: Commenters suggested that 

CMS recognize changes in patient 

severity, improved patient assessment, 


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coding and reimbursement changes in 

their case-mix methodology and work 

with National Association for Home 

Care and Hospice (NAHC) to uncover 

the reasons for case-mix weight changes 

and to develop a valid methodology for 

payment reform. Another commenter 

stated that CMS should include industry 

stakeholders in the analysis and 

development of policies, such as the 

case-mix adjustment cut, that have a 

significant impact on access to home 

care services. 

Response: Through the public 

comment process, we have obtained 

industry views as to the reasons for 

coding changes. As we have pointed out 

before, reasons offered, such as 

improved coding, are not a sufficient 

basis for raising payment rates. To the 

extent case-mix change is due to better 

methods of assessing patients in the 

home health setting, this does not justify 

making reimbursements as though the 

patients really were different in their 

case-mix levels of severity. We plan to 

solicit feasible alternative suggestions 

for scientific approaches to measuring 

real vs. nominal case-mix change in the 

home health study under section 

3131(d) of the Affordable Care Act. 

Comment: Some commenters stated 

that payment rate reductions due to 

case-mix weight changes are not 

warranted because Medicare 

expenditures on home health are well 

within budgeted levels, thereby 

demonstrating that aggregate spending 

has not increased enough to permit CMS 

to exercise its authority to adjust 

payment rates. Commenters cited 

budget projections of the Congressional 

Budget Office (CBO). Another 

commenter stated that while therapy 

services for home health patients have 

increased in volume since the start of 

the HH PPS in 2000, patient outcomes 

have improved and Medicare spending 

per patient and in the aggregate overall 

has stayed well below projections by the 

CBO. Some commenters stated that 

payment reductions in home health will 

lead to more institutional care, for 

example, by leading to increases in 

hospital readmissions of post-acute 

patients. 

Response: We have no statutory 

authority to consider the relationship of 

CBO projections to home health outlays 

when setting the HH PPS payment rates. 

The Secretary’s authority to respond to 

nominal coding change is set out at 

section 1895(b)(3)(B)(iv) of the Act. As 

stated earlier, we do not believe that the 

reductions will impede access to care, 

but we will continue to monitor for 

unintended consequences. There is no 

evidence that improvement in home 

health patient outcomes is related to the 

level of payments achieved through 

nominal case-mix change. Effects of 

payment reductions on access and 

patient outcomes are worthy of study, 

using carefully designed research. We 

are aware of the challenges of 

conducting conclusive research in this 

area, in part because other policy 

changes affecting the study question 

may co-occur. We may explore this area 

of research in the home health study 

under section 3131(d) Affordable Care 

Act. 

Comment: Commenters stated that 

CMS should not implement payment 

reductions to address high therapy 

utilization but rather address it by 

implementing changes to case-mix 

weights, such as the proposed changes, 

instead. 

Response: We note that we proposed 

to implement a 5.06 percent payment 

reduction to account for the residual 

nominal case-mix growth from 2000 to 

2009. The changes to the case-mix 

weights were proposed to better align 

payment with costs and to deter 

incentives which contribute to nominal 

case-mix growth. Therefore, we believe 

we still need to implement payment 

reductions to account for nominal casemix change from the inception of the 

HH PPS through 2009. 

Comment: Commenters stated that 

therapy utilization is a coding 

adjustment that accompanies not only 

an increase in reimbursement but also 

an increase in provider costs, implying 

that a rate reduction related to increased 

costs is inappropriate. Another 

commenter stated that a typical casemix weight change adjustment in other 

sectors may bring a reduction in profit 

margins only, whereas in home health 

the adjustment occurs where the higher 

payments from increased case-mix 

weights are offset by increased costs. 

Response: We believe that the goal of 

the Medicare program is to ensure that 

beneficiaries receive the right care at the 

right time. The evolution of patterns of 

therapy utilization since the PPS began 

leaves doubt that appropriate care has 

been provided. In the CY 2008 proposed 

regulation (72 FR 25356), we described 

a shift in the distribution of therapy 

visits per episode under the HH PPS 

that caused two peaks: One below the 

therapy threshold of 10 therapy visits; 

and the other in the 10 to 13 visit range. 

Before the HH PPS, the distribution had 

one peak, at 5 to 7 therapy visits, well 

below the 10-visit therapy threshold in 

use prior to the 2008 refinements to the 

HH PPS. The distribution of episodes 

(LUPA and non-LUPA) changed again 

with the implementation of the 153- 

group case-mix system and its revised 

set of thresholds and therapy steps. At 

the new 7-visit step (7 to 9 visits) there 

was a sudden 50 percent increase in the 

proportion of episodes, and at the new 

14-visit therapy threshold, there was a 

25 percent increase in the proportion of 

episodes. One commenter in 2010, in 

writing about the questionable 

prescription of therapy treatment, stated 

that certain agencies have habitually 

provided therapy to patients whose 

natural course of recuperation would 

have been the same regardless of receipt 

of therapy. Such prescribing behavior 

adds to doubts that services are always 

provided appropriately. We also note 

that we implemented a declining 

payment with each added therapy visit 

with the 2008 refined case-mix system, 

with the intent to deter inappropriate 

padding of therapy prescriptions to 

higher and higher numbers of visits, as 

we added new thresholds above 10 

visits. However, the pliability of therapy 

prescriptions, the continued growth in 

the proportion of episodes utilizing 

therapy, and the 25 percent increase in 

the proportion of episodes with high 

numbers of therapy visits (14 or more) 

in 2008 may be evidence that increased 

costs are more than offset by the 

increased payment associated with 

therapy. Furthermore, a Senate Finance 

Committee report concludes that among 

the major for-profit providers, more 

therapy was often provided than 

clinically needed in order to maximize 

Medicare reimbursement (Senate 

Finance Committee Staff, ‘‘Staff Report 

on Home Health and the Medicare 

Therapy Threshold’’, U.S. Government 

Printing Office, Washington: September 

2011). To the extent that unnecessary 

therapy was provided and contributed 

to nominal case-mix growth, these are 

overpayments, regardless of whether the 

unnecessary therapy had a cost to the 

HHA that provided it. 

In addition, analysis of profit margins 

indicates that they remain high among 

HHAs. For example, according to 

MedPAC’s analysis, Medicare margins 

were 17.7 percent in 2009. This 

situation suggests that higher payments 

are not necessarily being offset by 

increased costs. In March 2011, 

MedPAC estimated that Medicare 

margins will be 14.5 percent in 2011, 

taking into account the then-expected 

payment reductions (MedPAC, Report to 

Congress: Medicare Payment Policy, 

March 2010). Our estimates suggest 

aggregate Medicare profit margins in 

home health will remain strong under 

the payment policies we are finalizing 

with this rule. 

Comment: Commenters stated that 

there is an increased volume of episodes 

that have therapy utilization and that 

there have been improved patient 


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outcomes. Some of these commenters 

cited Table 8–5 in the March 2011 

MedPAC Report to Congress. They 

stated that the beneficiary outcomes 

have greatly improved in all functional 

measures with the increased therapy 

services. 

Response: There is not yet a body of 

rigorous literature that provides 

evidence tying improvements in home 

health outcome measures to the 

increased volume of therapy provided 

under the HH PPS. The standard for 

such evidence would be stronger than a 

broad correlation between improvement 

rates in outcomes and amount of 

therapy provided. In addition, we 

disagree that the March 2011 MedPAC 

Report to Congress implied or 

concluded that increased therapy 

utilization has improved patient 

outcomes. Rather, in the March 2011 

Report, the Commission criticized the 

home health measures for not capturing 

changes in quality that were related to 

the patient’s need for home health care. 

The Report further described that the 

improvement in walking measure is 

reported for all patients regardless of 

whether they needed home health to 

address a mobility condition. 

Comment: A commenter stated the 

real case-mix change analysis omits 

consideration of increased therapy 

needs in the population. Other 

commenters stated that therapy use 

changes were not explained in the 

model and that CMS admitted that it 

could not explain the correct amount of 

therapy expected for patients. The 

commenter stated CMS should use 

alternative variables which would be 

more indicative of the changes in 

therapy use. 

Response: The models were intended 

to analyze changes in case-mix over 

time and do not distinguish whether 

these changes are due to increases in 

therapy use or other factors. We do not 

believe that it would be appropriate to 

include utilization-related variables, 

such as the number of therapy visits, as 

predictors in the model, as such 

variables are provider-determined. In 

addition, the goal of these analyses was 

not to develop refinements to the 

payment system but rather to examine 

changes in measures of patient acuity 

that are not affected by any changes in 

provider coding practices. For example, 

the models do incorporate information 

about change in the types of patients 

more likely to use therapy, such as postacute joint replacement patients. CMS 

has access to the claims histories and 

other administrative data for patients in 

our samples, and we welcome 

suggestions about how to better use 

these resources in finding alternative 

variables more indicative of the need for 

therapy, particularly if the suggestions 

involve the use of data and variables 

that are not HHA-determined. 

Comment: A commenter stated that 

the model fails to account for any 

changes in HHA behavior related to 

patient populations served. These 

changes would include a marketing 

effort targeted to increase the proportion 

of patients who are high users of 

therapy. 

Response: We disagree with this 

comment. The predictive model for real 

case-mix was designed in 2007 and 

includes a comprehensive set of 

variables. We augmented the set of 

predictor variables this year by adding 

HCC data. The model looks at case-mix 

change across a large sample of 

providers, rather than considering 

individual provider behavior. If the 

characteristics of patients have changed 

due to marketing efforts, this should 

show up as changes in the mean values 

of patient characteristics over time. For 

example, the increase in knee 

replacement patients since the baseline 

year causes an increase in the predicted 

case-mix weight. We will continue to 

research ways to modify our models and 

data for analyzing real case-mix change 

over time. A challenge with using 

OASIS items is that, for the most part, 

OASIS items associated with case-mix 

are already used in the grouper and thus 

are not appropriate to use in the casemix change analyses (since changes in 

case-mix over time may be due to 

coding changes rather than changes in 

severity). 

Comment: The commenter stated that 

MedPAC is researching and developing 

revised payment models which could 

bring therapy reimbursement more in 

line with how other home health 

services are paid for and any dramatic 

reimbursement changes to the HH PPS 

should be postponed in anticipation of 

a more complete revision to the 

payment methodology. 

Response: We do not believe our 

proposals represent dramatic 

reimbursement changes. We have 

strived to maintain the look and feel of 

the refined system of 2008 in our 

proposals this year. We agree that 

dramatic changes to the HH PPS system 

should await the congressionally 

mandated study currently underway, 

pursuant to Section 3131(d) of the 

Affordable Care Act. This study may be 

followed by a demonstration to test 

major revisions to the payment 

methodology. 

Comment: A commenter implied that 

the industry did not play a role in 

developing the HH PPS and implied 

that when OASIS was first used, there 

was a significant variation in the 

reporting and that the industry was 

disadvantaged. 

Response: We followed the 

Administrative Procedures Act (APA) in 

implementing the HH PPS under the 

mandate in the Balanced Budget Act of 

1997. Under the APA, we solicited 

public comments in 1999 on the thenproposed system. OASIS itself was 

developed with industry participation 

for the purpose of measuring home 

health outcomes (see GAO–01–205, 

January 2001, Appendix II). A version of 

OASIS was used in the original casemix research that led to the design of 

the HH PPS case-mix system. The 

research results indicated that adequate 

case-mix adjustment of payments could 

be achieved using OASIS variables. We 

have noted in previous regulations that 

the average case-mix weight nationally, 

as estimated from OASIS assessments in 

the 12 months leading up to October 1, 

2000, was about 13 percent higher than 

the average in the sample of agencies 

whose data were used for the case-mix 

research. We used the estimate from the 

12 months leading up to October 1, 2000 

as our baseline for measuring case-mix 

change because it represented a very 

large, broad-based set of episodes. It did 

not reflect the earliest days of OASIS 

use. Given that coding practices 

continually evolved subsequent to the 

last 12 months ending October 1, 2000, 

and that agencies were not subject to the 

HH PPS incentives during the 12 

months ending October 1, 2000, we 

believe the baseline period that we 

selected is the most appropriate one to 

use to begin measuring coding change 

that occurred in relation to the 

introduction of the HH PPS. Any other 

period subsequent to our baseline builds 

in impacts on coding of the HH PPS and 

is questionable to use from the point of 

view of responsible fiscal stewardship. 

Comment: Commenters stated that the 

model is based on administrative data 

rather than clinical data. 

Response: The model only includes a 

few variables that are derived from 

OASIS assessments (measures of patient 

living arrangement) because the OASIS 

items can be affected by changes in 

coding practices. It is not practical to 

consider other types of home health 

clinical data (for example, from medical 

charts) in the model. 

Comment: A commenter wrote that 

the model relies too heavily on 

assumptions and beliefs rather than 

empirical evidence. Other commenters 

stated that the implementation of the 

payment reductions should be delayed 

until the validity of data and methods 

used to calculate the payment reduction 

can be verified. 


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Response: We disagree. The 

prediction model for real case-mix is an 

empirical model, the findings of which 

are based entirely on empirical 

evidence. We also disagree with the 

commenter’s suggestion that we have 

not validated the data or methods used 

to calculate the payment reduction. 

Over the last several years, we have 

continued to evaluate our data and 

methods, and this year, we procured a 

review of our model by Dr. Grabowski 

and his team at Harvard University, who 

found our model robust. 

The real case-mix prediction model 

and its application account for changes 

in the HH patient population by 

quantifying the relationship between 

patient demographic and clinical 

characteristics and case-mix. The 

relationships in conjunction with 

updated measures of patient 

characteristics are used to quantify real 

case-mix change. The characteristics in 

the model include proxy measures for 

severity, including a variety of 

measures, namely, demographic 

variables, hospital expenditures, 

expenditures on other Part A services, 

Part A utilization measures, living 

situation, type of hospital stay, severity 

of illness during the stay, and risk of 

mortality during the stay. This year, 

additional diagnosis data, based on 

physician and hospital diagnoses in the 

patient’s claims history, were added in 

the form of HCC indicators. Measurable 

changes in patient severity and patient 

need, factors mentioned by commenters, 

are an appropriate basis for changes in 

payment. Our model of real case-mix 

change has attempted to capture such 

increases. 

We recognize that models are 

potentially limited in their ability to 

pick up more subtle changes in a patient 

population such as those alluded to by 

various commenters. Yet in previous 

regulations we presented additional 

types of data suggestive of only minor 

changes in the population admitted to 

home health, and very large changes in 

case-mix indices over a short period. We 

included among these pieces of 

evidence information about the 

declining proportion of home health 

episodes associated with a recent acute 

stay for hip fracture, congestive heart 

failure, stroke, and hip replacement, 

which are four situations often 

associated with high severity and high 

resource intensity. We found declining 

shares for these types of episodes as of 

2005 (72 FR 49762, 49833 [August 

2007]). We presented information 

showing that resource use did not 

increase along with billed case-mix (72 

FR 49833); stable resource use data 

suggest that patients were not more in 

need of services over time, 

notwithstanding the rising billed casemix weights that suggested they would 

be. We also analyzed changes in OASIS 

item guidance that clarified definitions 

and could have led to progress in coding 

practice (72 FR 25356, 25359 [May 

2007]). We reported rates of OASIS 

conditions for the year before the 

beginning of the HH PPS and 2003, and 

found some scattered small changes 

indicative of worsening severity but no 

dramatic changes commensurate with 

the increase in case-mix weights (72 FR 

25359). In our discussion, we cited 

specific instances where agencies’ 

changing understanding of coding could 

have contributed to the adverse changes. 

However, as previously stated, Medicare 

payments should be based on patient 

level of severity, and not on coding 

practices. 

In the CY 2011 HH PPS proposed 

rule, we identified a very large, sudden 

1-year change (+0.0533) in the average 

case-mix weight by comparing a 2007 

sample that we assigned to case-mix 

groups using the new 153-group system 

and a 2008 sample grouped under the 

same system. It is unlikely that the 

patient population suddenly worsened 

in severity so as to cause an increase of 

0.0533 in the average case-mix weight in 

a single year. Furthermore, we 

concluded that the large change was not 

due to our use of the new, 153-group 

case-mix algorithm in 2008, because 

when we applied the previous case-mix 

system and the new system to a sample 

of 2007 claims, the average weight 

differed very little (the difference was 

0.0054). That is, the algorithms in the 

previous and new case-mix systems 

provided highly similar case-mix 

weights on the sample of 2007 claims. 

We further examined the diagnosis 

coding on OASIS assessments linked to 

the 20 percent claims sample and found 

a large increase between 2007 and 2008 

in the reporting of secondary diagnosis 

codes (75 FR 43242, July 23, 2010). The 

use of secondary diagnosis codes in the 

case-mix algorithm was introduced in 

2008 as part of the new case-mix 

system. 

Comment: A commenter stated CMS 

should suspend nominal case-mixrelated payment reductions until it 

develops an accurate and reliable model 

to evaluate changes in case-mix weights 

consistent with the whole nature of 

patients served in home health care, not 

just those discharged directly from 

hospitals. 

Response: Many variables in our 

model are applicable to patients who 

have not used hospitals recently, 

including variables relating to 

demographic status and post-acute care 

utilization. Another set of the model’s 

variables, used to describe the nature of 

any previous hospital stay, applies to 

many patients nonetheless, because we 

searched the claims history to find the 

last hospital stay that occurred before 

the episode. Finally, this year we also 

added a new source of information to 

the model, physician diagnoses from the 

claims history of each patient and 

hospital diagnosis information from all 

hospitalizations occurring in the year of 

the HH PPS episode of the patient. This 

represented a substantial increase in the 

amount of information available about 

patient health characteristics. We 

believe that, especially since we made 

this change, the model includes a rich 

set of patient measures. It is important 

to note that the omission of any 

particular variable is not enough to 

change estimates of unpredicted casemix change. Variables must have 

different prevalence rates in the initial 

and later periods. If prevalence rates for 

such variables were the same in both 

periods, the effects would net out; in 

other words, there would be no 

systematic difference in the predicted 

case-mix over time. 

Comment: Commenters stated that the 

Abt report on the real case-mix change 

analysis (‘‘Analysis of 2000–2008 Casemix Change’’, July 2010, link at http:// 

www.cms.gov/center/hha.asp) does not 

discuss what signs are consistent with 

known relationships and, hence, is not 

in a position to judge the signs of the 

coefficients. Commenters stated that the 

signs for various variables in the model 

are counterintuitive. Commenters stated 

that while Abt included variables 

related to inpatient stays, the estimated 

coefficients are not consistent with 

expectations that ‘‘the coefficient for 

any stay would be positive and the 

coefficient for the number of days 

would be negative.’’ The coefficient has 

an opposite sign than what is expected. 

Response: We thank the commenters 

for their comments. However, our 

purpose is to predict case-mix weights 

using all available and relevant 

administrative data, rather than to 

isolate the impact of individual 

variables. We have noted elsewhere that 

many coefficients have signs as we 

expect (Abt Associates 2008; 72 FR 

49762, 49780, August 29, 2007). 

Contrary to what the commenter states, 

it is not clear that a hospitalization 

would be associated with higher casemix; it may be that community patients 

are more clinically complex and have a 

higher case-mix than those who are 

discharged from a hospital to home 

health. This result is consistent with the 

impact of pre-admission location 

variables (from OASIS item M0175) in 


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the 80-group case-mix model. 

Furthermore, we believe that often the 

signs that commenters find 

counterintuitive are not so upon careful 

consideration of the variables already 

controlled for in the model. 

Comment: Some of the technical 

concerns are that the model contains 

numerous variables that are not 

statistically significant and may provide 

spurious results. 

Response: To avoid omitted variable 

bias, we believe it is prudent to include 

all available variables for which there is 

good reason to believe that they may be 

causally related to patient case-mix, and 

therefore, the models contained some 

statistically non-significant variables. In 

addition, the non-significant variables 

do not appreciably alter the results of 

the case-mix measurement model. 

Comment: Abt does not perform any 

multicollinearity diagnostic statistics or 

consider the remedy of combining some 

of the variables. The model uses a large 

number of variables that do not have 

much variation. The close interaction 

among the variables ‘‘is likely to pose 

problems with the prediction of the 

dependent variables.’’ 

Response: Given the objectives of the 

analysis, we are not particularly 

concerned about redundancy among 

variables. It is also important to note 

that such redundancy, often called 

multicollinearity, does not actually bias 

results and may only cause large 

standard errors of the coefficients for 

variables that are related to one another. 

Standard errors are not used in our casemix change calculations. The Abt 

Associates report described 

improvement in the predictive power of 

the model as each set of variables (for 

example, APR–DRG variables) was 

added beyond demographic variables 

alone. The addition of Part A 

expenditure variables, the last variable 

set added to the model (prior to the 

recent addition of HCC variables), led to 

little improvement in predictive power, 

and for that reason might be considered 

redundant; however, their addition did 

not change the essential results of the 

analysis (Abt Associates, 2008), which 

were that only a small proportion of the 

case-mix growth could be attributed to 

changes in patients’ characteristics. 

Comment: Commenters stated that 

they would like the model to meet a 

minimum requirement for a level of 

accuracy and reliability that is at least 

equivalent to the case-mix adjustment 

model that it is assessing. The 

commenters stated that the current HH 

PPS case-mix model had an R-squared 

explanatory power of over 40 percent 

while the case-mix weight change 

assessment model has an R-squared 

around 10 percent. The commenter 

states that the regression model Rsquare dropped from 19 percent to 

10 percent in the 2008 analysis and the 

decrease in the R-square is ‘‘unclear and 

unexplored.’’ They stated that since the 

R-square of the 80 HHRG case-mix 

model was 0.21 while the R-square of 

the 153 model was 0.44, the R-square 

value for the case-mix measurement 

model should be higher for the model 

using the 153 grouper. 

Commenters stated that the Abt 

models are unreliable because 40 

percent of the top variables differ from 

one model year to the next (original IPS 

model and the model rebased to 2008 

data), and 20 percent of the variables 

change signs. The commenter stated the 

high R-square of the current PPS casemix model suggests that the case-mix 

weight change regression model 

analysis for 2008 should have had a 

higher R-square. The decrease in the Rsquare is ‘‘unclear and unexplored.’’ 

Response: We thank commenters for 

their comments. We note that the 

commenter’s comments correspond to 

the older case-mix prediction model 

(which assessed real case-mix growth 

from 2000–2007 and from 2007–2008). 

We have since updated our case-mix 

prediction model to include HCC data 

and our case-mix model assesses real 

case-mix growth from 2000–2005, 2005– 

2007 and from 2007–2009. 

We also note that we disagree that the 

difference in R-squares for the models 

indicates that the prediction model for 

real case-mix is unreliable. Comparing 

the results for the 2000–2005 and 2005– 

2007 periods, four of the top five drivers 

of predicted case-mix change are the 

same in both models, as are 13 of the 

top 20. Similarly, 13 of the top 20 

drivers are the same for results from 

2005–2007 and 2007–2009, including 

the HCC community score. Most of the 

predicted case-mix change results from 

the major ‘‘drivers’’ in the model, and, 

of the top 50 drivers of case-mix change 

in the 2000–2005 analyses (which 

account for almost 80 percent of the 

total predicted change in that time 

period), 48 have the same sign in the 

2007 model and 30 also have the same 

sign for the 2009 model. 

We would expect some change over 

time in the variables that are among the 

top drivers of case-mix change, given 

the large number of variables in the 

model and the differing dependent 

variables (the 80 case-mix weights for 

the first model, pertaining to the 2000– 

2005 and 2005–2007 periods, and the 

153 case-mix weights for the second 

model, pertaining to the 2007–2009 

period). With regards to the 40 percent 

R-squared explanatory power 

benchmark, given that the goal of the 

case-mix change analyses is to 

determine the extent to which case-mix 

changes observed over time are due to 

changes in patient acuity or other 

factors (such as coding changes) that are 

not observed in the model, we do not 

believe that this is an appropriate 

statistical performance benchmark for 

the model. 

The explanatory power of the current 

HH PPS case-mix model is as high as it 

is in large part because of the therapyrelated variables in the model (where a 

direct measure of resource use is 

included on the right-hand side of the 

regression model). We do not believe 

that it is appropriate to include these 

types of variables in the case-mix 

change model because they are provider 

determined. 

Comment: A commenter stated that 

no explanation was provided on 

segmented choice of periods of 

evaluation. This commenter wrote that 

it is unclear why Abt subdivided the 

2000–08 period into 2000–2007 and 

2007–2008. To minimize the possibility 

for shifts in the relationship between 

resource requirements and explanatory 

variables, Abt could have subdivided 

the 8-year period in half or at least 

performed some sensitivity analysis to 

choose the time periods. 

Response: The procedure of 

identifying nominal case-mix change 

relies on subtracting an average of 

predicted weights from the average of 

actual, billed weights. The case-mix 

group system changed from one of 80 

groups to 153 groups in 2008, causing 

a change in the set of weights that could 

be billed to Medicare. Up until 2008, 

this was not an issue as the same set of 

weights was used throughout the entire 

history of the PPS up until that year. To 

be able to bridge the periods before and 

after the 153-group model, in last year’s 

analysis, we rebased the prediction 

model to the 2008 data, the first year 

that the 153-group model was used for 

paying home health providers, creating 

a 2007–2008 segment. We combined the 

results from the original IPS-period 

equation with the results from the 

rebased 2008 equation for last year’s 

analysis. For this year’s analysis, again 

we defined segments to accommodate 

data availability. We defined three 

segments. We broke the 2000–2007 

period that we previously analyzed into 

two periods, 2000–2005 and 2005–2007, 

because we added several variables 

derived from HCC model to the 80 

HHRG model. It was not possible to 

include HCC variables in analyses of 

years prior to 2005. The third segment 

covered 2007–2009 instead of 2007– 

2008, to update the data to the most 


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current year available. This year’s 

analysis used 2009 data, rather than 

2008 data, for rebasing to the 153-group 

model. 

Comment: Commenters criticized the 

model’s reliance on hospital DRG data 

stating that over half of all Medicare 

home health patients are admitted to 

care from a setting other than a hospital 

and many of the patients receive care far 

extended past an initial episode. 

Commenters stated that the APR–DRG 

variables are less relevant for multiple 

episode patients. Another concern was 

that 848 of the 902 variables are APR– 

DRG related to prior use hospitalization. 

Response: We disagree that the utility 

of the hospital information in the casemix change analysis is so limited, and 

with the addition of HCC data, we have 

enhanced the robustness of the variable 

set used for the analysis to include 

physician diagnoses and diagnoses of 

other clinicians, as well as Medicaid 

eligibility. Regardless of whether the 

patient came directly from a nonhospital-setting (for example, home or a 

post-acute institutional stay), 

information from a hospital stay 

preceding home health is typically 

relevant to the type of patient being seen 

by the HHA, and thus can provide 

information about the PPS case-mix 

measure for the home health episode. A 

recent hospitalization, whether or not 

there is an intervening period spent in 

some other setting before home health 

admission, is common before admission 

to home health. The Abt Associates 

case-mix change report (‘‘Analysis of 

2000–2008 Case-mix Change’’, July 

2010, link at http://www.cms.gov/ 

center/hha.asp) indicates that about 

90 percent of the episodes have a 

hospitalization history in the data, 

looking back a maximum of 4 years. 

However, from the information we show 

here about the likelihood of a hospital 

stay before and after home health, 

relatively few of the hospital stays 

contributing information are as old as 4 

years. We also note that the remaining 

10 percent of episodes are not dropped 

from the analysis; these episodes 

contribute information for the model, 

specifically, demographic information 

and various proxy measures derived 

from Part A utilization and expenditure 

data. 

Comment: Commenters stated that the 

model should recognize that home 

health patients are often treated in the 

home for conditions other than the 

primary condition that led to 

hospitalization and should consider that 

patients may have multiple episodes of 

care such that a prior hospitalization 

may be of little relevance to the 

condition of the patient. 

Response: We believe our addition of 

HCC data addresses this comment. The 

data reflect the cumulative diagnostic 

information from the patient’s claim 

history in the year of the episode. We 

would like to remind commenters that 

the real case-mix prediction model is 

not limited to diagnoses. The model also 

takes into account demographic factors, 

as well as utilization indicators of 

health status, such as Part A utilization 

measures. Moreover, the model 

measures the relationship between these 

factors and case-mix. 

Comment: A commenter stated 

hospital discharge data demonstrate that 

home health patients are admitted from 

hospital stays with a higher degree of 

acuity than in the past. ‘‘The acute care 

(inpatient prospective payment system 

(IPPS)) CMI for cases discharged to 

HHAs reflects the patient severity of the 

patients discharged to HHAs. As one of 

the measures for patient severity is prior 

hospitalization, it is believed to be 

unaffected by the home health CMI. The 

CMI for the prior hospitalization can be 

assumed to be a proxy measure of the 

‘‘real’’ case-mix index (CMI). Based on 

our analyses of the 2007 and 2008 

MedPAR data (Medicare discharges 

from short term acute care hospitals), 

we found that the CMI (MS DRG-based 

CMI) of cases discharged to HHAs 

increased by 2.5 percent from 1.588 in 

2007 to 1.630 in 2008. Furthermore, we 

also found that among the acute care 

cases discharged to HHAs, the 

proportion of cases categorized as 

Medicare Severity Adjusted Diagnosis 

Related Groups (MS DRGs) with 

complications and comorbidities 

increased by 3 percentage points from 

25 percent in 2007 to 28 percent in 

2008. This implies that the real CMI due 

to comorbidities most likely increased 

for the cases discharged to home health 

agencies.’’ 

Response: The MedPAR data analyzed 

in this comment cover the period when 

the MS–DRG system was implemented. 

We analyzed MS–DRG coding and 

found evidence of changes in coding 

and documentation practices that led to 

increases in billed acute care case-mix 

weights. CMS actuaries estimated that a 

2.5 percent increase in case-mix in the 

hospital IP PPS was due to coding and 

documentation changes occurring in FY 

2008 (75 FR 50355). The results cited by 

the commenter may have reflected the 

weight-increasing hospital coding 

behaviors addressed by the CMS 

regulatory analysis. Therefore, we have 

reason to believe that this measure alone 

is not good evidence for assessing real 

case-mix change. We must also point 

out that our analyses employing the 

APR–DRG system indicated that the 

proportion of episodes with a Mortality 

Risk Level 3 (Major) diagnosis increased 

over time while the proportion with 

Mortality Risk Level 2 (Moderate) 

decreased. However, our regression 

coefficients (for both the IPS and 2008 

model) showed a negative relationship 

between being in the moderate or major 

risk of severity groups and case-mix. 

Thus, the increase in the proportion of 

patients in the highest mortality risk 

category led to an estimate of lower 

predicted case-mix. Given these types of 

findings, it is not clear the extent to 

which the CMI changes that the 

commenter notes, even if they 

represented an accurate measure, would 

lead to a prediction of higher case-mix. 

Comment: The commenters stated 

that the Harvard team validation 

analysis confirms that patients 

discharged from a hospital to home 

health services are significantly 

different in terms of case-mix weight 

changes than those admitted to home 

health without a prior hospitalization. 

The case-mix weight change increased 

by 21.16 percent for those who were 

discharged to home health while the 

case-mix weight change increased by 

only 15.85 percent for those who were 

discharged to home health without a 

prior hospitalization. 

Response: Both of those case-mix 

weight change values are substantial. In 

addition, as described in the CY 2012 

HH PPS proposed rule, the results of the 

MEPS analysis did not provide evidence 

to suggest that the Medicare home 

health population has experienced a 

decrease in their health status over time. 

Given these results along with the 

finding of significant nominal case-mix 

percentage increases for the post-acute 

and community patients, the Harvard 

team concluded that the current model 

adequately measures real case-mix 

growth for home health patients, 

including patients admitted to home 

health from the community. 

Furthermore, we note our real and 

nominal case-mix change estimated for 

purposes of arriving at the case-mix 

change adjustment to the rates combine 

data from both populations. 

Comment: Many commenters 

suggested that all of the payment 

adjustments are based on a flawed 

foundation and suggested that CMS 

should not use data from IPS and early 

PPS years to compare increased casemix weights. Commenters recommend 

analyzing data with a different base year 

and analyzing case-mix weight changes 

for 2008 to current to see how much 

increase occurred in more recent years. 

Response: In our May 2007 proposed 

rule and our August 2007 final rule, we 

described the IPS samples and PPS 


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samples that were used to calculate 

case-mix change. We remind the 

commenter that 313,447 observations is 

an extremely large sample by statistical 

standards, and that agencies began 

collecting OASIS data in 1999, 

following issuance of a series of 

regulations beginning on January 25, 

1999 (64 FR 3764). Most of the data we 

used for the baseline period come from 

the first 3 quarters of the year 2000— 

months after collection was mandated to 

begin in August 1999. By 2000 the vast 

majority of agencies were complying 

with the reporting requirements. 

Indirect evidence that the data from the 

early years of the HH PPS were 

sufficiently reliable comes from model 

validation analysis we conducted 

during that period. Validation of the 80- 

group model on a large 19-month claims 

sample ending June 2002 (N = 469,010 

claims linked to OASIS) showed that 

the goodness-of-fit of the model was 

comparable to the fit statistic from the 

original Abt Associates case-mix sample 

(0.33 vs. 0.34), notwithstanding that 

average total resources per episode 

declined by 20 percent. That analysis 

also showed that all but three variables 

in the scoring system remained 

statistically significant. 

Comment: Commenters stated that 

CMS should suspend or drop case-mix 

reductions because the data used to 

determine the reductions do not 

recognize real increases in severity due 

to earlier and sicker hospital discharges. 

Response: Although we recognize that 

average lengths of stay in acute care 

settings are in decline, our analysis 

shows that agencies are, in fact, caring 

for fewer, not more, post-acute patients. 

Since 2001, the average length of stay in 

acute care preceding home health has 

declined by about one day, from 7 days 

to 6 days. Between 2008 and 2009, the 

average length of stay in acute care 

leading directly to home health 

admission declined from 6.07 days to 

5.85 days. However, agencies are caring 

for fewer highly acute patients in their 

caseloads. The proportion of non-LUPA 

episodes in which the patient went from 

acute care directly to home health 

within 14 days of acute hospital 

discharge declined substantially 

between 2001 and 2008, from 32 percent 

to 23 percent. Also, the median acute 

hospital length of stay for these nonLUPA episodes with a 14-day look back 

period remained unchanged at 5 days 

between 2002 and 2008 (see 75 FR 

70379). In 2009, the median length of 

stay declined to an estimated four days 

(see Table 2). The distribution of lengths 

of stay has been fairly stable, with 

declines since 2006 limited to the upper 

half of lengths of stay. 

We believe the declining prevalence 

of recent acute discharges is due in part 

to more patients incurring 

recertifications after admission to home 

health care, and also due to more 

patients entering care from the 

community. The shortening lengths of 

stay at the right tail (high percentiles) of 

the distribution may reflect changing 

utilization of long-term-care hospitals 

during recent years. The conclusion we 

draw from these data is that while 

patients on average have shorter 

hospital stays, agencies are also facing a 

smaller proportion of home health 

episodes in which the patient has been 

acutely ill in the very recent past. Also, 

the detailed data on the distribution of 

stay lengths suggest that for the most 

part lengths of stay for such patients 

remained fairly stable through 2009. 

Furthermore, we think that acuity of 

patients has been increasingly mitigated 

by lengthening post-acute stays for the 

substantial number of home health 

patients who use residential post-acute 

care prior to an episode. Our data show 

that patients who enter residential postacute care before home health 

admission have experienced increasing 

lengths of stay in post-acute care since 

2001. Using a 10 percent random 

beneficiary sample, we computed the 

total days of stay (including both acute 

and post-acute care days) for home 

health episodes with common patterns 

of pre-admission utilization during the 

60 days preceding the beginning of the 

episode. We included patients whose 

last stay was acute, or whose next-to-last 

stay was acute with a follow-on 

residential post-acute care stay, or 

whose third from last stay was acute 

followed by two post-acute care stays. 

These common patterns accounted for 

55 percent of the initial episodes in 

2001 and 42 percent in 2008. We found 

that total days of stay during the 60 days 

leading up to the episode averaged 12.6 

days in 2001, and rose to 12.8 days in 

2008. This small change in total days of 

stay during a period when acute LOS 

was declining was due to increasing 

lengths of stay in residential post-acute 

care for these patients. For example, 

within the 30 days before admission, an 

average length of stay in the post-acute 

care setting for episodes preceded by an 

acute stay that was the next-to-last stay, 

and where the post-acute care stay was 


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the very last stay before the claim fromdate, increased from 12.7 to 14.3 days. 

Our interpretation of these statistics is 

that patient acuity has been increasingly 

mitigated by longer post-acute stays for 

the substantial number of home health 

patients that use residential post-acute 

care prior to the start of a home health 

episode. Patient acuity also was 

mitigated by growing numbers of home 

health recertifications. 

Comment: Commenters stated that 

CMS uses inconsistent approaches in 

estimating the coding adjustment among 

provider sectors. They cited that over 

the last four years, CMS has used 

different case-mix change assessment 

models for post-acute providers: IRFs, 

LTCHs, and HHAs. Other commenters 

stated that the methodology ‘‘used to 

establish the reduction percentage’’ in 

the inpatient system was flawed and 

were concerned that the methodology 

used to establish the payment reduction 

for home health is flawed as well. 

Response: The payment systems, 

institutional conditions, data resources, 

case-mix assignment procedures, and 

many other aspects differ across care 

settings. Therefore, individual case-mix 

assessment methodologies must be 

developed for each of the post acute 

care sectors. Our general approach is 

consistent with the original approach 

CMS used to analyze the coding change 

problem affecting IRFs. Also, in terms of 

evaluating case-mix methodologies in 

the different settings, the methodologies 

must each be judged on their own 

individual merits. We have explained 

and justified the methodology in this 

and in previous regulations cited 

elsewhere in this preamble. 

Comment: Commenters stated that 

there should be no application of the 

adjustment to medical supplies unless 

CMS can establish that there is a change 

in case-mix weights specifically 

regarding medical supplies that is not 

due to real changes in patient 

characteristics and the proposed rule is 

unclear whether the adjustment factor 

will apply to NRS. 

Response: The 3.79 percent payment 

reduction in CY 2012 and the 1.32 

percent payment reduction in CY 2013 

that we are finalizing in this final rule 

will not be applied to non-routine 

medical supplies. The payment 

reductions will only be applied to the 

national standardized 60-day episode 

rates to fully account for growth in 

nominal case-mix from the inception of 

HH PPS through 2009. We will further 

explore potential payment reductions to 

non-routine medical supplies for future 

rulemaking. 

Comment: One commenter stated how 

there is much uncertainty surrounding 

how the ‘‘super committee,’’ created as 

part of the recent debt limit deal, will 

move forward assigning cuts in Federal 

spending over the next ten years and if 

the committee and/or the Congress fail 

to reach a compromise, there may be 

cuts to Medicare home health rates in 

conjunction with the regulatory cuts 

that CMS is proposing. (0038) The 

commenter was concerned with the 

combined effect of these additional cuts 

along with our payment reduction. 

Response: We will continue to 

monitor HHA margins and effects of 

payment policies on patients’ access to 

care. CMS also must comply with 

current and any future Medicare laws 

passed by the Congress. In addition, we 

cannot comment on any potential 

legislation which the Congress may be 

considering. 

Comment: Commenters stated that we 

should suspend or drop case-mix 

reductions in favor of the approach in 

S.2181/H.R. 3865 (110th Congress), 

which involved working with the home 

health industry to develop criteria and 

evaluating a medical records sample to 

determine reductions, rather than 

relying on hypothetical extrapolations. 

Another commenter mentioned that the 

Home Health Care Access Protection 

Act (S. 3315/H.R. 5803) was introduced 

to ‘‘establish a more reliable and 

transparent process for CMS to follow in 

evaluating Medicare payments for home 

health services.’’ The commenter 

suggested that CMS use this more 

transparent process which would still 

enable rate adjustments to be 

implemented provided that there is 

reliable evidence that there are higher 

case-mix scores resulting from factors 

other than changes in patient condition. 

Response: We commissioned a review 

of the case-mix change methodology, as 

we described in our proposed rule and 

elsewhere in this final rule. The 

research team of highly qualified 

personnel determined that an 

examination of the consistency of the 

results across types of episodes and 

providers, which they conducted 

themselves, would provide information 

about the reliability of the method. They 

considered information that they 

developed from the MEPS survey as 

well. We have not commissioned work 

based on a medical records sample. We 

note that a medical records sample 

could be used to determine payment 

reductions; however, there are many 

difficulties and limitations to this 

analysis. First, to produce reliable 

results, we would need to collect a large 

sample which would require significant 

financial resources that may not be 

available. We would a need a sizable 

sample of records from both the IPS 

period and from a follow-up year 

(for example, 2009). In addition, based 

on our past experience in retrieving old 

records, it is difficult to find enough 

records to constitute a valid broad-based 

sample. The procedure would have 

nurses group them into a case-mix 

group, and compare the results with 

those from a similar procedure 

performed on recent records. Additional 

potential problems with using medical 

records include the strong possibility 

that records would have insufficient 

information to allow assignments for the 

activities of daily living (ADL) items of 

the case-mix system, have insufficient 

information to enable independent 

staging of pressure ulcers, and other 

kinds of underreporting. It is possible 

that this procedure might not return the 

findings that the proponents suggest it 

would, because the nominal case-mix 

change problem partly results from 

reporting practices that have changed 

through time from a state of 

underreporting to a state of more 

complete reporting. Therefore, one 

would expect that the source records 

would likely reflect underreporting in 

the early years, just as the OASIS 

reflected underreporting in the early 

years. 

Comment: Commenters criticized the 

evaluation by the Harvard team. They 

stated that the Harvard team did not 

attempt to determine if the results were 

accurate and only validated the idea 

that a method that does not rely on 

home health specific patient data results 

in similar conclusions when reviewed 

in comparison to alternative methods 

that do not consider home health 

patient characteristics. 

Response: The Harvard team was 

asked to review the appropriateness and 

strength of evidence from the case-mix 

change methodology we used. After 

their examination, they concluded that 

the methodology was robust and valid. 

Comment: One commenter stated that 

they reviewed the report by 

Dr. Grabowski and his team at Harvard 

and found it provided compelling 

support for the case-mix measurement 

methodology used in the proposed rule. 

Response: We thank the commenter 

for the comments and the support. 

Comment: Commenters disagreed 

with the use of HCC data. The 

commenters stated that the HCC 

information has no bearing on the home 

health-specific condition of patients nor 

the condition at any provider setting 

and that an individual may need 

different levels of care at any given 

point in time. The commenters stated 

that the reliance on HCC does not offer 

the granular-level review of patient 

characteristics that is needed. Another 


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commenter stated that the methodology 

used to risk adjust for managed care is 

not the same as risk adjusting for home 

health patients at the time they received 

services and that they thought that this 

difference was not taken into account in 

the case-mix measurement model. 

Response: We added the HCC data 

partly as a response to commenters’ 

criticisms that the model of real casemix change was too reliant on hospitalgenerated claims information. We 

disagree with the statement that the 

HCC information has no bearing on the 

home health-specific condition of 

patients, because we used the HCC 

information for the year in which the 

episode took place. The patient’s 

conditions during that year, as reflected 

in all the diagnoses associated with 

physician visits, certain other types of 

clinician encounters, and hospital stays 

occurring that year, in addition to 

information such as Medicaid 

enrollment included in the HCC data, 

provide a relatively comprehensive 

picture from administrative data of the 

patient’s health status. We do not find 

that a granular level review of patient 

characteristics would be feasible, given 

the immense resources needed for a 

large set of independent reviews. 

Comment: Commenters were 

concerned with CMS’ use of 2009 data, 

stating that home health services have 

changed from 2009 to today. 

Response: As in previous rulemaking 

since the start of the HH PPS, we 

continue to use data samples that 

represent a 2-year lag of the service date 

relative to the year in which we conduct 

the analysis. The 2009 claims data 

matched to OASIS assessments and 

Part A information, as well as HCC 

information, are a complex set of 

analytic files that should be based on a 

complete year of data, to assure 

representativeness. If we were to begin 

file construction before having all the 

claims, we would introduce error into 

the results (in general, more 

complicated claims take longer to 

prepare and submit). Furthermore, we 

did not make major changes to the 

payment system that would affect most 

agencies between 2009 and 2011, and so 

we do not have strong reasons to believe 

that services patterns have changed 

dramatically. We noted in our proposed 

rule that in 2009 the major outlines of 

the therapy episode distribution 

exhibited a continuation of the outline 

established in 2008, the first year under 

the refinements. 

An alternative to using 2009 data to 

determine nominal case-mix growth 

would be to project the level of nominal 

case-mix growth for 2010 and beyond 

and make payment reductions based on 

our projections. However, these 

projections may result in payment 

reductions that are larger than those 

being implemented. We may consider 

such a methodology change in future 

rulemaking. 

Comment: The commenters stated 

that the payment reductions fail to take 

into account home health coding policy 

changes that negate the risk of coding 

weight increases, such as the 

elimination of hypertension from the 

case-mix system and the re-weighting of 

therapy episodes. Commenters 

suggested that CMS consider the impact 

of the hypertension adjustment in the 

overall analysis of nominal case-mix 

growth. Other commenters requested 

that CMS not make drastic changes to 

the case-mix while implementing the 

proposed rate reductions. 

Response: We note that when 

removing the two hypertension codes, 

we reallocated the resources and revised 

the weights in a budget neutral manner 

so that they would result in the same 

approximate aggregate expenditures as 

2009. Therefore, when removing the two 

hypertension codes, we are not taking 

away money from the case-mix system, 

and therefore, we can fully account for 

case-mix growth from 2000 to 2009. 

We also note that the payment 

reductions we have proposed are to 

compensate for nominal coding changes 

that occurred through 2009 and we 

proposed to implement the elimination 

of hypertension beginning in 2012. 

Based on our analysis discussed in 

Section II.B, we believe a revision in the 

case-mix weights is warranted and are 

therefore proposing the change to the 

case-mix weights along with the 

payment reductions. 

Comment: Commenters stated that 

external data references show 

indications of real changes in patient 

characteristics. They stated that the 

Medicare Expenditure Panel Survey 

(MEPS) Data analysis shows that 

patients are getting sicker every year 

and data may show a higher ‘‘real’’ casemix change than CMS estimates. 

Response: As stated in the proposed 

rule, to address the comment that a 

study which used MEPS data showed a 

higher rate of real case-mix growth in 

the entire Medicare population than our 

model estimated for Medicare home 

health patients, a more detailed analysis 

of the MEPS data was performed. The 

trends in health status of four different 

populations from 2000 to 2008 were 

analyzed. The data for the analysis were 

obtained from the MEPS 2000 and 2008 

Full Year Consolidated Data files. The 

four populations that were analyzed 

were: (1) The full MEPS sample; (2) all 

Medicare beneficiaries, defined as all 

respondents ever having Medicare in a 

given year; (3) all home health patients, 

defined as having at least one home 

health provider day in a given year; and 

(4) all home health Medicare 

beneficiaries, defined as all respondents 

with any Medicare home health charges. 

Two measures of self-reported health 

status and one measure derived from 

patient information that screened for 

ADL limitations were used to determine 

the trends in health status. These types 

of measures have been shown to be 

highly correlated with actual health 

(Ware and Sherbourne, 1992; 

McHorney, Ware, and Raczek, 1993). 

The three measures which were 

analyzed for each of the populations 

were: (1) Whether the respondent 

indicated perceived health status of 

‘‘poor’’ or ‘‘fair’’ as opposed to those 

indicating health status as ‘‘good,’’ 

‘‘very good’’ or ‘‘excellent;’’ (2) whether 

the respondent indicated if pain limited 

normal work (including work in the 

home) in the past 4 weeks ‘‘extremely’’ 

or ‘‘quite a bit’’ as opposed to those 

indicating pain limited work 

‘‘moderately,’’ ‘‘a little bit,’’ or ‘‘not at 

all,’’ and (3) whether respondents had a 

positive screen for needing assistance 

with ADL. In all cases, responses such 

as ‘‘refused,’’ ‘‘don’t know,’’ or ‘‘not 

ascertained’’ were omitted from the 

analysis. The Medicare analysis samples 

consisted of 3,371 and 4,144 

beneficiaries in 2000 and 2008, 

respectively. The Medicare home health 

subsamples consisted of 174 and 289 

beneficiaries in 2000 and 2008, 

respectively. The survey responses were 

then weighted using pre-constructed 

MEPS survey weights to estimate 

nationally representative changes in the 

three health status variables. 

All three measures indicated a slight 

increase in the overall health status of 

the Medicare home health population. 

Two of these results were not 

statistically significant, but the percent 

of home health Medicare beneficiaries 

experiencing ‘‘extreme’’ or ‘‘quite a bit’’ 

of work-limiting pain decreased 

substantially, from 56.6 percent in 2000 

to 45.4 percent in 2008 (p=0.039). 

Unlike Dr. Deb’s original study, the new 

MEPS analysis focuses specifically on 

Medicare home health users (as opposed 

to the entire Medicare population), and 

it is not reliant on expenditure data. A 

limitation of the Debs case-mix measure, 

which relies on expenditure data, is that 

it could reflect large increases in 

expenditures, such as drug 

expenditures, but any relationship to 

actual increases in impairments and 

other reasons for using home health 

resources is unclear. A possible 


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limitation of the new MEPS analysis is 

that the sample of Medicare home 

health respondents is relatively small, 

notwithstanding that the result of one of 

the three measures was statistically 

significant. Also, the ADL screening 

item may not capture a change in the 

frequency of very severe ADL 

limitations since the measure may be 

insensitive to changes at high levels of 

disability. However, the Harvard team 

asserted that the methods of the new 

MEPS analysis are more appropriate for 

assessing whether there are increases in 

the severity of illness burden that would 

specifically indicate a need for more 

resources in the Medicare home health 

population. Based on the two kinds of 

evidence, and a recognition of the 

limitations of both, we conclude that the 

MEPS data provide no evidence of an 

increase in patient severity from 2000 to 

2008. 

Comment: Commenters stated that the 

OCS data analysis on OASIS measures 

regarding a patient’s functional status 

unrelated to HH PPS HHRG calculations 

showed that there were declines in all 

nine functional categories and showed 

increased patient acuity from 2006– 

2008 as measured by ADL assessments 

of decreasing functional capabilities of 

home health patients. They also stated 

that OCS data analysis on OASIS 

measures of clinical conditions that are 

unrelated to HH PPS HHRG calculations 

shows a ‘‘large increase’’ in acuity as 

measured by changes in clinical 

conditions and there are increases in the 

number of patients requiring IV therapy, 

parenteral nutrition and those who have 

urinary tract infections at the start of 

care. They stated that the data also 

showed an increased inability to 

manage oral and injectable medications. 

They stated that the OASIS measures 

are not likely to be ‘‘upcoded’’ to secure 

higher reimbursement as none of the 

measures have a direct or indirect 

impact on payment and that the 

decreases in ADL incapacities are 

correlated with increase in use of 

therapy services. Further, the decrease 

in functional capabilities could have 

been easily correlated with increase in 

the use of therapy services as both 

physical and occupational therapists 

directly address the ADL incapacities 

that are the focus of these OASIS 

findings. The commenter referred to 

reports on the July 23, 2010, Proposed 

Rule commissioned by the Home Health 

Advocacy Coalition and the National 

Association for Home Health and 

Hospice, saying both documents 

indicate ‘‘non-case-mix related OASIS 

items, such as grooming and light meal 

preparation have shown increasing 

functional limitations among home 

health patients.’’ Commenters stated 

that other data showed that home health 

care patients have increased functional 

limitations and more complex clinical 

conditions than in past years. 

Response: Contrary to the trends 

reported by the commenter pertaining to 

treatments at home, our analysis from a 

large, random sample of OASIS data 

linked to claims shows that the 

proportion of episodes involving 

intravenous therapy or infusion therapy 

has remained stable at around 2.2 

percent. The proportion of episodes 

involving parenteral nutrition remains 

at 0.2 percent or less during that period. 

As we have stated in previous 

regulations, we are reluctant to use 

OASIS data to analyze changes in real 

case-mix because OASIS measures 

reflect changes in coding practices and 

payment incentives including quality 

measurement incentives, all of which 

are not related to real changes in 

patients’ acuity. We are also concerned 

that incentives could lead to reports of 

patient function—-whether or not 

particular function-related items are 

used in the case-mix assignment—that 

are consistent with the therapy visits 

planned. Unfortunately, this problem 

potentially limits the usefulness of noncase-mix items. We believe that 

independent measures are the best way 

to assure the reliability of our real casemix methodology. We plan to try to 

identify independent measures, beyond 

the independent measures we are 

currently using in our methodology, as 

we go forward. 

Comment: Commenters stated that 

patients are also taking many more 

medications. 

Response: OASIS-C includes 

information about medication use, but 

we do not have broad-based information 

about changes in numbers of 

medications in home health users in 

recent years. While we intend to 

examine the possible role that new 

variables in OASIS-C, including 

medication use, can play in case-mix 

adjustment, whether a trend indicative 

of increased medication use is 

important for measuring real change in 

case-mix over time depends on the 

extent to which its effect is independent 

of other factors recognized in our real 

case-mix change analytic procedure. 

Also, the challenge of obtaining 

historical data is great, but we can at 

least start tracking medication use with 

the availability of OASIS-C. 

Comment: One commenter was 

supportive of the payment reduction. 

The commenter stated that they 

believed that unwarranted 

overpayments attributable to coding 

practices should be recovered when 

possible and that the reduction is 

consistent with the experience of other 

prospective payment systems. The 

commenter stated that the payment 

reduction should not create payment 

adequacy or access to care issues since 

HHAs are projected to have margins 

exceeding 14 percent in 2011. The 

commenter stated that CMS should 

continue to examine nominal case-mix 

growth in the future and adjust 

payments accordingly. 

Response: We thank the commenters 

and will continue to monitor nominal 

case-mix growth and implement 

payment adjustments as needed. In 

summary, we thank the commenters for 

their thoughtful and comprehensive 

comments. As we described above in 

response to comments, we are finalizing 

a phased-in implementation of a 5.06 

percent reduction over 2 years, as some 

commenters suggested. We believe that 

by phasing-in the reductions over CY 

2012 and CY 2013, we allow HHAs an 

opportunity to adopt process 

efficiencies associated with the CY 2011 

legislative and regulatory requirements 

prior to imposing the full 5.06 percent 

payment reduction. 

In CY 2011 rulemaking, we deferred 

finalizing a proposed 3.79 percent 

reduction to the CY 2012 national 

standardized 60-day episode rates to 

account for nominal case-mix growth 

we identified through CY 2008 pending 

an independent review of our method 

for identifying real case-mix growth. We 

believe that providers expected and 

planned for us to impose a 3.79 percent 

payment reduction in CY 2012. As such, 

we are finalizing a 3.79 percent payment 

reduction in CY 2012 and a 1.32 percent 

payment reduction for CY 2013 to the 

national standardized 60-day episode 

rates. These reductions enable us to 

account for the nominal case-mix which 

we have identified through CY 2009, to 

follow through with the planned 3.79 

percent payment reduction for CY 2012, 

and to allow for HHAs’ adopting process 

efficiencies during CY 2012. 

B. Case-Mix Revision to the Case-Mix 

Weights 

1. Hypertension Diagnosis Coding 

Under the HH PPS 

As stated in the CY 2012 HH PPS 

proposed rule, in CY 2011 rulemaking, 

we proposed to remove ICD–9–CM code 

401.1, Benign Essential Hypertension, 

and ICD–9–CM code 401.9, Unspecified 

Essential Hypertension, from the HH 

PPS case-mix model’s hypertension 

group. Beginning with the HH PPS 

refinements in 2008, hypertension was 

included in the HH PPS system because 


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the data used in developing the 

refinements (data from 2003 and 2005) 

suggested it was associated with 

elevated resource use. As a result, the 

diagnoses Unspecified Essential 

Hypertension and Benign Essential 

Hypertension were associated with 

additional points from the four-equation 

model and, therefore, with potentially 

higher case-mix weights in the HH PPS 

case-mix system. When examining the 

trends in reporting of hypertension 

codes from 2000 to 2008, our analysis 

showed a large increase in the reporting 

of codes 401.1 and 401.9 in 2008. 

However, when looking at 2008 claims 

data, the average number of visits for 

claims with code 401.9 was slightly 

lower than the average for claims not 

reporting these hypertension codes. In 

the CY 2011 HH PPS proposed rule 

issued on July 23, 2010, we proposed to 

remove codes 401.1 and 401.9 from our 

case-mix model based on preliminary 

analysis of the trends in coding and 

resource use of patients with these 

codes. We suspected that the 2008 

refinements, which newly awarded 

points for the diagnosis codes 401.1 and 

401.9, led to an increase in reporting of 

these codes and that this reporting was 

a key driver of the high 2008 growth in 

nominal case-mix. 

In response to this proposed policy 

change, we received numerous 

comments, several of which stated that 

additional analysis was needed to 

substantiate the rationale for removing 

hypertension codes 401.1 and 401.9. In 

the CY 2011 HH PPS final rule, we 

withdrew our proposal to eliminate 

401.1 and 401.9 from our model and 

stated our intention to do a more 

comprehensive analysis of the resource 

use of patients with these two 

hypertension codes. As noted in our CY 

2012 HH PPS proposed rule, we have 

since completed a more thorough 

analysis. Based on the results of our 

latest analyses, we proposed to remove 

ICD–9–CM code 401.1, Benign Essential 

Hypertension, and ICD–9–CM code 

401.9, Unspecified Essential 

Hypertension, from the HH PPS casemix model’s hypertension group. Our 

data showed there continued to be an 

increase in the prevalence of ICD–9–CM 

code 401.9 from 2008 to 2009. In 

addition, agencies (regardless of 

ownership type) typically had a twofold 

or higher increase in the prevalence of 

a 401.9 diagnosis from 2005 to 2009, 

with the exception of the East North and 

the West North Central regions, which 

had an increase of about 1.7- and 1.5- 

fold, respectively. Most compelling, our 

analysis indicates that currently these 

diagnoses are not predictors of higher 

home health patient resource costs. 

Rather, current data indicates a lower 

cost associated with home health 

patients when these codes are reported. 

The results from two regression models 

testing the impact of the two 

hypertension codes on resource costs 

provided strong support for removing 

the 401.1 and 401.9 diagnoses from the 

case-mix system. The results showed 

that the presence of these diagnoses is 

associated with lower costs, when 

controlling for other case-mix related 

factors. Therefore, we proposed to 

remove codes 401.1 and 401.9 to more 

accurately align payment with resource 

use. 

In the CY 2011 HH PPS final rule, in 

response to comments, we stated that if 

we were to finalize removing these 

codes from our case-mix system, we 

would do so in such a way that we 

would revise our case-mix weights to 

ensure that the removal of the codes 

would result in no change in aggregate 

expenditures. Therefore, we proposed to 

revise the HH PPS case-mix weights in 

such a manner so as to not reduce 

aggregate home health expenditures. 

Please see the following section for 

details on our revision to the case-mix 

weights. The proposed revisions of the 

case-mix weights redistributed HH PPS 

payments among the case-mix groups 

such that removal of these hypertension 

codes was budget neutral. 

2. Revision of the Case-Mix Weights 

As we described in section II.B.1 of 

this preamble, we proposed to revise 

our HH PPS case-mix weights to remove 

two hypertension codes from our casemix system while maintaining budget 

neutrality. In the CY 2012 HH PPS 

proposed rule, we also justified another 

proposal for further revisions to the 

case-mix weights because of incentives 

that exist in the HH PPS to provide 

unnecessary therapy services. We 

described that our review of HH PPS 

utilization data shows a shift to an 

increased share of episodes with very 

high numbers of therapy visits. This 

shift was first observed in 2008 and it 

continued in 2009. In last year’s 

regulation, we described an increase of 

25 percent in the share of episodes with 

14 or more therapy visits. In the 2009 

sample, the share with 14 or more 

therapy visits continued to increase 

while the share of episodes with no 

therapy visits continued to decrease. 

The frequencies also indicate that the 

share of episodes with 20 or more 

therapy visits was 6 percent in 2009 

(data not shown), which is a 50 percent 

increase from the share of episodes of 

2007, when episodes with at least 20 

therapy visits accounted for only 

4 percent of episodes. 

Furthermore, we described that in 

their 2010 and 2011 Reports to 

Congress, MedPAC suggests that the HH 

PPS contains incentives which likely 

result in agencies providing more 

therapy than is needed. In their March 

2010 Report to Congress, MedPAC 

stated that ‘‘therapy episodes appear to 

be overpaid relative to others and that 

the amount of therapy changed 

significantly in response to the 2008 

revisions to the payment system.’’ In 

support of this statement, MedPAC 

showed that in 2008, there was a 

sudden shift to episodes with therapy 

services at the new therapy thresholds, 

which suggests inappropriate therapy 

utilization. In their March 2011 Report 

to Congress, MedPAC stated, ‘‘The 

volume data for 2009 indicate that the 

shifts that occurred in 2008 are 

continuing * * * Episodes with 14 or 

more therapy visits increased by more 

than 20 percent, and those with 20 or 

more therapy visits increased by 30 

percent.’’ 

Also, in their March 2011 Report to 

Congress, MedPAC suggested that the 

current HH PPS may ‘‘overvalue therapy 

services and undervalue nontherapy 

services.’’ In this report, MedPAC 

describes that HHA margins average 

17.7 percent in 2009, with 20 percent of 

agencies achieving an aggregate margin 

of 37 percent. MedPAC further stated 

that their analysis of high-margin and 

low-margin agencies suggests that the 

HH PPS overpays for episodes with high 

case-mix values and underpays for 

episodes with low-case-mix values. 

Furthermore, MedPAC reported that 

HHAs with high margins had high casemix values which were attributable to 

the agencies providing more therapy 

episodes (MedPAC, March 2011 Report 

to Congress). MedPAC went on to assert 

that ‘‘unless the case-mix system is 

revised, agencies will continue to have 

significant incentives to favor therapy 

patients, avoid high-cost nontherapy 

patients, and base the number of 

therapy visits on payment incentives 

instead of patient characteristics.’’ 

We stated that we concur that the 

therapy utilization shifts and the 

correlation between high agency 

margins and high volumes of therapy 

episodes strongly suggest that the costs 

which the HH PPS assigns to therapy 

services when deriving the relative 

payment weights are too high in 

comparison to actual costs incurred by 

agencies for therapy services. We 

believe that one factor which 

contributes to this overpayment for 

therapy services is the growing use of 

therapy assistants, instead of qualified 


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therapists, to provide home health 

therapy services. Current data suggest 

that the percentage of therapy assistants 

that is reflected in the therapy-wage 

weighted minutes used in the 

calculations of HH PPS relative resource 

costs is too low. For our 2008 

refinements, to construct the relative 

resource costs for episodes, we used the 

labor mix percentages reported in the 

Occupational Employment Statistics 

(OES) data by the Bureau of Labor 

Statistics. In 2005, which is the year of 

data that was used to develop the HH 

PPS refinements, the OES data showed 

that 15 percent of physical therapy was 

provided by therapy assistants and that 

11 percent of occupational therapy was 

provided by therapy assistants. This 

data was then used to develop the 

resource costs for episodes which were 

used to develop the current HH PPS 

payment weights. In 2008, the OES data 

showed that 19 percent of physical 

therapy was provided by therapy 

assistants and that 13 percent of 

occupational therapy was provided by 

therapy assistants. In addition, by 2009, 

OES data has shown that the percentage 

of physical therapy provided by therapy 

assistants was 20 percent and the 

percentage of occupational therapy 

provided by therapy assistants was 16 

percent. We noted that these statistics 

reflect the mix for all home health 

providers. We also noted that in CY 

2011, we began collecting G-code data 

on HH PPS claims which will enable us 

to quantify the percentage of therapy 

assistants who are providing therapy 

and to assess how the percentages vary 

relative to the quantity of therapy 

provided and the type of provider. We 

have since performed some preliminary 

analysis on the G-code data, which is 

further discussed in our responses to 

comments. 

In the CY 2012 HH PPS proposed 

rule, we stated that we believe that 

MedPAC has provided strong evidence 

that our reimbursement for episodes 

with high therapy is too high. Also, 

based on MedPAC’s analysis and our 

own findings, we believe that the 

resource costs reflected in our current 

case-mix weights for therapy episodes, 

in particular for those episodes with 

high amounts of therapy, are higher 

than current actual resource costs and 

that an adjustment to the HH PPS 

therapy case-mix weights is warranted. 

We noted that fully addressing 

MedPAC’s concerns with the way the 

HH PPS factors therapy visits into the 

case-mix system will be a complex 

process which will require more 

comprehensive analysis and potentially 

additional structural changes to the HH 

PPS. While we plan to address their 

concerns in a more comprehensive way 

in future years, for CY 2012 we 

proposed to revise the current case-mix 

weights by lowering the relative weights 

for episodes with high therapy and 

increasing the weights for episodes with 

little or no therapy. It should be noted 

that we proposed to revise the case-mix 

weights in a budget neutral way. In 

other words, our proposal redistributed 

some HH PPS dollars from high therapy 

payment groups to other HH PPS casemix groups, such as the groups with 

little or no therapy. We believe our 

proposed revision to the payment 

weights would result in more accurate 

HH PPS payments for targeted case-mix 

groups while addressing MedPAC 

concerns that our reimbursement for 

therapy episodes is too high and our 

reimbursement for non-therapy episodes 

is too low. Also, we believe our 

proposed revision of the payment 

weights will discourage the provision of 

unnecessary therapy services and will 

slow the growth of nominal case-mix. 

Our detailed approach, analysis, and 

case-mix revision methodology which 

supported our proposal was described 

in our CY 2012 HH PPS proposed rule. 

Before we described our approach to 

revise the case-mix weights to address 

therapy incentives, we first explained 

the changes we made to remove the 

hypertension diagnoses ICD–9–CM code 

401.1, Benign Essential Hypertension, 

and ICD–9–CM code 401.9, Unspecified 

Essential Hypertension from our casemix system. Our method of 

redistributing the resources started with 

changes to the four-equation model, 

which is the foundation for the 

subsequent revised payment regression 

and creation of revised case-mix 

weights. The changes to the fourequation model as described in the 

proposed rule are reiterated below. 

To examine the effects of removing 

the two hypertension codes 401.1 and 

401.9 from the case-mix system and 

determine whether the thresholds for 

the clinical severity indicators need to 

be changed if 401.1 and 401.9 are 

removed from the case-mix system, we 

estimated the four-equation model with 

and without codes 401.1 and 401.9 in 

the hypertension group. We used 2005 

data for this estimation because we 

wanted to achieve comparability 

between the current four-equation 

model with the revised four-equation 

model without the two hypertension 

codes using the same sample upon 

which we based the 2008 case-mix 

system refinements. We estimated the 

revised four-equation model to maintain 

the same variables we developed for our 

current four-equation model and 

thereby minimize changes to our current 

model and scoring system. The adjusted 

R-squared value for the four-equation 

model without codes 401.1 and 401.9 

derived from 2005 data was 0.4621. We 

then used the coefficients from the fourequation model without codes 401.1 

and 401.9 to determine the points which 

would be associated with all the clinical 

and functional severity levels found in 

our current four-equation model, as 

described on Table 2a of the CY 2008 

HH PPS final rule (Table 3). We note 

that Table 3 has been updated since the 

CY 2012 HH PPS proposed rule to 

reflect OASIS-C items. 

When comparing the four-equation 

model with the two hypertension 

diagnoses (which is equivalent to our 

current model) to the four equation 

model without the two hypertension 

diagnoses, there were some differences 

in the points assigned to variables 

(Table 4). We detailed these differences, 

which were no larger than one point in 

the 58 (out of 225) variables affected. 

Table 3 shows the points for each 

variable after the re-estimation of the 

four-equation model. 

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In the CY 2012 HH PPS proposed 

rule, we also stated that we examined 

how episodes in the sample shifted into 

a different clinical severity level when 

going from a four-equation model that 

includes 401.1 and 401.9 to a fourequation model that does not include 

401.1 and 401.9. It should be noted that 

a small number of episodes also 

changed functional groups. In our 

analysis, we looked at the distribution 


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of episodes in each clinical severity 

level (low, medium, high) by the fourequation model indicators (early/late 

episodes and low/high therapy 

episodes). When comparing the 

distribution of episodes using the fourequation model without the 401.1 and 

401.9 hypertension codes to the 

distribution of episodes using the fourequation model with the hypertension 

codes (our current four-equation model), 

there was a similar distribution of 

episodes between the low, medium and 

high clinical levels, for each of the fourequation model indicators. We also 

looked at the distribution of episodes in 

each functional severity level by the 

four-equation model indicator. There 

was also a very similar distribution of 

episodes for the three functional 

severity levels using the four-equation 

model without the two hypertension 

codes compared to the distribution of 

episodes using the current four-equation 

model, for each of the four-equation 

model indicators. Since the fourequation model without the 

hypertension codes 401.1 and 401.9 had 

similar clinical and functional 

distributions of episodes as the current 

model, we decided that it was not 

necessary to change the thresholds for 

the clinical and functional severity 

levels. 

We revised the payment regression 

model using the clinical and functional 

severity groups constituted after 

removal of the hypertension codes. In 

addition, as we described in the 

proposed rule, at this stage of case-mix 

system redevelopment, we decided to 

implement a revision of the weights 

using a new method of decelerating 

therapy resources with higher numbers 

of therapy visits. The new method 

involved the removal of the therapy 

visit step indicators from the payment 

regression model (a step indicator is a 

subgroup of episodes defined by a range 

of therapy visits, such as 7 to 9 therapy 

visits). This approach has the advantage 

of staging the introduction of clinical 

and functional severity levels into the 

model as a separate step, to avoid 

excessive influence on the clinical and 

functional effects from numerous 

therapy step variables that would 

otherwise be simultaneously entered 

into the regression. In other words, we 

eliminated the therapy visit step 

indicators from the payment regression 

model to ensure that more of the 

resource use would be captured by 

clinical and functional variables, rather 

than therapy variables. Later, we 

implemented a method to account for 

the resource use for the therapy step 

variables. The new payment regression 

model that was developed estimated the 

relationship between an episode’s total 

resource cost (as measured in dollars 

corresponding to wage weighted 

minutes) and the clinical severity 

indicators, functional severity 

indicators, and four-equation indicators 

(early/late episodes and low/high 

therapy services). 

It should be noted that for the 

payment regression model, we used data 

from 2007, which is the most recent 

data available before the 

implementation of the HH PPS 

refinements. The coefficients for the 

payment regression model using 2007 

data can be found in Table 5. The 

adjusted R-squared value for the 

payment regression model using 2007 

data is 0.3769. 

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The raw weights for each of the 153 

groups were then calculated based on 

the payment regression model. It should 

be noted that the raw weights do not 

change across the graduated therapy 

steps between the therapy thresholds. In 

the next step of weight revision, the 

weights associated with 0 to 5 therapy 

visits were increased. The weights 

associated with 14–15 therapy visits 

were decreased and the weights 

associated with 20+ therapy visits were 

further decreased as well. These 

adjustments were made to discourage 

inappropriate use of therapy while 

addressing concerns that non-therapy 

services are undervalued. As stated in 

the CY 2012 HH PPS proposed rule, the 

larger reduction factor for episodes with 

20 or more therapy visits compared to 

the reduction factor for episodes with 14 

to 15 therapy visits implemented a more 

aggressive deceleration than we used in 

the current weights. Currently, there is 

a high payment weight associated with 

the 20 or more therapy visit threshold 

to capture the costs associated with 

providing 20 therapy visits, as well as 

numbers of therapy visits well beyond 

20 therapy visits. As a result, there is a 

large increase in the payment weight 

between the 18–19 therapy visit step 

and the 20 or more therapy visit 

threshold. This large increase in the 

payment weight may create incentives 

for agencies to provide unnecessary 

therapy visits to reach the 20 therapy 

visit threshold, and may explain 

MedPAC’s observation that there was a 

larger increase in the number of 

episodes in the 20 or more therapy visit 

group than the 14 or more therapy visit 

group. By implementing a larger 

reduction to episodes with 20 or more 

therapy visits, we will provide a 

disincentive for agencies to pad 

episodes just to 20 visits or slightly 

more, to be able to realize a large margin 

from that threshold, which was 

designed to pay for not only episodes 

involving 20 or just above 20 therapy 

visits, but also episodes involving 

considerably more than 20 therapy 

visits. 

After the adjustments were applied to 

the raw weights, the weights were 

further adjusted to create an increase in 

the payment weights for the therapy 

visit steps between the therapy 

thresholds. Weights with the same 


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clinical severity level, functional 

severity level, and early/later episode 

status were grouped together. Then 

within those groups, the weights for 

each therapy step between thresholds 

were gradually increased. We did this 

by interpolating between the main 

thresholds on the model (from 0–5 to 

14–15 therapy visits, and from 14–15 to 

20+ therapy visits). We used a linear 

model to implement the interpolation so 

the payment weight increase for each 

step between the thresholds (such as the 

increase between 0–5 therapy visits and 

6 therapy visits and the increase 

between 6 therapy visits and 7–9 

therapy visits) was constant. The 

interpolated weights were then 

normalized so that the average case-mix 

weight in the 2007 sample was equal 

to 1. 

After applying the adjustments to the 

raw weights, applying the interpolation 

between the therapy thresholds, and 

normalizing the weights so that the 

average case-mix for the weights was 

equal to 1 in the 2007 sample, we 

applied a budget neutrality factor to the 

weights to ensure that the case-mix 

weights result in aggregate expenditures 

in 2009, which was the most current 

and complete data available to us, equal 

to expenditures using the current 

payment weights. It is important to note 

that our authority allows us to reduce 

home health payments only as 

described in section 1895(b)(3)(B)(iv) of 

the Act. As such, we must revise our 

payment weights in a budget neutral 

manner. Therefore, after deriving 

revised relative case-mix weights, we 

increased the weights to achieve budget 

neutrality to the most current, complete 

data available, which was 2009. In the 

CY 2012 proposed rule, as we described 

in section A of this final rule, we 

proposed to reduce payments under our 

authority in section 1895(b)(3)(B)(iv) of 

the Act to reduce the home health base 

episode payment to account for nominal 

case-mix growth through 2009. 

We also noted that we would 

continue to evaluate and potentially 

refine the payment weights as new data 

and analysis became available. We 

discuss our new data, analysis, and 

changes to the proposed payment 

weights in our comment responses 

below. 

The following is a summary of the 

comments we received regarding the 

proposal to revise the HH PPS case-mix 

weights. 

Comment: Commenters stated that the 

levels of weight changes are more 

arbitrary than evidence based and it 

appears that CMS picked a level of 

adjustment rather than develop a real 

analysis of the differences in episode 

costs/resource use from episode 

reimbursement rates. Commenters 

stated that the proposal to increase and 

decrease therapy episode case-mix 

weights is not supported by any 

evidence that the therapy related 

episode case-mix weights have a 

different relative resource cost today 

than they did in 2008 when CMS 

implemented the refinements. The 

commenters also stated that there is no 

resource cost change rationale for the 

proposed change in case-mix weights. In 

addition, commenters stated that they 

would like the data to directly show that 

the resource costs justify the specific 

adjustments proposed. Some 

commenters stated that if the payment 

model improperly incentivizes the 

provision of therapy care with higher 

than warranted payment rates, there 

should be data available to show the 

extent to which therapy episodes are 

overpriced and what level of payment 

would be appropriate. Commenters 

suggested that CMS undertake a study to 

provide additional rationale for the 

proposed adjustments to the case-mix 

weights. 

Response: As we stated in the CY 

2012 HH PPS proposed rule, we believe 

that MedPAC has provided strong 

evidence that our reimbursement for 

episodes with high therapy is too high. 

Also, based on MedPAC’s analysis and 

our own findings, we believe that the 

resource costs reflected in our current 

case-mix weights for therapy episodes, 

in particular for those episodes with 

high amounts of therapy, are too high 

and that an adjustment to the HH PPS 

therapy case-mix weights is warranted. 

In the proposed rule, we stated that 

we would continue to analyze therapy 

resource costs as more current and 

complete data became available. Since 

the publication of the proposed rule, 

complete 2009 CR data and partial 2011 

claims data, which include the new 

therapy G-codes, have become available. 

These data have enabled us to expand 

on MedPAC’s and our analysis for this 

final rule. 

We performed a variety of analyses to 

look at the resource costs of home 

health episodes, particularly those 

episodes with high therapy. As part of 

the analysis, we have developed 

methods to examine cost data from 

freestanding HHAs’ MCRs for FY 2009. 

The methodology involves an initial 

screening for incomplete and 

questionable data (for example, extreme 

ratios of payments to costs) similar to 

MedPAC’s ‘‘trimming’’ methodology 

and two additional trims, one which 

excludes providers whose Medicare 

home health outlier payments exceeded 

10 percent of their total Medicare home 

health payments and another which 

trims extreme values at the top and 

bottom 1 percent of the distribution of 

costs per visit for each discipline. We 

excluded providers whose Medicare 

home health outlier payments exceeded 

10 percent of their total Medicare home 

health payments because in CY 2010 

rulemaking, we found an association 

between high outlier payments and 

providers with questionable billing 

practices. We note that since only nonaudited MCRs are available, we found it 

necessary to perform trims to ensure 

reasonably accurate cost estimates. 

Using the trimmed MCRs, we developed 

agency specific costs per visit for each 

discipline. In the sample of 4,309 MCRs, 

if a particular agency’s cost-per-visit for 

a discipline was trimmed out when the 

trimming methodology was applied to 

the MCRs, the average cost-per-visit for 

all MCRs in the sample was used for 

that agency. For example, if a MCR had 

a value for the cost-per-visit for physical 

therapy that was in the top or bottom 1 

percent of the distribution of cost-pervisits for physical therapy, that value 

would be imputed as the average costper-visit from values retained in the 

data after trimming. If any agency 

needed all 6 discipline costs-per-visits 

imputed, its MCR was excluded from 

the dataset. We imputed the cost-pervisit using the average cost-per-visit in 

approximately 10 percent of instances. 

Most of the imputations involved 

occupational therapy, speech therapy, 

and medical social work, which together 

account for a relatively small share of 

visits. Combined these three disciplines 

accounted for only 1.5 visits out of total 

visits per episode, which averaged 18.8 

visits in 2009. 

The file preparation procedure 

described above resulted in a dataset 

consisting of 4,309 MCRs from 

freestanding agencies in 2009, 

approximately half the number in the 

original MCR file. Most of the losses 

occurred at the initial screening stage 

(incomplete and questionable data). We 

examined characteristics of the agencies 

represented in the final sample, and 

found that distributions in the original 

and final samples were very similar. 

Unsurprisingly, however, small agencies 

(with fewer than 95 episodes) were 

nearly halved as a proportion of all 

agencies represented in the MCRs; they 

accounted for approximately 7.5 percent 

of the MCRs we used. These agencies 

tended more often to have incomplete or 

questionable data in their MCRs. 

After developing agency specific costs 

per visit for each discipline, we merged 

the MCRs with 100 percent of the 

included providers’ claims for 2009. We 

estimated the cost of each provider’s 


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episodes by multiplying the number of 

visits, by discipline, by the average costper-visit, by discipline, calculated from 

the provider’s MCR. Due to data 

incompleteness and reliability issues 

related to costs and payments for nonroutine medical supplies (NRS), we did 

not include NRS in our estimate of the 

costs or payments. 

We compared the costs of these 

episodes to their Medicare payment. 

Our analysis of the differences in 

episodes’ costs and reimbursements 

suggests that payment on average 

exceeds costs by about 30-percent for 

normal episodes with 14 or more 

therapy visits. We defined normal 

episodes as non-LUPA, non-PEP, nonoutlier episodes. Because the 

reimbursement for episodes with at least 

14 therapy visits is high, the 30 percent 

estimate represents a large financial 

incentive. For instance, our analysis 

shows that in 2009, the average amount 

that payment exceeded cost for a normal 

episode with 14–19 therapy visits was 

more than $1100 (Table 6) and the 

average amount that payment exceeded 

costs for a normal episode with 20 or 

more therapy visits was more than 

$1500 (Table 7). We note that the 

average amount that payment exceeded 

costs for a normal episode with 1 to 5 

therapy visits was around $300. Ideally, 

we wish to avoid marked differences in 

the amount that payment exceeds costs 

for different types of episodes to lessen 

the incentive to admit certain types of 

patients to maximize Medicare 

reimbursements. 

We conducted a simulation to 

examine our proposal’s impact on 

margins and profit for different 

categories of episodes, using the data 

from the MCR providers that was also 

found in the 20 percent sample of 2009 

claims from which we estimate the 

proposed rule’s reimbursement impacts. 

The analysis was based on 3,361 

providers whose MCR period was 

precisely matched to the time period 

covered by the claims (that is, MCR 

periods had to begin and end in 2009). 

Although this sample was smaller than 

the cleaned CR sample from which we 

estimated per-episode costs and 

payments in 2009, the distributions of 

provider characteristics were changed 

little by the reduction in agencies. The 

simulation incorporated the proposed 

payment weights and the other payment 

parameters in our proposal (that is, a 

5.06 percent payment reduction due to 

nominal case-mix growth, the wage 

index, and rate updates). The simulation 

updated the costs of episodes to 2012 

dollars using the market basket increase 

and estimated the payment for episodes 

in terms of 2012 dollars. This analysis 

suggested that all episodes would have 

payments in excess of estimated costs, 

except for some episodes in the 20 or 

more therapy visit group. We note that 

about half of the episodes with 20 or 

more therapy visits would break even or 

retain a positive margin under the 

proposed revised case-mix weights. 

About 6 percent of episodes nationally 

in 2009 had 20 or more therapy visits. 

However, the results of this analysis 

also indicated that the revised case-mix 

weights in the proposed rule would 

result in episodes with 14 or more 

therapy visits having considerably less 

payments in excess of estimated costs 

than episodes with less than 14 therapy 

visits. 

We note that our analyses of the costs 

to reimbursement for high therapy 

episodes clearly indicates that we are 

currently overpaying for these episodes 

and we believe an adjustment to the 

case-mix weights for high therapy 

weights is necessary. However, based on 

the results of our simulation analysis on 

our proposed weights, we decided to 

test whether a different set of payment 


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adjustment factors would result in more 

even payments in excess of estimated 

costs across therapy and non-therapy 

episodes. As stated in the proposed rule, 

we examined a number of different sets 

of adjustments when developing the 

payment weights. One of the sets of 

adjustments was an adjustment where 

the weights associated with 0 to 5 

therapy visits were increased by 3.75 

percent, the weights associated with 14– 

15 therapy visits were decreased by 2.5 

percent, and the weights associated with 

20+ therapy visits were decreased by 5 

percent. We applied this set of 

adjustments in the same manner as the 

adjustments we originally proposed. 

When re-running the simulation 

analysis on these new weights, we saw 

relatively even payments in excess of 

estimated costs across the various types 

of episodes, including episodes with 

14–19 therapy visits, episodes with 20– 

25 visits, episodes with low therapy, 

and non-therapy episodes. It should be 

noted that episodes with 26 or more 

therapy visits did not have payments in 

excess of estimated costs; however, we 

believe there are efficiencies used when 

providing these high therapy episodes 

and that the costs we estimated for these 

episodes are higher than actual costs. In 

addition, some of these high therapy 

episodes may be eligible for outlier 

payments. As a result of the findings 

from the simulation analysis, which 

show relatively even payments in excess 

of estimated costs across episodes, we 

are finalizing these new weights created 

using the new adjustment factors. 

We note that for future rulemaking, 

we plan to do further analysis using 

audited CRs, if available, and data on 

the use of therapy assistants (G-code 

data) and we plan to make adjustments 

accordingly. In the CY 2011 HH PPS 

final rule, we finalized a requirement 

that HHAs report G-codes on the HH 

PPS claims which differentiate therapy 

provided by a qualified therapist versus 

therapy provided by a therapy assistant. 

We have preliminary data using claims 

from early in the period after reporting 

of the G-codes began in 2011. We have 

assessed how the percentages of therapy 

provided by a therapy assistant vary 

relative to the quantity of therapy 

provided. In our analysis, we looked at 

claims which had a start date on or after 

April 1, 2011 and examined the 

percentage of therapy provided by 

therapy assistants for various levels of 

therapy, such as episodes with 1–5 

therapy visits, 6–9 therapy visits, 10–13 

therapy visits, 14–19 therapy visits, and 

20+ therapy visits. In addition, we 

looked at the percentages of therapy 

provided by therapy assistants when 

episodes from all providers were 

included and when episodes from 

providers in areas where suspect billing 

practices are relatively widespread were 

excluded. The results from these two 

analyses were similar. 

Table 8 shows the percentage of 

therapy visits provided by therapy 

assistants when providers in areas 

associated with suspect billing practices 

are excluded. The overall results suggest 

that on average our assumptions, built 

into the resource cost estimates 

concerning the share of physical therapy 

assistants in the labor force are 

somewhat lower than reported so far in 

the G-code data. In 2007 (the data year 

used to estimate the payment regression 

leading to the relative weights), the 

assumption concerning the proportion 

of the labor share for physical therapy 

assistants was 17 percent. The national 

average in the initial G-code data for 

physical therapy assistants is 22.1 

percent. For occupational therapy, the 

results were different. The assumption 

concerning the labor share proportion 

for occupational therapy assistants was 

12 percent, while the national average 

in the G-code data for occupational 

therapy assistants is very similar, 11.8 

percent. 

Further results from the G-code data 

show that there is variation in the 

percentage of physical therapy provided 

by therapy assistants and the percentage 

of occupational therapy provided by 

therapy assistants when different levels 

of therapy are provided. The initial Gcode data suggest the percentages of 

physical therapy visits provided by 

therapy assistants for episodes with 14– 

19 therapy visits and 20+ therapy visits 

are 25.9 percent and 29.0 percent, 

respectively. We note that these results 

seem to indicate that providers may be 

using more therapy assistants for 

episodes with high therapy, and 

therefore, the costs for these high 

therapy episodes may be even less than 

what was reflected in our earlier cost-toreimbursement analyses. Furthermore, 

we note that the OES data produced by 

the Bureau of Labor Statistics showed 

that in 2009, 20 percent of physical 

therapy was provided by therapy 

assistants and that 16 percent of 

occupational therapy was provided by 

therapy assistants. 

We believe our analysis of the Gcodes indicates that the new 

adjustments to the case-mix weights 

may be conservative. We have decided 

to use a conservative approach while we 

wait for more complete data. We will 

continue to analyze data as they become 

available and may make further 

adjustments to the case-mix weights if 

necessary. 

Comment: Commenters stated that 

CMS should develop the necessary 

objective clinical and financial data to 

support any change in case-mix weights 

for therapy related episodes prior to 


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implementing any change in the 

weights. Commenters recommended 

that CMS limit changes to those that 

have a reliable and transparent base in 

evidence. Another commenter 

recommended that CMS refrain from 

methodology which only shifts 

reimbursement to different parts of the 

model and instead focus on working 

with the industry to make more 

substantive and appropriate changes 

that stabilize home care reimbursement 

and provides more accurate payment. 

The commenter stated that payment 

cuts and methodology changes that can 

influence clinical behavior have not 

been successful at accurately paying for 

therapy services and may have 

disproportionately harmed providers 

that are providing appropriate levels of 

care. 

Response: We wish to point out to 

commenters that our revised approach 

to deriving weights for therapy-related 

episodes shares a fundamental 

commonality with the method used to 

derive the weights currently. As we 

described in our CY 2008 proposed and 

final regulations (72 FR 25363 and 72 

FR 49764), in the four-equation model 

regression equation, we imposed a 

deceleration in the marginal increase in 

resources with each added therapy visit. 

We did this by imposing restrictions on 

the coefficients of the therapy visit 

variables during regression estimation. 

In fact, data analysis before imposing 

those restrictions showed no clear trend 

for the trajectory of growth in resources 

as therapy visits increased. Thus, the 

data did not provide a sensible guide. 

Commenters seem to assume that 

‘‘objective’’ clinical and financial data 

would provide a clear answer for 

modeling resources in therapy-related 

episodes, but this isn’t necessarily the 

case. We decided that a declining 

amount for marginal resources is 

appropriate in view of the need to 

address incentives to overuse therapy. 

After observing unexpected increases in 

episodes of 14 or more therapy visits, as 

well as other evidence and analysis 

bearing on the profitability of those 

categories of episodes, we sought a more 

aggressive approach. 

We pursued a data-driven approach at 

many decision points in this year’s 

modeling procedure. We examined the 

results from various perspectives, 

including graphically. The main impact 

of the changes to our modeling 

procedure was generally to dampen the 

upward slope of the weights. Please 

refer to the Abt report ‘‘Revision of the 

Case-Mix Weights for the Home Health 

Prospective Payment System Report’’ 

located at http://www.cms.gov/center/ 

hha.asp for additional information 

about the trends in the weights. 

In addition, our methodology was 

designed to be budget neutral. Our 

intention was to redirect resources to 

groups in accordance with updated 

information on resource use, to avoid 

having therapy resources dominate the 

results of the resource modeling 

procedure, and to reduce incentives to 

provide higher numbers of therapy 

visits than would be clinically 

indicated. We would be concerned that 

an approach which, as recommended by 

commenters, depends on negotiation 

with providers would stray too far from 

the data in the absence of clear 

consensus about how to treat patients in 

different situations. 

Our simulation of profits suggests that 

our proposals move away from gross 

overpayment for high therapy cases to 

more even payments in excess of 

estimated costs across episodes with 

varying levels of therapy. We 

understand that in occasional 

circumstances this approach may be 

interpreted to mean that clinicians no 

longer would enjoy decision-making 

unfettered by cost considerations when 

faced with high-therapy-need patients. 

We wish to remind providers that 

utilization and cost data in health care 

contain a large random element; 

therefore, it is not possible to predict the 

cost of every case with the hoped-for 

precision. We anticipate that our current 

research, as provided for in Section 

3131 of the Affordable Care Act, will 

ultimately advance the precision of our 

payment groups, and this mandate has 

involved and will continue to involve 

consultation with providers. However, 

at the current time we are obliged to use 

the data available to increase the 

accuracy of the HH PPS. 

Comment: Commenters stated that 

CMS failed to take into account the 

greater administrative costs associated 

with providing high therapy visits. 

Response: We do not have data in the 

MCRs or reliable data from commenters 

allowing us to estimate additional costs 

as mentioned in the comment. At this 

time, based on our data analysis 

described earlier in this section and 

MedPAC’s analyses, we believe that a 

substantial incentive exists to provide 

increasing numbers of high-therapy 

episodes and we conclude that high 

therapy episodes are excessively 

overpaid. 

Comment: Some commenters stated 

that they agree that the reimbursement 

for high therapy episodes is too high 

and that it is appropriate to adjust 

relative case-mix weights to better align 

resource use associated with care plans. 

Commenters stated that the proposed 

changes to the case-mix weights would 

improve access for patients who need 

non-therapy services and reduce the 

incentive to manipulate therapy visits to 

reap higher payments. Also, 

commenters stated that by reducing the 

overpayment associated with high 

therapy groups and redistributing it to 

lower therapy and other groups, CMS 

has encouraged more appropriate 

therapy use based on need. 

Furthermore, commenters stated that 

the proposed changes in the case-mix 

weights will help to decrease future 

nominal case-mix growth. Commenters 

believed that the proposed changes to 

the case-mix weights will reduce waste 

and help assure patients who need 

therapy will get the appropriate amount. 

Some commenters stated that they value 

the ongoing cooperation and 

collaboration on policy issues. 

Response: We thank the commenters 

for their feedback and we appreciate the 

support. 

Comment: Commenters stated that the 

case-mix weight changes are proposed 

to modify provider behavior by 

removing ‘‘incentives’’ for increased 

therapy utilization. They stated that the 

adjustments have the sole intent of 

changing clinical behavior for HHAs. 

Commenters stated that CMS should not 

use a payment model to direct clinical 

care planning and patient admission 

practices to address any concerns in 

care utilization. 

Response: We disagree that our 

proposals are intended to force a change 

in clinical behavior. The purpose of the 

revision to the case-mix weights is to 

more accurately pay for services. We 

also wish to discourage provision of 

unnecessary therapy services and slow 

nominal case-mix growth. When we 

proposed and finalized the 153-group 

system, we stated our concern that 

clinical judgment had been overtaken by 

financial incentives. Subsequent 

utilization data showing a sudden shift 

in the proportion of episodes with very 

high numbers of therapy visits 

suggested that agencies were providing 

high amounts of therapy to maximize 

reimbursements. Since our simulations 

indicate that providers will be 

adequately or more than adequately 

paid for varying numbers of therapy 

visits within episodes, except perhaps 

in some cases for episodes with the 

highest numbers of therapy visits, we 

believe the proposed system of weights 

will be accommodating to clinical 

judgment. 

Comment: Commenters stated that 

there should not be an across the board 

reduction in the payment for episodes 

with high therapy visits but rather CMS 

should conduct targeted medical review 


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so that those HHAs that are properly 

using therapy services are not punished 

for the actions of others. In addition, 

commenters stated that by 

implementing an across the board 

payment cut, agencies that have been 

more profitable may survive while 

agencies that have smaller margins may 

fail, thus potentially preserving those 

who may be committing abuse. 

Response: Although we appreciate the 

commenters’ suggestion, we cannot act 

on it because our resources are not 

sufficient to conduct claims review on 

a scale that would be required. In 

addition, we would like to clarify that 

our method of adjusting the therapyrelated episode weights did not result in 

an across the board reduction. 

Procedures we followed at the 

beginning of weight construction, based 

on 2007 data, resulted in a realignment 

of the weights. At the end of the weight 

construction process, we examined the 

change in weights and noted a wide 

range of differences in the weights, both 

positive and negative. Furthermore, we 

do not believe we are punishing 

agencies for the actions of others. The 

revision of the payment weights should 

result in relatively even payments in 

excess of estimated costs across various 

types of episodes, and therefore, result 

in more appropriate payment for 

services. 

Comment: Commenters were 

concerned by the use of four year old 

data (data from 2007). Commenters 

stated that just as the 2008 data may be 

tainted due to the impact of the change 

in therapy thresholds, the 2005 data 

may also be tainted due to the impact 

of the 10-visit single therapy utilization 

threshold. 

Response: We used 2007 data in our 

payment regression model because of 

our concerns about the reliability of the 

data from 2008 or later. In 2008, we 

implemented refinements to the HH PPS 

and our analysis showed an increase in 

nominal case-mix growth of about 4 

percent, when previous years showed a 

case-mix growth of only 1 percent. In 

addition, MedPAC commented on a 

sudden change in the provision of 

therapy after the three therapy 

thresholds were implemented in 2008 

and a decrease in episodes with no 

therapy. Due to these observations, we 

were concerned about using data from 

2008 or later. We also described in our 

proposed rule that during the process of 

revising the case-mix weights, we 

originally re-estimated the payment 

regression model on 2008 data using the 

same dependent and independent 

variables as the payment regression 

model in our 2008 refinements and we 

compared the results to the current 

payment regression, which was based 

on 2005 data. We saw that if we were 

to use 2008 data in our payment 

regression to develop the weights, the 

regression would assign a higher 

relative resource cost to high therapy 

episodes and would assign a lower 

relative resource cost to episodes with 

little or no therapy than was assigned 

when deriving the current weights. 

Given MedPAC’s conclusion that the 

payment system overvalues therapy and 

undervalues non-therapy episodes and 

the sudden change in the distribution of 

therapy episodes, we decided to use the 

most current pre-refinement data in our 

payment regression model, which was 

from 2007. We believe the 2007 data are 

more reflective of costs associated with 

patients’ actual clinical needs than the 

2008 and later data. 

Comment: Commenters stated that 

there is no evidence that the level of 

therapy visits provided to patients is 

unnecessary. Commenters stated that 

CMS has not reviewed the claims 

involving the therapy visits to see if the 

level that was provided is unnecessary. 

Other commenters stated that there is no 

unnecessary utilization of therapy 

services by HHAs in their area and that 

the overuse of therapy services is a 

perception and not data based. They 

stated that therapy services are limited 

in their rural community and there are 

not enough therapists for HHAs to 

overutilize their services. 

Response: The Senate Finance 

Committee recently performed an 

investigation of the nation’s three largest 

home-health companies and found that 

‘‘they encouraged employees to make 

enough home-therapy visits to reach 

thresholds that triggered bonus 

payments, whether or not the visits 

were medically necessary’’ (‘‘HomeHealth Firms Blasted’’, October 3, 2011, 

Wall Street Journal, p. B1). In addition, 

our analysis showed a 1-year change in 

the distribution of therapy services in 

2008 and showed that a significant 

portion of case-mix growth in 2008 and 

2009 was due to the increased provision 

of therapy services. Furthermore, our 

analysis on the costs of high therapy 

services showed that the payment 

exceeds costs by 30 percent or more. 

Our analysis indicated that the average 

cost of episodes with 14–19 therapy 

visits and the average cost of episodes 

with 20+ therapy visits are more than 

$1100 and $1500 below Medicare 

reimbursement levels, respectively. 

Therefore, we believe there is a payment 

incentive to provide high therapy 

services and that certain agencies may 

be providing more therapy services to 

maximize reimbursement. The goal of 

the revision to the case-mix weights is 

to more accurately pay for services and 

since data indicates that we are 

overpaying for services, we are revising 

our weights to better reflect costs. In 

addition, based on our analysis of the 

costs and our predictions about the 

payment with the new case-mix 

weights, almost all episodes with high 

therapy will still be paid above costs 

and that payment under the new 

weights will result in more similar 

payments in excess of estimated costs 

across episodes with varying levels of 

therapy than our current weights, 

thereby encouraging more appropriate 

therapy use based on patient need rather 

than reimbursement. 

Comment: Commenters suggested that 

CMS convene a technical expert panel 

of therapists and nurses to examine the 

appropriate use of all therapist 

assistants and nursing personnel in the 

home health benefit before 

implementing any changes to the HH 

PPS based on the premise that the 

utilization of therapy assistants is not 

clinically appropriate. One commenter 

provided examples of the use of therapy 

assistants. Commenters stated that there 

is no evidence to suggest that there is 

utilization of therapy assistants to 

increase the number of visits provided. 

Another commenter stated that the costs 

for therapy assistant services cannot be 

estimated by only looking at the 

assistant salary levels but also must 

include supervision time by the 

therapist and other related costs. Other 

commenters stated that therapy staffing 

agencies charge the same amount for 

therapist and therapy assistants, so 

some agencies don’t see a decrease in 

costs. The commenter stated that since 

the OES data is not specific to Medicare 

home health, CMS should wait to 

review the data on G-codes and should 

wait to collect a year’s worth of data 

before implementing any changes. 

Response: Commenters are mistaken 

in concluding that our proposals assume 

that therapy assistants are 

inappropriately used in home health 

care. Our concern is that our 

reimbursement rates are too high in 

comparison to the actual costs incurred 

by providers, including costs related to 

recent shifts in the labor mix for 

therapy. 

Our cost-to-reimbursement analysis 

used the average per-visit costs, 

inclusive of allocated overhead and the 

other costs of doing business for HHAs 

(except, as noted previously, NRS costs). 

The data available are not detailed 

enough to discern the drawing of 

resources to therapy assistant services as 

suggested by the commenter. Our 

analysis indicates that the average cost 

of episodes with 14–19 therapy visits 


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and the average cost of episodes with 

20+ therapy visits are more than $1100 

and $1500 below Medicare 

reimbursement levels, respectively, 

which leads us to believe that even 

given unrecognized costs for therapy 

assistant services, there would still be 

an inappropriate overpayment. Our OES 

data are limited to home health services, 

among which Medicare is the dominant 

payer for skilled services. The elements 

used in our rate-setting process come 

from national averages for firms in 

North American Industry Classification 

System (NAICS) Code 621600, Home 

Health Care Services. We do not know 

whether staffing agency practices as 

described by the commenter are 

widespread, but the data needed to 

incorporate reliably such information in 

resource cost estimates may be very 

difficult to develop. Although OES data 

also reflect services beyond Medicare’s 

services, OES offers the most 

representative labor mix data available 

at this writing. We also note that 

analysis of preliminary G-code data 

shows a higher percentage of physical 

therapy provided by therapy assistants 

for episodes with high therapy than 

what is reflected in the OES data, and 

therefore, resource costs for episodes 

with high therapy may be less than the 

costs we used to develop our current 

proposed weights. We agree with the 

commenter that more accurate 

information on therapy labor mix will 

be available as a result of the G-codes 

and we may consider making future 

adjustments based on G-code 

information. 

Comment: One commenter stated that 

there has been an increase in the past 

several years in therapy utilization and 

that only in recent years have they had 

adequate therapists to meet patient 

needs. In addition, the commenter 

stated that their HHAs only minimally 

use physical therapist assistants (PTAs) 

and certified occupational therapist 

assistants (COTAs) and that if CMS 

implements their new policies, their 

HHAs will be forced to reconsider/ 

increase their use of PTAs and COTAs 

to survive. 

Response: We are primarily 

concerned with increasing use of high 

numbers of therapy visits that may 

represent padding of the treatment plan 

to maximize reimbursement. Assuming 

the commenter’s agency is meeting 

patient needs and is cost efficient, we 

see no reason why they would be 

induced to increase their use of PTAs 

and COTAs, especially if they think it 

would represent a decline in quality. 

We reiterate that our payment 

simulations show adequate payment 

relative to costs for all episodes, except 

for some episodes in the 20+ therapy 

group, which may be eligible for outlier 

payments. 

Comment: A commenter stated that if 

CMS moves forward with the revision of 

the case-mix weights, then there should 

be a three-year phase-in to the new 

weights, beginning in 2012. The 

commenter stated that the phasing in 

would allow home care providers time 

to adjust to the financial consequences 

of the revised weights. 

Response: Our analysis of the costs of 

episodes with high therapy suggests that 

the payments for normal 60-day 

episodes with 14–19 therapy visits may 

average approximately $1,100 more than 

the costs and the payments for normal 

60-day episodes with 20+ therapy visits 

may average approximately $1,500 more 

than the costs. Given the large positive 

payments in excess of estimated costs 

suggested by these data, we believe that 

an adjustment to the weights is 

necessary and to phase-in or defer 

revising the weights any longer would 

be wasteful. 

Comment: A commenter 

recommended that CMS adjust its 

proposed policy and continue to pay the 

current rates for certain groups such as 

those patients discharged from the 

hospital and entering their first or 

second episode of home health. 

Response: Our method of weight 

construction takes account of the timing 

of the episode but it does not consider 

whether the patient was recently 

discharged from the hospital. We 

stopped using the patient’s preadmission location in the case-mix 

algorithm in 2008 because of difficulties 

agencies reported in obtaining accurate 

data and because the impact on 

resources was not clear in the 2005 data 

used for the model. We plan to revisit 

the role of pre-admission location as 

part of our study mandated by Section 

3131 of the Affordable Care Act. This 

will be done in the context of studying 

various kinds of new data that might be 

used in payment adjustments, to 

ameliorate possible access problems. 

Comment: Commenters stated that 

CMS has not examined the impact of the 

new proposed rule and cannot predict 

the effects of the implementation of the 

change in case-mix weights. 

Response: We disagree with the 

commenter. As we described in 

responses to commenters earlier in this 

preamble, we have done simulations 

that show that the revised case-mix 

weights with the new adjustments 

would result in more similar levels of 

net reimbursements (payments in excess 

of estimated costs) across episodes than 

the net reimbursements resulting from 

our current weights. In addition, Section 

IV shows the projected impacts of all of 

our policies (including the payment 

reduction for nominal case-mix growth). 

These impacts represent a negative 

impact on reimbursements well within 

the Medicare margins that were 

estimated by MedPAC. 

Comment: A commenter 

recommended monitoring quality 

outcomes and patient satisfaction after 

implementing these changes to ensure 

that the changes do not adversely affect 

patient care. 

Response: We agree that tracking the 

indicators mentioned by the commenter 

is a good idea. We note that statistical 

information on quality outcomes is 

publicly available on the CMS Web site 

for commenters to study. We anticipate 

that patient satisfaction information will 

be added to home health compare data 

in the future. We intend to monitor the 

effect of all of the provisions of this final 

rule for unintended consequences. 

Comment: Commenters stated that 

due to the therapy requirements 

implemented on April 1, 2011, there is 

less flexibility in using the therapy 

assistants. 

Response: The therapy requirements 

implemented in the CY 2011 HH PPS 

final rule which require an assessment 

by a qualified therapist at the 13th and 

19th visit were meant to confirm that 

the patient needs high therapy services 

and to ensure more involvement of 

qualified therapists in high therapy 

cases. Research studies conducted by 

Linda Resnick (of Brown University) et 

al., entitled ‘‘Predictors of Physical 

Therapy Clinic Performance in the 

Treatment of Patients with Low Back 

Pain Syndromes’’ (2008, funded by a 

grant from the National Institute of 

Child Health) and ‘‘State Regulation and 

the Delivery of Physical Therapy 

Services’’ (2006, funded in part through 

a grant from the Agency for Healthcare 

Research and Quality) concluded that 

more therapy time spent with a 

qualified physical therapist, and less 

time with a physical therapy assistant, 

is more efficient and leads to better 

patient outcomes. 

We note that according to our cost-toreimbursement analysis, we are 

overpaying for high therapy services 

and we are finalizing with this rule an 

adjustment to the payment weights to 

more accurately pay for these services. 

We also note that preliminary analysis 

of G-code data from 2011, the same time 

period that the therapy requirements 

were implemented, shows a higher 

percentage of physical therapy provided 

by assistants for high therapy cases than 

is reflected in our current weights. We 

will be continuing to examine the trends 

in the G-code reporting going forward 


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and we plan to use the information in 

rate setting. 

Comment: Commenters stated that 

CMS needs to analyze data to see 

whether their previous policies have 

addressed issues with the use of 

inappropriate therapy services before 

implementing the change in case-mix 

weights to address therapy issues. A 

commenter stated that it was not 

necessary to implement the payment 

reductions since CMS implemented the 

outlier policy and enhanced 

documentation requirements for therapy 

services. 

Response: As stated earlier, the 

purpose of the revision to the case-mix 

weights is to more accurately pay for 

services. We customarily base payment 

revisions on the most recent data 

available, consistent with our judgment 

as to its integrity. At this time, the data 

indicate that CMS is paying for episodes 

with 14–19 therapy visits by an average 

of more than $1100 over the agencies’ 

costs and is paying for episodes with 

20+ therapy visits by an average of more 

than $1500 over the agencies’ costs, and 

as such CMS is overpaying for high 

therapy cases. Previously implemented 

policies were intended to promote 

appropriate use of therapy and to 

increase the involvement of qualified 

therapists in high therapy cases to 

ensure that therapy is being provided in 

an efficient and effective manner. We 

again refer to the studies which 

described the improved patient 

outcomes with greater qualified 

therapist involvement. However, given 

that existing data show such high 

payments in excess of estimated costs 

for high therapy episodes, we believe an 

adjustment to the payment weights is 

necessary to more accurately pay for 

high therapy services. 

Comment: Commenters stated that the 

Affordable Care Act provisions along 

with the payment reductions would 

leave a huge negative impact on HHAs 

and commenters suggested that CMS not 

implement their proposed changes to 

the case-mix weights. 

Response: Our cost data show that we 

are paying too much for high therapy 

episodes, as our reimbursement exceeds 

costs by about 30 percent. We believe it 

is necessary to make adjustments to our 

case-mix weights to more accurately pay 

for high therapy episodes. Our 

simulation analysis indicates that the 

new, revised weights should still result 

in payments in excess of estimated costs 

for all high therapy episodes, except for 

some episodes in the 20+ therapy group. 

In addition, the new, revised weights 

should result in relatively even 

payments in excess of estimated costs 

across episodes with varying levels of 

therapy, as well as episodes with no 

therapy. As the Affordable Care Act 

provisions come into play, we will 

analyze reimbursement adequacy, as 

well as beneficiary access to services 

and make proposals accordingly. 

Comment: Commenters urged CMS to 

expedite that comprehensive study of 

the case-mix system, to involve home 

health industry experts in the process, 

and to implement a revamped case-mix 

system by 2014. 

Response: We have included industry 

representatives on the Technical Expert 

Panel meetings conducted under the 

Affordable Care Act Section 3131 

research and demonstration project. 

Further data collection and analysis will 

be conducted over the coming two 

years. Please see Section G for an update 

on the status of the study. 

Comment: Commenters stated that as 

an alternative to the adjustments to the 

weights, CMS should try to find cost 

savings by stopping overpayment to 

Medicare Advantage plans and 

suggested that CMS hold them 

accountable to the same Medicare 

Compare outcomes that HHAs must 

report. 

Response: We disagree with the 

commenter’s suggestion that CMS find 

cost savings by stopping overpayment to 

Medicare Advantage plans as an 

alternative to implementing adjustments 

to the weights. Our goal is to address the 

overpayment for high therapy services 

and we can only do so by adjusting the 

case-mix weights for high therapy cases. 

The goal of the revision of the case-mix 

weights is not to achieve a cost savings; 

we reiterate that the change in the casemix weights is budget neutral. (In 

contrast, the case-mix adjustment to the 

national standardized amounts is 

intended to recover previous 

overpayments that resulted from coding 

practice changes.) The goal of the 

weight adjustments is to more 

appropriately pay for high therapy 

services given our findings about the 

costs for these services and MedPAC’s 

request to address therapy 

vulnerabilities. 

Comment: Commenters stated that the 

proposed case-mix weight changes 

would increase the weights assigned to 

episodes with no therapy visits; 

however, commenters stated that these 

non-therapy episodes have not had an 

increase in relative resource costs since 

2008. 

Response: In their 2011 Report to 

Congress, MedPAC suggested that HH 

PPS may ‘‘overvalue therapy services 

and undervalue nontherapy services.’’ 

MedPAC also stated that through their 

analysis of high and low margin 

agencies, they concluded that ‘‘episodes 

with high case-mix values are overpaid 

and episodes with low case-mix values 

are underpaid.’’ We also note that the 

non-therapy episodes tend to have a 

much higher rate of outlier cases than 

episodes with therapy, and therefore, 

HH PPS may not be sufficiently paying 

for some of these episodes. In addition, 

we conducted a preliminary analysis 

looking at the differences in costs 

relative to reimbursement across 

different types of home health episodes 

and different agency characteristics. The 

findings suggested that unprofitable 

episodes on average had significantly 

more skilled nursing, home health aide 

visits, and total visits than average, 

while they also had fewer therapy visits. 

Furthermore, the results suggested that 

therapy and post-acute care episodes 

were more likely to be more profitable 

than mutually exclusive subpopulations 

of non-therapy and community-referred 

episodes, respectively. Moreover, 

regarding the HHRG, less profitable 

episodes were slightly more likely to be 

assigned the lowest functional or service 

utilization severity level (that is, 

C1F1S1, C2F1S1, C3F1S1). We note that 

this analysis did have some limitations. 

One limitation was that nationally 

aggregated costs were used instead of 

individual agency costs. However, we 

believe that the findings of the 

preliminary analysis, along with our 

observations of the incidence of outliers, 

and MedPAC’s findings indicate that the 

current system may undervalue nontherapy episodes. 

Comment: Commenters stated by 

increasing the weights for non-therapy 

episodes, the proposal discourages 

HHAs to provide any therapy. They 

stated that the proposal will lead to an 

adverse discrimination against patients 

in need of therapy at all levels of need 

and utilization. They stated that they are 

concerned that the change in case-mix 

weights will discourage rehabilitation 

and patient self-sufficiency. 

Response: We disagree with the 

commenters. Our data shows that we are 

currently overpaying for high therapy 

services. Also, we proposed to increase 

the weights for episodes with low 

therapy. Therefore, we do not believe 

that we are discouraging HHAs from 

providing therapy. We believe by more 

appropriately reimbursing for high 

therapy episodes, we are encouraging 

more appropriate therapy use based on 

patient need. We note that when 

projecting the payments for episodes 

with high therapy, payments are 

adequate and result in a profit, except 

on average for a small number of 

episodes with extreme levels of therapy, 

which in some cases may be eligible for 

outlier payments. 


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Comment: Commenters stated that 

there is a movement towards a 

multidisciplinary approach to care and 

utilization of broader ranges of therapy 

services to improve outcomes and that 

evidence based best practices have 

improved patient outcome scores. They 

stated that patients need a high number 

of therapy visits to implement the 

intervention practices, such as fall 

prevention. In a similar vein, other 

commenters stated that due to the use 

of interdisciplinary care, there is an 

increase in the provision of therapy and 

coordination between physical therapy, 

occupational therapy, and speech 

language therapy. They stated that 

proposed adjustments to the case-mix 

weights do not account for the cost of 

providing interdisciplinary care and 

they suggested that CMS and the home 

health community need to work 

together to develop a new system that 

accounts for the costs of the 

interdisciplinary patient care. Other 

commenters stated that OASIS data 

shows continued functional 

improvement in the status of home 

health patients and that HHAs are 

providing services well in excess of 20 

visits in an episode despite the lack of 

increase in payment after 20+ visits. 

Commenters stated that CMS should not 

consider all of the change to the higher 

therapy groups as unnecessary. 

Response: As part of our industry 

outreach efforts associated with the 

home health access study, we plan to 

solicit input from the industry regarding 

evidence pointing to the improved 

outcomes from the multidisciplinary 

approach, so that we can evaluate the 

strength of it. We have noted previously 

MedPAC’s concerns with the validity of 

outcome measurement in home health 

care. In addition, we reiterate that we do 

not believe the new case-mix weights 

will disincentivize interdisciplinary 

patient care, as the payments for 

episodes with high therapy are still 

projected to exceed costs. 

We also note that, as we described in 

the CY 2011 HH PPS final rule (75 FR 

70390 through 70391), research shows a 

direct relationship between improved 

patient outcomes, and the percentage of 

therapy provided by qualified 

therapists. As previously described, 

research studies conducted by Linda 

Resnick (of Brown University) et al., 

entitled ‘‘Predictors of Physical Therapy 

Clinic Performance in the Treatment of 

Patients with Low Back Pain 

Syndromes’’ (2008, funded by a grant 

from the National Institute of Child 

Health) and ‘‘State Regulation and the 

Delivery of Physical Therapy Services’’ 

(2006, funded in part through a grant 

from the Agency for Healthcare 

Research and Quality) concluded that 

more therapy time spent with a 

qualified physical therapist, and less 

time with a physical therapist assistant, 

is more efficient and leads to better 

patient outcomes. In these studies, the 

lower percentage of time seen by a 

qualified therapist and the greater 

percentage of time seen by an assistant 

or aide, the more likely a patient would 

have more visits per treatment per 

episode. The studies also concluded 

that, although delegation of care to 

therapy support personnel such as 

assistants may extend the productivity 

of the qualified physical therapist, it 

appears to result in less efficient and 

effective services. 

The commenter suggests that high 

therapy cases are the result of 

interdisciplinary care. While 

interdisciplinary therapy would 

increase the volume of therapy 

provided, we note that given the 

apparent high percentage of therapy 

assistants utilized in these episodes 

when compared to other therapy 

episodes, research would suggest that 

inefficiencies in care may be a factor in 

high therapy cases as well. Our current 

payments for these episodes would 

incentivize these inefficiencies. 

Additionally, as we have described in 

other comment responses, our 

simulation analysis shows that the 

revised weights will result in similar 

payments in excess of estimated costs 

for all episodes. As such, we believe we 

are lessening the incentive to provide 

particular types of episodes, while 

providing adequate reimbursements. 

Comment: Commenters stated that 

CMS should institute safeguards to 

monitor discriminatory patient 

admission practices and misguided 

clinical care practices. 

Response: We appreciate this 

comment but must point out that this is 

a costly and difficult task. Eventually, as 

a result of research mandated by the 

Congress in section 3131(d) of the 

Affordable Care Act, we hope to modify 

the HH PPS to lower the risk of 

discriminatory patient admission 

practices. As part of the outreach efforts 

for the section 3131(d) Affordable Care 

Act study, we plan to solicit comments 

on how we could launch a cost-effective 

effort without imposing unacceptable 

burdens on providers and patients. We 

also encourage continued efforts in the 

home health industry, aided by 

Medicare quality initiatives, to improve 

the consistency and appropriateness of 

clinical care plans and their 

implementation. In addition, we 

reiterate that based on our simulation 

analysis, we expect the new weights to 

result in similar payments in excess of 

estimated costs episodes and should 

therefore lessen discriminatory patient 

admission practices in home health. 

Comment: Commenters advised CMS 

to analyze provider costs in 2011 and 

2012 before implementing the change to 

the case-mix weights. 

Response: Due to the lag in providers’ 

preparation and submission of CRs, we 

do not have a complete set of data on 

provider costs for any given year until 

more than one year after the end of the 

year. As a result, the 2009 MCR data are 

the most current, complete cost data 

available. Given our analysis of the costs 

and payment for high therapy episodes 

using 2009 data, we believe that 

Medicare is overpaying for high therapy 

services by 30 percent or more. In 

addition, as we mentioned in a previous 

response, for our simulation analysis, 

we updated the costs of episodes to 

2012 dollars using the market basket 

increase and estimated the 2012 

payment for episodes. The simulation 

analysis using the new weights 

suggested that in 2012, the payment for 

episodes will still exceed costs and that 

there is a relatively even payments in 

excess of estimated costs across 

episodes, except for some episodes in 

the 20+ therapy group. We note that 

some of the episodes in the 20+ therapy 

group may be eligible for outlier 

payments. 

Comment: Some commenters stated 

that the proposal to change the case-mix 

weights is premature and unproductive. 

Other commenters stated that CMS 

should dedicate their resources to 

develop a case-mix adjuster that does 

not use therapy utilization as a variable 

in determining payment; instead CMS 

should look into using patient 

characteristics to pay for therapy. 

Commenters stated that they would be 

supportive of any change in the casemix weights that moves the model away 

from using utilization factors in 

determining payment. 

Response: In their 2010 and 2011 

Reports to Congress, MedPAC has urged 

us to address the therapy incentives in 

our payment system. We note that 

completely addressing MedPAC’s 

concerns with the way we factor therapy 

services into our reimbursement will be 

a complex process, requiring 

comprehensive structural changes and a 

great deal of additional research and 

analysis. However, we believe there is 

evidence that we are overpaying for 

high therapy services and that it is 

appropriate to revise the case-mix 

weights now, to mitigate therapy 

vulnerabilities in the short term while 

we develop a longer term solution. 

Comment: Commenters asked how 

CMS would check that the changes in 


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the case-mix weights would in fact be 

budget neutral. A commenter stated that 

in the past when changes in the HH PPS 

resulted in profits to the industry, CMS 

implemented a plan to recover the 

excess reimbursement. The commenter 

asked what would happen if the 

industry was under-reimbursed by the 

proposed changes, stating that in this 

situation, the proposed changes would 

not be budget neutral. 

Response: We are uncertain what the 

commenter’s concern is. As we 

described earlier in this section, we 

applied a budget neutrality factor to 

ensure that the new weights result in 

approximately the same aggregate 

expenditures as 2009, the most current 

data that were available. We equated the 

aggregate expenditures by setting the 

average of the case-mix weights under 

the new revised weights equal to the 

average under the current weights 

which we reimbursed in 2009. A slight 

difference between the aggregate totals 

remained, due to the effects of outlier 

payments. However, this difference 

amounted to only 0.01 percent. Also we 

reiterate that data shows that we are 

overpaying for high therapy services 

and we believe the new weights will 

more accurately align payment with 

costs. In addition, as stated in Section 

II.A, we will continue to assess real and 

nominal case-mix growth and if we 

were to see real case-mix growth 

increase more than the reported home 

health case-mix growth, we would 

increase payments accordingly. 

Furthermore, since the HH PPS began, 

the industry has never been underreimbursed in the aggregate and when it 

was determined that certain LUPAs 

were on average under-reimbursed, we 

implemented the LUPA add-on to 

compensate for the underpayment. 

Comment: A number of commenters 

stated that a failure to recalibrate the 

whole system weights would result in a 

change that was not budget neutral and 

Federal law prohibits changes in casemix that are not budget neutral. Another 

commenter requested that CMS explain 

in detail the methodology used to 

develop the budget neutrality 

adjustment for the proposed case-mix 

weights. 

Response: As stated in the proposed 

rule, to remove the two hypertension 

codes from our case-mix system, we 

needed to revise our case-mix weights to 

redistribute the dollars without 

reducing aggregate payments. To 

redistribute the dollars, we re-estimated 

the four equation models without codes 

401.1 and 401.9. We then used the 

results from the four equation model to 

determine the clinical and functional 

severity level groups for each episode. 

This information was then used to 

estimate the payment regression model, 

which in turn was used to develop the 

weights. In addition, CMS has applied 

a budget neutrality factor of 1.2832 so 

that the new case-mix weights result in 

approximately the same aggregate 

expenditures as 2009. More details 

about the methodology used to ensure 

budget neutrality can be found in an 

updated version of the Abt Associates 

report ‘‘Revision of the case-mix weights 

for the Home Health Prospective 

Payment System’’ at http:// 

www.cms.gov/center/hha.asp. 

We also note that the payment 

reductions arising out of the nominal 

case-mix changes we have identified are 

not intended to be budget neutral 

(discussed in Section II.A). We reduce 

payment rates to account for nominal 

case-mix change. 

Comment: CMS should publicly 

disclose the revised formula and factors 

employed in the calculation of a revised 

budget neutrality adjustment and 

provide an opportunity for public 

comment prior to finalization of the 

revised case-mix weights. 

Response: We note that the Abt 

Associates report ‘‘Revision of the CaseMix Weights for the Home Health 

Prospective Payment System’’ contains 

details about the methods used to 

achieve budget neutrality. This Abt 

Associates report was made publicly 

available around the same time that the 

CY 2012 HH PPS proposed rule was 

published. We have received comments 

on our methodology during this 

comment process. An updated version 

of this report will be made available at 

http://www.cms.gov/center/hha.asp. 

Comment: Commenters stated that 

CMS should update its occupational 

mix assumptions in the 2012 

refinements and that the increased use 

of therapy assistants should be reflected 

in the case-mix weights. 

Response: We thank the commenter 

for their comment and we would like to 

clarify our methodology. As stated in 

the Abt Associates report ‘‘Revision of 

the Case-mix Weights for the Home 

Health Prospective Payment System’’ 

which can be accessed at http:// 

www.cms.gov/center/hha.asp, the 

payment weights are based on wageweighted time spent on home health 

visits in our sample. The wages come 

from estimates of the national hourly 

wage for six disciplines of home health 

care workers (skilled nursing, physical 

therapist, occupational therapist, speech 

language therapist, medical social 

services, and home health aides) from 

the Bureau of Labor Statistics 

Occupational Employment Survey 

(OES). When re-estimating the payment 

regression model on 2007 data, we used 

the wage-weighted minutes based on the 

2007 OES data for average labor mix 

within each discipline and average 

hourly wages, including benefits. The 

2007 OES labor mix for physical 

therapists is composed of 17 percent 

physical therapist assistants, 1 percent 

physical therapy aides, and 82 percent 

physical therapists. The 2007 OES labor 

mix for occupational therapists is 

composed of 12 percent occupational 

therapist assistants and 88 percent 

occupational therapists. The payment 

regression is modeling the wageweighted time (resources) as predicted 

by the severity levels and therapy 

variables for early and later episodes, 

using 2007 claims. We note that before 

updating the labor mix in the wageweighted minutes to more current data 

than 2007, we will wait for more 

complete G-code data. We will continue 

to assess the accuracy of our case-mix 

weights and may make adjustments in 

future rulemaking as more G-code data 

becomes available. 

Comment: Commenters stated that 

CMS should calculate the budget 

neutrality adjustment to equate 2012 

expenditures under the current and 

proposed case-mix weight models. 

Commenters recommended that CMS 

recalculate the budget neutrality 

adjustment to reflect the idea that HHAs 

have experienced some ‘‘real’’ case-mix 

change in 2010 and 2011 and will 

experience more in 2012. 

Response: We applied a budget 

neutrality factor (1.2832) to the weights 

to ensure that the final proposed 

weights result in aggregate expenditures 

in 2009 approximately equal to 

expenditures using the current payment 

weights. We made the weights budget 

neutral to 2009 because the data from 

2009 were the most current complete 

data available at the time. Using the 

most complete actual data available to 

achieve budget neutrality is a method 

consistent with case-mix weight 

recalibration methodology utilized by 

other Medicare payment systems. 

Similarly, the methodology is consistent 

with the method we have utilized since 

CY 2008 rulemaking to analyze and 

account for case-mix growth unrelated 

to real changes in patient acuity 

(nominal case-mix). Our current method 

assesses case-mix growth and reduces 

payment rates as warranted only after 

the claims data are complete. This 

method for both establishing budget 

neutrality in the weights and adjusting 

for nominal case-mix growth confines 

the correction on account of nominal 

case-mix growth to the rates while 

allowing the average case-mix level to 

evolve in the claims history without 


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intervention. However, the commenter’s 

suggestion to project case-mix growth 

for future years is intriguing and we 

may consider such a methodology 

change in future rulemaking. Such a 

methodology change would allow us to 

project changes in case-mix based on 

expected trends in case-mix growth. It 

would also require us to make 

projections for payment adjustments to 

account for nominal case-mix growth 

based on trends. This projection method 

may be preferable to delaying the ability 

to account for future nominal case-mix 

increase. We believe that such a change 

in long-standing methodology would 

require rulemaking. 

Our continued analyses of current 

claims data as they become available 

allows us to make adjustments to HH 

PPS case-mix weights as warranted, 

achieving budget neutrality using the 

most current complete data available, 

and account for growth in nominal casemix as warranted. 

Comment: Commenters stated that 

CMS explicitly proposes that the casemix weight changes will affect clinical 

and patient admission behavior of 

HHAs. They stated that if the case-mix 

weight changes are implemented, the 

proportion of patient episodes with 14 

or more therapy visits will decline and 

the proportion of non-therapy episodes 

will increase. 

Response: Based on observation of 

sharp changes in distribution of 

episodes by the number of therapy 

visits, on information coming to us 

about provider practices in the field, as 

well as on analysis of margins in HH 

PPS, an effect on the behavior of HHAs 

would not be surprising. 

Comment: The commenters stated 

that the therapy episodes have higher 

case-mix weights on average than nontherapy episodes so the reduction in the 

proportion of therapy episodes will 

reduce the average case-mix weight 

nationally and that failure to account for 

this behavioral change reduces the 

budget neutrality adjustment. Other 

commenters stated that the change in 

case-mix weights does not appear to be 

budget neutral because only 30 of the 

case-mix weight values increased while 

123 of the case-mix weight values 

decreased from the current levels. 

Response: To date, we have not 

incorporated forecasts of the sort 

indicated by the commenter in our 

budget neutrality adjustments. We may 

consider this for future rulemaking. 

However, we think that forecasting 

changes in the national case-mix 

average due to the utilization changes 

mentioned by the commenter would be 

difficult and perhaps not a reliable basis 

for payment. Regarding the positive and 

negative changes the case-mix weight 

values, we note that when developing 

the budget neutrality factor, we took 

into account the number of episodes in 

each HHRG along with the change in 

weights. We developed the factor so that 

the change in the weights would result 

in the same aggregate expenditures as 

2009. One cannot only look at the 

increases or decreases in the case-mix 

weight values but one must also look at 

the degree of the change in the weights 

and the number of episodes associated 

with each of the weights when looking 

at budget neutrality. In general, the casemix weight values that increased had 

higher volumes than the ones that 

decreased. 

Comment: A commenter appreciated 

that the proposed changes to the casemix weights are budget neutral. 

Response: We thank the commenter 

for their support. 

Comment: A commenter asked that 

CMS identify how the points from the 

hypertension 401.1 and 401.9 codes are 

reallocated in the proposed case-mix 

weight changes. 

Response: The points are reallocated 

in the course of estimating the fourequation model’s regression equation. In 

Table 3 shown above, we show the 

points associated with various clinical 

and functional variables based on the 

results of the four-equation model. The 

four-equation model is a linear 

regression explaining an episode’s wage 

weighted minutes of care in the home as 

measured in dollars (the dependent 

variable) as a function of the episode’s 

timing, therapy visits, clinical variable 

indicators (for example, pressure ulcer 

stage), and functional indicators (for 

example, limitation in bathing). After 

estimating the model, we determine the 

points associated with clinical and 

functional variables by dividing the 

coefficients by 10. By re-estimating the 

four-equation model on data without 

hypertension codes 401.1 and 401.9, we 

redistributed the points which would be 

associated with the two hypertension 

codes to other variables in the model. 

Table 4 shows the differences in points 

between the current and proposed casemix adjustment scores. As stated in the 

proposed rule, for 13 of the 33 clinical 

and functional variables which had a 

different number of points, there was an 

extra point assigned when the two 

hypertension codes were excluded and 

for 20 of the 33 clinical and functional 

variables, there was one less point 

assigned compared to the current 

model. 

Comment: Commenters stated that 

CMS presented strong and objective 

data indicating that an elimination of 

hypertension codes 401.1 and 401.9 was 

warranted. Commenters stated that they 

would like to see a comparable 

approach for therapy utilization. Other 

commenters stated that despite the data 

analysis of the resource costs of patients 

with hypertension codes 401.1 and 

401.9, from a clinical viewpoint, there 

are still concerns that the removal of the 

hypertension codes might undervalue 

the resources need to address the needs 

of patients with hypertension. 

Response: Our past exploration of 

modeling therapy elements of the casemix in home health showed that 

predictive power is relatively low. 

MedPAC’s recent results in their 

preliminary models of therapy elements 

are consistent with our experience. We 

will continue to study this issue. We 

remind the commenters concerned 

about removal of hypertension codes 

that our analysis showed that after the 

153-group system went into effect, 

hypertension was no longer associated 

with marginal added resources. This 

was probably due to a big change in the 

frequency of reporting hypertension and 

meant that the average patient with 

hypertension (after accounting for other 

clinical conditions) was not as costly to 

care for as the average patient reported 

to have hypertension in 2005 (the year 

of the data that originally used to create 

the 153-group system). The new 

guidelines developed by the National 

Heart Lung and Blood Institute (NHLBI) 

concerning the appropriate reporting of 

these hypertension codes were released 

in late 2004. It is possible that prior to 

the NHLBI guidelines, HHAs were using 

codes 401.1 and 401.9 to reflect more 

severe hypertensive conditions. Our 

2008 refinements analysis utilized 2003 

data (prior to the NHLBI guidelines) and 

2005 data (shortly after the guidelines 

release and likely prior to widespread 

adoption of them). As such, one 

probable reason that the 2008 

refinements analysis identified these 

codes as more resource intensive, when 

more current data analysis does not, 

would be HHA use of these codes to 

reflect more severe hypertensive 

patients. 

Comment: Commenters urged CMS to 

check that the removal of weights for 

the hypertension codes 401.1 and 401.9 

is not premature and based on sound 

methodology. Commenters stated that 

coding experts believe that eliminating 

the two hypertension codes will result 

in up to a 7 percent decrease in codingrelated reimbursement. 

Response: In our proposal, we 

explained that the new point allocation 

from the re-estimated four-equation 

model redistributed resources across the 

other conditions in the model. Our other 

procedures for deriving the weights 


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were designed to maintain the effects of 

the redistribution. Therefore, a change 

in reimbursement for patients with the 

hypertension codes would in general 

not be 7 percent. The change for any 

given patient would depend on their 

combination of case-mix recognized 

conditions. 

Comment: Commenters stated that 

CMS proposed to eliminate the codes 

401.1 and 401.9 based on their concerns 

surrounding the new guidelines 

developed by the NHLBI. 

Response: In addition to our concerns 

about changes in coding due to the new 

guidelines developed by the NHLBI, 

which we believe resulted in more 

accurate coding, we have also shown 

that the two hypertension codes are not 

associated with additional resources, 

and therefore, we are implementing the 

removal of these codes. 

Comment: Commenters stated that 

there are certain areas where the 

increase in hypertension makes sense 

given the high prevalence of heart 

disease and obesity. Another commenter 

was concerned with the removal of 

hypertension from the case-mix system, 

stating that there may be external factors 

that CMS has not taken into account and 

that treatment of hypertension is an 

important part of home health. 

Response: We thank the commenters 

for their comments. However, we note 

that we presented various analyses 

which showed that the two codes 401.1 

and 401.9 are not associated with 

additional resource use. Therefore, we 

believe that the two codes should be 

removed from our case-mix system. 

However, we would like to clarify that 

we are not completely removing 

hypertension from our case-mix system; 

we are only removing codes 401.1 and 

401.9. Currently, we believe that certain 

types of hypertension, such as 

hypertensive heart disease and 

hypertensive chronic kidney disease, 

are associated with additional resource 

use and should be included in our 

payment system; however, all of our 

analysis confirms that the two 

hypertension codes for benign essential 

and unspecified essential hypertension 

on average are not associated with 

additional resource use, and therefore, 

we are removing the codes to more 

accurately align payment with resource 

use. 

Comment: Commenters stated that 

when changing or removing part of the 

model, CMS should perform the same 

comprehensive approach as it used for 

the 2008 refinements. The commenter 

stated that we should use the same 

criteria we used for the refinements to 

determine whether certain diagnoses 

codes and variables should be included 

in the model. 

Response: As a result of research we 

are undertaking pursuant to Section 

3131 of the Affordable Care Act, we 

plan a comprehensive re-examination of 

the variable set that is potentially 

available to us to use for case-mix and 

other payment adjustments. We decided 

to defer a comprehensive re-modeling 

effort until new and/or revised variables 

have been researched and can be tested. 

On OASIS, reported hypertension 

prevalence more than doubled between 

2005 and 2008, the first year of the 

refined 153-group system. By 2008, 

hypertension prevalence was more than 

60 percent. Given the large amount of 

coding change associated with 

hypertension, and the resulting 

extraordinary prevalence, we saw a 

need to revisit its impact on costs. The 

results indicated that for the average 

hypertension patient, the condition was 

not associated with a statistically 

significant increase in resources. 

Comment: Commenters stated they 

would like to see CMS run the full, 

original regression models on test data 

from 2009 to see whether the indicators 

for hypertension codes 401.1 and 401.9 

should be kept in the case-mix system. 

The commenters stated that after 

running the data, they would like to see 

the coefficients for the indicators for 

codes 401.1 and 401.9 from the full 

regression models for all 4 equations 

using the 2009 data. 

Response: We did not pursue the 

commenters’ suggestion, pending the 

outcome of ongoing research. We 

previously mentioned in this preamble 

concerns that data from 2008 and later 

reflect a large amount of nominal coding 

change. Without intensive work 

developing and reviewing current, 

discarded, and potentially new variables 

for the model, we would not necessarily 

arrive at an appropriate score for the 

hypertension variables. Also, we believe 

making significant scoring changes 

piecemeal (before a thorough review of 

potential variable sets) adds 

unacceptable burdens to administrative 

and HHA operations. We also note that 

re-estimating the full original regression 

models is not necessary to support our 

decision to remove the two 

hypertension codes. The reason is that 

we did re-run one multivariate 

regression models used to test the 

impact of the hypertension codes in our 

proposed rule. This model isolated the 

additional resources associated with 

codes 401.1 and 401.9 and is an 

additional analysis to that which we 

described in the proposed rule. When 

developing the proposed rule, we ran 

the test regression model controlling for 

the current weights because at the time, 

we had not yet developed the proposed 

weights. The results supported the 

removal of the codes. Table 9 shows the 

results of an updated test regression 

model. One can see the coefficients from 

the regression model of total resource 

use on the case-mix weight (using the 

refined revised case-mix weights that do 

not include the 401.1 or 401.9 diagnoses 

in calculating case-mix weight) and 

indicator variables for the presence of 

the 401.1 and 401.9 hypertension 

diagnoses. This equation is based on 

2009 data with LUPAs and outliers 

excluded. The coefficients show that, 

controlling for the revised case-mix 

weights that we are finalizing in this 

rule, the presence of either a 401.1 or a 

401.9 diagnosis is associated with 

significantly lower resource use. The 

mean value of the dependent variable is 

543.17, so the magnitude of the 

coefficients is not particularly large, 

especially for the 401.9 diagnosis, but 

the results support dropping the two 

diagnoses from the case-mix calculation 

since they are not associated with 

higher resource use. We believe that this 

analysis along with the other analysis 

presented in the proposed rule support 

the removal of the two hypertension 

codes 401.1 and 401.9. 

BILLING CODE 4120–01–P 


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In summary, as described in our 

response to comments, we are finalizing 

our proposal to revise the case-mix 

weights. Based on our analyses after the 

publication of the CY 2012 HH PPS 

proposed rule, we have refined the 

revision to the case-mix weights and the 

new adjustments to the case-mix 

weights can be seen in Table 10. 

We reiterate that we used the same 

methodology described in the proposed 

rule when developing the new revised 

case-mix weights. To ensure that the 

revised weights result in approximately 

the same aggregate expenditures as we 

incurred in 2009, the budget neutrality 

factor applied to the weights changed 

slightly from 1.2847 to 1.2832. The new 

revised case-mix weights can be seen in 

Table 11. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

As stated earlier in our responses to 

comments, we performed a simulation 

analysis on the new revised weights. 

When re-running the simulation 

analysis on these new weights, we saw 

relatively even payments in excess of 

estimated costs across the various types 

of episodes, including but not limited to 

the episodes with 14–19 therapy visits, 

episodes with 20–25 visits, and nontherapy episodes. We note that in our 

analysis, we looked at various groups of 

episodes, such as non-therapy episodes, 

episodes with 1–5 therapy visits, 

episodes with 6–9 therapy visits, 

episodes with 10–13 therapy visits, 

episodes with 14–19 therapy visits and 

episodes with 20–25 therapy visits, as 

well as episodes with 26+ therapy visits. 

The analysis showed an even, similar 

payment in excess of estimated costs 

between almost all of the groups of 

episodes, except for episodes with 26+ 

therapy visits. We also note that in our 

sample, episodes with 20–25 visits are 

64 percent of all of the episodes with 

20+ therapy visits. 

In addition, when performing a 

regression of the episode’s total resource 

(dependent variable) using the new 

revised case-mix weights (independent 

variable), the R-squared value is 0.5436, 

which is slightly higher than the Rsquared value for the proposed weights. 

As more data becomes available, such as 

G-code data and possibly audited CR 

data, we may further implement 

changes to the weights in future 

rulemaking. 

C. Outlier Policy 

1. Background 

As we highlighted in our proposed 

rule (76 FR 41012), section 1895(b)(5) of 

the Act allows for the provision of an 

addition or adjustment to the national 

standardized 60-day case-mix and wageadjusted episode payment amounts in 

the case of episodes that incur 

unusually high costs due to patient 

home health (HH) care needs. In the 

proposed rule, we noted that prior to the 

enactment of the Affordable Care Act in 

March 2010, this section of the Act 

stipulated that estimated total outlier 

payments could not exceed 5 percent of 

total projected or estimated HH 

payments in a given year. We also 

provided historical milestones for the 

development of the outlier payment 

policy, including an overview of the 

July 2000 final rule (65 FR 41188 

through 41190), in which we described 

the method for determining outlier 

payments. 

As part of our proposed rule (76 FR 

41013), we reiterated what was said in 

the CY 2010 HH PPS final rule (74 FR 

58080 through 58087), in which we 

discussed excessive growth in outlier 

payments, the reasons for this growth, 

and our policy changes and 

methodologies to address it, which 

culminated in a 10 percent agency level 

outlier cap. We noted that this cap was 

implemented in concert with a reduced 

fixed dollar loss (FDL) ratio of 0.67. 

These policies resulted in a projected 

target outlier pool of approximately 2.5 

percent. 

In our proposed rule (76 FR 41013), 

we also provided an overview of how 

the outlier payment percentage is 

determined and the relationship 

between the FDL and loss-sharing ratios. 

At the time of the proposed rule, a 

preliminary look at partial CY 2010 

Health Care Information System (HCIS) 

data showed total outlier payments to be 

1.68 percent of total HH PPS payments. 

As such, we proposed to maintain the 

current FDL ratio of 0.67 until more 

recent and complete data became 

available on which to conduct further 

analysis. 

As we stated in the proposed rule (76 

FR 41013), we must deliver a Report to 

Congress regarding the results and 

recommendations of a home health 

study no later than March 1, 2014. 

Section 3131(d)(1)(A)(iii) of the 

Affordable Care Act requires the 

Secretary to analyze potential revisions 

to outlier payments to better reflect 

costs of treating Medicare beneficiaries 

with high levels of severity of illness. 

2. Comments and Responses 

The following is a summary of the 

comments we received regarding the 

outlier policies in the proposed rule. 

Comment: Several commenters 

expressed general agreement with the 

methodology used to review the outlier 

policy, including possibly adjusting the 

fixed-dollar loss (FDL) ratio from its 

current value of 0.67 based on more 

current data becoming available. Many 

of these commenters urged CMS to 

refine its outlier policies to ensure 

access to care for Medicare 

beneficiaries, and also ensure that the 

full 2.5 percent of expected HH 

expenditures be spent on outlier 

payments. Some of these commenters 

noted that data presented by CMS 

showed less than 2.5 percent of outlier 

dollars were expended. Commenters 

also noted that outlier expenditures are 

less than prior years, reflecting that the 

impact of the outlier cap has been 

successful in addressing abuse of this 

provision of the payment system. 

Response: We thank commenters for 

their recognition of the need for the 

outlier payment limit and recognize the 

concerns expressed by many to ensure 

that the 2.5 percent target in outlier 

payments allowed is expended. We 

agree on the importance of ensuring 

access to care for high cost Medicare 

beneficiaries. We also agree that the 

outlier cap policy plays an important 

part in addressing abuse of the payment 

system. As stated in our proposed rule, 

we will continue to monitor outlier 

payments as a percentage of total HH 

PPS payments as newer data becomes 

available. 


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At the writing of this final rule, the 

most current 2010 claims data shows 

the outlier payment outlay has 

increased from 1.68 to 1.91 percent of 

total 2010 HH expenditures. We 

recognize that this percentage still falls 

below the 2.5 percent outlier target. We 

believe it is necessary to finalize the 

outlier policy 0.67 FDL ratio and 0.80 

loss-sharing ratio as proposed to ensure 

we do not violate the statutory mandate 

to not exceed 2.5 percent of expected 

HH expenditures in outlier payments. 

We also note that an expected correction 

to a claims processing error related to 

the outlier cap may change the final 

outlier expenditures in CY 2010. 

We assure commenters that we intend 

to thoroughly analyze ways to improve 

the HH PPS’s ability to identify patient 

severity and cost, address possible home 

health access issues for high cost 

patients, and investigate options for 

improving the HH PPS outlier policies 

as part of the home health study. 

Comment: A number of commenters 

specifically suggested that the cost 

sharing ratio of 0.80 be increased rather 

than lowering the FDL and that CMS 

should move away from using the low 

utilization payment adjustment (LUPA) 

as the proxy for actual cost in 

computing the outlier payment, 

believing that actual agency-specific 

costs subject to a cap or a per visit 

outlier cap would further reduce outlier 

abuse and better compensate agencies 

that use the outlier provision 

judiciously. Many commenters 

expressed their belief that outlier 

payments should play an important part 

in addressing the needs of patients 

whose extraordinary costs are beyond 

the compensation offered by regular HH 

PPS payments. One of the commenters 

stated that CMS continues to focus on 

the outlier payment boost as if it were 

a profit-making tool for HHAs even 

though most outlier episodes lose 

money. Another commenter requested 

in particular that CMS exempt special 

needs certified HHAs that serve highcost patients with multiple clinical 

issues from the 10 percent outlier cap 

threshold. One such commenter added 

that CMS should further evaluate the 

outlier threshold in relationship to nonroutine supplies (NRS) due to this 

commenter’s concern that patients with 

complex wounds might be adversely 

impacted. 

Response: We reiterate that we intend 

to analyze alternatives to our current 

outlier policy as part of the home health 

study mandated by section 3131 of the 

Affordable Care Act. The study calls for 

CMS to investigate improvements to the 

HH PPS to account for patients with 

varying severity of illness. We agree 

with commenters that the current HH 

PPS outlier payments play an important 

role in addressing the needs of patients 

whose costs are beyond the 

compensation offered by regular HH 

PPS payments. Regarding possible 

exemptions for special needs certified 

HHAs that serve high-cost patients with 

multiple clinical issues from the 10 

percent outlier cap threshold, we note 

that section 3131(b) of the Affordable 

Care Act does not allow for exceptions 

to the mandate of the outlier policy 

which reduces estimated aggregate HH 

payments by 5 percent, allows no more 

than an estimated 2.5 percent of 

aggregate HH payments to be outlier 

payments, and requires the 10 percent 

agency-level outlier cap. We do not have 

statutory authority to exempt any 

providers from the 10 percent outlier 

cap. Lastly, we will also include the 

commenter’s suggested NRS analysis as 

part of the Affordable Care Actmandated home health access study. 

In summary, as described above, 

preliminary analysis of partial 2010 

claims described in the proposed rule 

indicated outlier payments to be 

approximately 1.68 percent of total HH 

PPS payments. For this final rule, we 

have updated our analysis with a full 

year of CY 2010 data. The data show the 

outlier payment percentage has 

increased to 1.91 percent of total HH 

PPS payments. 

To ensure that we adhere to our 

statutory mandate to expend no more 

than 2.5 percent of expected total HH 

PPS payments in outlier payments, we 

are maintaining our current policies of 

a FDL ratio of 0.67 and a loss-sharing 

ratio of 0.80 for CY 2012. Table 18 from 

our proposed rule has been updated and 

shows the outlier payment history as a 

percentage of total HH PPS payments 

between Calendar Years 2004 and 2010. 

D. CY 2012 Rate Update 

1. Home Health Market Basket Update 

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

requires that the standard prospective 

payment amounts for CY 2012 be 

increased by a factor equal to the 

applicable home health market basket 

update for those HHAs that submit 

quality data as required by the 

Secretary. Section 3401(e) of the 

Affordable Care Act amended section 

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

clause (vi) which states, ‘‘After 

determining the home health market 

basket percentage increase * * * the 

Secretary shall reduce such percentage 

* * * for each of 2011, and 2012, by 1 

percentage point. The application of this 

clause may result in the home health 

market basket percentage increase under 

clause (iii) being less than 0.0 for a year, 


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and may result in payment rates under 

the system under this subsection for a 

year being less than such payment rates 

for the preceding year.’’ 

In the proposed rule, we proposed a 

home health (HH) market basket update 

of 2.5 percent for CY 2012. This update 

was based on IHS Global Insight Inc.’s 

first quarter 2011 forecast, utilizing 

historical data through the fourth 

quarter of 2010. Since publication of the 

proposed rule, we have a revised HH 

market basket update of 2.4 percent 

based on IHS Global Insight Inc.’s third 

quarter 2011 forecast, utilizing historical 

data through the second quarter of 2011. 

A detailed description of how we derive 

the HH market basket is available in the 

CY 2008 HH PPS proposed rule (72 FR 

25356, 25435). Due to the requirement 

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

the CY 2012 HH PPS payment update 

percentage is to be calculated by 

reducing the CY 2012 HH market basket 

update of 2.4 percent by 1 percentage 

point. In effect, the final CY 2012 HH 

PPS payment update percentage is 

calculated to be 1.4 percent. 

The following is a summary of the 

comments we received regarding the HH 

market basket update. 

Comment: One commenter objected to 

CMS decreasing the market basket 

increase. 

Response: Section 3401(e) of the 

Affordable Care Act mandates the 1 

percentage point decrease to the home 

health market basket update. 

Comment: One commenter criticized 

the market basket index, claiming that it 

fails to include consideration of the 

direct cost increases that CMS rules may 

have on the delivery of care. Instead, it 

evaluates general cost changes such as 

the cost of caregivers, transportation, 

insurance, and office space. 

The commenter further stated that 

this approach does not provide CMS 

with the information needed to adjust 

payment rates in relation to regulatory 

cost increases. When the home health 

services ‘‘product’’ changes because of 

new regulatory or administrative 

requirements, CMS must include an 

element in the market basket index to 

address the resulting cost changes. Or 

alternatively, they request CMS adjust 

base payment rates to account for such 

cost, as it has done in the past for costs 

such as OASIS. 

Finally, the commenter claims the 

weaknesses in the current market basket 

index calculation method is highlighted 

this year in the significant difference 

between the index rate applied to 

hospitals and the index rate proposed 

for HHAs. A difference of 0.5 is, on its 

face, unsupportable, as HHAs have 

experienced significantly increased 

administrative costs for the face-to-face 

encounter rule and the requirements to 

greatly increase professional therapist 

assessments of patients along with 

increases in gas costs for a provider 

group that travels nearly 5 billion miles 

a year. 

Response: The home health market 

basket is a fixed-weight Laspeyres-type 

price index. The index is not, nor is it 

intended to be, a cost index. Its weights 

reflect the cost distribution for a 

selected base year while current-period 

price changes are measured. As such, 

the index measures ‘‘pure’’ price 

changes only. The effects on total 

expenditures resulting from periodic 

changes in the quantity or mix of goods 

and services purchased by home health 

providers are, by design, captured in the 

base year weights (or cost shares), which 

are updated on a recurring basis. 

The 0.5 percentage point difference 

referenced by the commenter (3.0 

percent final FY 2012 IPPS market 

basket update minus the 2.5 percent 

proposed CY 2012 HH market basket 

update [not the 2.4 percent final CY 

2012 HH market basket update]) 

between the HHA market basket 

increase and IPPS market basket 

increase is the result of the differences 

in the inputs that HHAs and IPPS 

hospitals purchase to provide medical 

care services and the expected price 

changes associated with those inputs. 

For instance, IPPS hospitals tend to 

employ a staff with a higher skill mix 

(with the price growth associated with 

that skill mix tending to grow slightly 

more rapidly). Likewise, a significant 

share of hospital costs is dedicated to 

prescription drug expenses (a category 

that is projected to experience relatively 

higher price growth in the coming year). 

2. Home Health Care Quality Reporting 

Program 

a. Background and Quality Reporting 

Requirements 

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

states that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ In addition, 

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

dictates that ‘‘for 2007 and each 

subsequent year, in the case of a HHA 

that does not submit data to the 

Secretary in accordance with subclause 

(II) with respect to such a year, the HH 

market basket percentage increase 

applicable under such clause for such 

year shall be reduced by 2 percentage 

points.’’ This requirement has been 

codified in regulations at § 484.225(i). 

HHAs that meet the quality data 

reporting requirements would be 

eligible for the full home health market 

basket percentage increase. HHAs that 

do not meet the reporting requirements 

would be subject to a 2 percent 

reduction to the home health market 

basket increase. 

b. OASIS Data 

Accordingly, for CY 2012, we 

proposed to continue to use a HHA’s 

submission of OASIS data as one form 

of quality data to meet the requirement 

that the HHA submit data appropriate 

for the measurement of health care 

quality. We proposed for CY 2012 to 

consider OASIS assessments submitted 

by HHAs to CMS in compliance with 

HHA Conditions of Participation and 

Conditions for Payment for episodes 

beginning on or after July 1, 2010 and 

before July 1, 2011 as fulfilling one 

portion of the quality reporting 

requirement for CY 2012. This time 

period would allow 12 full months of 

data collection and would provide us 

the time necessary to analyze and make 

any necessary payment adjustments to 

the payment rates for CY 2012. We 

proposed to reconcile the OASIS 

submissions with claims data to verify 

full compliance with the OASIS portion 

of the quality reporting requirements in 

CY 2012 and each year thereafter on an 

annual cycle July 1 through June 30 as 

described above. 

As set forth in the CY 2008 final rule, 

agencies do not need to submit OASIS 

data for those patients who are excluded 

from the OASIS submission 

requirements under the Home Health 

Conditions of Participation (CoPs) 

§ 484.1–§ 484.265, as well as those 

excluded, as described at 70 FR 76202: 

• Those patients receiving only 

nonskilled services; 

• Those patients for whom neither 

Medicare nor Medicaid is paying for 

home health care (patients receiving 

care under a Medicare or Medicaid 

Managed Care Plan are not excluded 

from the OASIS reporting requirement); 

• Those patients receiving pre- or 

post-partum services; or 

• Those patients under the age of 

18 years. 

As set forth in the CY 2008 HH PPS 

final rule (72 FR 49863), agencies that 

become Medicare-certified on or after 

May 1 of the preceding year (2011 for 

payments in 2012) are excluded from 

any payment penalty for quality 

reporting purposes for the following CY. 

Therefore, HHAs that are certified on or 

after May 1, 2011 are excluded from the 

quality reporting requirement for CY 


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2012 payments. These exclusions only 

affect quality reporting requirements 

and do not affect the HHA’s reporting 

responsibilities under the Conditions of 

Participation and Conditions of 

Payment. 

(1) OASIS Data and Annual Payment 

Update 

HHAs that submit OASIS data as 

specified above are considered to have 

met one portion of the quality data 

reporting requirements. Additional 

portions of the quality data reporting 

requirements are discussed below under 

sections D.2.c and D.2.d. 

(2) OASIS Data and Public Reporting 

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

further states that ‘‘[t]he Secretary shall 

establish procedures for making data 

submitted under sub clause (II) available 

to the public. Such procedures shall 

ensure that a home health agency has 

the opportunity to review the data that 

is to be made public with respect to the 

agency prior to such data being made 

public.’’ 

To meet the requirement for making 

such data public, we proposed to 

continue using a subset of OASIS data 

that is utilized for quality measure 

development and reported on the Home 

Health Compare Web site. Currently, the 

Home Health Compare Web site lists 23 

quality measures from the OASIS data 

set as described below. The Home 

Health Compare Web site, which was 

redesigned in October 2010, is located at 

http://www.medicare.gov/HHCompare/ 

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

contractor, to its own quality data that 

the contractor updates periodically. We 

proposed to continue this process, to 

enable each agency to view its quality 

measures before public posting of data 

on Home Health Compare. 

The following 13 OASIS–C process 

measures have been publicly reported 

on Home Health Compare since October 

2010: 

• Timely initiation of care. 

• Influenza immunization received 

for current flu season. 

• Pneumococcal polysaccharide 

vaccine ever received. 

• Heart failure symptoms addressed 

during short-term episodes. 

• Diabetic foot care and patient 

education implemented during shortterm episodes of care. 

• Pain assessment conducted. 

• Pain interventions implemented 

during short-term episodes. 

• Depression assessment conducted. 

• Drug education on all medications 

provided to patient/caregiver during 

short-term episodes. 

• Falls risk assessment for patients 65 

and older. 

• Pressure ulcer prevention plans 

implemented. 

• Pressure ulcer risk assessment 

conducted. 

• Pressure ulcer prevention included 

in the plan of care. 

We published information about these 

new process measures in the Federal 

Register in the CY 2010 HH PPS 

proposed and final rules (74 FR 40960 

and 74 FR 58096, respectively), and in 

the CY 2011 HH PPS proposed and final 

rules (75 FR 43250 and 75 FR 70401, 

respectively). We proposed and 

finalized the decision to update Home 

Health Compare in October 2010 to 

reflect the addition of the process 

measures. 

We proposed to continue publicly 

reporting these 13 process measures and 

consider them as measures of home 

health quality.HERE 

The following 10 OASIS–C outcome 

measures are currently listed on Home 

Health Compare: 

• Improvement in ambulation/ 

locomotion. 

• Improvement in bathing. 

• Improvement in bed transferring. 

• Improvement in management of 

oral medications. 

• Improvement in pain interfering 

with activity. 

• Acute care hospitalization. 

• Emergency Department Use 

Without Hospitalization. 

• Improvement in dyspnea. 

• Improvement in status of surgical 

wounds. 

• Increase in number of pressure 

ulcers. 

As proposed and finalized in the CY 

2011 HH PPS final rule (75 FR 70401), 

these OASIS–C outcome measure 

calculations were publicly reported for 

the first time in July 2011. 

(3) Transition From OASIS–B1 to 

OASIS–C 

The implementation of OASIS–C on 

January 1, 2010 impacted the schedule 

of quality measure reporting for CY 

2010 and CY 2011. Although sufficient 

OASIS–C data were collected during CY 

2010 and early CY 2011 and risk models 

were in development, the outcome 

reports (found on Home Health 

Compare and the contractor outcome 

reports used for HHA’s performance 

improvement activities) remained static 

with OASIS–B1 data. The last available 

OASIS–B1 reports remained in the 

system and on the Home Health 

Compare site until they could be 

replaced with OASIS–C reports. 

Sufficient numbers of patient episodes 

were needed to report measures based 

on new OASIS–C data. This is 

important because measures based on 

patient sample sizes taken over short 

periods of time can be inaccurate and 

misleading due to issues like seasonal 

variation and under-representation of 

long-stay home health patients. Once 

sufficient OASIS–C data were collected 

and submitted to CMS’s national 

repository, we could begin producing 

new reports based on OASIS–C. 

December 2009 was the last month for 

which outcome data were calculated for 

OASIS–B1 data and OASIS–B1 CASPER 

outcome reports continued to be 

available after March 2010. OASIS–C 

process measures were made available 

to preview in September 2010 and were 

publicly reported in October 2010. 

OASIS–C outcome measures were made 

available to preview in June 2011 and 

were publicly reported in July 2011. 

c. Claims Data, Requirements, and 

Outcome Measure Change 

We proposed to continue to use the 

aforementioned specified measures 

derived from the OASIS–C data for 

purposes of measuring home health care 

quality. We proposed to also use 

measures derived from Medicare claims 

data to measure home health quality. 

This would also ensure that providers 

would not have an additional burden of 

reporting quality of care measures 

through a separate mechanism, and that 

the costs associated with the 

development and testing of a new 

reporting mechanism would be avoided. 

The change to OASIS–C brought 

about modifications to the OASIS–B1 

measure ‘‘Emergent Care,’’ and resulted 

in the following change to that measure: 

• Emergency Department Use without 

Hospitalization: This measure replaces 

the previously reported measure: 

Emergent care. It excludes emergency 

department visits that result in a 

hospital admission because those visits 

are already captured in the acute care 

hospitalization measure. 

Upon review of actual claims data for 

emergency department visits and 

responses to OASIS–C data item M2300, 

we determined that the claims data are 

a more robust source of data for this 

measure, therefore the OASIS-based 

measure ‘‘Emergency Department (ED) 

Use Without Hospitalization’’ was not 

publicly reported effective July 2011. 

The ED Use Without Hospitalization 

measure will be recalculated from 

claims data and we proposed that public 

reporting of the claims-based measure 

would begin January 2012. We invited 

comment on the proposed use of claims 

data in the calculation of home health 

quality measures and as an additional 

measurement of home health quality. 


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To summarize, we proposed that the 

following 13 process and 9 outcome 

measures, which comprise measurement 

of home health care quality, would 

continue to be publicly reported in July 

2011 and quarterly thereafter: 

• Timely initiation of care. 

• Influenza immunization received 

for current flu season. 

• Pneumococcal polysaccharide 

vaccine ever received. 

• Heart failure symptoms addressed 

during short-term episodes. 

• Diabetic foot care and patient 

education implemented during shortterm episodes of care. 

• Pain assessment conducted, 

• Pain interventions implemented 

during short-term episodes. 

• Depression assessment conducted. 

• Drug education on all medications 

provided to patient/caregiver during 

short-term episodes. 

• Falls risk assessment for patients 65 

and older. 

• Pressure ulcer prevention plans 

implemented. 

• Pressure ulcer risk assessment 

conducted. 

• Pressure ulcer prevention included 

in the plan of care. 

• Improvement in ambulation/ 

locomotion. 

• Improvement in bathing. 

• Improvement in bed transferring. 

• Improvement in management of 

oral medications. 

• Improvement in pain interfering 

with activity. 

• Acute care hospitalization. 

• Improvement in dyspnea. 

• Improvement in status of surgical 

wounds. 

• Increase in number of pressure 

ulcers. 

We proposed that the claims-based 

measure ‘‘Emergency Department Use 

without Hospitalization’’ would be 

publicly reported in January 2012. 

Increase in Number of Pressure Ulcers 

Measure 

We did not receive any comment 

related to the Increase in Number of 

Pressure Ulcers measure. However, as a 

part of our measure maintenance 

process which was ongoing at the time 

of the proposed rule, we determined 

that the rates for this measure do not 

distinguish between poor performance 

and good performance and the risk 

adjustment model for this measure is 

insufficient. For these reasons, we will 

not finalize this measure for public 

reporting. 

The following is summary of the 

comments we received regarding the 

Home Health Care Quality 

Improvement: OASIS proposal. 

Comment: We received a total of 11 

comments pertaining to the home health 

quality reporting program, OASIS 

section. Ten of those comments were 

supportive of the proposal for continued 

use of the OASIS based process and 

outcome measures, as well as the use of 

claims based data when claims data are 

applicable and not burdensome to 

collect. The Emergency Department Use 

without Hospitalization and the Acute 

Care Hospitalization measures were 

specifically noted by commenters as 

measures for which claims would be 

more precise and readily available data 

sources. One commenter requested 

further clarification of what data CMS 

will use to calculate this quality 

measure (for example, how would 

observation stays be calculated after a 

planned procedure and how would the 

agency monitor the timing of when the 

last OASIS assessment was completed 

as compared to when the ER visit 

occurred?). Addition of a claims-based 

measure related to observation stays was 

also suggested. 

Response: We appreciate the positive 

feedback supporting the proposed use of 

OASIS process and outcome measures 

and particularly those comments 

supporting the addition of claims as a 

data source. In response to the request 

for further clarification, CMS is still 

working with the measure developer to 

determine the precise specifications for 

the claims-based measure of Emergency 

Department Use Without 

Hospitalization. The specific disposition 

of observation stays is undetermined. 

Details of the measure specifications 

will be provided when finalized. 

Comment: We received one comment 

expressing confusion regarding the use 

of claims data, expressing concern that 

slow claims filing might potentially 

impact the accuracy of the ED Use 

Without Hospitalization measure, 

noting that using the same data base for 

all measures makes more sense and 

stating that the fact that CMS has 

concerns about the reliability of OASIS 

data for one measure suggests concern 

about the reliability of OASIS data 

overall. This commenter recommends 

that CMS abandon the proposal to 

substitute hospital claims data as the 

source for the ED Use Without 

Hospitalization measure. 

Response: In this response, we intend 

to clarify the reason for use of claims 

data for the ED Use Without 

Hospitalization measure. OASIS item 

M2300 asks: ‘‘Since the last time OASIS 

data were collected, has the patient 

utilized a hospital emergency 

department?’’ OASIS data is not 

collected on every home health visit, 

and M2300 is reported only at the time 

of transfer or discharge. CMS 

contractors compared responses on 

OASIS item M2300 to submitted 

outpatient claims for ER visits for 

continuously enrolled Medicare fee-forservice beneficiaries who had a home 

health stay of less than 60 days during 

2010. This analysis showed that only 25 

percent of outpatient ER visits were 

correctly reported on item M2300, 

implying that a measure of emergency 

department use without hospitalization 

calculated from M2300 is unreliable. 

Although there is a delay in receiving 

outpatient claims, 90 percent of 

outpatient claims are received within 

2 months of service date and thus 

utilization measures calculated from 

claims can be reported for the same 

periods as measures calculated from 

OASIS data. Additionally, as CMS relies 

on submitted outpatient claims for 

payment purposes, these data are 

already extensively verified. 

Using a single database as the source 

of all measures is not the best approach. 

It is not feasible to do so because the 

data collected on ED Use Without 

Hospitalization via OASIS is not reliable 

and enhancing the reliability of this data 

may impose undue burden on 

providers. The benefits of reliable data 

outweigh the slight complication of 

drawing quality data from two sources. 

The problem with item M2300 does 

not necessarily imply there may be 

problems with other OASIS items. Other 

OASIS items involve a home health 

practitioner reporting direct observation 

of the patient. M2300, however, asks for 

information that the home health 

practitioner does not directly observe. 

The decision to visit the emergency 

room is typically made by the patient or 

by the patient’s family or other primary 

care-giver. The HHA’s knowledge that 

an emergency department visit occurred 

is dependent on the patient or caregiver 

informing the HHA about the event. 

Reliance on Medicare outpatient 

claims is considerably less burdensome 

to HHAs than requiring additional 

investigation of potential emergency 

department visits. The claims-based 

measure is still under development and 

will be thoroughly tested and validated 

prior to public reporting. As a result of 

the comments and ongoing evaluation of 

the proposed measures, we finalize all 

as we proposed with these exceptions: 

• Public reporting of the claims-based 

ED Use Without Hospitalization 

measure will begin as early as January 

2012, contingent on the measure’s 

readiness for public reporting; and 

• The Increase in Number of Pressure 

Ulcers measure will no longer be 

publicly reported effective as early as 

October 2011. 


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d. Home Health Care CAHPS Survey 

(HHCAHPS) 

In the CY 2011HH PPS final rule Rate 

Update for (75 FR 70404 et seq.), we 

stated that the expansion of the HH 

quality measures reporting requirements 

for Medicare-certified agencies will 

include the Consumer Assessment of 

Healthcare Providers and Systems 

(CAHPS®) Home Health Care 

(HHCAHPS) Survey for the CY 2012 

annual payment update (APU). We are 

maintaining our existing policy as 

issued in the CY 2011 HH PPS Rate 

Update, and moved forward to have 

HHCAHPS linkage to the pay-forreporting (P4R) requirements affecting 

the HH PPS rate update for CY 2012. 

(1) Background and Description of 

HHCAHPS 

As part of the U.S. Department of 

Health and Human Services’ (DHHS) 

Transparency Initiative, we have 

implemented a process to measure and 

publicly report patient experiences with 

home health care using a survey 

developed by the Agency for Healthcare 

Research and Quality’s (AHRQ’s) 

CAHPS® program, and endorsed by the 

National Quality Forum (NQF). The 

HHCAHPS survey is part of a family of 

CAHPS® surveys that asks patients to 

report on and rate their experiences 

with health care. The Home Health Care 

CAHPS (HHCAHPS) survey presents 

home health patients with a set of 

standardized questions about their 

home health care providers and about 

the quality of their home health care. 

Prior to this survey, there was no 

national standard for collecting 

information about patient experiences 

that would enable valid comparisons 

across all HHAs. The history of the 

HHCAHPS has been given in previous 

rules, but it also available on our Web 

site at https://homehealthcahps.org and 

also, in the HHCAHPS Protocols and 

Guidelines Manual, which is 

downloadable from our Web site. 

For public reporting purposes, we 

will report five measures—three 

composite measures and two global 

ratings of care from the questions on the 

HHCAHPS survey. The publicly 

reported data will be adjusted for 

differences in patient mix across HHAs. 

We anticipate that HHCAHPS will first 

be publicly reported in April 2012 on 

Home Health Compare on http:// 

www.medicare.gov. For the HHCAHPS 

reported measures, each composite 

measure consists of four or more 

questions regarding one of the following 

related topics: 

• Patient care (Q9, Q16, Q19, and 

Q24); 

• Communications between providers 

and patients (Q2, Q15, Q17, Q18, Q22, 

and Q23); 

• Specific care issues on medications, 

home safety, and pain (Q3, Q4, Q5, Q10, 

Q12, Q13, and Q14); 

The two global ratings are the overall 

rating of care given by the HHA’s care 

providers, and the patient’s willingness 

to recommend the HHA to family and 

friends. 

The HHCAHPS survey is currently 

available in six languages. At the time 

of the CY 2010 HH PPS final rule, 

HHCAHPS was only available in 

English and Spanish. In the proposed 

rule for CY 2010, we stated that we 

would provide additional translations of 

the survey over time in response to 

suggestions for any additional language 

translations. We now offer HHCAHPS in 

English, Spanish, Mandarin (Simplified) 

Chinese, Cantonese (Classical) Chinese, 

Russian, and Vietnamese languages. We 

will continue to consider additional 

translations of the HHCAHPS in 

response to the needs of the home 

health patient population. 

All of the requirements about 

eligibility for HHCAHPS and 

conversely, which home health patients 

are ineligible for HHCAHPS are 

delineated and detailed in the 

HHCAHPS Protocols and Guidelines 

Manual which is downloadable from 

the official Home Health Care CAHPS 

Web site https://homehealthcahps.org. 

To be eligible, home health patients 

must have received at least two skilled 

home health visits in the past 2 months, 

paid for by Medicare or Medicaid. 

HHCAHPS surveys will not be taken 

from patients who are: 

• Under the age of 18; 

• Deceased; 

• Receiving hospice care; 

• Receiving routine maternity care 

only; 

• Living in a State that restricts the 

release of patient information for a 

specific condition or illness that the 

patient has; or are 

• Requesting that their names not be 

released to anyone. 

We stated in previous rules that 

Medicare-certified agencies are required 

to contract with an approved HHCAHPS 

survey vendor. Beginning in summer 

2009, interested vendors applied to 

become approved HHCAHPS survey 

vendors. HHCAHPS survey vendors are 

required to attend introductory and all 

update trainings conducted by CMS and 

the HHCAHPS Survey Coordination 

Team, as well as to pass a post-training 

certification test. We now have 

approximately 40 approved HHCAHPS 

survey vendors. The list of approved 

vendors is available at https:// 

homehealthcahps.org. 

(2) HHCAHPS Requirements for CY 

2012 

In the CY 2010 HH PPS final rule 

(74 FR 58078 et seq.), we stated that 

HHCAHPS would not be required for 

the APU for CY 2011. We did this so 

that HHAs would have more time to 

prepare for the implementation of 

HHCAHPS. Therefore, in the CY 2010 

HH PPS final rule, we stated that data 

collection should take place beginning 

in the third quarter of CY 2010 to meet 

the HHCAHPS reporting requirements 

for the CY 2012 APU. In the CY 2010 

HH PPS final rule, and in the CY 2011 

HH PPS final rule, we stated that 

Medicare-certified agencies would be 

required to participate in a dry run for 

at least 1 month in third quarter of 2010 

(July, August, and/or September), and to 

begin continuous monthly data 

collection in October 2010 through 

March 2011, for the CY 2012 APU. The 

dry run data were due to the Home 

Health CAHPS® Data Center by 11:59 

p.m., Eastern standard time (e.s.t.) on 

January 21, 2011. The dry run data will 

not be publicly reported on the CMS 

Home Health Compare Web site. The 

purpose of the dry run was to provide 

an opportunity for vendors and HHAs to 

acquire first-hand experience with data 

collection, including sampling and data 

submission to the Home Health Care 

CAHPS Data Center. 

In the CY 2011 HH PPS final rule, it 

was stated that the mandatory period of 

data collection for the CY 2012 APU 

would include the dry run data in the 

third quarter 2010 that were due 11:59 

p.m., e.s.t., on January 21, 2011, data 

from each month in the fourth quarter 

of 2010 (October, November and 

December 2010), and data from each 

month in the first quarter 2011 (January, 

February and March 2011). We 

previously stated that all Medicarecertified HHAs should continuously 

collect HHCAHPS survey data for every 

month in every quarter beginning 

October 2010, and submit these data for 

the fourth quarter of 2010 to the Home 

Health CAHPS Data Center by 11:59 

p.m., Eastern Daylight Time (e.d.t.), on 

April 21, 2011. In the CY 2011 HH PPS 

final rule, we stated that the data 

collected for the 3 months of the first 

quarter 2011 would have to be 

submitted to the Home Health CAHPS 

Data Center by 11:59 p.m., e.d.t., on July 

21, 2011. We also stated that these data 

submission deadlines would be firm 

(that is, no late submissions would be 

accepted). HHAs must monitor their 

HHCAHPS survey vendors to ensure 

that their HHCAHPS data are submitted 


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on time to the Home Health Care 

CAHPS Data Center. HHAs can access 

and review their data submission 

reports on https://homehealthcahps.org, 

and follow the directions on how to 

access these reports in their HHA 

account. 

These periods (a dry run in third 

quarter 2010, and 6 months of data from 

October 2010 through March 2011) were 

deliberately chosen to comprise the 

HHCAHPS reporting requirements for 

the CY 2012 APU because they 

coincided with the OASIS-C reporting 

requirements that would already have 

been due on June 30, 2011 for the CY 

2012 APU. We also exempted Medicarecertified agencies from the HHCAHPS 

reporting requirements if they had fewer 

than 60 HHCAHPS-eligible unique 

patients from April 1, 2009 through 

March 31, 2010. In the CY 2011 HH PPS 

final rule, we stated that by January 21, 

2011 HHAs would need to provide CMS 

with patient counts for the period of 

April 1, 2009 through March 31, 2010. 

We posted a form on https:// 

homehealthcahps.org that the HHAs 

needed to use to submit their patient 

counts. This patient counts reporting 

requirement pertains only to Medicarecertified HHAs with fewer than 60 

HHCAHPS eligible, unduplicated or 

unique patients for that time period. 

The aforementioned agencies are 

exempt from conducting the HHCAHPS 

survey for the APU in CY 2012. 

We stated in the CY 2010 HH PPS 

final rule (74 FR 58078) and in the CY 

2011 HH PPS final rule that we would 

exempt newly Medicare-certified HHAs. 

If an HHA became Medicare-certified 

April 1, 2010 and after, then they would 

be exempt from participating in 

HHCAHPS. 

For CY 2012, we maintain our policy 

that all HHAs, unless covered by 

specific exclusions, must meet the 

quality reporting requirements or be 

subject to a two (2) percentage point 

reduction in the HH market basket 

percentage increase, in accordance with 

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

(3) HHCAHPS Reconsiderations and 

Appeals Process 

We stated in the CY 2011 HH PPS 

final rule that we would propose a 

reconsiderations and appeals process for 

HHAs not meeting the HHCAHPS 

reporting requirements for CY 2012. We 

are finalizing our proposed 

reconsiderations and appeals process for 

HHAs that fail to meet the HHCAHPS 

data collection requirements. HHAs that 

are not compliant with OASIS-C and/or 

HHCAHPS reporting requirements for 

the CY 2012 APU were notified that 

they were noncompliant with CY 2012 

quality reporting requirements. We 

issued a Joint Signature Memorandum 

to RHHIs/MACs with a list of HHAs not 

compliant with OASIS and/or 

HHCAHPS (TDL–aa453, 08–26–2011 in 

a CMS Memorandum dated September 

2, 2011). The September Memorandum 

included language regarding the 

evidence required for the 

reconsideration process, how to prepare 

a request for reconsideration of the CMS 

decision, and that HHAs will have 

30 days to file their requests for 

reconsiderations to CMS. We will 

examine each request and make a 

determination about whether we plan to 

uphold our original decision. HHAs will 

receive CMS’ reconsideration decision 

by December 31, 2011. HHAs have a 

right to appeal under 42 CFR part 405, 

subpart R, to the Provider 

Reimbursement Review Board (PRRB) if 

they were not satisfied with the CMS 

reconsideration determination. 

The CMS Memorandum dated 

September 2, 2011 included the TDL– 

11353, and was published in the CMS 

Manual System, Medicare Claims 

Processing. The CMS Memorandum was 

sent to Fiscal Intermediaries (FIs), 

Regional Home Health Intermediaries 

(RHHIs) and/or Carriers. The RHHIs/ 

MACs verified the claims submissions 

for the identified timeframe for the 2012 

APU period, to confirm that the claims 

match the HHAs we identified as 

noncompliant with OASIS and 

HHCAHPS. The RHHIs/MACs identified 

and notified the HHAs that they could 

lose 2 percent of their 2012 APU, and 

provided them with instructions on how 

to request reconsideration of their 

noncompliant status in respect to 

reporting OASIS and/or HHCAHPS for 

the CY 2012 APU. If HHAs choose to 

seek reconsideration of the CMS 

decision (that they did not fulfill the 

HHCAHPS reporting requirements), 

then HHAs are strongly advised to 

access and review their data 

submissions reports on https:// 

homehealthcahps.org for information 

regarding their vendors data submission 

activities for the months comprising the 

APU period. The RHHIs/MACS will 

forward the HHAs requests for 

reconsideration of their noncompliance 

status for HHCAHPS and/or OASIS 

reporting requirements to CMS on a 

flow basis so that CMS can review and 

prepare recommendations for cross 

component review. The HHAs would be 

informed about CMS’ final decisions by 

December 31, 2011. 

(4) HHCAHPS Oversight Activities 

We stated in the CY 2011 HH PPS 

final rule that vendors and HHAs are 

required to participate in HHCAHPS 

oversight activities to ensure 

compliance with HHCAHPS protocols, 

guidelines, and survey requirements. 

The purpose of the oversight activities 

is to ensure that HHAs and approved 

survey vendors follow the HHCAHPS 

Protocols and Guidelines Manual. As 

stated, all approved survey vendors 

must develop a Quality Assurance Plan 

(QAP) for survey administration in 

accordance with the HHCAHPS 

Protocols and Guidelines Manual. The 

first QAP must be submitted within 6 

weeks of the data submission deadline 

after the vendor’s first quarterly data 

submission. The HHCAHPS 

Coordination Team reviews the QAPs 

and recommends specific revisions. 

HHCAHPS survey vendors must revise 

their QAP until it is fully satisfactory to 

the HHCAHPS Coordination Team. 

Once the vendor has a fully acceptable 

QAP, the vendor will submit subsequent 

updated QAPs to the HHCAHPS 

Coordination Team on an annual basis 

thereafter, or update the QAP at any 

time that changes occur in staff, vendor 

capabilities, or systems. A model QAP 

is included in the HHCAHPS Protocols 

and Guidelines Manual. The QAP 

should include the following: 

• Organizational Background and 

Staff Experience. 

• Work Plan. 

• Sampling Plan. 

• Survey Implementation Plan. 

• Data Security, Confidentiality and 

Privacy Plan. 

• Questionnaire Attachments. 

As part of the oversight activities, the 

HHCAHPS Survey Coordination Team 

conducts on-site visits to the HHCAHPS 

vendors. The purpose of the site visits 

is to allow the HHCAHPS Coordination 

Team to observe the entire Home Health 

Care CAHPS Survey implementation 

process, from the sampling stage 

through file preparation and 

submission, as well as to assess how the 

HHCAHPS data are stored. The 

HHCAHPS Survey Coordination Team 

reviews the survey vendor’s survey 

systems, and assesses administration 

protocols based on the HHCAHPS 

Protocols and Guidelines Manual posted 

at https://homehealthcahps.org. The 

HHCAHPS Survey Coordination Team 

includes the CMS staff assigned to work 

on HHCAHPS, and the Federal 

contractor for the HHCAHPS 

implementation. HHCAHPS survey 

vendors are not part of the HHCAHPS 

Survey Coordination Team. The systems 

and program review include, but are not 

limited, to the following: 

• Survey management and data 

systems; 

• Printing and mailing materials 

facilities; 


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• Telephone call center facilities; 

• Data receipt, entry and storage 

facilities; and 

• Written documentation of survey 

processes. 

After the site visits, HHCAHPS survey 

vendors are given a defined time period 

in which to correct any identified issues 

and provide follow-up documentation 

of corrections for review. In general, the 

defined time periods will be between 2 

weeks to 1 month after these issues are 

stated in the HHCAHPS Coordination 

Team’s site visit report to the HHCAHPS 

survey vendor. HHCAHPS survey 

vendors will be subject to follow-up site 

visits as needed. 

(5) HHCAHPS Requirements for CY 

2013 

For the CY 2013 APU, HHCAHPS data 

collection and reporting are required for 

four continuous quarters. The data 

collection period includes second 

quarter 2011 through first quarter 2012. 

HHCAHPS survey vendors acting on 

behalf of their contracted HHAs are 

required to submit HHCAHPS data files 

quarterly to the Home Health CAHPS 

Data Center on October 21, 2011, 

January 23, 2012, April 19, 2012, and 

July 19, 2012. 

For the CY 2013 APU, HHAs will be 

required to submit their HHCAHPS data 

files to the Home Health CAHPS Data 

Center for CY 2013 as follows: The data 

for the second quarter 2011 by 11:59 

p.m., e.d.t., on October 21, 2011; the 

data for the third quarter 2011 by 11:59 

p.m., e.s.t., on January 23, 2012; the data 

for the fourth quarter 2011 by 11:59 

p.m., e.d.t., on April 19, 2012; and the 

data for the first quarter 2012 by 11:59 

p.m., e.d.t., on July 19, 2012. Beginning 

with April 2012 quarterly data 

submissions and moving forward, 

HHCAHPS quarterly data submissions 

will always be the third Thursday of the 

month (in the months of April, July, 

October, and January). HHAs must 

monitor their HHCAHPS survey vendors 

to ensure that their HHCAHPS data is 

submitted on time to the Home Health 

Care CAHPS Data Center. HHAs can 

access and review their data submission 

reports on https://homehealthcahps.org, 

and follow the directions on how to 

access these reports on their HHA 

account. 

HHAs that have fewer than 60 

HHCAHPS-eligible unduplicated or 

unique patients in the period of April 1, 

2010 through March 31, 2011 are 

exempt from the HHCAHPS data 

collection and submission requirements 

for the CY 2013 APU. For the CY 2013 

APU, agencies with fewer than 60 

HHCAHPS-eligible, unduplicated or 

unique patients are required to submit 

their counts on the Participation 

Exemption Request form posted at 

https://homehealthcahps.org by 11:59 

p.m., e.d.t., on April 19, 2012. This 

deadline is firm, as are all of the 

HHCAHPS quarterly data submission 

deadlines. 

HHAs receiving Medicare certification 

on or after April 1, 2011 are exempt 

from the HHCAHPS data collection and 

submission requirements for the CY 

2013 APU, because these HHAs were 

not Medicare-certified in the period of 

April 1, 2010 and March 31, 2011. 

(6) HHCAHPS Codified Criteria 

The following criteria from the CY 

2011 HH PPS final rule are now revised 

so that the requirements for OASIS and 

Home Health CAHPS are clearly 

distinguishable in the Federal 

regulations. We are revising this section 

to clarify that HHCAHPS is associated 

with the APU described at § 484.225(i) 

and the quality reporting requirements, 

and not with other payment 

requirements. 

In the CY 2011 HH PPS final rule (75 

FR 70465), we stated for § 484.250, 

Patient Assessment Data, that ‘‘An HHA 

must submit to CMS the OASIS–C data 

described at § 484.55(b)(1) and Home 

Health Care CAHPS data for CMS to 

administer the payment rate 

methodologies described in § 484.215, 

§ 484.230, and § 484.235 of this subpart, 

and meet the quality reporting 

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

of the Act.’’ 

We are revising this section to clarify 

that HHCAHPS is only associated with 

the APU described at § 484.225(i) and 

the quality reporting requirements, and 

not with other payment requirements. 

(7) HHCAHPS Requirements for CY 

2014 

For the CY 2014 APU, HHCAHPS data 

collection and reporting is required for 

four continuous quarters. The data 

collection period includes the second 

quarter 2012 through the first quarter 

2013. HHAs are required to submit their 

HHCAHPS data files to the Home Health 

CAHPS Data Center the third Thursday 

of the month for the months of October 

2012, January 2013, April 2013 and July 

2013. HHAs are required to submit their 

HHCAHPS data files to the Home Health 

CAHPS Data Center for CY 2014 as 

follows: For the second quarter 2012 by 

11:59 p.m., e.d.t., on October 18, 2012; 

for the third quarter 2012 by 11:59 p.m., 

e.s.t., on January 17, 2013; for the fourth 

quarter 2012 by 11:59 p.m., e.d.t., on 

April 18, 2013; and for the first quarter 

2013 by 11:59 p.m., e.d.t., on July 18, 

2013. HHAs must monitor their 

HHCAHPS survey vendors to ensure 

that their HHCAHPS data is submitted 

on time to the Home Health Care 

CAHPS Data Center. HHAs can access 

and review their data submission 

reports on https://homehealthcahps.org, 

and follow the directions on how to 

access these reports on their HHA 

account. 

As noted, we exempt HHAs receiving 

Medicare certification on or after April 

1, 2012 from the HHCAHPS data 

collection and submission requirements 

for the CY 2014 APU, as data 

submission and analysis will not be 

possible for an agency that late in the 

reporting period for the CY 2014 APU 

requirements. 

As noted, all HHAs that have fewer 

than 60 HHCAHPS-eligible 

unduplicated or unique patients in the 

period of April 1, 2011 through March 

31, 2012 are exempt from the HHCAHPS 

data collection and submission 

requirements for the CY 2014 APU. For 

the CY 2014 APU, agencies with fewer 

than 60 HHCAHPS-eligible, 

unduplicated or unique patients are 

required to submit their counts on the 

Participation Exemption Request form 

posted on https://homehealthcahps.org 

by 11:59 p.m., e.d.t., on April 18, 2013. 

This deadline is firm, as are all of the 

HHCAHPS quarterly data submission 

deadlines. 

(8) For Further Information on the 

HHCAHPS Survey 

We strongly encourage HHAs 

interested in learning about the survey 

to view the official Web site for the 

HHCAHPS at https// 

homelhealthcahps.org. HHAs can also 

send an email to the HHCAHPS Survey 

Coordination Team at 

HHCAHPS@rti.org. or telephone tollfree (1–(866) 354–0985) for more 

information about HHCAHPS. 

The following is summary of the 

comments we received regarding the 

HHCAHPS proposal. 

Comment: We received several 

comments about the proposed 

reconsiderations and appeals process. 

We were urged not to have the process 

be burdensome to HHAs. 

Response: We agree that the process 

should not be burdensome to HHAs. We 

have modeled the HHCAHPS 

reconsiderations and appeals process 

after the one that is used for Hospital 

CAHPS, which has been in use for 6 

years. We have described the HHCAHPS 

requirements in the notification memo 

that the RHHIs/MACs will be sending to 

the affected HHAs, on behalf of CMS. 

We believe that the HHAs will have 

enough time to prepare their 

reconsideration appeal to CMS within 


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30 days. CMS will fully examine every 

reconsideration request. 

Comment: We received comments 

that there are several variables that may 

result in the collection of inaccurate 

HHCAHPS data that are beyond the 

control of the HHA such as patient 

confusion on how to complete the 

survey or patient refusal to complete the 

survey. 

Response: We allow proxies to 

complete the HHCAHPS survey for 

home health patients who are unable to 

complete the survey on their own. 

Patient refusal to complete the survey 

does not result in the collection of 

inaccurate HHCAHPS data. 

As long as the HHCAHPS protocols 

are followed, HHAs will not be 

penalized. To meet the APU 

requirements, HHAs must follow the 

survey protocols, which allow for nonresponse and proxy response. 

Comment: We received comments 

that recommended that the results of the 

HHCAHPS vendor oversight activities 

be made available to HHAs so they can 

make informed decisions when 

selecting or changing their HHCAHPS 

vendors. 

Response: If a vendor has significant 

issues that would put HHAs at risk for 

not meeting the APU requirements, 

CMS will immediately alert the affected 

HHAs, thereby providing agencies with 

sufficient time to switch vendors and to 

ensure that the HHAs will not be 

penalized if their data collection 

activities are interrupted because of 

circumstances outside of their control. 

We would also note this next to the 

vendor name on the vendor list that is 

posted on https://homehealthcahps.org. 

If we find that a vendor does not comply 

with HHCAHPS protocols and 

guidelines, or correct in a timely 

manner any deficiencies that are found 

during oversight activities, then we will 

remove that vendor from the approved 

list. 

Comment: We received comments 

that recommended that CMS explicitly 

hold HHAs harmless for any failures of 

HHCAHPS vendors to comply with 

HHCAHPS protocols and guidelines. 

Response: We believe that HHAs must 

monitor their vendors to ensure that 

vendors submit data on time, by using 

the information that is available to them 

on the HHCAHPS Data Submission 

Reports. This will also ensure that data 

is submitted in the proper format, and 

will subsequently be successfully 

submitted to the HHCAHPS Data Center. 

Comment: We received comments 

that recommended that CMS provide 

clear instructions to HHAs on when and 

what information is appropriate for the 

HHA to share with its patients regarding 

the HHCAHPS survey. While we are 

aware that some of this information has 

been provided by HHCAHPS 

contractors, there is still some confusion 

among providers, and therefore, we 

believe that additional guidance from 

the Agency is warranted. 

Response: HHAs can say to clients 

that they may receive an HHCAHPS 

survey and that it is a legitimate survey 

that is implemented and sponsored by 

the Federal government. However, the 

HHAs should not give information that 

would coach the patients as to how to 

complete the HHCAHPS survey. Also, 

we are assuming that when the 

commenters wrote that ‘‘we are aware 

that some of this information has been 

provided by HHCAHPS contractors’’ 

that they were referring to the 

HHCAHPS survey vendors, which are 

not CMS contractors. 

Comment: We received comments of 

concern that the HHCAHPS data may be 

more subjective impressions of 

interpersonal relationships with staff 

than valid measures of clinical and 

administrative excellence. We would 

urge CMS to work more closely with the 

members of the home health community 

like us as the data begins to be compiled 

prior to public reporting to prevent 

possible misunderstanding of these 

measures by the public. 

Response: The HHCAHPS is not 

supposed to measure the aspects of 

clinical care that can be captured 

through a medical record. HHCAHPS 

focuses on areas where the patient is the 

best or only source for the information. 

We believe that the HHCAHPS is a valid 

measure of patient’s perspectives of 

home health care. The developmental 

work on the Home Health Care CAHPS 

began in mid-2006, and the first survey 

was field-tested (to validate the length 

and content of the survey) in 2008 by 

the AHRQ and the CAHPS grantees, and 

the final survey was used in a national 

randomized mode experiment in 2009 

through 2010. 

A rigorous, scientific process was 

used in the development of the survey, 

including: A public Call for Measures; 

literature reviews; focus groups with HH 

patients; cognitive interviews (several 

rounds in 2007) with HH patients; 

extensive stakeholder input; technical 

expert panel reviews in each phase of 

the developmental work; 

comprehensive assessment review and 

subsequent endorsement in March 2009 

by the National Quality Forum. The 

NQF represents the consensus of many 

health care providers, consumer groups, 

professional associations, purchasers, 

Federal agencies and research and 

quality organizations); and public 

responses to Federal Register notices. 

The survey received OMB clearance in 

July 2009. Key stakeholders and home 

health experts have been regularly 

providing feedback to CMS about the 

draft HHCAHPS data displays and draft 

information that is being prepared for 

the display of HHCAHPS data that is 

being reported on Home Health 

Compare on http://www.medicare.gov in 

April 2012 and forward. 

Comment: We received comments 

that support the implementation of 

HHCAHPS because it will meaningfully 

reduce the incidence of improper home 

health service use and it will 

complement the changes approved by 

the Congress. 

Response: We appreciate supportive 

comments about HHCAHPS. The survey 

will provide an opportunity for patients 

to share their perspective about the care 

provided, and will complement the 

changes approved by the Congress to 

expand the quality measures and to 

increase transparency in home health. 

Comment: We received a comment 

that urged CMS to involve HHA 

representatives in the analysis of 

CAHPS to determine which measures 

are most appropriate for public 

reporting before posting them on 

Medicare Compare. 

Response: We are following the 

precedence of other CAHPS surveys that 

publicly report the data concerning 

health care providers. We tested and 

analyzed the individual questions and 

how they are best grouped together in 

the formative and developmental stages 

of the survey that included a national 

field test. The Technical Expert Panel 

and the public stakeholders for the 

Home Health Care CAHPS survey chose 

these measures after they reviewed the 

findings of the research grantees that 

tested the CAHPS survey in the field on 

behalf of the Federal government. The 

three composite measures and the two 

global overall ratings were chosen to 

best inform the public about the 

HHCAHPS results for national 

comparisons. 

Comment: We received a comment 

that the HHA should receive an 

administrative reimbursement to cover 

the costs of implementing HHCAHPS. 

Response: The collection of the 

patient’s perspectives of care quality 

data for similar CAHPS surveys, such as 

the Hospital CAHPS survey, follow the 

same model where in the health care 

providers pay the approved survey 

vendors for the data collection costs and 

we pay for the training, technical 

assistance, oversight of vendors and 

data analysis costs. HHAs are strongly 

encouraged to report their respective 

HHCAHPS costs on their CRs but 

should note that these costs are not 


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reimbursable under the HH PPS. It is 

advised that HHAs ‘‘shop around’’ for 

the best cost value for them before 

contracting with an approved 

HHCAHPS vendor to conduct the 

survey on their behalf. The HHCAHP 

approved survey vendors list is on 

https://homehealthcahps.org. 

In summary, we are finalizing the 

HHCAHPS requirements for the CY 

2012 APU as proposed in the CY 2012 

HH PPS proposed rule (76 FR 41051). 

There are no policy changes in 

HHCAHPS from the proposed rule to 

the final rule regarding HHCAHPS. The 

same requirements and deadlines stand 

as final. The HHCAHPS data submission 

due date for the CY 2012 APU are in the 

CY 2011 HH PPS final rule, and they 

mirror the dates that we stated in this 

CY 2012 HH PPS final rule. All data 

submission deadlines for HHCAHPS are 

posted on the official Web site for 

HHCAHPS, https:// 

homehealthcahps.org. 

The periods of a dry run in the third 

quarter 2010, and monthly data 

collection beginning in October 2010 

through March 2011, comprise the 

HHCAHPS reporting requirements for 

the CY 2012 APU. HHAs with patient 

counts of 59 or fewer patients for the 

period of April 1, 2009 through March 

31, 2010 are exempt from the HHCAHPS 

reporting requirements for the CY 2012 

APU. HHAs that became Medicarecertified on April 1, 2010 or later are 

exempt from the HHCAHPS reporting 

requirements for the CY 2012 APU. 

Continuous monthly data collection is 

required for HHCAHPS, as the data 

collection period of April 2011 through 

March 2012, comprise the data 

collection months for the CY 2013 APU, 

and the data collection period of April 

2012 through March 2013, comprise the 

data collection months for the CY 2014 

APU. 

3. Home Health Wage Index 

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

of the Act require the Secretary to 

provide appropriate adjustments to the 

proportion of the payment amount 

under the HH PPS to account for area 

wage differences, using adjustment 

factors that reflect the relative level of 

wages and wage-related costs applicable 

to the furnishing of home health 

services. We apply the appropriate wage 

index value to the labor portion of the 

HH PPS rates based on the site of 

service for the beneficiary (defined by 

section 1861(m) of the Act as the 

beneficiary’s place of residence). 

Previously, we determined each HHA’s 

labor market area based on definitions 

of Metropolitan Statistical Areas (MSAs) 

issued by the Office of Management and 

Budget (OMB). We have consistently 

used the pre-floor, pre-reclassified 

hospital wage index data to adjust the 

labor portion of the HH PPS rates. We 

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

results in an appropriate adjustment to 

the labor portion of the costs, as 

required by statute. 

In the November 9, 2005 final rule for 

CY 2006 (70 FR 68132), we began 

adopting revised labor market area 

definitions as discussed in the Office of 

Management and Budget (OMB) 

Bulletin No. 03–04 (June 6, 2003). This 

bulletin announced revised definitions 

for MSAs and the creation of 

Micropolitan Statistical Areas and CoreBased Statistical Areas (CBSAs). The 

bulletin is available online at http:// 

www.whitehouse.gov/omb/bulletins/ 

b03–04.html. In addition, OMB 

published subsequent bulletins 

regarding CBSA changes, including 

changes in CBSA numbers and titles. 

This rule incorporates the CBSA 

changes published in the most recent 

OMB bulletin. The OMB bulletins are 

available at http://www.whitehouse.gov/ 

omb/bulletins/index.html. 

Finally, we continue to use the 

methodology discussed in the CY 2007 

HH PPS final rule for (71 FR 65884) to 

address those geographic areas in which 

there are no Inpatient Prospective 

Payment System (IPPS) hospitals and, 

thus, no hospital wage data on which to 

base the calculation of the HH PPS wage 

index. For rural areas that do not have 

IPPS hospitals and, therefore, lack 

hospital wage data on which to base a 

wage index, we use the average wage 

index from all contiguous CBSAs as a 

reasonable proxy. Since CY 2007, this 

methodology has been used to calculate 

the wage index for rural Massachusetts. 

However, as indicated in the CY 2012 

HH PPS proposed rule (76 FR 41019), 

there is now a rural IPPS hospital with 

wage data upon which to base a wage 

index for rural Massachusetts. 

Therefore, it is not necessary to apply 

this methodology to rural Massachusetts 

for CY 2012. 

For rural Puerto Rico, we do not apply 

this methodology due to the distinct 

economic circumstances that exist there, 

but instead continue using the most 

recent wage index previously available 

for that area (from CY 2005). 

For urban areas without IPPS 

hospitals, we use the average wage 

index of all urban areas within the State 

as a reasonable proxy for the wage index 

for that CBSA. At the time of the 

proposed rule, both CBSA 49700, Yuba 

City, CA, and CBSA 25980, HinesvilleFort Stewart, GA, did not have IPPS 

hospital wage data. However, for this 

final rule, Yuba City, CA now has IPPS 

hospital wage data. Therefore, the only 

urban area without IPPS hospital wage 

data is Hinesville-Fort Stewart, Georgia 

(CBSA 25980). 

The wage index values are available 

on the CMS Web site at http:// 

www.cms.gov/HomeHealthPPS/ 

HHPPSRN/list.asp. 

The following is summary of the 

comments we received regarding the 

home health wage index proposal. 

Comment: A commenter stated that 

the current method of adjusting labor 

costs using the hospital wage index does 

not accurately account for increased 

travel costs and lost productivity for 

time spent traveling to provide services 

in less densely populated/rural areas. 

The commenter believes that, pending 

development of an industry specific 

wage index, CMS should fully 

investigate the impact of population 

density on HHAs costs and efficiency. 

The commenter suggested that CMS add 

a population density factor by zip code 

during calculation of the labor portion 

of the payment to account for increased 

costs of providing services in less 

densely populated areas. This would 

provide an incentive to providers to 

serve patients in rural areas while at the 

same time reducing excess 

reimbursement for services provided in 

densely populated urban and congregate 

living facilities. The net result of the 

adjustment should be budget neutral or 

perhaps even result in a cost savings. 

Response: We do not have evidence 

that a population density adjustment is 

an appropriate adjustment to the wage 

index. Section 3131(d) of the Affordable 

Care Act requires the Secretary to 

conduct a study on HHA costs involved 

with providing ongoing access to care to 

low-income beneficiaries in medically 

underserved areas, and in treating 

beneficiaries with varying levels of 

severity of illness. Because medically 

underserved areas may be associated 

with population density, the purview of 

the above mentioned study may 

possibly include feasibility of such an 

adjustment as part of that research. 

However, we note that in setting up the 

original HH PPS rates in 2000, we were 

not able to find any cost differences 

between rural and urban HHAs. While 

rural agencies cite the added cost of 

long distance travel to treat their 

patients, urban/non-rural agencies also 

cite added costs such as needed security 

measures and the volume of traffic that 

they must absorb. We will consider this 

suggestion in future research activities. 

Comment: One commenter disagreed 

with the CMS decision to switch from 

MSAs to CBSAs for the wage index 

calculation because it had a negative 


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financial impact on the commenter’s 

geographic area. The commenter notes 

that more than half of the CBSAs in his 

State will experience a decrease in CY 

2012. 

Response: We continue to believe that 

using OMB’s CBSA designations reflect 

the most recent available geographic 

classifications and are a reasonable and 

appropriate way to define geographic 

areas for purposes of determining wage 

index values. 

Comment: Several commenters 

expressed concerns about inequities in 

how the wage index is calculated and 

implemented for HHAs as compared to 

hospitals within the same CBSA. The 

wage index for HHA’s is based on prefloor, pre-reclassified hospital wage 

data, but hospitals in the same 

geographic area have the ability to apply 

for reclassification and may be eligible 

for a rural floor wage index. The 

commenters state that this inequity has 

created a competitive advantage for 

hospitals in recruiting and retaining 

increasingly scarce nurses and 

therapists. Any wage index deviations 

available to hospitals should be equally 

available to other types of providers. 

Response: The regulations that govern 

the HH PPS currently do not provide a 

mechanism for allowing providers to 

seek geographic reclassification. As we 

have explained in past rulemaking 

(most recently, in the CY 2011 HH PPS 

final rule (75 FR 70411)), the rural floor 

and geographic reclassification in the 

IPPS are statutorily authorized and are 

only applicable to hospital payments. 

The rural floor provision is provided at 

section 4410 of the Balanced Budget Act 

of 1997 (Pub. L. 105–33) (BBA) and is 

exclusive to hospitals. The 

reclassification provision provided at 

section 1886(d)(10) of the Act is also 

specific to hospitals. 

Comment: One commenter stated that 

the hospitals in his area are CAHs and 

are cost reimbursed. The commenter 

stated that HHAs cannot offer 

competitive wages for caregivers who 

are paid higher and receive better 

benefits from CAHS in their same 

service area. 

Response: Section 1895(b)(4)(C) of the 

Act states that the wage adjustment 

factors used under the HH PPS may be 

the factors used by the Secretary for 

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

Act. Accordingly, we continue to 

believe that the pre-floor/prereclassified hospice wage index 

continues to be the appropriate wage 

index used by the HH PPS. 

Comment: Several commenters 

recommended that CMS overhaul the 

entire wage index system, as 

recommended by MedPAC in its 

comments to CMS regarding the 

hospital wage index, to eliminate such 

inequities in the future. The 

commenters requested CMS to put a 

freeze on any wage index decreases. 

One commenter believes that the 

Affordable Care Act gives CMS the 

authority needed to issue the 

appropriate changes. However, the 

commenter did not support the 

institution of a new index model except 

when it applies in all provider sectors 

with whatever distinctions are 

appropriate to a provider’s employment 

mix. Another commenter believes that 

the use of the hospital wage index to 

adjust non-hospital reimbursement rates 

was originally intended to be an interim 

measure while CMS examined industryspecific wage data for post-acute 

services. 

Response: As several commenters 

noted, we have research currently under 

way to examine alternatives to the wage 

index methodology, including the issues 

the commenters mentioned about 

ensuring that the wage index minimizes 

fluctuations, matches the costs of labor 

in the market, and provides for a single 

wage index policy. Section 3137 of the 

Affordable Care Act provides that the 

Secretary of Health and Human Services 

shall submit a report to the Congress by 

December 31, 2011, that includes a plan 

to reform the hospital wage index 

system. Section 3137 of the Affordable 

Care Act further instructs the Secretary 

to take into account MedPAC’s 

recommendations on the Medicare wage 

index classification system, and to 

include one or more proposals to revise 

the wage index adjustment applied 

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

for purposes of the IPPS. The 

proposal(s) are to consider each of the 

following: 

• The use of Bureau of Labor 

Statistics data or other data or 

methodologies to calculate relative 

wages for each geographic area. 

• Minimizing variations in wage 

index adjustments between and within 

MSAs and statewide rural areas. 

• Methods to minimize the volatility 

of wage index adjustments while 

maintaining the principle of budget 

neutrality. 

• The effect that the implementation 

of the proposal would have on health 

care providers in each region of the 

country. 

• Issues relating to occupational mix, 

such as staffing practices and any 

evidence on quality of care and patient 

safety, including any recommendations 

for alternative calculations to the 

occupational mix. 

• Provide for a transition. 

To assist us in meeting the 

requirements of section 106(b)(2) of the 

Tax Relief and Health Care Act of 2006 

(Pub. L. 109–432, enacted on December 

20, 2006) (TRHCA), in February 2008, 

we awarded a Task Order under our 

Expedited Research and Demonstration 

Contract to Acumen, LLC. Acumen, LLC 

conducted a study of both the current 

methodology used to construct the 

Medicare wage index and the 

recommendations reported to the 

Congress by MedPAC. Parts 1 and 2 of 

Acumen’s final report, which analyzes 

the strengths and weaknesses of the data 

sources used to construct the CMS and 

MedPAC indexes, is available online at 

http://www.acumenllc.com/reports/cms. 

MedPAC’s recommendations were 

presented in the FY 2009 IPPS final rule 

(available online at http:// 

edocket.access.gpo.gov/2008/pdf/E8- 

17914.pdf). We plan to monitor these 

efforts closely, and to determine what 

impact or influence they may have on 

the HH PPS wage index. At this time, 

we will continue to use the wage index 

policies and methodologies described in 

this final rule to adjust the HH PPS rates 

for differences in area wage levels. 

However, we will continue to monitor 

MedPAC and Acumen’s progress on any 

revisions to the IPPS wage index to 

identify any policy changes that may be 

appropriate for HHAs and potential 

changes may be presented in a future 

proposed rule. The latest information on 

hospital wage index reform is discussed 

in the ‘‘Proposed Changes to the 

Hospital Inpatient Prospective Payment 

Systems for Acute Care Hospitals and 

the Long-Term Care Hospital 

Prospective Payment System and Fiscal 

Year 2012 Rates’’ proposed rule, 

published in the May 5, 2011 Federal 

Register (76 FR 25788). 

Comment: Another commenter objects 

to the use of the pre-floor, prereclassified wage index for home health 

due to the inaccuracy of using a mix of 

hospital costs to measure home health 

labor costs. Problems with the errors 

and omissions in the hospital cost 

reporting method are well documented. 

Response: We utilize efficient means 

to ensure and review the accuracy of the 

hospital CR data and resulting wage 

index. The home health wage index is 

derived from the pre-floor, prereclassified hospital wage index which 

is calculated based on CR data from 

hospitals paid under the hospital IPPS. 

All IPPS hospitals must complete the 

wage index survey (Worksheet S–3, 

Parts II and III) as part of their Medicare 

CRs. Cost reports will be rejected if 

Worksheet S–3 is not completed. In 

addition, our intermediaries perform 

desk reviews on all hospitals’ 


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Worksheet S–3 wage data, and we run 

edits on the wage data to further ensure 

the accuracy and validity of the wage 

data. Furthermore, HHAs have the 

opportunity to submit comments on the 

hospital wage index data during the 

annual IPPS rulemaking period. 

Therefore, we believe our review 

processes result in an accurate reflection 

of the applicable hospital wages for the 

areas given. We also believe the use of 

this hospital wage data results in an 

appropriate adjustment to the labor 

portion of the home health costs, as 

required by statute. 

Comment: A commenter stated that 

CMS exacerbates HH wage index 

disparities by changing the methodology 

used to address geographic areas in 

which there are no IPPS hospitals, and 

thus, no hospital wage data on which to 

base the calculation of the HH PPS wage 

index. For rural areas that do not have 

IPPS hospitals, CMS used the average 

wage index from all contiguous CBSAs 

as a reasonable estimate. This 

methodology was used to calculate the 

wage index for only one state, 

Massachusetts. It is well documented 

that two CAHs in Massachusetts 

converted back from CAH status even 

though doing so would not benefit them 

directly. By giving up their cost based 

reimbursement, these two hospitals 

increase the home health wage index in 

Massachusetts. Due to the budget 

neutral nature of this methodology, the 

HHAs in the other 49 states will face a 

reduction in payments. The commenter 

requested that CMS re-evaluate the 

methodology used to calculate the wage 

index for rural areas that do not have 

IPPS hospitals such as was the case for 

the State of Massachusetts. The 

inequitable distribution of Medicare 

payments due to obvious manipulation 

by specific providers clearly represents 

preferential treatment. 

Response: By nature, the hospital 

wage index is constructed, in the 

aggregate, to average to 1.0. Therefore, 

the index is designed to be budget 

neutral in the sense that for areas where 

wage index values increase, those 

increases are offset by decreases in other 

areas. The hospital wage index is based 

on hospital cost data and hospital 

utilization, and thus, in the aggregate, 

when applied to HH utilization for the 

purposes of impacts, the average wage 

index value may not result to be exactly 

1.0. For instance, as explained in the 

impact analysis section for this final 

rule, the new wage index will result in 

an estimated increase of $10 million in 

aggregate payments to HHAs in CY 

2012. 

When there is an IPPS hospital in an 

area, we use the IPPS hospital(s) wage 

data to calculate the pre-floor, prereclassified hospital wage index which 

is used for the HH PPS wage index. In 

the CY 2007 HH PPS final rule (71 FR 

65905), we established a policy to 

address rural areas without an IPPS 

hospital. We use the average wage index 

from CBSAs which are contiguous to the 

rural area as an acceptable proxy for a 

rural wage index. Other post acute 

payment systems such as SNF and IRF 

adopted this policy as well. When an 

IPPS hospital emerges in an area that 

previously had none, our policy 

requires that we use the CR data from 

that hospital to compute that areas wage 

index. 

Comment: Beginning in FY 2004, 

excluding CAH data from the 

calculation of the hospital wage index 

affects the calculation of the HH Wage 

index. As CAHs are located in rural 

areas, the absence of CAH wage data 

further compromises the accuracy, and 

therefore, appropriateness, of using a 

hospital wage index to determine the 

labor costs of HHAs located in rural 

areas. 

Response: As stated above, beginning 

with the CY 2007 HH PPS final rule (71 

FR 65905), we established a policy to 

address rural areas without an IPPS 

hospital. In that rule, we addressed 

commenters concerns with our former 

policy of using the last available rural 

wage index for those areas which no 

longer had an IPPS hospital. We 

outlined four alternatives for imputing a 

wage index for those rural areas. We 

believe that using the average wage 

index from CBSAs which are contiguous 

to the rural area as an acceptable proxy 

for a rural wage index is accurate and 

appropriate. 

Comment: One commenter noted that 

the wage index is subject to swings in 

area values that are far beyond 

manageable by providers. With a wage 

index reduction of over 10 points in 

some cases, it is impossible to sensibly 

budget a fiscal year, particularly when 

the index is not published until a few 

months before a calendar year. The 

commenter suggested that CMS apply 

limits on the decreases and increases 

that can occur from one year to the next 

with the wage index. 

Response: Updating the wage index 

must be done in a budget neutral 

manner. Establishing limits on how 

much a particular wage index could 

increase or decrease from one year to 

another would not be consistent with 

budget neutrality. Consequently, we 

implement updated versions of the wage 

index, in their entirety. 

Comment: A commenter is concerned 

that the wage index in his locale was 

proposed to decrease by 4.54 percent 

from CY 2011 to CY 2012. 

Response: The wage index values are 

based on hospital cost data. 

Consequently, increases and decreases 

in the wage index values are normal. 

4. CY 2012 Annual Payment Update 

a. National Standardized 60-Day 

Episode Rate 

The Medicare HH PPS has been in 

effect since October 1, 2000. As set forth 

in the July 3, 2000 final rule (65 FR 

41128), the base unit of payment under 

the Medicare HH PPS is a national 

standardized 60-day episode rate. As set 

forth in § 484.220, we adjust the 

national standardized 60-day episode 

rate by a case-mix relative weight and a 

wage index value based on the site of 

service for the beneficiary. 

In the CY 2008 HH PPS final rule with 

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

revised the home health market basket. 

To provide appropriate adjustments to 

the proportion of the payment amount 

under the HH PPS to account for area 

wage difference, we apply the 

appropriate wage index value to the 

labor portion of the HH PPS rates. The 

labor-related share of the case-mix 

adjusted 60-day episode rate is 77.082 

percent and the non-labor-related share 

is 22.918 percent. The CY 2012 HH PPS 

rates use the same case-mix 

methodology and application of the 

wage index adjustment to the labor 

portion of the HH PPS rates as set forth 

in the CY 2008 HH PPS final rule with 

comment period. Following are the 

steps we take to compute the case-mix 

and wage adjusted 60-day episode rate: 

(1) Multiply the national 60-day 

episode rate by the patient’s applicable 

case-mix weight. 

(2) Divide the case-mix adjusted 

amount into a labor (77.082 percent) 

and a non-labor portion (22.918 

percent). 

(3) Multiply the labor portion by the 

applicable wage index based on the site 

of service of the beneficiary. 

(4) Add the wage-adjusted portion to 

the non-labor portion, yielding the casemix and wage adjusted 60-day episode 

rate, subject to any additional applicable 

adjustments. 

In accordance with section 

1895(b)(3)(B) of the Act, this document 

constitutes the annual update of the HH 

PPS rates. The HH PPS regulations at 

§ 484.225 set forth the specific annual 

percentage update methodology. In 

accordance with § 484.225(i), for a HHA 

that does not submit home health 

quality data, as specified by the 

Secretary, the unadjusted national 


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prospective 60-day episode rate is equal 

to the rate for the previous calendar year 

increased by the applicable home health 

market basket index amount minus two 

percentage points. Any reduction of the 

percentage change will apply only to the 

calendar year involved and will not be 

considered in computing the 

prospective payment amount for a 

subsequent calendar year. 

For CY 2012, we proposed to base the 

wage index adjustment to the labor 

portion of the HH PPS rates on the most 

recent pre-floor and pre-reclassified 

hospital wage index. As discussed in 

the July 3, 2000 HH PPS final rule, for 

episodes with four or fewer visits, 

Medicare pays the national per-visit 

amount by discipline, referred to as a 

LUPA. We update the national per-visit 

rates by discipline annually by the 

applicable home health market basket 

percentage. We adjust the national pervisit rate by the appropriate wage index 

based on the site of service for the 

beneficiary, as set forth in § 484.230. We 

proposed to adjust the labor portion of 

the updated national per-visit rates used 

to calculate LUPAs by the most recent 

pre-floor and pre-reclassified hospital 

wage index. We also proposed to update 

the LUPA add-on payment amount and 

the NRS conversion factor by the 

applicable home health market basket 

update of 1.4 percent for CY 2012. 

Medicare pays the 60-day case-mix 

and wage-adjusted episode payment on 

a split percentage payment approach. 

The split percentage payment approach 

includes an initial percentage payment 

and a final percentage payment as set 

forth in § 484.205(b)(1) and 

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

percentage payment on the submission 

of a request for anticipated payment 

(RAP) and the final percentage payment 

on the submission of the claim for the 

episode, as discussed in § 409.43. The 

claim for the episode that the HHA 

submits for the final percentage 

payment determines the total payment 

amount for the episode and whether we 

make an applicable adjustment to the 

60-day case-mix and wage-adjusted 

episode payment. The end date of the 

60-day episode as reported on the claim 

determines which calendar year rates 

Medicare would use to pay the claim. 

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

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A PEP adjustment as set forth in 

§ 484.205(d) and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

HH PPS payment rates are updated, 

annually, by the HH PPS payment 

update percentage. For CY 2012, the HH 

PPS payment update percentage is the 

CY 2012 home health market basket 

update percentage (2.4 percent) minus 1 

percentage point (per the Affordable 

Care Act) for a CY 2012 HH PPS 

payment update percentage of 1.4 

percent. For HHAs that do not submit 

the required quality data, the CY 2012 

HH PPS payment update percentage (1.4 

percent) is reduced by 2 percentage 

points for a CY 2012 HH PPS payment 

update percentage (for HHAs that do not 

submit the required quality data) of 

¥0.6 percent. 

b. Updated CY 2012 National 

Standardized 60-Day Episode Payment 

Rate 

In calculating the annual update for 

the CY 2012 national standardized 60- 

day episode payment rates, we first look 

at the CY 2011 rates as a starting point. 

The CY 2011 national standardized 60- 

day episode payment rate is $2,192.07. 

Next, we update that payment amount 

by the CY 2012 HH PPS payment update 

percentage of 1.4 percent. 

As previously discussed in section 

II.A. of this final rule (‘‘Case-Mix 

Measurement’’), our updated analysis of 

the change in case-mix that is not due 

to an underlying change in patient 

health status reveals an additional 

increase in nominal change in case-mix. 

Therefore, we reduce rates by 3.79 

percent in CY 2012, resulting in an 

updated CY 2012 national standardized 

60-day episode payment rate of 

$2,138.52. The updated CY 2012 

national standardized 60-day episode 

payment rate for an HHA that submits 

the required quality data is shown in 

Table 13. The updated CY 2012 national 

standardized 60-day episode payment 

rate for an HHA that does not submit the 

required quality data is updated by the 

CY 2012 HH PPS payment update 

percentage (1.4 percent) minus 2 

percentage points and is shown in Table 

14. 

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c. National Per-Visit Rates Used To Pay 

LUPAs and Compute Imputed Costs 

Used in Outlier Calculations 

In calculating the CY 2012 national 

per-visit rates used to calculate 

payments for LUPA episodes and to 

compute the imputed costs in outlier 

calculations, the CY 2011 national pervisit rates for each discipline are 

updated by the CY 2012 HH PPS 

payment update percentage of 1.4 

percent. National per-visit rates are not 

subject to the 3.79 percent reduction 

related to the nominal increase in casemix. The CY 2012 national per-visit 

rates per discipline are shown in Table 

15. The six home health disciplines are 

as follows: 

• Home Health Aide (HH aide); 

• Medical Social Services (MSS); 

• Occupational Therapy (OT); 

• Physical Therapy (PT); 

• Skilled Nursing (SN); and 

• Speech Language Pathology 

Therapy (SLP). 


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d. LUPA Add-On Payment Amount 

Update 

Beginning in CY 2008, LUPA episodes 

that occur as the only episode or initial 

episode in a sequence of adjacent 

episodes are adjusted by adding an 

additional amount to the LUPA 

payment before adjusting for area wage 

differences. We update the LUPA 

payment amount by the CY 2012 HH 

PPS payment update percentage of 1.4 

percent. The LUPA add-on payment 

amount is not subject to the 3.79 percent 

reduction related to the nominal 

increase in case-mix. For CY 2012, we 

update the add-on to the LUPA payment 

to HHAs that submit the required 

quality data by the CY 2012 HH PPS 

payment update percentage of 1.4 

percent. The CY 2012 LUPA add-on 

payment amount is shown in Table 16. 

We update the add-on to the LUPA 

payment to HHAs that do not submit the 

required quality data by the CY 2012 

HH PPS payment update percentage (1.4 

percent) minus two percentage points, 

for a –0.6 percent update. 


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e. Nonroutine Medical Supply 

Conversion Factor Update 

Payments for nonroutine medical 

supplies (NRS) are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. We increase CY 2011 

NRS conversion factor ($52.54) by the 

CY 2012 HH PPS payment update 

percentage of 1.4 percent. The final 

updated CY 2012 NRS conversion factor 

for 2012 appears in Table 17. For CY 

2012, the NRS conversion factor is 

$53.28. 

Using the NRS conversion factor 

($53.28) for CY 2012, the payment 

amounts for the various severity levels 

are shown in Table 18. 


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For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2011 NRS conversion 

factor. We increase the CY 2011 NRS 

conversion factor ($52.54) by the CY 

2012 HH PPS payment update 

percentage of 1.4 percent minus 2 

percentage points, or –0.6 percent. The 

CY 2012 NRS conversion factor ($52.22) 

for HHAs that do not submit quality 

data is shown in Table 19. 

The payment amounts for the various 

severity levels based on the updated 

conversion factor ($52.22) for HHAs that 

do not submit quality data are 

calculated in Table 20. 

5. Rural Add-On 

Section 421(a) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act (MMA) of 2003 (Pub. 

L. 108–173, enacted on December 8, 

2003 and as amended by section 3131(c) 

of the Affordable Care Act) provides an 

increase of 3 percent of the payment 

amount otherwise made under section 

1895 of the Act for home health services 

furnished in a rural area (as defined in 

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

episodes and visits ending on or after 

April 1, 2010 and before January 1, 

2016. The statute waives budget 

neutrality related to this provision, as 

the statute specifically states that the 

Secretary shall not reduce the standard 

prospective payment amount (or 

amounts) under section 1895 of the Act 

applicable to home health services 

furnished during a period to offset the 

increase in payments resulting in the 

application of this section of the statute. 

The 3 percent rural add-on is applied 

to the national standardized 60-day 

episode rate, national per-visit rates, 

LUPA add-on payment, and NRS 

conversion factor when home health 

services are provided in rural (nonCBSA) areas. Refer to Tables 21 thru 25 

for these payment rates. 

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BILLING CODE 4120–01–C 

E. Therapy Corrections and 

Clarifications 

1. Therapy Technical Correction to 

Regulation Text 

In the CY 2012 HH PPS proposed rule 

(76 FR 41023 through 41024), we noted 

that regulation text at 

§ 409.44(c)(2)(i)(D)(2) associated with 

changes we made to our regulations for 

CY 2011 required a technical correction. 

This technical correction was to change 

the word ‘‘before’’ in this regulation to 

the phrase ‘‘no later than’’ such that the 

final wording would read, ‘‘Where more 

than one discipline of therapy is being 

provided, the qualified therapist from 

each discipline must provide the 

therapy service and functionally 

reassess the patient in accordance with 

§ 409.44(c)(2)(i)(A) during the visit 

which would occur close to but no later 

than the 19th visit per the plan of care.’’ 

2. Occupational Therapy Policy 

Clarifications 

We also proposed (76 FR 41024) to 

clarify when occupational therapy 

would be considered a dependent 

service versus when it would be 

considered a qualifying service under 

the Medicare home health benefit, 

explaining the history of occupational 

therapy as a skilled yet dependent 

service under the benefit. We 

highlighted key regulations that explain 

the status of occupational therapy and 

clarified the status of when 

occupational therapy becomes a 

qualifying service by proposing to 

change the regulation text at 

§ 409.42(c)(4) to establish exactly when 

occupational therapy becomes a 

qualifying service. We proposed to 

amend § 409.42(c)(4) to state that 

occupational therapy services that meet 

the requirements of § 409.44(c) initially 

qualify for home health coverage as a 

dependent service as defined in 

§ 409.45(d) if the beneficiary’s eligibility 

for home health services was 

established by virtue of a prior need for 

intermittent skilled nursing care, 

speech-language pathology services, or 

physical therapy in the current or prior 

certification period. Subsequent to an 

initial covered occupational therapy 

service, continuing occupational 

therapy services which meet the 

requirements of § 409.44(c) would be 

considered qualifying services. 

We also proposed a change to 

§ 409.44(c) to include a technical 

correction to this regulation text. We 

proposed to correct ‘‘(c)(1) through (4)’’ 

to, ‘‘(c)(1) and (2),’’ which is the correct 

reference. 

The following is a summary of the 

comments we received regarding the 

therapy corrections and clarifications. 

Comment: All commenters were 

supportive of or neutral toward the 

policy clarification regarding when 

occupational therapy becomes a 

qualifying service. Among these 

comments, some requested we further 

clarify whether occupational therapy 

can continue to be the qualifying service 

when the need for occupational therapy 

spans into a subsequent episode. One 

commenter asked for further 

clarification regarding when 

occupational therapy must be followed 

by a skilled nursing, physician therapy, 

or speech therapy service. Another 

commenter urged CMS to follow up this 

policy clarification with detailed 

explanations in the Medicare Benefit 

Policy Manual, including through the 

use of examples. Another commenter 

expressing agreement with our policy 

clarification, equated the clarifying 

policy with the elimination of the 

requirement that an original qualifying 

service must complete at least one 

covered visit after the initial dependent 

occupational therapy visit. 

Response: We thank commenters for 

their positive response to our 

clarification of when occupational 

therapy becomes a qualifying service. 

Because some commenters have 

suggested that the regulation text could 

be clarified for episodes beyond the 

initial episode for patients receiving 

more than one episode of home health, 

we are revising § 409.42(c)(4) to further 

clarify the regulation text in this final 

rule. 

In response to the commenter who 

stated that the proposed policy removed 

the requirement that an original 

qualifying service must complete at 

least one covered visit after the initial 

dependent occupational therapy visit, 

we note that the commenter’s 

interpretation of the proposed policy is 

not accurate as we will describe below. 

In response to the commenter who 

requested further clarification regarding 

when occupational therapy must be 

followed by a skilled nursing, physician 

therapy, or speech therapy service, we 

clarify that the initial occupational 

therapy service must be followed by 

another qualifying service to be covered. 

Subsequent occupational therapy 

services, however, do not require 

another qualifying service to follow 

them. Specifically, we are clarifying that 

once a beneficiary’s eligibility for home 


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health services has been established by 

virtue of a prior need for an intermittent 

skilled service (that is, skilled nursing 

care, physical therapy, or speechlanguage pathology therapy), and the 

beneficiary also meets each of the 

criteria specified in § 409.44(c), the first 

occupational therapy service provided 

to the patient is considered a dependent 

service. We note that § 409.45(a) 

describes that in order for Medicare to 

cover a dependent service, the service 

must be followed by a qualifying skilled 

service, which meets the criteria in 

§ 409.44(c), except when certain 

unexpected circumstances occur, such 

as an unexpected inpatient admission or 

the death of the beneficiary. As such, 

the first occupational therapy service, 

which is a dependent service, is covered 

only when followed by an intermittent 

skilled nursing care service, speechlanguage pathology service, or physical 

therapy service which meet the criteria 

in § 409.44(c), unless the exceptional 

circumstance criteria is met. Once that 

requirement for covered occupational 

therapy has been met, all subsequent 

occupational therapy services that meet 

the criteria in § 409.44(c) are considered 

to be qualifying, both in the current and 

in subsequent certification periods 

(subsequent adjacent episodes). Once 

occupational therapy has become a 

qualifying service, it remains a 

qualifying service from that point on as 

long as the services continue to meet the 

criteria in § 409.44(c). Therefore, there is 

no need for another qualifying skilled 

service to follow a covered qualifying 

occupational therapy service at the end 

of a home health episode. It is possible 

for covered qualifying occupational 

therapy services to exist at the end of an 

initial episode for a given beneficiary, if 

all of the above described requirements/ 

criteria are met, without additional 

qualifying skilled nursing care, physical 

therapy, or speech-language pathology 

services following that covered 

qualifying occupational service. We 

plan to include these clarifications in 

Pub. 100–02, Chapter 7, Medicare 

Benefit Policy Manual. 

Comment: We received several 

comments regarding the therapy 

reassessment requirements finalized 

with the CY 2011 HH PPS final rule. 

Some commenters called for CMS to 

stop all or part of the requirements. A 

number of commenters expressed their 

belief that with the 13th and 19th 

reassessment visit requirement, the 30- 

day reassessment requirement is not 

needed. These commenters stated the 

same exceptions permitted for the 13th 

and 19th-reassessment visit policy 

should apply to the 30-day reassessment 

policy as well to make it more flexible. 

A few commenters gave hospitalizations 

as an example of when there should be 

an exception to the 30-day reassessment 

requirement, noting that sometimes 

when home health patients are admitted 

to the hospital, the hospital might be 

delayed several days in contacting the 

HHA or not contact the HHA at all. One 

commenter questioned the logic of these 

therapy regulations, suggesting that they 

decrease the productivity of therapists 

and other home health staff, leading to 

agencies having to hire more staff to 

cover the needs of the aging population. 

Many commenters stated the therapy 

requirements are causing an undue 

burden on agencies while interfering 

with quality therapy care that a patient 

receives. Another commenter suggested 

that these therapy policies have had the 

opposite effect of what we intended 

because agencies that previously did not 

use therapy assistants are now using 

them more due to the increased costs 

associated with our policies. Among the 

alternatives that commenters proposed 

were to have reassessments required 

every 14 days, every 12–15 days for the 

first 30 days and then at least every 30 

days, and between days 15–21 and 29– 

35 (that is, within the 3rd and 5th weeks 

of the episode). 

Among those commenters who 

referred to the issues of administrative 

burden and inefficiency, especially in 

light of State licensure requirements for 

therapists (for example, New York 

requires PTAs must be supervised every 

6 visits or every 30 days, whichever 

comes first), one commenter mentioned 

adding a 0.5 full time equivalent (FTE) 

for clinical auditing and 1 FTE as a 

scheduler to assure appropriate 

scheduling and track compliance. Some 

commenters suggested that the policy 

requires too many assessments; 

speaking of multiple-therapy cases, one 

commenter stated that these excessive 

assessments lead to lumping back-toback assessments by multiple therapists. 

The commenter also suggested that due 

to our recalibration of therapy weights 

that de-emphasize high-therapy 

episodes less than before, these 13th 

and 19th-reassessment visits are no 

longer needed. One commenter stated 

that a physical therapist is expected to 

document for an occupational therapist. 

Another commenter recommended that 

we reconvene a technical expert panel 

to examine the appropriate use of 

therapy assistants and nursing 

personnel under the benefit to verify 

whether use of therapy assistants in 

particular is clinically inappropriate. 

The commenter also provided detailed 

explanations on the role of therapists 

and therapy assistants and how they 

interact with one another in such areas 

as communication, decision-making, 

and patient care delivery. The 

commenter also provided detailed 

recommendations on how the therapy 

CY 2011 policies can be better 

communicated, including through 

manual additions and revisions, and 

additional Questions and Answers. This 

commenter noted that some of the 

confusion over the 13th and 19th-visit 

requirements has to do with whether the 

‘‘count’’ includes both covered and noncovered visits. Last, this commenter 

suggested that no additional changes to 

our therapy policies be made until a 

technical evaluation panel (TEP) can 

develop an alternate payment system for 

therapy alone. This commenter and 

another requested that CMS provide 

additional training for therapists and 

HHAs regarding these therapy 

requirements. 

Response: We thank the commenters 

for their feedback, but note that the 

comments regarding the therapy 

reassessment requirements from the CY 

2011 HH PPS final rule (75 FR 70372) 

are outside of the scope of this rule. 

However, we are further clarifying our 

policies and respond to comments 

regarding the administrative burden of 

these requirements and the suggestion 

that due to our recalibration of therapy 

weights that these requirements are no 

longer needed. We respectfully remind 

commenters that our reasons for the 

therapy reassessments outlined in the 

CY 2011 HH PPS final rule were not 

only to address payment vulnerabilities 

that have led to high use and sometimes 

overuse of therapy services, but also to 

ensure more qualified therapist 

involvement for beneficiaries receiving 

high amounts of therapy which 

evidence shows results in better patient 

outcomes. We note again, as we did in 

the CY 2011 HH PPS final rule (75 FR 

70390 through 70391), that research 

studies conducted by Linda Resnick (of 

Brown University) et al., entitled 

‘‘Predictors of Physical Therapy Clinic 

Performance in the Treatment of 

Patients with Low Back Pain 

Syndromes’’ (2008, funded by a grant 

from the National Institute of Child 

Health) and ‘‘State Regulation and the 

Delivery of Physical Therapy Services’’ 

(2006, funded in part through a grant 

from the Agency for Healthcare 

Research and Quality) provide support 

for our therapy policies. Both studies 

concluded that more therapy time spent 

with a qualified physical therapist, and 

less time with a physical therapist 

assistant, is more efficient and leads to 

better patient outcomes. In these 


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studies, the lower percentage of time 

seen by a qualified therapist and the 

greater percentage of time seen by an 

assistant or aide, the more likely a 

patient would have more visits per 

treatment per episode. The studies also 

concluded that, although delegation of 

care to therapy support personnel such 

as assistants may extend the 

productivity of the qualified physical 

therapist, it appears to result in less 

efficient and effective services. We 

believe that by requiring regular visits 

by a qualified therapist during a course 

of treatment, we will achieve more 

appropriate and efficient provision of 

therapy services while also achieving 

better therapy outcomes. 

We also note that even with 

reductions in payments for high-therapy 

episodes, HHAs receive higher 

payments for these episodes than other 

episodes. We continue to believe that 

the requirement for a qualified therapist 

(instead of an assistant) to perform the 

needed therapy service at key points in 

a patient’s course of treatment, as well 

as to assess, measure and document the 

effectiveness of the therapy provided 

promotes more effective and efficient 

care. Regarding the issue of the at least 

every 30-days reassessment requirement 

and hospitalizations, we also note that 

through a recently-posted Question and 

Answer, available at http:// 

www.cms.gov/HomeHealthPPS/ 

Downloads/ 

Therapy_Questions_and_Answers.pdf, 

we have allowed for one exception to 

the 30-day reassessment requirement 

(that is, when there is a hold on therapy 

due to the patient’s hospitalization for 

an unexpected change in the patient’s 

condition). As we stated in this question 

and answer, we believe that the policy 

that requires a qualified therapist to 

perform the necessary therapy service, 

assess the patient, measure, and 

document the effectiveness of the 

therapy at least once every 30 days 

during a course of therapy treatment is 

essential to ensuring that effective, 

reasonable, and necessary therapy 

services are being provided to the 

patient. In the case of a home health 

patient where the therapy goals in the 

plan of care have not been met, but the 

doctor has instead ordered a temporary 

interruption in therapy, we would 

usually expect that the unique clinical 

condition of the patient would enable 

the HHA to anticipate that an 

interruption in therapy may be needed. 

In such cases, the HHA should ensure 

that the requirements are met earlier 

than the end of the 30-day period to 

ensure the HHA meets the 30-day 

requirement. 

Where unexpected sudden changes in 

the patient’s condition result in a need 

to stop therapy, we would expect to see 

documentation and evidence in the 

medical record which would support an 

unexpected change in the patient’s 

condition which precludes delivery of 

the therapy service. We will modify our 

manual to describe that in such 

documented cases, the 30-day qualified 

therapist visit/assessment/measurement 

requirement can be delayed until the 

patient’s physician orders therapy to 

resume. 

We also note in response to the 

commenter that stated a physical 

therapist would be asked to do the 

assessment for an occupational therapist 

that, as we stated in the CY 2011 HH 

PPS final rule (75 FR 70392), 

in§ 409.44(c)(2)(i)(A), we clarified that 

our expectation is that only the therapist 

of his or her own corresponding 

discipline should complete the 

reassessment for that therapy discipline. 

Because we recognize that agencies and 

therapists continue to have questions on 

how to count therapy visits to determine 

when the required therapy assessment 

visits (which are to occur close to both 

the 14th and 20th Medicare-covered 

therapy visits but no later than the 13th 

and 19th Medicare-covered therapy 

visits) should occur, we have provided 

a clarification in § 409.44(c)(2)(i)(C)(2) 

and § 409.44(c)(2)(i)(D)(2) that from a 

Medicare payment perspective, only 

Medicare-covered visits are to be 

considered and counted. Specifically, to 

reflect that Medicare payment policy 

recognizes only Medicare-covered visits, 

we are inserting the words, ‘‘Medicarecovered’’ before the words, ‘‘therapyvisit’’ in both these regulations related 

to multiple therapy disciplines being 

provided because commenters have 

expressed confusion over the process of 

counting at both of these junctures. We 

have also inserted the words, ‘‘the 14th 

Medicare-covered therapy visit’’ at 

§ 409.44(c)(2)(i)(C)(2) and the words, 

‘‘the 20th Medicare-covered therapy 

visit’’ at § 409.44(c)(2)(i)(D)(2) to further 

reinforce that the counting of therapy 

visits for Medicare payment purposes 

should include only those Medicarecovered visits which are close to the 

14th and 20th Medicare-covered therapy 

visits, but no later than the 13th and 

19th Medicare-covered therapy visit. 

Last, to further address commenters’ 

confusion, we have made minor changes 

to the regulation text to make the 

language between § 409.44(c)(2)(i)(C)(2) 

and 409.44(c)(2)(i)(D)(2) consistent. 

We note that the counting of therapy 

visits for Medicare payment purposes 

might differ from how agencies and 

therapists would count therapy visits for 

a patient’s plan of care. Consequently, 

we have also removed the references to 

the patient’s ‘‘plan of care’’ in 

§ 409.44(c)(2)(i)(C)(2) and 

§ 409.44(c)(2)(i)(D)(2). We also note that 

both Medicare-covered and non-covered 

visits are included on the Medicare 

home health claim forms, where they 

should continue to be designated as 

covered or non-covered. We conclude 

by stating that we are committed to 

continuing our provider education 

efforts related to these therapy policies. 

Comment: Another commenter stated 

that there are situations in which a 30- 

day skilled therapist visit for assessment 

of therapy must be followed by yet 

another skilled therapist visit for 

reassessment based on the therapy 

threshold. 

Response: Again, while this comment 

is outside of the scope of this rule, we 

would like to note that every time a 

qualified therapist performs the therapy 

service, assesses the patient, measures 

and documents the effectiveness of the 

therapy service for that therapy 

discipline, the 30-day clock is ‘reset’. As 

such, a qualified therapist visit/ 

assessment/measurement and 

documentation which satisfies the 

threshold requirement could also satisfy 

the 30-day requirement. 

Comment: We received one comment 

from a physical therapist who provided 

an overview of the profession from the 

commenter’s perspective, highlighting 

payment trends for therapists, 

depending on which type of entity 

therapists work for (for example, 

directly for a HHA or as a contractor or 

subcontractor). The commenter 

provided examples of personal 

employment experiences that 

substantiate our concerns regarding 

intentional overprescribing of therapy 

and inappropriate use of therapy 

assistants. Consequently, the commenter 

recommended program integrity 

policies for CMS’ consideration. 

Response: We thank this commenter 

for taking the time to provide such a 

thoughtful response and will share this 

commenter’s suggestions with our 

program integrity colleagues. 

3. Summarization of Final Policies 

As a result of the comments we 

received, we will finalize our technical 

corrections to § 409.44(c) and 

§ 409.44(c)(2)(i)(D)(2). We will also 

finalize our regulation text at 

§ 409.42(c)(4) to reflect that subsequent 

to an initial covered occupational 

therapy service, continuing 

occupational therapy services which 

meet the requirements of § 409.44(c) are 

considered to be qualifying services. In 

addition, we further clarify the intent of 


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this policy on when occupational 

therapy becomes a qualifying service by 

making the following change to 

§ 409.42(c)(4) as it appeared in our 

proposed rule: We are adding the 

phrase, ‘‘in the current and subsequent 

adjacent certification periods 

(subsequent adjacent episodes)’’ to the 

first line of this regulation text after the 

words, ‘‘Occupational therapy 

services.’’. Last, as we summarized 

above, we further clarify the method for 

counting visits for the 13th and 19th 

reassessment visit requirements by 

adding the words, ‘‘Medicare-covered’’ 

and deleting the words, ‘‘per the plan of 

care,’’ at § 409.44(c)(2)(i)(C)(2) and 

§ 409.44(c)(2)(i)(D)(2). 

F. Home Health Face-to-Face Encounter 

As described in the CY 2011 HH PPS 

final rule (75 FR 70427), section 6407(a) 

of the Patient Protection and Affordable 

Care Act, as amended by section 10605 

of the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152), amended the requirements for 

physician certification of home health 

services contained in sections 

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

Act by requiring that, as a condition for 

payment, prior to certifying a patient’s 

eligibility for the home health benefit, 

the physician must document that the 

physician himself or herself or a 

permitted nonphysician practitioner 

(NPP) has had a face-to-face encounter 

with the patient. 

However, we believe that the statute 

does not preclude a patient’s acute or 

post-acute physician from informing the 

certifying physician regarding their 

experience with the patient for the 

purpose of the face-to-face encounter 

requirement, as an NPP can. Instead, we 

believe that for patients admitted to 

home health following discharge from 

an acute or post-acute stay, the statutory 

language contains an unintentional gap 

in that it does not explicitly include 

language which allows the acute or 

post-acute attending physician to inform 

the certifying physician regarding his or 

her face-to-face encounters with the 

patient. 

Therefore, for patients admitted to 

home health upon discharge from a 

hospital or post-acute facility, we 

proposed to allow the physician who 

cared for the patient in an acute or postacute facility to inform the certifying 

physician regarding their encounters 

with the patient to satisfy the face-toface encounter requirement, much like 

an NPP currently can. 

The following is a summary of the 

comments we received regarding the 

home health face-to-face encounter 

proposal. 

Comment: Several commenters 

expressed concern regarding scenarios 

where a face-to-face encounter occurs 

late. Specifically, commenters believe 

that when the encounter occurs more 

than 30 days after the episode start, that 

CMS should allow providers the 

flexibility to restart the episode with the 

start of care date within 30 days of the 

face-to-face encounter. Commenters 

described longstanding CMS policy that 

has allowed such restarting of the 

episode for Medicare payment purposes 

in certain situations beyond the 

agency’s control. Commenters described 

that longstanding claims processing 

manual guidance has always allowed 

some flexibility in the OASIS 

completion in targeted scenarios, such 

as when a patient’s payer source 

changes from Managed Care to Medicare 

fee-for-service (FFS). At times, the HHA 

is not notified timely that such a payer 

change has occurred. Commenters 

described that this same payer change 

scenario may result in a late face-to-face 

encounter, which is a Medicare FFS 

requirement. Allowing OASIS flexibility 

in targeted scenarios enables the 

provider to begin to bill Medicare at the 

point in time when all Medicare 

eligibility criteria are met. 

Response: We thank the commenters 

for their comment and while this 

comment is outside the scope of this 

rule, we are taking this opportunity to 

clarify the policy. Conditions of 

participation regulations at § 484.55 

require HHAs to complete a 

comprehensive assessment for each 

patient no later than 5 days after the 

start of care. In the scenarios described 

by the commenter, there exists a 

comprehensive assessment which 

includes the OASIS assessment which 

was completed within 5 days of the 

agency providing care to the patient. 

However, Medicare FFS eligibility was 

not met until later. We acknowledge 

that longstanding guidance in Section 

80 of Chapter 10 of the Medicare Claims 

Processing Manual states that if a 

Medicare beneficiary changes from a 

different pay source to Medicare FFS, a 

new start of care OASIS assessment 

must be completed that reflects a start 

of care date equal to the start of the 

beneficiary’s change to Medicare FFS. 

The manual allows for this OASIS 

completion flexibility in targeted 

situations, to meet both Medicare billing 

and eligibility rules. In these cases, the 

OASIS which was completed to satisfy 

the Medicare billing and eligibility 

requirement could have a completion 

date which is later than 5 days after the 

start of care date. We believe a late faceto-face encounter is another of these 

targeted situations which justifies 

OASIS completion flexibility. 

Specifically, where a face-to-face 

encounter did not occur within the 90 

days prior to the start of care or within 

30 days after the start of care, a provider 

may complete another OASIS with a 

start of care date equal to the date when 

all Medicare eligibility is met. However, 

Medicare will not pay for services 

provided before the date of eligibility. 

Comment: Some commenters 

suggested that, if a face-to-face 

encounter does not occur within 30 

days of the start of care, CMS should 

shift the burden of responsibility away 

from the HHA for financial loss and 

include physician communication 

requirements as a component of the 

CMS initiatives associated with the 

transition of care. Commenters 

suggested that the financial burden of 

the face-to-face documentation alone 

has significantly added to HHAs’ 

operating costs. Other commenters 

stated the face-to-face requirement 

presents such an administrative burden 

that HHAs have had to add full-time 

staff to track the documentation 

requirements. 

Response: We thank the commenters 

for their comments but these comments 

are outside the scope of this rule. 

However, we would like to remind 

commenters that we do not have the 

statutory authority to exempt HHAs 

from responsibility for the face-to-face 

encounter requirement, as the 

Affordable Care Act mandates that it is 

a condition for payment. 

Comment: Some commenters 

requested that, due to difficulties 

securing documentation and physician 

refusal to write a narrative documenting 

why the patient needs skilled services 

and why the patient is homebound, the 

face-to-face documentation requirement 

should be limited to the statements that 

the patient needs skilled services and is 

homebound, and that the primary 

reason for home health services was 

addressed in the encounter, 

accompanied by the physician’s 

signature and date. Another commenter 

suggested that CMS allow NPPs to 

document and sign the face-to-face 

documentation. Some commenters 

asked CMS to allow the narrative on a 

patient’s plan of care to satisfy the 

documentation requirement. Other 

commenters suggested that CMS require 

a universal format of documentation to 

prevent Medicare contractor payment 

denials. Commenters requested that the 

face-to-face documentation be reduced 

to a check box on the plan of care or the 

Form 485. One commenter suggested 

that a separate, single certification form 


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be used for patients referred from the 

hospital to home care. 

Response: We thank the commenters 

for their comments but these comments 

are outside the scope of this rule. 

However, we will briefly respond to the 

commenters’ questions to ensure that 

commenters clearly understand the law 

and the policy. We would like to remind 

commenters that the law requires the 

certifying physician to document that 

the physician or an allowed NPP has 

had a face-to-face encounter with the 

patient. As such, a change in the statute 

would be required to allow an NPP to 

document the encounter. In response to 

the commenters who suggested that a 

standard form which contains 

checkboxes should be allowed to satisfy 

the documentation requirement and the 

commenter who asked CMS to allow the 

physician to simply sign a standard 

statement that the patient needs skilled 

services and is homebound, in our view, 

these suggestions would not satisfy the 

statutory requirement that the certifying 

physician document the encounter 

itself. We have reviewed forms which 

contained generic questions with 

checkboxes for the physician to simply 

check off and sign. We believe that such 

a form would not satisfy the 

documentation mandate in the law. 

Similarly, we believe a form that 

contains a pre-printed statement that the 

patient is homebound and needs skilled 

services which the physician would 

sign, as one commenter suggested, 

would also not meet the statutory 

requirement. Further, documentation 

which was drafted by another 

commenter which the physician would 

sign also would not meet the 

requirement. In using the words 

‘‘document the encounter’’ in the statute 

instead of ‘‘attest to the encounter,’’ we 

believe that the Congress intended the 

certifying physician to include factual 

information about the patient’s 

condition as seen during the encounter 

which would support the physician’s 

certification of the patient’s eligibility 

(homebound status and the need for 

skilled services). 

We have provided certifying 

physicians the flexibility to generate the 

documentation from their electronic 

medical record entries concerning the 

patient. The physician’s own medical 

record entries would contain the factual 

information about the patient’s 

condition as seen during the encounter. 

We also allow the physician’s support 

staff to extract the documentation from 

the physician’s medical record entries 

for the physician’s signature. We accept 

documentation which was generated or 

extracted from a physician’s medical 

record, assuming it contains all the 

required content, regardless of what 

format it is in, even when that generated 

format contains checkboxes. 

Additionally, as we describe in more 

detail later in this section, if an allowed 

practitioner other than the certifying 

physician performs the encounter, the 

certifying physician may incorporate the 

practitioner’s communication regarding 

the patient’s clinical condition as part of 

the certifying physician’s 

documentation. 

In response to the commenter who 

requested that the physician’s narrative 

on the plan of care satisfy the 

documentation requirement, we note 

that this would be acceptable in certain 

cases. As described above, we do not 

mandate that the documentation be in 

any particular format. We do require 

that the content requirements be met. 

We would expect that a physician’s 

orders referring the patient to home 

health could satisfy some or all of the 

documentation content requirements. 

However, as stated above, we believe 

the law would not allow an HHA to 

draft the documentation for the 

physician to sign. CMS is aware that 

often HHAs will draft the plan of care 

narrative for the physician to sign. In 

these cases, the plan of care narrative 

would not satisfy the documentation 

requirement because the narrative is 

drafted by the HHA instead of the 

physician, and is based on the HHA’s 

assessment of the patient, not the 

physician’s encounter. 

In response to the commenters who 

requested that CMS require a universal 

format for the documentation, we note 

that since 2002, we have not mandated 

the use of a specific form when 

physicians certify a patient’s eligibility 

for Medicare’s home health benefit. 

Instead, we allow physicians and HHAs 

to meet the certification documentation 

requirements in a way that utilizes their 

respective practice documentation 

system, and gives providers flexibility to 

use electronic medical record software. 

Comment: We received comments 

that the face-to-face requirement 

presents an unnecessary barrier to care 

for all patients, but especially for bed 

bound patients who need ambulance 

transportation to physician 

appointments. Also, a commenter 

suggested that the Affordable Care Act 

be revised to expand the definition of 

telehealth services to allow individuals 

to meet the face-to-face requirements 

through technologies available in their 

homes. A commenter suggested that 

telehealth could be used to satisfy the 

face-to-face encounter, and asked CMS 

to revise its regulations so that the 

patient’s home could be a telehealth 

originating site. Further, some 

commenters requested that CMS 

immediately halt the face-to-face 

requirement. Some commenters 

requested that the requirement be 

revised to establish exemptions to the 

face-to-face encounter for post-acute 

home health patients or those patients 

with barriers to physician care. We also 

received comments asking CMS to 

expand the current face-to-face 

timeframes. 

Response: We thank the commenters 

for their input but these comments are 

outside the scope of this rule. However, 

we will take the opportunity to briefly 

respond to the commenters to ensure 

better understanding of the statute. We 

would like to remind commenters that 

the face-to-face requirement is only 

required for initial certifications, not 

recertifications. In response to the 

commenters who asked us to halt or 

change the provision, we would not 

have the authority to do so. In response 

to the commenter who asked CMS to 

revise its regulation to add the home as 

a telehealth originating site, we note 

that section 1834(m) of the Act limits 

those sites where a telehealth service 

can be provided. Regarding the 

timeframe of the face-to-face 

requirement, we believe the current 

timeframe of 90 days prior to the start 

of care and 30 days after the start of care 

is appropriate and best meets the 

program integrity and quality goals 

associated with the provision. 

Comment: Some commenters 

requested the elimination of the face-toface requirement for patients admitted 

to home health within certain 

timeframes of hospital discharges. 

Commenters stated that patients who 

are discharged from a hospital have 

clearly seen a physician and discharge 

planning team who determined home 

health to be an appropriate postdischarge follow-up. Commenters 

believed that the intent of this 

provision, which is a program integrity 

provision, is to ensure that the patient 

recently saw his or her physician. 

Response: We thank the commenters 

for their suggestions. However, this 

exemption would violate the statutory 

mandate. We do not have the authority 

to exempt post-acute home health 

admissions from the face-to-face 

encounter requirement. 

Comment: We received comments 

questioning whether or not the acute or 

post-acute physician will still be 

allowed to initiate the plan of care, 

perform and document the face-to-face 

encounter, certify the patient’s home 

health eligibility, and ‘‘hand off’’ the 

plan of care to the patient’s community 

physician. Commenters were confused 

by the proposed regulation text language 


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at § 424.22(a)(1)(v)(A) stating that the 

acute or post-acute physician ‘‘must’’ 

inform the certifying physician of the 

face-to-face encounter clinical findings. 

As the proposed regulatory text reads, 

commenters believed the use of ‘‘must’’ 

indicated that an attending acute or 

post-acute physician must inform the 

certifying physician of the findings from 

the face-to-face encounter rather than 

being able to perform the encounter, 

document the encounter and certify 

home health eligibility himself or 

herself. 

Response: We thank the commenters 

for their comments. The physician who 

cared for the patient in an acute or postacute facility prior to the patient’s home 

health admission can perform and 

document the face-to-face encounter 

and certify the patient’s home health 

eligibility, initiate the plan of care, and 

hand off the plan of care to the patient’s 

community physician. These physicians 

often complete the certification of home 

health eligibility for a patient, which 

now includes the face-to-face 

documentation. In this rule, we simply 

proposed additional flexibility for the 

physician who cared for the patient in 

an acute or post-acute facility to inform 

the certifying physician of the patient’s 

need for skilled services and 

homebound status in the same manner 

that an NPP can. To address any 

confusion that may exist, we will revise 

§ 424.22(a)(1)(v)(A) to only require the 

physician who cared for the patient in 

the acute or post-acute facility to inform 

the certifying physician when the 

physician who cared for the patient in 

the acute or post-acute facility is not the 

certifying physician. 

Comment: A commenter suggested 

that in an acute or post-acute facility, a 

patient is often seen by many physicians 

and any of those physicians should be 

able to inform the certifying physician. 

Therefore, the commenter suggested that 

CMS consider removing the word 

‘‘attending’’ from the regulation text and 

use the term ‘‘acute’’ or ‘‘post-acute’’ 

physician instead. The commenter 

described how a patient’s home health 

initiation and supervision may be most 

appropriately managed by a specialist, 

primary care physician, hospitalist, or 

surgeon, irrespective of who is the 

attending physician. 

Response: We found the comment 

compelling and will remove ‘‘attending’’ 

from the regulatory text. Instead, we 

will describe that a physician who cared 

for the patient in an acute or post-acute 

facility and who has privileges at the 

facility can inform the certifying 

physician regarding the patient’s 

clinical condition. The certifying 

physician can use that information to 

document the face-to-face encounter. 

Comment: Many commenters 

disagreed with the proposed rule to 

require a face-to-face encounter and 

supporting documentation for Medicaid 

patients. 

Response: These comments are 

outside the scope of this rule. The 

Medicaid face-to-face provision was 

proposed in the Face-to-Face 

Requirements for Home Health Services; 

Policy Changes and Clarifications 

Related to Home Health proposed rule 

published in the July 12, 2011 Federal 

Register (76 FR 41032). 

Comment: We received comments 

supporting the added flexibility 

associated with the face-to-face 

encounter provision, given that 

physicians who care for the patient in 

an acute or post-acute facility are the 

most familiar with the patient’s 

condition upon discharge, yet may not 

want the burden of designing a plan of 

care and certifying eligibility, and 

should be allowed to inform the 

physician as an NPP. 

Response: We thank the commenters 

for their support. 

Comment: We received a comment 

asking for CMS to include language in 

the final rule that clearly outlines that 

the HHA may assist with the 

communication between the physician 

who cared for the patient in an acute or 

post-acute facility, who performed the 

face-to-face encounter, and the 

certifying physician. We received 

comments asking CMS to clarify 

whether verbal and/or written or typed 

documentation qualifies as 

communication between the physician 

who cared for the patient in an acute or 

post-acute facility and the patient’s 

certifying physician. Other commenters 

questioned whether the documentation 

of the face-to-face encounter must be in 

the HHA record. 

Response: We thank the commenters 

for their comments. The HHA may 

facilitate communication between the 

physician who cared for the patient in 

an acute or post-acute facility and the 

patient’s community physician. We note 

that this would be considered a part of 

the patient’s care coordination. 

However, we reiterate that the HHA 

cannot draft the encounter 

documentation for the certifying 

physician to sign. Similarly, we note 

that the information flow/ 

communications from the allowed NPP 

or physician who cared for the patient 

in an acute or post-acute facility to the 

certifying physician concerning the 

patient’s condition cannot be altered by 

the HHA. For example, in most cases we 

would expect the patient’s discharge 

plan to contain the information, from 

the allowed NPP or the physician caring 

for the patient in the acute or post-acute 

facility, needed by the certifying 

physician to document the encounter. 

We would expect that both the HHA 

and the patient’s community physician 

(certifying physician) would receive the 

patient’s discharge plan. When this does 

not occur, or it does not occur in a 

timely manner, the HHA can send a 

copy of the discharge plan to the 

certifying physician to expedite the 

information exchange. However, it 

would be unacceptable for the HHA to 

fill in missing clinical information 

concerning the patient, based on the 

HHA’s assessment of the patient. The 

documentation must reflect the 

physician’s (or NPP’s) experience with 

the patient, not the HHA’s. Regarding 

the commenters who asked for guidance 

on what sort of communication CMS 

expects would occur between the 

physician who cared for the patient in 

the acute or post-acute facility and the 

certifying physician, we do not require 

a specific communication protocol to 

occur between an NPP, or a physician 

who cared for the patient in an acute or 

post-acute facility, and the certifying 

physician. We intend for the 

communication between an NPP, or a 

physician who cared for the patient in 

an acute or post-acute facility, and the 

certifying physician to occur in a way 

that works best for the two health care 

professionals involved. We would 

expect that often the patient’s discharge 

summary, even if not in the form of a 

discharge plan, with the information 

flow/communications from the allowed 

NPP or the physician who cared for the 

patient in the acute or post-acute 

facility, can serve as the face-to-face 

documentation so long as it includes the 

signature of the certifying physician and 

the required content. To address the 

commenter who asked whether or not 

the HHA needs to have the face-to-face 

encounter documentation on record, we 

remind the commenter that the face-toface encounter documentation is part of 

the certification of eligibility and as 

such must be in the HHA’s records. 

Comment: Commenters stated that the 

face-to-face documentation is 

redundant, given the documentation of 

a patient’s needs on the discharge plan 

and/or plan of care. Commenters 

questioned whether a certifying 

physician would need to rewrite the 

documentation of the face-to-face 

encounter rather than just review the 

information documented by the 

physician who cared for the patient in 

an acute or post-acute facility regarding 

the encounter. Commenters also 


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expressed concern that in the case of 

hospital support staff assisting in the 

documentation, the level of detail on a 

hospital patient’s post-acute needs that 

is typically available in standard 

hospital medical record notes is not 

adequate to satisfy the face-to-face 

documentation requirements. 

Furthermore, commenters suggested 

that hospital-based physicians typically 

lack information on the criteria related 

to Medicare’s homebound status and are 

not trained to make judgments on 

homebound status following discharge. 

Commenters suggested that the 

proposed additional flexibility needs to 

be integrated with existing discharge 

processes. Other commenters suggested 

that once the patient is discharged from 

the hospital, the hospitalist no longer 

feels accountable for the patient. 

Commenters were concerned that 

patients may be denied access to home 

health services in cases where 

collaboration between the physician 

who cared for the patient in an acute or 

post-acute facility and the certifying 

physician is not timely, because the 

certifying physician might be unable to 

obtain the needed documentation 

information. We also received 

comments that this added flexibility 

will add to an already strained 

relationship between the acute or postacute physician and the community 

physician since they will be doing each 

other’s work. Commenters suggested 

that the proposed flexibility will add a 

new burden to community physicians 

since they will not be paid for certifying 

the patient’s eligibility for home health. 

Other commenters asked that CMS 

allow for community physicians to bill 

G0180 if the patient’s physician who 

cared for the patient in an acute or postacute facility is performing the face-toface encounter and certifying home 

health eligibility. 

Response: We thank the commenters 

for their comments. Regarding the 

commenter who asked whether the 

certifying physician must retype the 

acute or post-acute physician’s 

documentation on the certification form, 

we note that we allow for the face-toface documentation to be part of the 

certification or an addendum to it. 

Therefore, it would be acceptable for the 

certifying physician (or his or her 

support staff) to attach a communication 

(such as a discharge summary) from an 

allowed NPP, or a physician who cared 

for the patient in an acute or post-acute 

facility, who performed the encounter to 

the certification as an addendum. If, for 

example, a discharge summary from a 

physician who cared for the patient in 

an acute or post-acute facility contains 

all of the needed documentation 

content, the certifying physician would 

simply need to sign and date the 

discharge summary and ensure it is 

attached as an addendum to the 

certification. 

In response to the commenter who 

was concerned that acute physicians 

may not communicate a patient’s 

homebound status to the certifying 

physician, we note that this additional 

flexibility does not change the 

documentation content requirements or 

change the requirement that the 

certifying physician must document the 

encounter. If the information sent to the 

certifying physician does not explicitly 

contain statements which describe why 

the patient requires skilled services and 

how the patient’s condition supports 

homebound status, we would expect it 

to contain enough information regarding 

the patient’s clinical condition for the 

certifying physician (or his or her 

support staff) to complete the 

documentation. A typical discharge 

summary would contain enough clinical 

information to enable the certifying 

physician to assess homebound status, 

for example. Where the information 

lacks the clinical detail which would 

enable the certifying physician to 

complete the documentation, we would 

expect the certifying physician or the 

physician’s support staff to obtain the 

additional information from the 

physician who cared for the patient in 

an acute or post-acute facility, discharge 

planner, or the acute or post-acute 

physician’s support staff. We would 

expect that most of the time, a phone 

call or electronic mail exchange 

between the physicians’ support staffs 

would address gaps in information. In 

response to the commenters who were 

concerned that the information sharing 

might not occur in a timely manner or 

the information exchange would be 

burdensome to the community 

physician and may strain the 

community physician and acute or postacute physician relationship, we note 

that we believe that this information 

sharing between the physician who 

cared for the patient in an acute or postacute facility and the community 

physician who assumes care for the 

patient upon discharge (certifying 

physician) for the purposes of 

documenting the face-to-face encounter, 

is consistent with the sort of 

communication which occurs when any 

patient is discharged from an inpatient 

setting to the community. Discharge 

procedures generally require that the 

discharge plan includes the patient’s 

clinical condition and that the discharge 

plan and supporting documentation be 

shared with the patient’s follow-up care 

provider. Where the discharge plan is 

not sent to the certifying physician and 

instead is sent to the HHA, the HHA 

would forward a copy of the discharge 

plan to the certifying physician. We also 

note that the physician who completes 

and signs the certification of eligibility 

can bill Medicare using the G0180 code. 

Comment: Commenters suggested that 

CMS should allow any physician to 

work with another physician colleague 

sharing the face-to-face encounter and 

documentation responsibilities, as well 

as the certification. Commenters also 

asked CMS to expand the physicians 

who may perform the face-to-face 

encounter to include partners or 

colleagues of the certifying physician or 

urgent care center physicians for nonacute inpatient settings. Further, a 

commenter stated that if a patient goes 

to an outpatient clinic appointment and 

sees an alternate physician, the alternate 

physician should be allowed to perform 

the encounter and inform the certifying 

physician of the patient’s clinical 

condition, homebound status, and need 

for skilled services. 

Response: We thank the commenters 

for their suggestions. While we are 

sensitive to the scenarios which the 

commenters describe, we do not believe 

we would have a strong justification to 

assert that the Congress intended to 

allow any physician to inform the 

certifying physician and as such, we 

believe we would not have the statutory 

authority to allow this additional 

flexibility. We note that the Medicare 

home health benefit relies on the 

patient’s physician to determine 

eligibility for home health services. This 

type of physician involvement is critical 

from both a quality of care and program 

integrity perspective. Prior to enactment 

of the face-to-face encounter provision, 

the patient’s physician often relied on 

information provided by an HHA when 

making decisions about patient care. 

The Affordable Care Act established the 

requirement for a physician face-to-face 

encounter prior to certifying a patient’s 

eligibility for home health services, 

along with other program integrity 

provisions, to address concerns 

surrounding ineligible patients 

receiving home health services and 

concerns that physicians who had no 

firsthand knowledge of the patient’s 

clinical condition were certifying the 

patient’s eligibility for home health. 

Additionally, in the CY 2011 HH PPS 

final rule, we described research which 

showed fewer re-hospitalizations when 

the home health patient had a recent 

encounter with the physician 

responsible for the home health care 

plan. We also refer the commenters to 


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the CY 2012 HH PPS proposed rule (76 

FR 41024 through 41025), where we 

described our reasons for believing that 

the Congress did not intend to exclude 

physicians who care for the patient in 

an acute or post-acute facility from 

informing the certifying physician 

regarding their recent encounters with 

the patient as the Congress allowed 

certain NPPs to do. We described why 

we believed that in adding this 

flexibility, we are increasing 

communication between HHAs and 

physicians, why we believed that 

adopting this flexibility introduced no 

program integrity risks or quality 

concerns and why we believed the 

flexibility is consistent with the goals of 

the law, including the goal of achieving 

more physician involvement with the 

patient when ordering home health 

services. If the hospital physician is 

unwilling to certify a patient’s eligibility 

for home health, the hospital discharge 

plan sent to the certifying physician 

would contain current clinical 

information regarding the patient, 

enabling the certifying physician to 

make determinations regarding the 

patient care. However, we do not 

believe that a similar strong argument 

exists that the Congress intended to 

allow any physician to inform the 

certifying physician. As such, we would 

not have the statutory authority to allow 

this additional flexibility. 

Comment: Commenters suggested that 

CMS study transitions from hospitals to 

home care to evaluate whether the faceto-face improves care coordination, 

discourages home health utilization by 

patients who do not qualify for 

Medicare-covered home health services, 

or contributes to preventing or delaying 

access to medically necessary home 

care. Other commenters suggested that 

CMS regularly meet with the NAHC for 

industry input. Commenters also 

suggested that CMS has not provided 

adequate education to the physician 

community and should consider 

initiatives such as Patient Care 

Transitions and Accountable Care to 

manage a more widespread effort for 

physician communication. Another 

commenter noted that CMS’ Web-based 

‘‘Frequently Asked Questions’’ (FAQ) 

for provider clarity are sporadically 

updated without notice and are 

seemingly ad hoc policy developments. 

A commenter also suggested that CMS 

date its policy guidance so that 

providers know which guidance is most 

recent. 

Response: We thank the commenters 

for their comments but these comments 

are outside the scope of this rule. 

However, we will continue to work with 

the industry to educate providers and 

we will continue to monitor the effects 

of the face-to-face requirement. 

Comment: We received a comment 

that a major issue with the face-to-face 

requirement is that patients should have 

the right to refuse a clinic visit that is 

not medically necessary. 

Response: We thank the commenter 

for the comment but this comment is 

outside the scope of this rule. We would 

like to clarify, however, that the face-toface requirement is a statutory 

requirement for payment. Further, we 

would expect that practitioners would 

typically be conducting a medically 

necessary service to the patient, and this 

service would also meet the face-to-face 

encounter requirement. We also remind 

the commenter that, to be eligible for the 

Medicare home health benefit, a patient 

must be under the care of a physician. 

Should a patient refuse to have a faceto-face encounter with the physician 

responsible for care, we would question 

whether the patient was legitimately 

under the care of the physician. 

As a result of the comments, we will 

finalize the proposed implementation 

approach with the following revisions: 

• We will remove ‘‘attending’’ from 

the regulatory language and add 

additional language at § 424.22(a)(1)(v) 

to describe physicians who qualify as 

the physician who cared for the patient 

in an acute or post-acute facility. 

• We will revise § 424.22(a)(1)(v) so 

that the certifying physician’s 

documentation of the face-to-face 

encounter clearly states that either the 

certifying physician himself or herself, 

the allowed NPP, or, for patients 

admitted to home health immediately 

after an acute or post-acute stay, a 

physician who cared for the patient in 

an acute or post-acute facility, has had 

a face-to-face encounter with the 

patient. 

• We will add clarifying language to 

§ 424.22(a)(1)(v)(A) to address scenarios 

where the physician who cared for the 

patient in an acute or post-acute facility 

performing the face-to-face encounter is 

also the certifying physician. We will 

revise § 424.22(a)(1)(v)(A) to describe 

that the NPP or the physician who cared 

for the patient in an acute or post-acute 

facility performing the face-to-face 

encounter must communicate the 

clinical findings of the encounter to the 

certifying physician, unless the 

physician who cared for the patient in 

an acute or post-acute facility is also the 

certifying physician. 

We will finalize the above face-to-face 

encounter provisions for starts of care 

beginning January 1, 2012 and later. 

G. Payment Reform: Home Health Study 

and Report 

As we noted in our proposed rule (76 

FR 41025), section 3131(d) of the 

Affordable Care Act requires the 

Secretary to conduct a study on HHA 

costs of providing access to care to lowincome Medicare beneficiaries or 

beneficiaries in medically underserved 

areas, and in treating beneficiaries with 

varying levels of severity of illness 

(specifically, patients with ‘‘high levels 

of severity of illness’’). In our proposed 

rule, we provided a completed 

description of the varied areas for which 

we have the authority to explore as part 

of our payment reform activities (76 FR 

41025 through 41026). We continue to 

plan for the study to evaluate the 

current HH PPS and develop payment 

reform options which might minimize 

vulnerabilities and more accurately 

align payment with patient resource 

costs to prepare the Report to Congress 

regarding the study that we must deliver 

no later than March 1, 2014. 

In our proposed rule, we also 

highlighted multiple activities that 

included those associated with the 

development of a study analytic 

approach (76 FR 41025), as well as our 

progress to date. We have held a second 

technical evaluation panel (TEP) since 

publishing our proposed rule and plan 

to publish the TEP proceedings on the 

CMS Web Site in the coming weeks. 

As we announced in the proposed 

rule, we anticipate awarding another 

contract that will build upon the 

foundation established. Specifically, 

this contract will include refinement of 

the analytic plan performance of the 

detailed analysis, and ultimately 

recommendations for payment model 

options. We will provide updates 

regarding our progress in future 

rulemaking and open door forums. 

The following is a summary of the 

comments we received regarding this 

study and report. 

Comment: We received a number of 

comments expressing appreciation for 

the status report on our progress and 

future plans for the payment reform 

study. Commenters’ specific suggestions 

for topics to incorporate into the study 

design and plan included the following: 

analysis and revisions for the HH PPS 

to more appropriately capture and align 

resource costs to payment among all the 

different service groups; research on the 

underutilization of therapy services in 

rural and underserved areas; and ways 

of improving physician interaction with 

home health patients separate from the 

face-to-face requirement. A few 

commenters expressed particular 

concern that the study explore the 


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hypothesis that a subset of HHAs, 

concentrated in the non-profit sector, 

have become safety net providers, 

continuing to offer access to those 

vulnerable patients that can be 

challenging and costly to serve, relative 

to HH PPS payments. 

Response: We thank commenters for 

their expressed support of our efforts to 

date. We will attempt to include as 

many of the recommended areas of 

study as part of the final study design 

as possible, including those suggestions 

related to the outlier policy as we noted 

above in that section (see II.C. Outlier 

Policy). We will continue to solicit 

input from stakeholders as we develop 

the final study plan and provide 

periodic updates on our progress 

through multiple avenues such as the 

CMS Web Site and Open Door Forums. 

Finally, we will continue to provide 

periodic updates on our progress. 

H. International Classification of 

Diseases 10th Edition (ICD–10) Coding 

In the CY 2012 HH PPS proposed 

rule, we discussed our preliminary 

plans to transition to the use of ICD–10– 

CM codes in October 2013. Based upon 

experience gained in our review of the 

ICD–10–CM codes we are striving to 

have the draft code lists out in the 

spring of 2012 versus October 2011. In 

addition, based upon comments 

received on our transition plans we are 

aiming to get the draft ICD–10–CM 

HHRG out on or before April 2013 

versus the proposed July 2013 target 

contained in the proposed rule. 

Effective March 17, 2009, we finalized 

our policies for the Health Insurance 

and Portability Accountability Act 

Administrative Simplification: 

Modifications to the Medical Data Code 

Set Standards to Adopt ICD–10–CM and 

ICD–10–PCS (74 FR 3328). The March 

17, 2009 final rule modifies the standard 

medical data code sets for coding 

diagnoses by adopting the International 

Classification of Disease, 10th Revision, 

Clinical Modification (ICD–10–CM) for 

diagnosis coding, including the Official 

ICD–10–CM Guidelines for Coding and 

Reporting. These new codes replace the 

International Classification of Diseases, 

9th Revision, Clinical Modification, 

Volumes 1 and 2, including the Official 

ICD–9–CM Guidelines for Coding and 

Reporting. Entities are required to have 

implemented the adopted policies by 

October 1, 2013. On October 1, 2013, the 

ICD–9 code sets used to report medical 

diagnoses will be replaced by the ICD– 

10 code sets. In preparation for the 

transition to use of ICD–10–CM codes, 

CMS is currently undergoing extensive 

efforts to update the Medicare payment 

systems. 

One of the key activities identified 

under this transition to ICD–10–CM 

codes is the need for CMS to review and 

update the payment systems which 

currently use ICD–9–CM codes. Home 

health agencies report ICD–9–CM codes 

for their patients through OASIS–C. The 

HHAs enter data (including the ICD–9– 

CM codes) collected from their patients’ 

OASIS assessments into a data 

collection software tool. For Medicare 

patients, the data collection software 

invokes HH PPS Grouper software to 

assign a Health Insurance Prospective 

Payment System (HIPPS) code on the 

Medicare HH PPS bill, ultimately 

enabling CMS’ claims processing system 

to reimburse the HHA for services 

provided to patients receiving 

Medicare’s home health benefit. The HH 

PPS Grouper currently utilizes ICD–9– 

CM codes to calculate the HIPPS code. 

Effective October 1, 2013, the HH PPS 

Grouper will utilize the ICD–10–CM 

codes to calculate the HIPPS code. 

We have been working with the 

HHRG maintenance contractor to revise 

the HHRG to accommodate ICD–10–CM 

codes, as well as identify the 

appropriate ICD–10–CM codes to be 

included in each diagnosis group within 

the HHRG. In addition, we have also 

contracted with Abt Associates to assist 

with resolving the transition of certain 

codes that may be mapped to more than 

one diagnosis code under ICD–10–CM. 

To assist HHAs and their vendors in 

preparing for this transition, the Agency 

is committed to providing information 

for transitioning the HHRG to 

accommodate ICD–10–CM codes 

effective October 1, 2013. The Agency 

will update providers and vendors 

through the ICD–10–CM National 

Provider outreach calls on our 

conversion plans. Additional detail 

concerning teleconference registration is 

available at http://www.cms.gov/ICD10/ 

Tel10/list.asp?intNumPerPage=20&

submit=Go. Further details pertaining to 

our plans will be announced through 

the National Provider outreach calls. 

We will provide a draft list of ICD– 

10–CM codes for the HHRG through the 

ICD–10 section of the Web site. Specific 

dates regarding our roll-out plans will 

be announced through the National 

Provider outreach calls. The preliminary 

plans include publishing the draft list of 

ICD–10–CM codes for the HHRG by the 

spring of 2012, for industry review, as 

well as describing our testing approach 

for the HHRG to accommodate and 

process ICD–10–CM codes through the 

ICD–10 section of the CMS Web site. In 

reviewing the list of proposed ICD–10– 

CM codes we have identified that more 

time is needed to complete our review 

and develop a draft lists for industry 

review. However, the release of the draft 

list in early 2012 permits ample time for 

consideration of any comments received 

to be taken into consideration during 

our development of the CY 2013 HH 

PPS proposed rule. The objective of the 

ICD–10–CM HHRG testing is to verify 

that all properly formatted input data 

containing ICD–10–CM diagnosis codes 

will produce the expected output. The 

HHRG maintenance contractor will 

convert current OASIS–C records to 

their translated ICD–10–CM codes to 

determine that appropriate outputs are 

achieved. CMS and the HHRG 

maintenance contractor will review the 

results of the testing to determine if 

additional testing is required. 

In addition, in April 2013, we plan to 

share the ICD–10–CM HHRG software 

with those vendors and HHAs that have 

agreed to serve as Beta Testers and get 

their feedback regarding the software’s 

functionality. We may expand the 

release of this draft version by releasing 

the draft ICD–10 HHRG to all interested 

parties. We are pursuing a wider release 

of the draft HHRG based upon 

comments received requesting that the 

agency release the draft HHRG to all 

interested parties. Issues and concerns 

noted will be reviewed and addressed 

by the HHRG Maintenance Contractor in 

consultation with CMS. 

We plan to release the final version of 

the ICD–10–CM HHRG in July 2013 (or 

earlier if feasible) to permit HHAs and 

their vendors sufficient time to install 

the software. We will strive to release 

the final version of the ICD–10–CM 

HHRG as early as possible based upon 

comments received from the industry 

requesting an earlier release date. 

The following is summary of the 

comments we received regarding the 

International Classification of Diseases 

10th Edition (ICD–10) Coding. 

Comment: One commenter suggested 

that CMS should consider an earlier 

release of the HHRG software which was 

proposed to be released to Beta Testers 

in April 2013. In addition, the 

commenter suggested that CMS should 

publish and make available the draft 

HHRG available to the entire industry 

for their review versus the current 

approach of soliciting input from 

vendors that have volunteered to review 

our HHRG. 

Response: We appreciate the feedback 

provided and are committed to 

developing an earlier release of the 

HHRG if possible and will take into 

consideration the suggestion concerning 

industry wide release of the draft 

October 2013 ICD–10–CM HHRG. Final 

details concerning our implementation 

plans will be released through the 

scheduled Provider Outreach 


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teleconferences and posted on the ICD– 

10 section of the CMS Web site. 

Comment: Several commenters’ 

suggested that CMS has committed to 

publishing this information in a format 

that crosswalks the ICD–9–CM to ICD– 

10 codes. 

Response: We have not reached any 

decisions regarding the format of the 

code lists. Additional information 

concerning the format will be provided 

through the ICD–10–CM provider 

outreach teleconferences and posted on 

the ICD–10 section of the CMS Web site. 

Comment: Several commenter’s noted 

their appreciation of our plans to release 

the proposed lists of ICD–10–CM codes 

as early as October 1, 2011. 

Response: Based upon our current 

progress in reviewing the code lists 

developed by our support contracts and 

resolving potential conflicts, we will be 

revising the language in our final 

regulation. The regulation will reflect 

that the proposed lists of ICD–10–CM 

codes may be made available on the 

ICD–10 section of the CMS Web site in 

the spring of 2012. 

As a result of the comments, we have 

made modifications to the language to 

indicate that we will take into 

consideration a commenters’ suggestion 

that all interested parties should be 

included in the review of the draft ICD– 

10–CM HHRG. A final decision will be 

announced in a future ICD–10 Provider 

Outreach teleconference and posted on 

the ICD–10 section of the CMS Web site. 

In addition, the agency will consider the 

suggestion surrounding the format of the 

ICD–10 translation list and a final 

decision will be announced as outlined 

earlier in this section. Lastly, based 

upon our current experience in 

reviewing the ICD–10–CM codes we 

believe that the draft code list will not 

be made available on the ICD–10 section 

of the CMS Web site until early 2012. 

I. Clarification To Benefit Policy Manual 

Language on ‘‘Confined to the Home’’ 

Definition 

To address the recommended changes 

of the Office of Inspector General (OIG) 

to the home health benefit policy 

manual, CMS proposed to clarify its 

‘‘confined to the home’’ definition to 

more accurately reflect the definition as 

articulated in the Act. We proposed to 

move the requirements that the patient 

require physical assistance to leave the 

home or if leaving home is medically 

contraindicated, and that the condition 

of the patient should be such that there 

exists a normal inability to leave home 

and, consequently, leaving the home 

would require a considerable and taxing 

effort to the beginning of section 30.1.1 

of the Chapter 7 Home Health Benefit 

Policy Manual as necessary 

requirements to be considered 

‘‘confined to the home.’’ Further, we 

proposed to remove vague terms from 

section 30.1.1, such as ‘‘generally 

speaking,’’ to ensure clear and specific 

requirements for the definition. These 

changes present the requirements first 

and more closely align our policy 

manual with the Act to prevent 

confusion and promote a clearer 

enforcement of the statute and more 

definitive guidance to HHAs for 

compliance. As such, we proposed that 

section 30.1.1 begin with the following, 

revised language: 

‘‘30.1.1—Patient Confined to the Home 

For a patient to be eligible to receive 

covered home health services under 

both Part A and Part B, the statute 

requires that a physician certify in all 

cases that the patient is confined to his/ 

her home. For purposes of the statute, 

an individual shall be considered 

‘‘confined to the home’’ (that is, 

homebound) if the following exist: 

(1) The individual has a condition 

due to an illness or injury that restricts 

his or her ability to leave their place of 

residence except with: the aid of 

supportive devices such as crutches, 

canes, wheelchairs, and walkers; the use 

of special transportation; or the 

assistance of another person; or if 

leaving home is medically 

contraindicated. 

(2) The individual does not have to be 

bedridden to be considered ‘‘confined to 

the home’’. However, the condition of 

the patient should be such that there 

exists a normal inability to leave home 

and, consequently, leaving home would 

require a considerable and taxing effort. 

If the patient does in fact leave the 

home, the patient may nevertheless be 

considered homebound if the absences 

from the home are infrequent or for 

periods of relatively short duration, or 

are attributable to the need to receive 

health care treatment. Absences 

attributable to the need to receive health 

care treatment include, but are not 

limited to: 

• Attendance at adult day centers, 

licensed or certified by a State or 

accredited to furnish adult day-care 

services in the State, to receive 

therapeutic, psychological, or medical 

treatment; 

• Ongoing receipt of outpatient 

kidney dialysis; or 

• The receipt of outpatient 

chemotherapy or radiation therapy. 

Any absence of an individual from the 

home attributable to the need to receive 

health care treatment, including regular 

absences for the purpose of participating 

in therapeutic, psychosocial, or medical 

treatment in an adult day-care program 

that is licensed or certified by a State, 

or accredited to furnish adult day-care 

services in a State, shall not disqualify 

an individual from being considered to 

be confined to his home. Any other 

absence of an individual from the home 

shall not so disqualify an individual if 

the absence is of an infrequent or of 

relatively short duration. For purposes 

of the preceding sentence, any absence 

for the purpose of attending a religious 

service shall be deemed to be an 

absence of infrequent or short duration. 

It is expected that in most instances, 

absences from the home that occur will 

be for the purpose of receiving health 

care treatment. However, occasional 

absences from the home for nonmedical 

purposes, for example, an occasional 

trip to the barber, a walk around the 

block or a drive, attendance at a family 

reunion, funeral, graduation, or other 

infrequent or unique event would not 

necessitate a finding that the patient is 

not homebound if the absences are 

undertaken on an infrequent basis or are 

of relatively short duration and do not 

indicate that the patient has the capacity 

to obtain the health care provided 

outside rather than in the home. 

Some examples of homebound 

patients that illustrate the factors used 

to determine whether a homebound 

condition exists would be: * * *’’ 

The following is a summary of the 

comments we received regarding 

clarification to benefit policy manual 

language on ‘‘confined to the home’’ 

definition. 

Comment: Commenters were not clear 

on whether the individual needs to meet 

both of the requirements of (1) needing 

physical assistance to leave the home or 

if leaving home is medically 

contraindicated and (2) the condition of 

the patient being such that there exists 

a normal inability to leave home and, 

consequently, leaving the home would 

require a considerable and taxing effort; 

or if meeting either one of the 

requirements is acceptable. A 

commenter recommended adding ‘‘and’’ 

at the end of statement ‘‘1’’ to clarify. 

Response: As the statute is written, 

statement ‘‘1’’ must first be met and 

then statement ‘‘2’’ must also be true 

about a patient to be considered 

homebound. We found this comment 

compelling and will add ‘‘and’’ to the 

end of statement ‘‘1’’ to better match the 

manual guidance to the statutory 

language and to more clearly distinguish 

the requirements. Therefore, it will be 

clear that, to be considered ‘‘confined to 

the home’’ a patient must first meet one 

of the requirements within statement 

‘‘1’’ (if the patient requires physical 

assistance to leave the home or if 


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leaving home is medically 

contraindicated), and the individual 

must then also meet both of the 

requirements of statement ‘‘2’’ (the 

condition of the patient should be such 

that there exists a normal inability to 

leave home and, consequently, leaving 

the home would require a considerable 

and taxing effort). 

Comment: Several commenters 

suggested that CMS add clarifying 

language differentiating absences from 

the home for entertainment versus those 

required to preserve independent living 

to prevent premature disqualification of 

otherwise eligible patients. Commenters 

also stated that the vagueness of the 

definition forces HHAs to submit postpayment demand bills to Medicare for 

Medicare/Medicaid dually eligible 

patients, even when the patient may not 

be confined to the home, causing 

administrative burden and waste. 

Further, commenters suggested that 

CMS provide guidance about this 

provision to State Medicaid offices to 

prevent inconsistent application and 

better control the administrative 

burdens. Still other commenters 

recommended removing the ‘‘confined 

to the home’’ definition to align with 

Medicaid. A commenter stated that the 

statement about not being bedridden is 

confusing. 

Response: We believe the comments 

are out of the scope of the proposed 

rule. We only proposed to align the 

manual language with the statutory 

language at this time. Further 

clarification of the definition would 

need to be proposed through the 

rulemaking process. However, we will 

continue to work with the industry to 

better inform and educate about the 

requirements of the benefit. 

Comment: We received comments 

suggesting that CMS leave the current 

definition in place so as to prevent the 

definition from becoming narrower and 

arbitrary. Further, commenters stated 

that the need for aid of a supportive 

device, the use of special transportation 

or the assistance of another person does 

not necessarily entail a normal inability 

to leave home and requiring a 

considerable and taxing effort to do so, 

which could lead to further 

misapplication of the benefit. 

Response: We proposed to align the 

manual language to better mirror the 

statutory language with regard to the 

‘‘confined to the home’’ definition, 

thereby intending to make the definition 

clearer and more consistent. However, 

we do not believe that the proposed 

clarification makes the homebound 

definition narrower and more arbitrary. 

Rather, the clarification moves the two 

requirements (one of which must be 

met) to the beginning of the manual 

guidance before further description of 

examples and exceptions. 

Comment: We received support for 

the proposed clarification, maintaining 

that the clarification better addresses 

providers’ concerns about how patients’ 

occasional absences from the home 

affect their homebound status and 

eligibility for the home health benefit. 

Response: We thank the commenters 

for their support. 

As a result of the comments, we will 

finalize the proposed clarification of the 

manual language with the following 

exceptions: We are adding ‘‘and’’ to the 

end of statement ‘‘1’’ of the two 

requirements for homebound status to 

more clearly convey that to be 

considered ‘‘confined to the home,’’ the 

patient first must meet one of the 

following two requirements. The patient 

must either need physical assistance 

leaving the home or leaving is medically 

contraindicated. If the patient meets one 

of those requirements, the patient must 

then also meet the two additional 

requirements as follows: There must 

also be a normal inability to leave home 

and leaving the home must require a 

considerable and taxing effort. 

III. Collection of Information 

Requirements 

This document does not impose any 

new information collection and 

recordkeeping requirements. The 

information collection requirements 

discussed in proposed § 424.22 are 

currently approved under OMB control 

number 0938–1083. The information 

collection requirements discussed in 

proposed § 484.250, the OASIS–C and 

Home Health Care CAHPS, are currently 

approved under OMB control numbers 

0938–0760 and 0938–1066, respectively. 

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. Chapter 35). 

IV. Regulatory Impact Analysis 

A. Introduction 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

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

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (March 22, 1995; Pub. L. 

104–4), and the Congressional Review 

Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). This 

final rule has been designated an 

‘‘economically significant’’ rule under 

section 3(f)(1) of Executive Order 12866 

and a major rule under the 

Congressional Review Act. Accordingly, 

the rule has been reviewed by the Office 

of Management and Budget. 

B. Statement of Need 

This final rule adheres to the 

following statutory requirements. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered HH services provided 

under a plan of care (POC) that were 

paid on a reasonable cost basis by 

adding section 1895 of the Act, entitled 

‘‘Prospective Payment For Home Health 

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

requires the Secretary to establish a HH 

PPS for all costs of HH services paid 

under Medicare. In addition, section 

1895(b)(3)(A) of the Act requires (1) the 

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited CR data available to the 

Secretary, and (2) the standardized 

prospective payment amount be 

adjusted to account for the effects of 

case-mix and wage levels among HHAs. 

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

addresses the annual update to the 

standard prospective payment amounts 

by the HH applicable percentage 

increase. Section 1895(b)(4) of the Act 

governs the payment computation. 

Sections 1895(b)(4)(A)(i) and 

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of appropriate casemix adjustment factors for significant 

variation in costs among different units 

of services. Lastly, section 1895(b)(4)(C) 

of the Act requires the establishment of 

wage adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 


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furnished in a geographic area 

compared to the applicable national 

average level. 

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

amended by section 3131 of the 

Affordable Care Act, gives the Secretary 

the option to make changes to the 

payment amount otherwise paid in the 

case of outliers because of unusual 

variations in the type or amount of 

medically necessary care. Section 

1895(b)(3)(B)(v) of the Act requires 

HHAs to submit data for purposes of 

measuring health care quality, and links 

the quality data submission to the 

annual applicable percentage increase. 

Also, section 3131 of the Affordable 

Care Act requires that HH services 

furnished in a rural area (as defined in 

section 1886(d)(2)(D) of the Act) for 

episodes and visits ending on or after 

April 1, 2010, and before January 1, 

2016, receive an increase of 3 percent 

the payment amount otherwise made 

under section 1895 of the Act. 

C. Overall Impact 

The update set forth in this final rule 

applies to Medicare payments under HH 

PPS in CY 2012. Accordingly, the 

following analysis describes the impact 

in CY 2012 only. We estimate that the 

net impact of the proposals in this rule 

is approximately $430 million in CY 

2012 savings. The $430 million impact 

due to the proposed CY 2012 HH PPS 

rule reflects the distributional effects of 

an updated wage index ($10 million 

increase) plus the 1.4 percent HH PPS 

payment update percentage ($280 

million increase), for a total increase of 

$290 million. The 3.79 percent case-mix 

adjustment applicable to the national 

standardized 60-day episode rates ($720 

million decrease) plus the combined 

wage index and HH PPS payment 

update percentage ($290 million 

increase) results in a total savings of 

$430 million in CY 2012. The $430 

million in savings is reflected in the first 

row of column 3 of Table 26 as a 2.31 

percent decrease in expenditures when 

comparing the current CY 2011 HH PPS 

to the CY 2012 HH PPS. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to $34.5 

million in any 1 year. For the purposes 

of the RFA, our updated data show that 

approximately 98 percent of HHAs are 

considered to be small businesses 

according to the Small Business 

Administration’s size standards with 

total revenues of $13.5 million or less in 

any 1 year. Individuals and States are 

not included in the definition of a small 

entity. The Secretary has determined 

that this final rule would have a 

significant economic impact on a 

substantial number of small entities. We 

define small HHAs as those with total 

revenues of $13.5 million or less in any 

1 year. Analysis reveals a 2.62 percent 

decrease in estimated payments to small 

HHAs in CY 2012. 

A discussion on the alternatives 

considered is presented in section V.E. 

below. The following analysis, with the 

rest of the preamble, constitutes our 

final RFA analysis. 

In this final rule, we have stated that 

our analysis reveals that nominal casemix continues to grow under the HH 

PPS. Specifically, nominal case-mix has 

grown from the 17.45 percent growth 

identified in our analysis for CY 2011 

rulemaking to 19.03 percent for this 

year’s rulemaking (see further 

discussion in sections II.A. and II.B.). 

Nominal case-mix is an increase in casemix that is not due to an increase in 

patient acuity. We believe it is 

appropriate to reduce the HH PPS rates 

to account for the increase in nominal 

case-mix, so as to move towards more 

accurate payment for the delivery of 

home health services. Our analysis 

shows that smaller HHAs are impacted 

slightly more than are larger HHAs by 

the provisions of this rule. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of RFA. 

For purposes of section 1102(b) of the 

Act, we define a small rural hospital as 

a hospital that is located outside of a 

metropolitan statistical area and has 

fewer than 100 beds. This final rule 

applies only to HHAs. Therefore, the 

Secretary has determined that this final 

rule would not have a significant 

economic impact on the operations of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2011, that 

threshold is approximately $136 

million. This final rule is not 

anticipated to impose spending costs on 

State, local, or Tribal governments in 

the aggregate, or by the private sector, of 

$136 million or more. 

D. Detailed Economic Analysis 

This final rule sets forth updates to 

the HH PPS rates contained in the CY 

2011 HH PPS final rule. The impact 

analysis of this final rule presents the 

estimated expenditure effects of policy 

changes proposed in this rule. We use 

the latest data and best analysis 

available, but we do not make 

adjustments for future changes in such 

variables as number of visits or casemix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare home 

health benefit, based on Medicare 

claims from 2009. We note that certain 

events may combine to limit the scope 

or accuracy of our impact analysis, 

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

inaccuracies resulting from other 

changes in the impact time period 

assessed. Some examples of such 

possible events are newly-legislated 

general Medicare program funding 

changes made by the Congress, or 

changes specifically related to HHAs. In 

addition, changes to the Medicare 

program may continue to be made as a 

result of the Affordable Care Act, or new 

statutory provisions. Although these 

changes may not be specific to the HH 

PPS, the nature of the Medicare program 

is such that the changes may interact, 

and the complexity of the interaction of 

these changes could make it difficult to 

predict accurately the full scope of the 

impact upon HHAs. 

Comment: A commenter 

recommended that we modify our 

impact analysis approach. The 

commenter states that the proposed rule 

simply quantifies the percentage cut in 

rates on a geographic basis and broadly 

evaluates the impact of the changes on 

home health categories such as 

freestanding, hospital-based, nonprofits, 

and urban and rural providers. 

Response: We believe that State-level 

impacts would be misleading unless we 

also provided break-outs of rural-versesurban and ownership status of providers 

within the State. While we believe that 

our impact analysis is reflective of how 

HHAs are impacted by the provisions of 

this rule in that we provide impacts by 

type of facility, urban/rural, regions and 

other areas of the country, and facility 

size, we did perform a State-level 

analysis as the commenters suggested. 

That analysis shows similar results in 

that States estimated to see the more 

significant negative impacts, as a result 

of the provisions of this rule, are located 

in those areas of the country that are 


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estimated to see the most significant 

negative impact (that is, East South 

Central, West South Central, South 

Atlantic, East North Central, and 

Mountain). Analysis shows, for the 

States hit hardest in these areas of the 

country, not-for-profit HHAs and HHAs 

in rural areas are somewhat protected by 

provisions of this rule such as the 

redistributional effects of decreasing 

case-mix weights for high therapy cases 

and increasing case-mix weights for low 

and non-therapy cases, and the 3 

percent rural add-on update. 

In addition, for States in which 

significant negative impacts exist for 

non-profit and/or rural HHAs, we 

performed a preliminary analysis using 

2009 freestanding Medicare cost report 

data (MCR). This analysis indicates a 

more than adequate volume of providers 

with margins strong enough to absorb 

the payment reductions to account for 

nominal case-mix growth. For example, 

our State-level analysis shows that 

Tennessee is the hardest hit State by the 

provisions of this rule, and is estimated 

to see a ¥6.18 percent decrease in 

payments from CY 2011 to CY 2012. 

While the impact on rural and not-forprofit HHAs in Tennessee is somewhat 

lessened for the reasons described 

above, they are still estimated to see 

significant decreases in payments in CY 

2012. However, our preliminary 

analysis of 2009 freestanding MCR data 

indicate that Tennessee providers, 

including rural and not-for-profit HHAs, 

are experiencing margins which would 

enable them to absorb the reductions. 

Our analysis shows similar results in 

several other States in these areas of the 

country which are estimated to see 

relatively significant negative impacts as 

a result of the provisions of this rule. As 

such, since our analysis of freestanding 

HHA MCR data shows strong positive 

margins in these areas of the country, 

we believe that the provisions of this 

rule, should not lead to access to access 

to care issues. That being said, we 

would like to note that predicting 

agencies’ margins (particularly, the 

increase in the number of agencies with 

negative margins) as a result of the 

provisions of this rule is difficult to do 

because many agencies may find ways 

to cut costs so that margins remain 

strong. This is supported by the fact that 

Medicare margins have remained strong 

since PPS implementation even with 

reductions in payments similar to the 

reduction being finalized in this final 

rule. We also understand that our 

analyses has limitations since it is based 

on 2009 MCR data, the latest complete 

MCR data at the time of preparation of 

this rulemaking. However, in their 

March 2011 Report to Congress, 

MedPAC projected an average of 14.5 

percent margins for HHAs in 2011, 

when taking into account various 

payment adjustments such as the CY 

2011 payment reduction for nominal 

case-mix growth. 

To supplement the above described 

analysis, similar to analysis that we 

have performed in previous rulemaking 

when the issue of ‘‘access to care’’ was 

a concern, we also looked at estimated 

margins of HHAs, by county after 

estimating the impact of the provisions 

of this rule. We performed this analysis 

for the purposes of possibly identifying 

potential access risks associated with 

this rule. In particular, we looked to 

identify whether the finalized policies 

of this rule might increase the number 

of counties not served by at least one 

HHA with a positive margin. The 

analysis demonstrated that the 

occurrence of such counties was very 

infrequent. Looking further, we also 

identified that the counties we 

identified as not having at least one 

HHA with a positive margin did have at 

least one HHA in a contiguous county 

with a positive margin, or at a minimum 

it was determined that the provisions of 

this rule did not create a scenario 

where, for a county without at least one 

HHA with a positive margin, that 

county did not have a contiguous 

county with at least one HHA with a 

positive margin. 

As we have previously described, our 

preliminary analyses indicate HH 

industry margins are sufficient to 

support a rate reduction of this size. We 

note that margin analysis alone is not an 

accurate access to care indicator. Many 

factors affect whether agencies with low 

or negative margin would close or not, 

such as the organization’s mission, the 

availability of alternate sources of 

funding, and whether or not the 

organization is embedded in a larger 

one. We would also like to note that the 

number of agencies continues to grow, 

totaling around 11,000 in 2010, a 65 

percent increase since 2002 and that 

access to care was not found to be 

inadequate in 2002, when the number of 

agencies nationally was much lower 

than it is today. Thus, given these 

reasons along with our described 

analysis above we do not believe that 

the finalized policies in this rule should 

result in access to care issues. At the 

core of our policies is our objective to 

pay appropriately for the efficient 

delivery of reasonable and necessary 

home health services. As always, we 

will, of course, continue to monitor for 

unintended consequences of the final 

policies of this rule. 

Table 26 represents how HHA 

revenues are likely to be affected by the 

policy changes proposed in this rule. 

For this analysis, we used linked home 

health claims and OASIS assessments; 

the claims represented a 20-percent 

sample of 60-day episodes occurring in 

CY 2009. The first column of Table 26 

classifies HHAs according to a number 

of characteristics including provider 

type, geographic region, and urban and 

rural locations. The second column 

shows the payment effects of the wage 

index only. The third column shows the 

payment effects of all the proposed 

policies outlined earlier in this rule. For 

CY 2012, the average impact for all 

HHAs due to the effects of the wage 

index is a 0.03 percent increase in 

payments. The overall impact for all 

HHAs, in estimated total payments from 

CY 2011 to CY 2012, is a decrease of 

approximately 2.31 percent. 

As shown in Table 26, the combined 

effects of all of the changes vary by 

specific types of providers and by 

location. Rural and voluntary non-profit 

agencies fare considerably better than 

urban and proprietary agencies as a 

result of the proposed provisions of this 

rule. We believe this is due mainly to 

the distributional effects of the 

recalibration of the case-mix weights as 

described in section II.A of the proposed 

rule. Essentially, these impacts suggest 

that under the current case-mix system, 

rural and voluntary non-profit agencies 

bill less for high therapy episodes than 

do urban and proprietary agencies. 

There is not much difference in the 

estimated impact (2.79 to 2.98 percent 

decreases) on HHAs when looking at the 

facility size based on the number of first 

episodes, with the lone exception being 

that the largest HHAs are estimated to 

see a 1.88 percent decrease in payments 

in CY 2012. There is considerable 

variation in the estimated impacts 

depending on the region of the country 

in which the HHA is located. HHAs in 

the North are estimated to see a 1.31 

percent increase in payments while 

HHAs in other regions are estimated to 

receive between a 0.09 percent increase 

in payments (West) and a 3.83 percent 

decrease (South). HHAs in the New 

England, Mid Atlantic, and Pacific areas 

of the country are estimated to receive 

increases of 1.37 percent, 1.27 percent 

and 1.33 percent, respectively. 

However, HHAs in the South Atlantic, 

East South Central, West South Central, 

East North Central, West North Central, 

and Mountain areas of the country are 

estimated to receive decreases in 

payments ranging from 0.50 percent to 

4.78 percent. Freestanding HHAs are 

estimated to see a 2.73 percent decrease 

in payments while facility-based HHAs 


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are estimated to see a 0.53 percent 

increase in payments. Voluntary not-forprofit HHAs are estimated to see a 0.52 

percent increase in payments, while forprofit HHAs are estimated to see a 3.49 

percent decrease in payments in CY 

2012. Rural agencies are estimated to 

see a 1.52 percent decrease in payments 

in CY 2012, while urban agencies are 

estimated to see a 2.45 percent decrease 

in payments. Rural, freestanding, 

voluntary not-for-profit HHAs are 

estimated to see a 1.56 percent increase 

in payments. As described above, we 

believe the considerable variation in 

some of the estimated impacts is due 

mainly to the distributional effects of 

the recalibration of the case-mix 

weights. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

E. Alternatives Considered 

As described in section V.C. above, 

implementing the case-mix adjustment 

for CY 2012 along with the HH PPS 

payment update percentage and the 

updated wage index, the aggregate 

impact would be a net decrease of $430 

million in payments to HHAs, resulting 

from a $290 million increase due to the 

updated wage index and the HH PPS 

payment update percentage and a $720 

million reduction from the 3.79 percent 

case-mix adjustment. If we were to not 

implement the case-mix adjustment for 

CY 2012, Medicare would pay an 

estimated $720 million more to HHAs in 

CY 2012, for a net increase in payments 


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to HHAs in CY 2012 of $290 million 

(HH PPS payment update percentage 

and updated wage index). We believe 

that not implementing a case-mix 

adjustment, and paying out an 

additional $720 million to HHAs when 

those additional payments are not 

reflective of HHAs treating sicker 

patients, would not be in line with the 

intent of the HH PPS, which is to pay 

accurately and appropriately for the 

delivery of home health services to 

Medicare beneficiaries. If we were to 

implement a 5.06 case-mix adjustment 

for CY 2012 along with the HH PPS 

payment update percentage and the 

updated wage index, the aggregate 

impact would be a net decrease of $670 

million in payment to HHAs, resulting 

from a $290 million increase due to the 

updated wage index and the HH PPs 

payment update percentage and a $960 

million reduction from a 5.06 percent 

case-mix adjustment. As we stated in 

our response to comments in Section 

II.A. of this rule, we are sensitive to the 

challenges HHAs may have had in 

adapting to the Affordable Care Act 

provisions which were implemented in 

CY 2011, such as the face-to-face 

encounter provision. We also agree that 

the Affordable Care Act provisions and 

the CY 2011 therapy changes described 

by commenters likely required HHAs to 

incorporate process changes to adhere to 

these new requirements. As such, we 

are finalizing a phased-in 

implementation of the 5.06 percent 

reduction over 2 years, as some 

commenters suggested. We believe that 

by phasing-in the reductions over CY 

2012 and CY 2013, we allow HHAs an 

opportunity to adopt process 

efficiencies associated with the CY 2011 

mandates prior to imposing the full 5.06 

percent payment reduction. 

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

gives CMS the authority to implement 

payment reductions for nominal casemix growth, changes in case-mix that 

are unrelated to actual changes in 

patient health status. We are committed 

to monitoring the accuracy of payments 

to HHAs, which includes the 

measurement of the increase in nominal 

case-mix, which is an increase in casemix that is not due to patient acuity. As 

discussed in section II.A. of this rule, 

we have determined that there is a 19.03 

percent nominal case-mix change from 

2000 to 2009. To account for the 

remainder of the 19.03 percent residual 

increase in nominal case-mix beyond 

that which was has been accounted for 

in previous payment reductions (2.75 

percent in CY 2008 through CY 2010 

and 3.79 percent in CY 2011),), as 

described in the proposed rule and 

restated in Section II.A. of this rule, we 

have estimated that the percentage 

reduction to the national standardized 

60-day episode rates for nominal casemix change for CY 2012 would be 5.06 

percent. As described in a comment and 

response in Section II.A. of this rule, 

commenters expressed concern that the 

proposed cut of 5.06 percent would 

impede access to home health care. 

Some commenters stated that rural areas 

would be hit the hardest by a case-mix 

reduction to payments. One commenter 

described his analysis which concluded 

that over 55 percent of agencies would 

be forced into negative margins as a 

result of the reductions. The commenter 

further stated that six States and Guam 

would have more than 70 percent of 

their agencies with negative margins in 

CY 2012 as a result of the proposed 5.06 

percent reduction. In response to these 

comments, we noted that the effects of 

the payment update, the wage index 

update, and the revision of case-mix 

weights must also be taken into account 

when assessing the impact of a 5.06 

percent reduction and that we believe 

the commenter did not do consider 

these in his analysis. We described our 

analysis which showed that the revision 

of the case-mix weights would have a 

re-distributional effect on HH PPS 

payments which benefit rural and nonprofit HHAs, and HHAs in certain areas 

of the country. Our analysis showed that 

some rural and non-profit HHAs, as well 

as HHAs in certain areas of the country, 

were estimated to see an increase in 

payments in CY 2012, even with a 5.06 

percent nominal case-mix reduction. We 

described our analysis of the combined 

effects of all the policies in the proposed 

rule, our preliminary analysis of 

Medicare CRs, and MedPAC’s margin 

projections, and we concluded that 

Medicare margins are strong enough to 

absorb a 5.06 percent reduction to 

account for growth in nominal case-mix 

without impeding access. However, for 

the reasons described in section II.A. in 

this final rule, we are phasing-in the 

implementation of a 5.06 percent 

reduction over 2 years, finalizing a 3.79 

percent reduction in CY 2012 and a 1.32 

percent reduction in CY 2013. 

We believe that the alternative of not 

implementing a case-mix adjustment to 

the payment system in CY 2012 to 

account for the increase in case-mix that 

is not real would be detrimental to the 

integrity of the PPS. As discussed in 

section II.A. of this rule, because 

nominal case-mix continues to grow 

(about 1 percent each year in 2006 and 

2007, 4 percent in 2008, and 2 percent 

in 2009), and thus to date we have not 

accounted for all the increase in 

nominal case-mix growth, we believe it 

is appropriate to reduce HH PPS rates 

now, thereby paying more accurately for 

the delivery of home health services 

under the Medicare home health 

benefit. The other reduction to HH PPS 

payments, a 1.0 percentage point 

reduction to the proposed CY 2012 

home health market basket update, is 

discussed in this rule and is not 

discretionary as it is a requirement in 

section 1895(b)(3)(B)(vi) of the Act (as 

amended by the Affordable Care Act). 

F. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/ 

circulars_a004_a-4), in Table 27, we 

have prepared an accounting statement 

showing the classification of the 

transfers associated with the provisions 

of this final rule. This table provides our 

best estimate of the decrease in 

Medicare payments under the HH PPS 

as a result of the changes presented in 

this final rule. 

G. Conclusion 

In conclusion, we estimate that the 

net impact of the proposals in this rule 

is approximately $430 million in CY 

2012 savings. The $430 million impact 

to the final CY 2012 HH PPS reflects the 

distributional effects of an updated 

wage index ($10 million increase), the 

1.4 percent HH PPS payment update 


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percentage ($280 million increase), and 

the 3.79 percent case-mix adjustment 

applicable to the national standardized 

60-day episode rates ($720 million 

decrease). This analysis, together with 

the remainder of this preamble, 

provides a Regulatory Impact Analysis. 

V. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a proposed rule 

(and subsequent final rule) that imposes 

substantial direct requirement costs on 

State and local governments, preempts 

State law, or otherwise has Federalism 

implications. We have reviewed this 

final rule under the threshold criteria of 

Executive Order 13132, Federalism, and 

have determined that it would not have 

substantial direct effects on the rights, 

roles, and responsibilities of States, 

local or Tribal governments. 

List of Subjects 

42 CFR Part 409 

Health facilities, Medicare. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 484 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 409—HOSPITAL INSURANCE 

BENEFITS 

■ 1. The authority citation for part 409 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

Subpart E—Home Health Services 

Under Hospital Insurance 

■ 2. Section 409.42 is amended by 

revising paragraph (c)(4) to read as 

follows: 

§ 409.42 Beneficiary qualifications for 

coverage of services. 

* * * * * 

(c) * * * 

(4) Occupational therapy services in 

the current and subsequent certification 

periods (subsequent adjacent episodes) 

that meet the requirements of 

§ 409.44(c) initially qualify for home 

health coverage as a dependent service 

as defined in § 409.45(d) if the 

beneficiary’s eligibility for home health 

services has been established by virtue 

of a prior need for intermittent skilled 

nursing care, speech-language pathology 

services, or physical therapy in the 

current or prior certification period. 

Subsequent to an initial covered 

occupational therapy service, 

continuing occupational therapy 

services which meet the requirements of 

§ 409.44(c) are considered to be 

qualifying services. 

* * * * * 

■ 3. Section 409.44 is amended by 

revising paragraphs (c) introductory 

text, (c)(2)(i)(C)(2), and (c)(2)(i)(D)(2) to 

read as follows: 

§ 409.44 Skilled services requirements. 

* * * * * 

(c) Physical therapy, speech-language 

pathology services, and occupational 

therapy. To be covered, physical 

therapy, speech-language pathology 

services, and occupational therapy must 

satisfy the criteria in paragraphs (c)(1) 

and (2) of this section. 

* * * * * 

(2) * * * 

(i) * * * 

(C) * * * 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide all of the therapy services and 

functionally reassess the patient in 

accordance with paragraph (c)(2)(i)(A) 

of this section during the visit 

associated with that discipline which is 

scheduled to occur close to the 14th 

Medicare-covered therapy visit, but no 

later than the 13th Medicare-covered 

therapy visit. 

(D) * * * 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide all of the therapy services and 

functionally reassess the patient in 

accordance with paragraph (c)(2)(i)(A) 

of this section during the visit 

associated with that discipline which is 

scheduled to occur close to the 20th 

Medicare-covered therapy visit, but no 

later than the 19th Medicare-covered 

therapy visit. 

* * * * * 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

■ 4. The authority citation for part 424 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

Subpart B—Certification and Plan 

Requirements 

■ 5. Section 424.22 is amended by 

revising paragraphs (a)(1)(v) 

introductory text and (a)(1)(v)(A) to read 

as follows: 

§ 424.22 Requirements for home health 

services. 

* * * * * 

(a) * * * 

(1) * * * 

(v) The physician responsible for 

performing the initial certification must 

document that the face-to-face patient 

encounter, which is related to the 

primary reason the patient requires 

home health services, has occurred no 

more than 90 days prior to the home 

health start of care date or within 30 

days of the start of the home health care 

by including the date of the encounter, 

and including an explanation of why 

the clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

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

of this chapter, respectively. The faceto-face encounter must be performed by 

the certifying physician himself or 

herself, by a nurse practitioner, a 

clinical nurse specialist (as those terms 

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

Act) who is working in collaboration 

with the physician in accordance with 

State law, a certified nurse midwife (as 

defined in section 1861(gg)of the Act) as 

authorized by State law, a physician 

assistant (as defined in section 

1861(aa)(5) of the Act) under the 

supervision of the physician, or, for 

patients admitted to home health 

immediately after an acute or post-acute 

stay, the physician who cared for the 

patient in an acute or post-acute facility 

and who has privileges at the facility. 

The documentation of the face-to-face 

patient encounter must be a separate 

and distinct section of, or an addendum 

to, the certification, and must be clearly 

titled, dated and signed by the certifying 

physician. 

(A) If the certifying physician does 

not perform the face-to-face encounter 

himself or herself, the nonphysician 

practitioner or the physician who cared 

for the patient in an acute or post-acute 

facility performing the face-to-face 

encounter must communicate the 

clinical findings of that face-to-face 

patient encounter to such certifying 

physician. 

* * * * * 


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PART 484—HOME HEALTH SERVICES 

■ 6. 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. 

Subpart E—Prospective Payment 

System for Home Health Agencies 

■ 7. Section 484.250 is revised to read 

as follows: 

§ 484.250 Patient assessment data. 

(a) Data submission. An HHA must 

submit the following data to CMS: 

(1) The OASIS–C data described at 

§ 484.55(b)(1) of this part for CMS to 

administer the payment rate 

methodologies described in §§ 484.215, 

484.230, and 484.235 of this subpart, 

and to meet the quality reporting 

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

of the Act. 

(2) The Home Health Care CAHPS 

survey data for CMS to administer the 

payment rate methodologies described 

in § 484.225(i) of this subpart, and to 

meet the quality reporting requirements 

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

(b) Patient count. An HHA that has 

less than 60 eligible unique HHCAHPS 

patients annually must annually submit 

to CMS their total HHCAHPS patient 

count to CMS to be exempt from the 

HHCAHPS reporting requirements for a 

calendar year period. 

(c) Survey requirements. An HHA 

must contract with an approved, 

independent HHCAHPS survey vendor 

to administer the HHCAHPS Survey on 

its behalf. 

(1) CMS approves an HHCAHPS 

survey vendor if such applicant has 

been in business for a minimum of 3 

years and has conducted surveys of 

individuals and samples for at least 2 

years. 

(i) For HHCAHPS, a ‘‘survey of 

individuals’’ is defined as the collection 

of data from at least 600 individuals 

selected by statistical sampling methods 

and the data collected are used for 

statistical purposes. 

(ii) All applicants that meet these 

requirements will be approved by CMS. 

(2) No organization, firm, or business 

that owns, operates, or provides staffing 

for a HHA is permitted to administer its 

own Home Health Care CAHPS 

(HHCAHPS) Survey or administer the 

survey on behalf of any other HHA in 

the capacity as an HHCAHPS survey 

vendor. Such organizations will not be 

approved by CMS as HHCAHPS survey 

vendors. 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program). 

Dated: October 13, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: October 25, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–28416 Filed 10–31–11; 4:15 pm] 

BILLING CODE 4120–01–P 


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