44242 Federal Register / Vol. 77, No. 145 / Friday, July 27, 2012 / Notices 

utility, and clarity of the information to 

be collected; and (4) the use of 

automated collection techniques or 

other forms of information technology to 

minimize the information collection 

burden. 

1. Type of Information Collection 

Request: Revised collection; Title of 

Information Collection: Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program; Use: The Centers for 

Medicare & Medicaid Services (CMS) 

will conduct competitive bidding 

programs in which certain suppliers 

will be awarded contracts to provide 

competitively bid DMEPOS items to 

Medicare beneficiaries in a competitive 

bidding area (CBA). CMS conducted its 

first round of bidding in 2007 which 

was implemented on July 1, 2008. The 

first round of bidding was subsequently 

delayed by section 154 of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA). 

As required by MIPPA, CMS 

conducted the competition for the 

Round 1 Rebid in 2009. The Round 1 

Rebid contract and prices became 

effective on January 1, 2011. The 

Medicare Modernization Act (MMA) 

requires the Secretary to recompete 

contracts not less often than once every 

3 years; therefore, CMS is preparing to 

recompete competitive bidding 

contracts in the Round 1 Rebid areas. 

The 60-day Federal Register notice 

published on May 7, 2012, (77 FR 

26763). Subsequently, the Application 

for Suppliers/Networks collection 

instrument has been revised by 

clarifying, removing and renumbering a 

few questions. The burden estimate has 

not changed. Form Number: CMS– 

10169 (OCN: 0938–1016); Frequency: 

Reporting—Occasionally; Affected 

Public: Business or other for-profit, Notfor-profit institutions; Number of 

Respondents: 16,003; Total Annual 

Responses: 20,047; Total Annual Hours: 

34,795. (For policy questions regarding 

this collection contact James Cowher at 

410–786–1948. For all other issues call 

410–786–1326.) 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS Web Site 

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

PaperworkReductionActof1995, or 

Email your request, including your 

address, phone number, OMB number, 

and CMS document identifier, to 

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office on (410) 786– 

1326. 

To be assured consideration, 

comments and recommendations for the 

proposed information collections must 

be received by the OMB desk officer at 

the address below, no later than 5 p.m. 

on August 27, 2012. 

OMB, Office of Information and 

Regulatory Affairs, Attention: CMS 

Desk Officer, Fax Number: (202) 395– 

6974, Email: OIRA_submission@omb.

eop.gov. 

Dated: July 24, 2012. 

Martique Jones, 

Director, Regulations Development Group, 

Division B, Office of Strategic Operations and 

Regulatory Affairs. 

[FR Doc. 2012–18346 Filed 7–26–12; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

[CMS–1434–N] 

RIN 0938–AR17 

Medicare Program; Hospice Wage 

Index for Fiscal Year 2013 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Health and 

Human Services (HHS). 

ACTION: Notice. 

SUMMARY: This notice sets forth the 

hospice wage index for fiscal year (FY) 

2013 and will continue the phase-out of 

the wage index budget neutrality 

adjustment factor (BNAF), with an 

additional 15 percent BNAF reduction, 

for a total BNAF reduction through FY 

2013 of 55 percent. The BNAF phaseout will continue with successive 15 

percent reductions from FY 2014 

through FY 2016. This notice clarifies 

that providers should report additional 

diagnoses on hospice claims. This 

notice also updates the public on the 

status of hospice payment reform and 

the quality reporting program. 

DATES: This notice is effective on 

October 1, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Anjana Patel, (410) 786–2120 for 

questions regarding hospice wage 

index. 

Katie Lucas, (410) 786–7723 for 

questions regarding diagnosis 

reporting on claims. 

Zinnia Harrison, (410) 786–4587 for 

questions regarding payment reform. 

Robin Dowell, (410) 786–0060 for 

questions regarding quality reporting 

for hospices. 

Hillary Loeffler, (410) 786–0456 for 

questions regarding this notice. 

SUPPLEMENTARY INFORMATION: 

Addenda Are Only Available Through 

the Internet on the CMS Web Site 

In the past, the Addenda referred to 

throughout the preamble of our 

proposed and final rules or notices were 

available in the Federal Register. 

However, the Addenda of the annual 

proposed and final rules, or annual 

notices, will no longer be available in 

the Federal Register. Instead, these 

Addenda to the annual proposed and 

final rules or annual notices will be 

available only through the Internet on 

the CMS Web site. The Addenda to the 

FY 2013 Hospice Wage Index Notice are 

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

Medicare/Medicare-Fee-for-ServicePayment/Hospice/index.html. Readers 

who experience any problems accessing 

any of the Addenda to the proposed and 

final rules or notices related to the 

hospice wage index that are posted on 

the CMS Web site identified above 

should contact Anjana Patel at 

410–786–2120. 

Table of Contents 

I. Background 

A. General 

1. Hospice Care 

2. Medicare Payment for Hospice Care 

B. Hospice Wage Index 

1. Raw Wage Index Values (Pre-Floor, 

Pre-Reclassified Hospital Wage Index) 

2. Definition of Rural and Urban Areas 

3. Areas Without Hospital Wage Data 

4. CBSA Nomenclature Changes 

5. Wage Data for Multi-Campus Hospitals 

6. Hospice Payment Rates 

II. Provisions of the Notice 

A. FY 2013 Hospice Wage Index 

1. Background 

2. Areas Without Hospital Wage Data 

3. FY 2013 Wage Index With an Additional 

15 Percent Reduced Budget Neutrality 

Adjustment Factor (BNAF) 

4. Effects of Phasing Out the BNAF 

B. Clarification Regarding Diagnosis 

Reporting on Hospice Claims 

C. Update on Hospice Payment Reform 

D. Update on the Hospice Quality 

Reporting Program 

III. Waiver of Proposed Rulemaking 

IV. Collection of Information Requirements 

V. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impacts 

4. Detailed Economic Analysis 

a. Effects on Hospices 

b. Hospice Size 

c. Geographic Location 

d. Type of Ownership 

e. Hospice Base 

f. Effects on Other Providers 

g. Effects on the Medicare and Medicaid 

Programs 

h. Accounting Statement 

i. Conclusion 

B. Regulatory Flexibility Act Analysis 

C. Unfunded Mandates Reform Act 

Analysis 


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VI. Federalism Analysis 

VII. Files Available to the Public via the 

Internet 

I. Background 

A. General 

1. Hospice Care 

Hospice care is an approach to 

treatment that recognizes that the 

impending death of an individual 

warrants a change in the focus from 

curative to palliative care, for relief of 

pain and for symptom management. The 

goal of hospice care is to help terminally 

ill individuals continue life with 

minimal disruption to normal activities 

while remaining primarily in the home 

environment. A hospice uses an 

interdisciplinary approach to deliver 

medical, nursing, social, psychological, 

emotional, and spiritual services 

through use of a broad spectrum of 

professional and other caregivers, with 

the goal of making the individual as 

physically and emotionally comfortable 

as possible. Counseling services and 

inpatient respite services are available 

to the family of the hospice patient. 

Hospice programs consider both the 

patient and the family as a unit of care. 

Section 1861(dd) of the Social 

Security Act (the Act) provides for 

coverage of hospice care for terminally 

ill Medicare beneficiaries who elect to 

receive care from a participating 

hospice. Section 1814(i) of the Act 

provides payment for Medicare 

participating hospices. 

2. Medicare Payment for Hospice Care 

Sections 1812(d), 1813(a)(4), 

1814(a)(7), 1814(i), and 1861(dd) of the 

Act, and our regulations at 42 CFR part 

418, establish eligibility requirements, 

payment standards and procedures, 

define covered services, and delineate 

the conditions a hospice must meet to 

be approved for participation in the 

Medicare program. Part 418 subpart G, 

provides for payment in one of four 

prospectively-determined rate categories 

(routine home care, continuous home 

care, inpatient respite care, and general 

inpatient care) to hospices, based on 

each day a qualified Medicare 

beneficiary is under a hospice election. 

B. Hospice Wage Index 

The hospice wage index is used to 

adjust payment rates for hospice 

agencies under the Medicare program to 

reflect local differences in area wage 

levels. Our regulations at § 418.306(c) 

require each hospice’s labor market to 

be established using the most current 

hospital wage data available, including 

any changes by the Office of 

Management and Budget (OMB) to the 

Metropolitan Statistical Areas (MSAs) 

definitions. OMB revised the MSA 

definitions beginning in 2003 with new 

designations called the Core Based 

Statistical Areas (CBSAs). For the 

purposes of the hospice benefit, the 

term ‘‘MSA-based’’ refers to wage index 

values and designations based on the 

previous MSA designations before 2003. 

Conversely, the term ‘‘CBSA-based’’ 

refers to wage index values and 

designations based on the OMB revised 

MSA designations in 2003, which now 

include CBSAs. In the August 11, 2004 

Inpatient Prospective Payment System 

(IPPS) final rule (69 FR 48916, 49026), 

labor market area definitions were 

revised and adopted at § 412.64(b), 

which were effective October 1, 2004, 

for acute care hospitals. We also revised 

the labor market areas for hospices 

using the new OMB standards that 

included CBSAs. In the Fiscal Year (FY) 

2006 hospice wage index final rule (70 

FR 45130), we implemented a 1-year 

transition policy using a 50/50 blend of 

the CBSA-based wage index values and 

the MSA-based wage index values for 

FY 2006. The one-year transition policy 

ended on September 30, 2006. For fiscal 

years 2007 and beyond, we have used 

CBSAs exclusively to calculate wage 

index values. 

The original hospice wage index was 

based on the 1981 Bureau of Labor 

Statistics hospital data and had not been 

updated since 1983. In 1994, because of 

disparity in wages from one 

geographical location to another, a 

committee was formed to negotiate a 

wage index methodology that could be 

accepted by the industry and the 

government. This committee, 

functioning under a process established 

by the Negotiated Rulemaking Act of 

1990, comprised representatives from 

national hospice associations; rural, 

urban, large and small hospices, and 

multi-site hospices; consumer groups; 

and a government representative. On 

April 13, 1995, the Hospice Wage Index 

Negotiated Rulemaking Committee (the 

Committee) signed an agreement for the 

methodology to be used for updating the 

hospice wage index. 

In the August 8, 1997 Federal 

Register (62 FR 42860), we published a 

final rule implementing a new 

methodology for calculating the hospice 

wage index based on the 

recommendations of the negotiated 

rulemaking committee. The Committee’s 

statement was included in the appendix 

of that final rule (62 FR 42883). 

The reduction in overall Medicare 

payments if a new wage index were 

adopted was noted in the November 29, 

1995 notice transmitting the 

recommendations of the Committee (60 

FR 61264). The Committee also decided 

that for each year in updating the 

hospice wage index, aggregate Medicare 

payments to hospices would remain 

budget neutral to payments as if the 

1983 wage index had been used. 

As suggested by the Committee, 

‘‘budget neutrality’’ would mean that, in 

a given year, estimated aggregate 

payments for Medicare hospice services 

using the updated hospice values would 

equal estimated payments that would 

have been made for these services if the 

1983 hospice wage index values had 

remained in effect. Although payments 

to individual hospice programs would 

change each year, the total payments 

each year to hospices would not be 

affected by using the updated hospice 

wage index because total payments 

would be budget neutral as if the 1983 

wage index had been used. To 

implement this policy, a Budget 

Neutrality Adjustment Factor (BNAF) 

would be computed and applied 

annually to the pre-floor, prereclassified hospital wage index when 

deriving the hospice wage index. 

The BNAF is calculated by computing 

estimated payments using the most 

recent, completed year of hospice 

claims data. The units (days or hours) 

from those claims are multiplied by the 

updated hospice payment rates to 

calculate estimated payments. For the 

FY 2012 Hospice Wage Index final rule, 

that meant estimating payments for FY 

2012 using units (days or hours) from 

the FY 2010 hospice claims data, and 

applying the FY 2012 hospice payment 

rates. The FY 2012 hospice wage index 

values are then applied to the labor 

portion of the payments only. The 

procedure is repeated using the same 

units from the claims data and the same 

payment rates, but using the 1983 

Bureau of Labor Statistics (BLS)-based 

wage index instead of the updated raw 

pre-floor, pre-reclassified hospital wage 

index (note that both wage indices 

include their respective floor 

adjustments). The total payments are 

then compared, and the adjustment 

required to make total payments equal 

is computed; that adjustment factor is 

the BNAF. 

The FY 2010 Hospice Wage Index 

final rule (74 FR 39384) finalized a 

provision for a 7-year phase-out of the 

BNAF, which is applied to the wage 

index values. The BNAF was reduced 

by 10 percent in FY 2010, an additional 

15 percent in FY 2011 and by an 

additional 15 percent again in FY 2012, 

for a total reduction of 40 percent to 

date, and will be reduced by an 

additional 15 percent in each of the next 

4 years, for complete phase out in 2016. 


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1. Raw Wage Index Values (Pre-Floor, 

Pre-Reclassified Hospital Wage Index) 

As described in the August 8, 1997 

hospice wage index final rule (62 FR 

42860), the pre-floor and prereclassified hospital wage index is used 

as the raw wage index for the hospice 

benefit. These raw wage index values 

are then subject to either a budget 

neutrality adjustment or application of 

the hospice floor to compute the 

hospice wage index used to determine 

payments to hospices. 

Pre-floor, pre-reclassified hospital 

wage index values of 0.8 or greater are 

currently adjusted by a reduced BNAF; 

however, adjusting a wage index value 

by a reduced BNAF still results in an 

increase in the wage index value. Prefloor, pre-reclassified hospital wage 

index values below 0.8 are adjusted by 

either: (1) The hospice BNAF, reduced 

by a total of 40 percent for FY 2012; or 

(2) the hospice floor (which is a 15 

percent increase) subject to a maximum 

wage index value of 0.8; whichever 

results in the greater value. Once the 

BNAF is completely phased out, the 

hospice floor adjustment will simply 

consist of increasing any wage index 

value less than 0.8 by 15 percent, 

subject to a maximum wage index value 

of 0.8. 

For example, if in FY 2012, County A 

had a pre-floor, pre-reclassified hospital 

wage index (raw wage index) value of 

0.3994, we would perform the following 

calculations using the budget-neutrality 

factor (which for this example is an 

unreduced BNAF of 0.058593, less 40 

percent, or 0.035156) and the hospice 

floor to determine County A’s hospice 

wage index: 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the 40 percent reduced BNAF: 

(0.3994 × 1.035156 = 0.4134) 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the hospice floor: (0.3994 × 1.15 = 

0.4593) 

Based on these calculations, County 

A’s hospice wage index would be 

0.4593. 

The BNAF has been computed and 

applied annually, in full or in reduced 

form, to the labor portion of the hospice 

payment. Currently, the labor portion of 

the payment rates is as follows: For 

Routine Home Care, 68.71 percent; for 

Continuous Home Care, 68.71 percent; 

for General Inpatient Care, 64.01 

percent; and for Respite Care, 54.13 

percent. The non-labor portion is equal 

to 100 percent minus the labor portion 

for each level of care. Therefore the nonlabor portion of the payment rates is as 

follows: For Routine Home Care, 31.29 

percent; for Continuous Home Care, 

31.29 percent; for General Inpatient 

Care, 35.99 percent; and for Respite 

Care, 45.87 percent. 

2. Definition of Rural and Urban Areas 

Each hospice’s labor market is 

determined based on definitions of 

MSAs issued by OMB. In general, an 

urban area is defined as an MSA or New 

England County Metropolitan Area 

(NECMA), as defined by OMB. Under 

§ 412.64(b)(1)(ii)(C), a rural area is 

defined as any area outside of the urban 

area. The urban and rural area 

geographic classifications are defined in 

§ 412.64(b)(1)(ii)(A) through (C), and 

have been used for the Medicare 

hospice benefit since implementation. 

When the raw pre-floor, prereclassified hospital wage index was 

adopted for use in deriving the hospice 

wage index, it was decided not to take 

into account Inpatient Prospective 

Payment System (IPPS) geographic 

reclassifications. This policy of 

following OMB designations of rural or 

urban, rather than considering some 

Counties to be ‘‘deemed’’ urban, is 

consistent with our policy of not taking 

into account IPPS geographic 

reclassifications in determining 

payments under the hospice wage 

index. 

3. Areas Without Hospital Wage Data 

When adopting OMB’s new labor 

market designations in FY 2006, we 

identified some geographic areas where 

there were no hospitals, and thus, no 

hospital wage index data on which to 

base the calculation of the hospice wage 

index. Beginning in FY 2006, we 

adopted a policy to use the FY 2005 prefloor, pre-reclassified hospital wage 

index value for rural areas when no 

hospital wage data were available. We 

also adopted the policy that for urban 

labor markets without a hospital from 

which a hospital wage index data could 

be derived, all of the CBSAs within the 

State would be used to calculate a 

statewide urban average pre-floor, prereclassified hospital wage index value to 

use as a reasonable proxy for these 

areas. Consequently, in subsequent 

fiscal years, we applied the average prefloor, pre-reclassified hospital wage 

index data from all urban areas in that 

State, to urban areas without a hospital. 

In FY 2012, the only CBSA was 25980, 

Hinesville-Fort Stewart, Georgia. 

In the FY 2008 final rule (72 FR 

50214, 50217), we considered 

alternatives to our methodology to 

update the pre-floor, pre-reclassified 

hospital wage index for rural areas 

without hospital wage data. We 

indicated that we believed that the best 

imputed proxy for rural areas, would: 

(1) Use pre-floor, pre-reclassified 

hospital data; (2) use the most local data 

available to impute a rural pre-floor, 

pre-reclassified hospital wage index; (3) 

be easy to evaluate; and, 4) be easy to 

update from year to year. 

Therefore, in FY 2008 through FY 

2012, in cases where there was a rural 

area without rural hospital wage data, 

we used the average pre-floor, prereclassified hospital wage index data 

from all contiguous CBSAs to represent 

a reasonable proxy for the rural area. 

This approach does not use rural data; 

however, the approach, which uses prefloor, pre-reclassified hospital wage 

data, is easy to evaluate, is easy to 

update from year to year, and uses the 

most local data available. In the FY 2008 

rule (72 FR at 50217), we noted that in 

determining an imputed rural pre-floor, 

pre-reclassified hospital wage index, we 

interpret the term ‘‘contiguous’’ to mean 

sharing a border. For example, in the 

case of Massachusetts, the entire rural 

area consists of Dukes and Nantucket 

counties. We determined that the 

borders of Dukes and Nantucket 

counties are contiguous with Barnstable 

and Bristol counties. Under the adopted 

methodology, the pre-floor, prereclassified hospital wage index values 

for the counties of Barnstable (CBSA 

12700, Barnstable Town, MA) and 

Bristol (CBSA 39300, Providence-New 

Bedford-Fall River, RI-MA) would be 

averaged resulting in an imputed prefloor, pre-reclassified rural hospital 

wage index for FY 2008. We noted in 

the FY 2008 final hospice wage index 

rule that while we believe that this 

policy could be readily applied to other 

rural areas that lack hospital wage data 

(possibly due to hospitals converting to 

a different provider type, such as a 

Critical Access Hospital, that does not 

submit the appropriate wage data), if a 

similar situation arose in the future, we 

would re-examine this policy. 

We also noted that we do not believe 

that this policy would be appropriate for 

Puerto Rico, as there are sufficient 

economic differences between hospitals 

in the United States and those in Puerto 

Rico, including the payment of hospitals 

in Puerto Rico using blended Federal/ 

Commonwealth-specific rates. 

Therefore, we believe that a separate 

and distinct policy is necessary for 

Puerto Rico. Any alternative 

methodology for imputing a pre-floor, 

pre-reclassified hospital wage index for 

rural Puerto Rico would need to take 

into account the economic differences 

between hospitals in the United States 

and those in Puerto Rico. Our policy of 

imputing a rural pre-floor, prereclassified hospital wage index based 


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on the pre-floor, pre-reclassified 

hospital wage index (or indices) of 

CBSAs contiguous to the rural area in 

question does not recognize the unique 

circumstances of Puerto Rico. While we 

have not yet identified an alternative 

methodology for imputing a pre-floor, 

pre-reclassified hospital wage index for 

rural Puerto Rico, we will continue to 

evaluate the feasibility of using existing 

hospital wage data and, possibly, wage 

data from other sources. For FY 2008 

through FY 2012, we have used the 

most recent pre-floor, pre-reclassified 

hospital wage index available for Puerto 

Rico, which is 0.4047. 

4. CBSA Nomenclature Changes 

The OMB regularly publishes a 

bulletin that updates the titles of certain 

CBSAs. In the FY 2008 final rule (72 FR 

50218), we noted that the FY 2008 rule 

and all subsequent hospice wage index 

rules and notices would incorporate 

CBSA changes from the most recent 

OMB bulletins. The OMB bulletins may 

be accessed at http:// 

www.whitehouse.gov/omb/bulletins/ 

index.html. 

5. Wage Data From Multi-Campus 

Hospitals 

Historically, under the Medicare 

hospice benefit, we have established 

hospice wage index values calculated 

from the raw pre-floor, pre-reclassified 

hospital wage data (also called the IPPS 

wage index) without taking into account 

geographic reclassification under 

sections 1886(d)(8) and (d)(10) of the 

Act. The wage adjustment established 

under the Medicare hospice benefit is 

based on the location where services are 

furnished without any reclassification. 

For more information regarding this 

section, please refer to 76 FR 47305 

(‘‘Hospice Wage Index for FY 2012’’, 

August 4, 2011). 

For FY 2012, the data collected from 

cost reports submitted by hospitals for 

cost reporting periods beginning during 

FY 2007 were used to compute the 2011 

raw pre-floor, pre-reclassified hospital 

wage index data, without taking into 

account geographic reclassification 

under sections 1886(d)(8) and (d)(10) of 

the Act. This 2011 raw pre-floor, prereclassified hospital wage index was 

used to derive the applicable wage 

index values for the hospice wage index 

because these data (FY 2007) were the 

most recent complete cost data. 

Beginning in FY 2008, the IPPS 

apportioned the wage data for multicampus hospitals located in different 

labor market areas (CBSAs) to each 

CBSA where the campuses were located 

(see the FY 2008 IPPS final rule with 

comment period (72 FR 47317 through 

47320)). We are continuing to use the 

raw pre-floor, pre-reclassified hospital 

wage data as a basis to determine the 

hospice wage index values because 

hospitals and hospices both compete in 

the same labor markets, and therefore, 

experience similar wage-related costs. 

We note that the use of raw pre-floor, 

pre-reclassified hospital (IPPS) wage 

data used to derive the FY 2012 hospice 

wage index values reflects the 

application of our policy to use those 

data to establish the hospice wage 

index. The FY 2013 hospice wage index 

values presented in this Notice were 

computed consistent with our raw prefloor, pre-reclassified hospital (IPPS) 

wage index policy (that is, our historical 

policy of not taking into account IPPS 

geographic reclassifications in 

determining payments for hospice). As 

implemented in the August 8, 2008 FY 

2009 Hospice Wage Index final rule, for 

the FY 2009 Medicare hospice benefit, 

the hospice wage index was computed 

from IPPS wage data (submitted by 

hospitals for cost reporting periods 

beginning in FY 2004 (as was the FY 

2008 IPPS wage index)), which 

allocated salaries and hours to the 

campuses of two multi-campus 

hospitals with campuses that are located 

in different labor areas, one in 

Massachusetts and another in Illinois. 

Thus, in FY 2009 and subsequent fiscal 

years, hospice wage index values for the 

following CBSAs have been affected by 

this policy: Boston-Quincy, MA (CBSA 

14484), Providence-New Bedford-Falls 

River, RI–MA (CBSA 39300), ChicagoNaperville-Joliet, IL (CBSA 16974), and 

Lake County-Kenosha County, IL–WI 

(CBSA 29404). 

6. Hospice Payment Rates 

Section 4441(a) of the Balanced 

Budget Act of 1997 (BBA) amended 

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

establish updates to hospice rates for 

FYs 1998 through 2002. Hospice rates 

were to be updated by a factor equal to 

the market basket index, minus 1 

percentage point. Payment rates for FYs 

since 2002 have been updated according 

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

Act, which states that the update to the 

payment rates for subsequent fiscal 

years will be the market basket 

percentage for the fiscal year. It has been 

longstanding practice to use the 

inpatient hospital market basket as a 

proxy for a hospice market basket. 

Historically, the rate update has been 

published through a separate 

administrative instruction issued 

annually in the summer to provide 

adequate time to implement system 

change requirements. Hospices 

determine their payments by applying 

the hospice wage index set forth in this 

Notice to the labor portion of the 

published hospice rates. Starting with 

FY 2013 (and in subsequent fiscal 

years), the market basket percentage 

update under the hospice payment 

system referenced in sections 

1814(i)(1)(C)(ii)(VII) and 

1814(i)(1)(C)(iii) of the Act will be 

annually reduced by changes in 

economy-wide productivity, as set out 

at section 1886(b)(3)(B)(xi)(II) of the Act. 

In FY 2013 through FY 2019, the market 

basket percentage update under the 

hospice payment system will be 

reduced by an additional 0.3 percentage 

point (although for FY 2014 to FY 2019, 

the potential 0.3 percentage point 

reduction is subject to suspension under 

conditions set out under section 

1814(i)(1)(C)(v) of the Act). Congress 

also required in section 1814(i)(5)(A) 

through (C) of the Act that hospices 

begin submitting quality data, based on 

measures to be specified by the 

Secretary, for FY 2014 and subsequent 

fiscal years. Beginning in FY 2014, 

hospices which fail to report quality 

data will have their market basket 

update reduced by 2 percentage points. 

II. Provisions of Notice 

A. FY 2013 Hospice Wage Index 

1. Background 

As previously noted, the hospice final 

rule published in the Federal Register 

on December 16, 1983 (48 FR 56008) 

provided for adjustment to hospice 

payment rates to reflect differences in 

area wage levels. We apply the 

appropriate hospice wage index value to 

the labor portion of the hospice 

payment rates based on the geographic 

area where hospice care was furnished. 

Each hospice’s labor market area is 

based on definitions of MSAs issued by 

the OMB. In this notice, we are using 

the pre-floor, pre-reclassified hospital 

wage index, based solely on the CBSA 

designations, as the basis for 

determining wage index values for the 

FY 2013 hospice wage index. The 

updated hospice wage index was 

previously published in the Federal 

Register; for FY 2013 and subsequent 

years, the updated hospice wage index 

is posted to the CMS Web site shortly 

after the associated rule or notice is 

published. The hospice wage index is 

based on the most currently available 

hospital wage data. 

As noted above, our hospice payment 

rules utilize the wage adjustment factors 

used by the Secretary for purposes of 

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

hospital wage adjustments. In this 

notice, we are again using the pre-floor 

and pre-reclassified hospital wage index 


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data as the basis to determine the 

hospice wage index, which is then used 

to adjust the labor portion of the hospice 

payment rates based on the geographic 

area where the beneficiary receives 

hospice care. We believe the use of the 

pre-floor, pre-reclassified hospital wage 

index data, as a basis for the hospice 

wage index, results in the appropriate 

adjustment to the labor portion of the 

costs. For the FY 2013 update to the 

hospice wage index, we are continuing 

to use the most recent pre-floor, prereclassified hospital wage index 

available at the time of publication. 

2. Areas Without Hospital Wage Data 

In adopting the CBSA designations, 

we identified some geographic areas 

where there are no hospitals, and no 

hospital wage data on which to base the 

calculation of the hospice wage index. 

These areas are described in section 

I.B.4 of this notice. Currently, the only 

CBSA that is affected by this policy is 

CBSA 25980, Hinesville-Fort Stewart, 

Georgia. We continue to apply this 

policy for FY 2013 notice. 

Currently, the only rural areas where 

there are no hospitals from which to 

calculate a pre-floor, pre-reclassified 

hospital wage index are in Puerto Rico. 

In previous years, Massachusetts had a 

rural area where there were no hospitals 

from which to calculate a pre-floor, prereclassified hospital wage index. This 

area of Massachusetts now has an IPPS 

hospital with wage data for computing 

the FY 2012 rural Massachusetts 

hospital wage index. The hospital was 

formerly a Critical Access Hospital, but 

converted to an IPPS hospital in FY 

2008, the base year for the FY 2012 

hospital wage index. 

As described in section I.B.4 of this 

notice, for FY 2013, we continue to use 

the most recent pre-floor, prereclassified hospital wage index value 

available for Puerto Rico, which is 

0.4047. This pre-floor, pre-reclassified 

hospital wage index value is then 

adjusted upward by the hospice 15 

percent floor adjustment in the 

computing of the FY 2013 hospice wage 

index. 

3. FY 2013 Wage Index With an 

Additional 15 Percent Reduced Budget 

Neutrality Adjustment Factor (BNAF) 

The hospice wage index set forth in 

this notice will be effective October 1, 

2012 through September 30, 2013. We 

are not finalizing any modifications to 

the hospice wage index methodology. 

For this notice, the FY 2012 hospital 

wage index was the most current 

hospital wage data available for 

calculating the FY 2013 hospice wage 

index values. We used the FY 2012 prefloor, pre-reclassified hospital wage 

index data for this calculation. 

As noted above, for this FY 2013 wage 

index notice, the hospice wage index 

values are based solely on the adoption 

of the CBSA-based labor market 

definitions and the hospital wage index. 

We continue to use the most recent prefloor and pre-reclassified hospital wage 

index data available (based on FY 2008 

hospital cost report wage data). A 

detailed description of the methodology 

used to compute the hospice wage index 

is contained in the September 4, 1996 

hospice wage index proposed rule (61 

FR 46579), the August 8, 1997 hospice 

wage index final rule (62 FR 42860), and 

the August 6, 2009 FY 2010 Hospice 

Wage Index final rule (74 FR 39384). 

The August 6, 2009 FY 2010 Hospice 

Wage Index final rule finalized a 

provision to phase out the BNAF over 

seven years, with a 10 percent reduction 

in the BNAF in FY 2010, and an 

additional 15 percent reduction in each 

of the next six years, with complete 

phase out in FY 2016. Therefore, in 

accordance with the August 6, 2009 FY 

2010 Hospice Wage Index final rule, the 

BNAF for FY 2013 was reduced by an 

additional 15 percent for a total BNAF 

reduction of 55 percent (10 percent from 

FY 2010, an additional 15 percent from 

FY 2011, an additional 15 percent for 

FY 2012, and an additional 15 percent 

in FY 2013). 

The unreduced BNAF for FY 2013 is 

0.060438 (or 6.0438 percent). A 55 

percent reduced BNAF, which is 

subsequently applied to the pre-floor, 

pre-reclassified hospital wage index 

values greater than or equal to 0.8, is 

computed to be 0.027197 (or 2.7197 

percent). Pre-floor, pre-reclassified 

hospital wage index values which are 

less than 0.8 are subject to the hospice 

floor calculation; that calculation is 

described in section I.B.1. The BNAF is 

updated based on availability of more 

complete data. 

The addenda with the wage index 

values for rural and urban areas will not 

be published in the Federal Register. 

The wage index values for rural areas 

and urban areas are available via the 

Internet at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/Hospice/index.html. 

The final hospice wage index for FY 

2013 includes the BNAF reduction. 

4. Effects of Phasing Out the BNAF 

The full (unreduced) BNAF calculated 

for the FY 2013 notice is 6.0438 percent. 

As implemented in the August 6, 2009 

FY 2010 Hospice Wage Index final rule 

(74 FR 39384), for FY 2013, we are 

reducing the BNAF by an additional 15 

percent, for a total BNAF reduction of 

55 percent (a 10 percent reduction in FY 

2010, plus a 15 percent reduction in FY 

2011, plus a 15 percent reduction in FY 

2012, plus a 15 percent reduction in FY 

2013), with additional reductions of 15 

percent per year in each of the next 3 

years until the BNAF is phased out in 

FY 2016. 

For FY 2013, this is mathematically 

equivalent to taking 45 percent of the 

full BNAF value, or multiplying 

0.060438 by 0.45, which equals 

0.027197 (2.7197 percent). The BNAF of 

2.7197 percent reflects a 55 percent 

reduction in the BNAF. The 55 percent 

reduced BNAF (2.7197 percent) was 

applied to the pre-floor, pre-reclassified 

hospital wage index values of 0.8 or 

greater in the final FY 2013 hospice 

wage index. 

The hospice floor calculation still 

applies to any pre-floor, pre-reclassified 

hospital wage index values less than 

0.8. The hospice floor calculation is 

described in section I.B.1 of this notice. 

We examined the effects of an 

additional 15 percent reduction in the 

BNAF, for a total BNAF reduction of 55 

percent, on the final FY 2013 hospice 

wage index compared to the total 40 

percent reduced BNAF which was used 

for the FY 2012 hospice wage index. 

The additional 15 percent BNAF 

reduction applied to the final FY 2013 

wage index resulted in a (rounded) 0.9 

percent reduction in wage index values 

in 92.8 percent of CBSAs, and no 

reduction in wage index values in 7.2 

percent of CBSAs. We note that these 

are reductions in wage index values, not 

in payments. See Table 1 in section V 

of this notice for the effects on 

payments. The wage index values are 

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

Medicare/Medicare-Fee-for-ServicePayment/Hospice/index.html, and they 

already reflect the additional 15 percent 

BNAF reduction. 

Those CBSAs whose pre-floor, prereclassified hospital wage index values 

had the hospice 15 percent floor 

adjustment applied before the BNAF 

reduction will not be affected by this 

ongoing phase out of the BNAF. These 

CBSAs, which typically include rural 

areas, are protected by the hospice 15 

percent floor adjustment. We estimate 

that 32 CBSAs are already protected by 

the hospice 15 percent floor adjustment, 

and are therefore completely unaffected 

by the BNAF reduction. There are 332 

hospices in these 32 CBSAs. 

Additionally, for some CBSAs with 

pre-floor, pre-reclassified wage index 

values less than 0.8, it will now be more 

advantageous to apply the hospice 15 

percent floor adjustment rather than the 

BNAF adjustment, as a result of the 

additional 15 percent reduction in the 


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BNAF applied in FY 2013. Areas where 

the hospice floor calculation would 

have yielded a wage index value greater 

than 0.8 if the 40 percent reduction in 

BNAF were maintained, but which will 

have a final wage index value less than 

0.8 after the additional 15 percent 

reduction in the BNAF (for a total BNAF 

reduction of 55 percent) is applied, will 

now be eligible for the hospice floor 

adjustment. These CBSAs may see a 

smaller reduction in their hospice wage 

index values if the hospice 15 percent 

floor adjustment is applied. We estimate 

that 4 CBSAs will have their pre-floor, 

pre-reclassified hospital wage index 

value become newly protected by the 

hospice 15 percent floor adjustment due 

to the additional 15 percent reduction in 

the BNAF applied in the final FY 2013 

hospice wage index. Because of the 

protection given by the hospice 15 

percent floor adjustment, these CBSAs 

will usually see smaller percentage 

decreases in their hospice wage index 

values than those CBSAs that are not 

eligible for the hospice 15 percent floor 

adjustment. This will affect those 

hospices with lower hospice wage index 

values, which are typically in rural 

areas. There are 57 hospices located in 

these 4 CBSAs. 

Finally, the hospice wage index 

values only apply to the labor portion of 

the payment rates; the labor portion is 

described in section I.B.1 of this notice. 

Therefore, the projected reduction in 

payments due solely to the additional 

15 percent reduction of the BNAF 

applied in FY 2013 is estimated to be 

0.60 percent, as calculated from the 

difference in column 3 and column 4 of 

Table 1 in section V of this notice. In 

addition, the estimated effects of the 

phase-out of the BNAF will be mitigated 

by any inpatient hospital market basket 

updates in payments. The final market 

basket update applicable to hospice 

payments for FY 2013 is 1.6 percent. 

Starting with FY 2013 (and in 

subsequent fiscal years), the market 

basket percentage update under the 

hospice payment system as described in 

section 1814(i)(1)(C)(ii)(VII) or section 

1814(i)(1)(C)(iii) of the Act will be 

annually reduced by changes in 

economy-wide productivity as specified 

in section 1886(b)(3)(B)(xi)(II) of the 

Act. In FY 2013 through FY 2019, the 

market basket percentage update under 

the hospice payment system will be 

reduced by an additional 0.3 percentage 

point (although for FY 2014 to FY 2019, 

the potential 0.3 percentage point 

reduction is subject to suspension under 

conditions set out under section 

1814(i)(1)(C)(v) of the Act). This final 

1.6 percent market basket update for FY 

2013 is based on a 2.6 percent inpatient 

hospital market basket percentage 

increase (based on IHS Global Insight, 

Inc’s second quarter 2012 forecast with 

historical data through the first quarter 

of 2012), less a 0.7 percentage point 

productivity adjustment and a 0.3 

percentage point reduction. The final 

FY 2013 hospice market basket update 

is communicated through an 

administrative instruction. 

The combined estimated effects of the 

updated wage data, an additional 15 

percent reduction of the BNAF, and the 

market basket update are shown in 

Table 1 in section V of this notice. The 

updated wage data are estimated to 

decrease payments by 0.1 percent 

(column 3 of Table 1). The additional 15 

percent reduction in the BNAF, which 

has already been applied to the wage 

index values in this notice, is estimated 

to reduce payments by 0.6 percent. 

Therefore, the changes in the wage data 

and the additional 15 percent BNAF 

reduction reduce estimated hospice 

payments by 0.7 percent, when 

compared to FY 2012 payments (column 

4 of Table 1). However, so that hospices 

can fully understand the total estimated 

effects on their revenue, we have also 

accounted for the 1.6 percent market 

basket update for FY 2013. The net 

effect of that 1.6 percent increase and 

the 0.7 percent reduction due to the 

updated wage data and the additional 

15 percent BNAF reduction, is an 

estimated increase in payments to 

hospices in FY 2013 of 0.9 percent 

(column 5 of Table 1). 

B. Clarification Regarding Diagnosis 

Reporting on Hospice Claims 

Recent analyses by Abt Associates, 

our hospice contractor, showed that 

77.2 percent of hospice claims from 

2010 only report a principal diagnosis. 

However, by definition, hospice patients 

are at the end-of-life; most are elderly 

and likely have multiple co-morbidities. 

Therefore, we believe that hospice 

claims which only report a principal 

diagnosis are not providing an accurate 

description of the patients’ conditions. 

Providers should code and report 

coexisting or additional diagnoses to 

more fully describe the Medicare 

patients they are treating. 

The ICD–9–CM Official Guidelines for 

Coding and Reporting (ICD–9–CM 

Coding Guidelines) require reporting of 

all additional or co-existing diagnoses. 

These ICD–9–CM Coding Guidelines are 

provided by CMS and the Centers for 

Disease Control’s (CDC’s) National 

Center for Health Statistics (NCHS) to 

health care providers. The current ICD– 

9–CM Coding Guidelines use the 

International Classification of Diseases, 

9th Revision, Clinical Modification 

(ICD–9–CM) and are available through 

the CMS Web site at: http://www.cms.

gov/ICD9ProviderDiagnosticCodes/or on 

the CDC’s Web site at http://www.cdc.

gov/nchs/data/icd9/icd9cm_guidelines_

2011.pdf. As noted in the ICD–9–CM 

Coding Guidelines, ‘‘These coding and 

reporting guidelines are a set of rules 

that have been developed to accompany 

and complement the official 

conventions and instructions provided 

within the ICD–9–CM itself. * * * 

Adherence to these guidelines when 

assigning ICD–9–CM diagnosis and 

procedure codes is required under the 

Health Insurance Portability and 

Accountability Act (HIPAA).’’ 

In addition, at 45 CFR 162.1002, the 

Secretary adopted the ICD–9–CM code 

set, including The Official ICD–9–CM 

Guidelines for Coding and Reporting 

and CMS’ Hospice Claims Processing 

manual requires that hospice claims 

include other diagnoses ‘‘as required by 

ICD–9–CM Coding Guidelines’’ (IOM 

100–04, chapter 11, section 30.1, 

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

Regulations-and-Guidance/Guidance/

Manuals/Downloads/clm104c11.pdf). 

As such, HIPAA, federal regulations, 

and the Medicare hospice claims 

processing manual all require that these 

ICD–9–CM Coding Guidelines be 

applied to the coding and reporting of 

diagnoses on hospice claims. 

Finally, CMS is in the early stages of 

hospice payment reform; as noted in the 

Payment Reform Update in section II.C 

of this notice, we are considering 

multiple approaches to reform, 

including case-mix adjustment. To 

adequately account for any clinical 

complexities a given patient might have 

as a result of related co-morbidities, 

those co-morbidities must be included 

on the Medicare hospice claim. While 

some hospice providers are reporting 

additional or co-existing diagnoses on 

claims, a majority are not. As such, the 

current claims data do not allow us to 

appropriately analyze whether a casemix adjustment would or would not be 

a reasonable approach to, or part of, 

payment reform. 

ICD–9–CM Coding Clinic is the 

official publication for the ICD–9–CM 

Coding Guidelines. The Coding Clinic 

recognizes there can be discrepancies 

between the ICD–9–CM Coding 

Guidelines or Coding Clinic advice, and 

payer coding policies. The Coding 

Clinic’s goal is to provide advice 

according to the most accurate and 

correct coding consistent with ICD–9– 

CM principles. However, payers have 

additional goals, including those related 

to responsible fiscal management. The 

Coding Clinic noted that it is not 


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possible to write coding guidelines that 

are consistent with all payer guidelines. 

The Coding Clinics wrote that ‘‘there are 

a variety of payment policies that may 

impact on coding. Many of those 

payment policies * * * may be 

inconsistent with ICD–9–CM rules/ 

conventions.’’ (‘‘Coding Clinic for ICD– 

9–CM’’, Volume 17, Number 3, Third 

Quarter 2000, pp 13–14). In the 

Medicare hospice benefit, coexisting or 

additional diagnoses could be related or 

unrelated to the hospice patient’s 

terminal illness. The Medicare hospice 

benefit only covers and pays for 

hospices to provide palliation and 

management of the patient’s terminal 

illness and related conditions. 

Therefore, to meet payment policy 

goals, we are clarifying for hospices that 

they should report on hospice claims all 

coexisting or additional diagnoses that 

are related to the terminal illness; they 

should not report coexisting or 

additional diagnoses that are unrelated 

to the terminal illness. Hospice patients 

receive care in both outpatient and nonoutpatient settings. 

The ICD–9–CM Coding Guidelines use 

different terminology to refer to 

coexisting or additional diagnoses, 

depending on whether a patient is in an 

outpatient or non-outpatient setting. In 

a non-outpatient setting, these comorbidities are referred to as other or 

additional diagnoses. In an outpatient 

setting, they are referred to as coexisting 

diagnoses. These terms are explained 

more fully in sections III and IV of the 

ICD–9–CM Coding Guidelines. 

Section III of the ICD–9–CM Coding 

Guidelines addresses non-outpatient 

settings, and states that ‘‘For reporting 

purposes the definition for ‘‘other 

diagnoses’’ is interpreted as additional 

conditions that affect patient care in 

terms of requiring: Clinical evaluation; 

or therapeutic treatment; or diagnostic 

procedures; or extended length of 

hospital stay; or increased nursing care 

and/or monitoring.’’ Using the Uniform 

Hospital Discharge Data Set (UHDDS) 

definitions, ‘‘Other Diagnoses’’ are 

defined as ‘‘all conditions that coexist at 

the time of admission, that develop 

subsequently, or that affect the 

treatment received and/or the length of 

stay. Diagnoses that relate to an earlier 

episode which have no bearing on the 

current hospital stay are to be 

excluded.’’ While UHDDS definitions 

initially applied to hospitals, the ICD–9– 

CM Coding Guidelines note that their 

application has been extended to all 

non-outpatient settings, which includes 

hospice inpatient units and nursing 

facilities. 

Section IV.K of the ICD–9–CM Coding 

Guidelines addresses outpatient 

settings, and instructs providers to 

‘‘Code all documented conditions that 

coexist at the time of the encounter/ 

visit, and require or affect patient care 

treatment or management. Do not code 

conditions that were previously treated 

and no longer exist.’’ 

We do not believe that requiring 

reporting of coexisting or additional 

diagnoses that are related to the 

terminal illness would create a burden 

for hospices; some providers already 

report these diagnoses on their claims. 

Information about related and unrelated 

diagnoses should already be included as 

part of the plan of care, and determined 

by the hospice interdisciplinary group 

(IDG). The hospice conditions of 

participation (CoPs) at § 418.54(c)(2) 

require that the comprehensive 

assessment include ‘‘complications and 

risk factors that affect care planning’’. 

The CoPs at § 418.56(e)(4) require that 

the hospice IDG ‘‘provide for an ongoing 

sharing of information with other nonhospice healthcare providers furnishing 

services unrelated to the terminal illness 

and related conditions.’’ The existing 

standard practice for hospices is to 

include the related and unrelated 

diagnoses on the patient’s plan of care 

in order to assure coordinated, holistic 

patient care and to monitor the 

effectiveness of the care that is 

delivered. 

We are clarifying that all of a patient’s 

coexisting or additional diagnoses s 

should be reported on the hospice 

claim. We note that doing so will bring 

hospices into compliance with existing, 

longstanding policy, and will provide 

data needed for hospice payment 

reform. Hospices should not report 

diagnoses which are unrelated to the 

terminal illness on their claims. Hospice 

claims currently include a field for the 

patient’s principal diagnosis, but allow 

for up to 17 additional diagnoses to be 

included on a paper UB–04 claim, or up 

to 24 additional diagnoses on the 837I 

5010 electronic claim. 

C. Update on Hospice Payment Reform 

Section 1814(i)(6) of the Act was 

amended by section 3132(a) of the 

Patient Protection and Affordable Care 

Act of 2010 (Pub. L. 111–148) as 

amended by the Health Care Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152) (collectively known as the 

Affordable Care Act). The amendment 

authorized the Secretary to collect 

additional data and information 

determined appropriate to revise 

payments for hospice care and for other 

purposes. The types of data and 

information described in the Act would 

capture resource utilization, which can 

be collected on claims, cost reports, and 

possibly other mechanisms as we 

determine to be appropriate. The data 

collected may be used to revise the 

methodology for determining the 

payment rates for routine home care and 

other services included in hospice care, 

no earlier than October 1, 2013, as 

described in section 1814(i)(6)(D) of the 

Act. In addition, we are required to 

consult with hospice programs and the 

Medicare Payment Advisory 

Commission (MedPAC) regarding 

additional data collection and payment 

revision options. 

According to the MedPAC March 

2012 ‘‘Report to Congress: Medicare 

Payment Policy’’ (available at http:// 

medpac.gov/chapters/Mar12_Ch11.pdf), 

Medicare expenditures for hospice 

services exceeded $13 billion in 2010, 

and the aggregate Medicare margin in 

2009 was 7.1 percent. In addition, 

MedPAC found 53 percent growth in the 

number of hospices from 2000 to 2010, 

of which a majority were for-profit 

hospices. MedPAC also noted a change 

in patient case-mix from predominantly 

cancer diagnoses to non-cancer 

diagnoses. The growth in Medicare 

expenditures, margins, number of new 

hospices, and the change in patient 

case-mix has brought attention to 

changes in the hospice industry. 

Over the past several years, MedPAC, 

the Government Accountability Office, 

and the HHS Office of Inspector General 

(OIG) all recommended that we collect 

more comprehensive data in order to 

better understand the utilization of the 

Medicare hospice benefit. MedPAC has 

also suggested an alternative payment 

model that it believes will address the 

vulnerabilities in the current payment 

system. As part of our research, we will 

investigate the MedPAC, OIG, and GAO 

recommendations as well as other 

payment options. 

We are moving forward with the 

hospice payment reform research. Our 

contractor, Abt Associates, completed 

an environmental scan; a draft analytic 

plan; and convened technical advisory 

panel meetings under the initial 

contract. They will continue, under a 

contract awarded in September 2011, to 

review the most current peer-reviewed 

literature; to convene additional 

stakeholder meetings; to conduct further 

research and analyses based on the 

analytic plan; to identify potential data 

collection needs; and to research and 

develop hospice payment model 

options. In order to determine how to 

best revise the hospice payment 

methodology, we will consult with 

hospice programs and MedPAC. We will 

continue to collaborate with the HHS 

Office of the Assistant Secretary of 

Planning and Evaluation (ASPE) along 


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with other federal experts regarding 

hospice payment reform research efforts 

and update stakeholders on our 

progress. 

D. Update on the Hospice Quality 

Reporting Program 

In last year’s Hospice Wage Index 

final rule (76 FR 47302, 47318, August 

4, 2011), we finalized a hospice Quality 

Reporting Program (QRP) as required by 

section 3004 of the Affordable Care Act. 

The quality measures adopted for the 

hospice program for FY 2014 include a 

measure related to pain management 

and a measure that assesses whether a 

hospice participates in a Quality 

Assessment and Performance 

Improvement (QAPI) program that 

includes at least three indicators related 

to patient care. Hospices are required to 

begin collecting quality data in October 

2012, and will submit that quality data 

in 2013. Hospices failing to report 

quality data in 2013 will have their 

market basket update reduced by 2 

percentage points in FY 2014. We note 

that these requirements are not 

changing. 

We have proposed quality data 

reporting requirements for FY 2015 and 

thereafter. However, we did not publish 

the proposal in this notice. Please see 

the Home Health Prospective Payment 

System Rate Update for Calendar Year 

2013 proposed rule for a detailed 

discussion on our proposal for the 

hospice quality data reporting 

requirements affecting payments in FY 

2015 and each subsequent year. 

Please follow the instructions in the 

Home Health Prospective Payment 

System Rate Update for Calendar Year 

2013 proposed rule (CMS–1358–P) to 

comment on the hospice proposals 

described in that proposed rule. We will 

respond to those comments in the Home 

Health Prospective Payment System 

Rate Update for Calendar Year 2013 

final rule. 

III. Waiver of Proposed Rulemaking 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register to provide a period for public 

comment before the provisions of a rule 

take effect. We can waive this 

procedure, however, if we find good 

cause that notice and comment 

procedures are impracticable, 

unnecessary, or contrary to the public 

interest, and we incorporate a statement 

of finding and its reasons in the notice. 

We find it is unnecessary to undertake 

notice and comment rulemaking for the 

update in this notice because the update 

does not make any substantive changes 

in policy, but merely reflects the 

application of previously established 

methodologies which permit no 

discretion on the part of the Secretary. 

Therefore, under 5 U.S.C. 553(b)(3)(B), 

for good cause, we waive notice and 

comment procedures. 

IV. Collection of Information 

Requirements 

This document does not impose 

information collection requirements as 

defined by the Paperwork Reduction 

Act of 1995. 

V. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We have examined the impacts of this 

notice as required by EO 12866 

(September 30, 1993, Regulatory 

Planning and Review), EO 13563 on 

Improving Regulation and Regulatory 

Review (January 18, 2011), the 

Regulatory Flexibility Act (September 

19, 1980; Pub. L. 96–354) (RFA), section 

1102(b) of the Social Security Act, 

section 202 of the Unfunded Mandates 

Reform Act of 1995 (March 22, 1995; 

Pub. L. 104–4), EO 13132 on Federalism 

(August 4, 1999), 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. This notice 

has been designated an ‘‘economically’’ 

significant notice, under section 3(f)(1) 

of EO 12866. We have prepared a 

regulatory impact analysis that to the 

best of our ability presents the costs and 

benefits of this notice. 

2. Statement of Need 

This notice follows 42 CFR 418.306(c) 

which requires annual issuance, in the 

Federal Register, of the hospice wage 

index based on the most currently 

available CMS hospital wage data, 

including any changes to the definitions 

of MSAs or CBSAs. In addition, this 

notice clarifies for hospice providers 

that they must include all related 

diagnoses on hospice claims. Finally, 

this notice updates the public on the 

status of hospice payment reform and 

the hospice quality reporting program. 

3. Overall Impacts 

The overall impact of this notice is an 

estimated net decrease in Federal 

payments to hospices of $100 million 

for FY 2013. We estimated the impact 

on hospices, as a result of the changes 

to the FY 2013 hospice wage index and 

of reducing the BNAF by an additional 

15 percent, for a total BNAF reduction 

of 55 percent (10 percent in FY 2010, 

15 percent in FY 2011, 15 percent in FY 

2012, and 15 percent in FY 2013). The 

BNAF reduction is part of a 7-year 

BNAF phase-out that was finalized in 

previous rulemaking (74 FR 39384 

(August 6, 2009)), and is not a policy 

change. 

As discussed previously, the 

methodology for computing the hospice 

wage index was determined through a 

negotiated rulemaking committee and 

promulgated in the August 8, 1997 

hospice wage index final rule (62 FR 

42860). The BNAF, which was 

promulgated in the August 8, 1997 rule, 

is being phased out. This notice updates 

the hospice wage index in accordance 

with the 2010 Hospice Wage Index final 

rule, which finalized a 10 percent 

reduced BNAF for FY 2010 as the first 

year of a 7-year phase-out of the BNAF, 

to be followed by an additional 15 

percent per year reduction in the BNAF 

in each of the next 6 years. The total 

phase-out will be complete by FY 2016. 

4. Detailed Economic Analysis 

Column 4 of Table 1 shows the 

combined effects of the updated wage 

data (the 2012 pre-floor, pre-reclassified 

hospital wage index) and of the 

additional 15 percent reduction in the 

BNAF (for a total BNAF reduction of 55 

percent), comparing estimated payments 

for FY 2012 to estimated payments for 

FY 2013. The FY 2012 payments used 

for comparison have a 40 percent 

reduced BNAF applied. We estimate 

that the total hospice payments for FY 

2013 will decrease by $100 million as a 

result of the application of the updated 

wage data ($¥10 million) and the 

additional 15 percent reduction in the 

BNAF ($¥90 million). This estimate 

does not take into account the market 

basket update communicated separately 

through an administrative instruction, 

which after adjustments is 1.6 percent 

for FY 2013. Starting with FY 2013 (and 

in subsequent fiscal years), the market 

basket percentage update under the 

hospice payment system as described in 

section 1814(i)(1)(C)(ii)(VII) or section 

1814(i)(1)(C)(iii) of the Act will be 

annually reduced by changes in 

economy-wide productivity as 

mandated by the Affordable Care Act 

and set out at section 


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1886(b)(3)(B)(xi)(II) of the Act. In 

addition, in FY 2013 through FY 2019, 

the market basket percentage update 

under the hospice payment system will 

be reduced by an additional 0.3 

percentage point as mandated by the 

Affordable Care Act (although for FY 

2014 to FY 2019, the potential 0.3 

percentage point reduction is subject to 

suspension under conditions set out 

under section 1814(i)(1)(C)(v) of the 

Act). This 1.6 percent market basket 

update is based on a 2.6 percent 

inpatient hospital market basket 

percentage increase for FY 2013 reduced 

by 0.7 percentage point for the 

productivity adjustment and by 0.3 

percentage point as mandated by the 

Affordable Care Act. The final FY 2013 

hospice update and associated payment 

rates are communicated through an 

administrative instruction in the 

summer. The estimated effect of the 1.6 

percent market basket update on 

payments to hospices is approximately 

$240 million. Taking into account the 

1.6 percent market basket update (+$240 

million), in addition to the updated 

wage data ($¥ 10 million), and the 

additional 15 percent reduction in the 

BNAF ($¥ 90 million), it is estimated 

that hospice payments would increase 

by $140 million in FY 2013 ($240 

million ¥ $10 million ¥ $90 million = 

$140 million). The percent change in 

estimated payments to hospices due to 

the combined effects of the updated 

wage data, the additional 15 percent 

reduction in the BNAF (for a total BNAF 

reduction of 55 percent), and the market 

basket update of 1.6 percent is reflected 

in column 5 of the impact table 

(Table 1). 

a. Effects on Hospices 

This section discusses the impact of 

the projected effects of the hospice wage 

index, including the effects of a 1.6 

percent market basket update for FY 

2013 that is communicated separately 

through an administrative instruction. 

This notice continues to use the CBSAbased pre-floor, pre-reclassified hospital 

wage index as a basis for the hospice 

wage index and continues to use the 

same policies for treatment of areas 

(rural and urban) without hospital wage 

data. The final FY 2013 hospice wage 

index is based upon the 2012 pre-floor, 

pre-reclassified hospital wage index and 

the most complete claims data available 

(FY 2011) with an additional 15 percent 

reduction in the BNAF (combined with 

the 10 percent reduction in the BNAF 

taken in FY 2010, an additional 15 

percent taken in 2011, an additional 15 

percent in 2012, and an additional 15 

percent taken in 2013 for a total BNAF 

reduction of 55 percent in FY 2013). 

The BNAF reduction is part of a 7-year 

BNAF phase-out that was finalized in 

previous rulemaking, and is not a policy 

change. 

For the purposes of our impacts, our 

baseline is estimated FY 2012 payments 

with a 40 percent BNAF reduction, 

using the 2010 pre-floor, pre-reclassified 

hospital wage index. Our first 

comparison (column 3 of Table 1) 

compares our baseline to estimated FY 

2013 payments (holding payment rates 

constant) using the updated wage data 

(2012 pre-floor, pre-reclassified hospital 

wage index). Consequently, the 

estimated effects illustrated in column 3 

of Table 1 show the distributional 

effects of the updated wage data only. 

The effects of using the updated wage 

data combined with the additional 15 

percent reduction in the BNAF are 

illustrated in column 4 of Table 1. 

We have included a comparison of the 

combined effects of the additional 15 

percent BNAF reduction, the updated 

wage data, and a 1.6 percent market 

basket update for FY 2013 (Table 1, 

column 5). Presenting these data gives 

the hospice industry a more complete 

picture of the effects on their total 

revenue based on changes to the hospice 

wage index and the BNAF phase-out as 

discussed in this Notice, and the FY 

2013 market basket update which will 

be communicated separately through an 

administrative instruction. Certain 

events may limit the scope or accuracy 

of our impact analysis, because such an 

analysis is susceptible to forecasting 

errors due to other changes in the 

forecasted impact time period. The 

nature of the Medicare program is such 

that the changes may interact, and the 

complexity of the interaction of these 

changes could make it difficult to 

predict accurately the full scope of the 

impact upon hospices. 

TABLE 1—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

HOSPITAL WAGE INDEX DATA, REDUCING THE BUDGET NEUTRALITY ADJUSTMENT FACTOR (BNAF) BY AN ADDITIONAL

15 PERCENT (FOR A TOTAL BNAF REDUCTION OF 55 PERCENT) AND APPLYING A 1.6 PERCENT† MARKET BASKET

UPDATE TO THE FY 2013 HOSPICE WAGE INDEX, COMPARED TO THE FY 2012 HOSPICE WAGE INDEX WITH A 40 

PERCENT BNAF REDUCTION

Number of 

hospices 

Number of 

routine home 

care days in 

thousands 

Percent 

change in 

hospice 

payments due 

to FY2013 

wage index 

change 

Percent 

change in 

hospice 

payments due to 

wage 

index change, 

additional 15% 

reduction in 

budget neutrality 

adjustment 

Percent 

change in 

hospice 

payments due 

to wage index 

change, 

additional 15% 

reduction in 

budget 

neutrality 

adjustment and 

market basket 

update 

(1) (2) (3) (4) (5) 

ALL HOSPICES ................................. 3,659 83,400 (0 .1) (0 .7) 0.9 

URBAN HOSPICES ........................... 2,598 72,885 (0 .1) (0 .7) 0.9 

RURAL HOSPICES ........................... 1,061 10,515 (0 .0) (0 .4) 1.2 

BY REGION—URBAN: 

NEW ENGLAND ......................... 138 2,750 0 .2 (0 .4) 1.2 

MIDDLE ATLANTIC .................... 256 7,872 0 .2 (0 .4) 1.2 

SOUTH ATLANTIC ..................... 378 16,417 (0 .4) (1 .0) 0.6 

EAST NORTH CENTRAL ........... 346 10,946 (0 .5) (1 .1) 0.5 

EAST SOUTH CENTRAL ........... 178 4,614 (0 .5) (1 .0) 0.5 

WEST NORTH CENTRAL .......... 192 4,592 0 .3 (0 .3) 1.3 


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TABLE 1—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

HOSPITAL WAGE INDEX DATA, REDUCING THE BUDGET NEUTRALITY ADJUSTMENT FACTOR (BNAF) BY AN ADDITIONAL

15 PERCENT (FOR A TOTAL BNAF REDUCTION OF 55 PERCENT) AND APPLYING A 1.6 PERCENT† MARKET BASKET

UPDATE TO THE FY 2013 HOSPICE WAGE INDEX, COMPARED TO THE FY 2012 HOSPICE WAGE INDEX WITH A 40 

PERCENT BNAF REDUCTION—Continued 

Number of 

hospices 

Number of 

routine home 

care days in 

thousands 

Percent 

change in 

hospice 

payments due 

to FY2013 

wage index 

change 

Percent 

change in 

hospice 

payments due to 

wage 

index change, 

additional 15% 

reduction in 

budget neutrality 

adjustment 

Percent 

change in 

hospice 

payments due 

to wage index 

change, 

additional 15% 

reduction in 

budget 

neutrality 

adjustment and 

market basket 

update 

(1) (2) (3) (4) (5) 

WEST SOUTH CENTRAL .......... 506 9,530 0 .4 (0 .2) 1.4 

MOUNTAIN ................................. 251 6,081 (0 .1) (0 .7) 0.9 

PACIFIC ...................................... 316 8,667 0 .2 (0 .4) 1.2 

OUTLYING .................................. 37 1,415 0 .2 0 .2 1.8 

BY REGION—RURAL: 

NEW ENGLAND ......................... 27 219 0 .8 0 .2 1.8 

MIDDLE ATLANTIC .................... 45 534 (0 .2) (0 .7) 0.8 

SOUTH ATLANTIC ..................... 140 2,327 (0 .2) (0 .6) 1.0 

EAST NORTH CENTRAL ........... 147 1,732 (0 .6) (1 .2) 0.4 

EAST SOUTH CENTRAL ........... 154 1,812 (0 .1) (0 .2) 1.4 

WEST NORTH CENTRAL .......... 196 1,131 0 .3 (0 .1) 1.5 

WEST SOUTH CENTRAL .......... 190 1,576 0 .4 (0 .1) 1.5 

MOUNTAIN ................................. 109 681 0 .1 (0 .4) 1.2 

PACIFIC ...................................... 52 490 1 .4 0 .7 2.3 

OUTLYING .................................. 1 14 0 .0 0 .0 1.6 

BY SIZE/DAYS: 

0–3499 DAYS (small) ................. 681 1,185 0 .1 (0 .4) 1.2 

3500–19,999 DAYS (medium) .... 1784 18,086 0 .1 (0 .5) 1.1 

20,000+ DAYS (large) ................ 1194 64,129 (0 .1) (0 .7) 0.9 

TYPE OF OWNERSHIP: 

VOLUNTARY .............................. 1141 31,433 (0 .1) (0 .7) 0.9 

PROPRIETARY .......................... 1999 43,637 (0 .1) (0 .6) 1.0 

GOVERNMENT .......................... 519 8,330 (0 .0) (0 .6) 1.0 

HOSPICE BASE: 

FREESTANDING ........................ 2586 67,320 (0 .1) (0 .7) 0.9 

HOME HEALTH AGENCY ......... 557 9,935 (0 .1) (0 .7) 0.9 

HOSPITAL .................................. 498 5,970 0 .0 (0 .5) 1.0 

SKILLED NURSING FACILITY .......... 18 176 (0 .2) (0 .9) 0.7 

BNAF = Budget Neutrality Adjustment Factor. 

Comparison is to FY 2012 data with a 40 percent BNAF reduction. 

* Provider data as of December 31, 2011 for hospices with claims filed in FY 2011. 

†The 1.6 percent final market basket update for FY 2013 is based on a 2.6 percent inpatient hospital market basket percentage increase, reduced by a 0.7 percentage point productivity adjustment and by 0.3 percentage point. Starting with FY 2013 (and in subsequent fiscal years), the 

market basket percentage update under the hospice payment system as described in section 1814(i)(1)(C)(ii)(VII) or section 1814(i)(1)(C)(iii) of 

the Act will be annually reduced by changes in economy-wide productivity as set out at section 1886(b)(3)(B)(xi)(II) of the Act. In FY 2013 

through FY 2019, the market basket percentage update under the hospice payment system will be reduced by an additional 0.3 percentage point 

(although for FY 2014 to FY 2019, the potential 0.3 percentage point reduction is subject to suspension under conditions set out under section 

1814(i)(1)(C)(v) of the Act). 

REGION KEY: New England=Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic=Pennsylvania, 

New Jersey, New York; South Atlantic=Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West 

Virginia; East North Central=Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central=Alabama, Kentucky, Mississippi, Tennessee; West 

North Central=Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central=Arkansas, Louisiana, Oklahoma, 

Texas; Mountain=Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; Pacific=Alaska, California, Hawaii, Oregon, Washington; Outlying=Guam, Puerto Rico, Virgin Islands. 

Table 1 shows the results of our 

analysis. In column 1, we indicate the 

number of hospices included in our 

analysis as of December 31, 2011 which 

had also filed claims in FY 2011. In 

column 2, we indicate the number of 

routine home care days that were 

included in our analysis, although the 

analysis was performed on all types of 

hospice care. Columns 3, 4, and 5 

compare FY 2012 estimated payments 

with those estimated for FY 2013. The 

estimated FY 2012 payments 

incorporate a BNAF which has been 

reduced by 40 percent. Column 3 shows 

the percentage change in estimated 

Medicare payments for FY 2013 due to 

the effects of the updated wage data 

only, compared with estimated FY 2012 

payments. The effect of the updated 

wage data can vary from region to region 

depending on the fluctuations in the 

wage index values of the pre-floor, prereclassified hospital wage index. 


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Column 4 shows the percentage change 

in estimated hospice payments from FY 

2012 to FY 2013 due to the combined 

effects of using the updated wage data 

and reducing the BNAF by an additional 

15 percent. Column 5 shows the 

percentage change in estimated hospice 

payments from FY 2012 to FY 2013 due 

to the combined effects of using updated 

wage data, an additional 15 percent 

BNAF reduction, and the final 1.6 

percent market basket update. 

Table 1 also categorizes hospices by 

various geographic and hospice 

characteristics. The first row of data 

displays the aggregate result of the 

impact for all Medicare-certified 

hospices. The second and third rows of 

the table categorize hospices according 

to their geographic location (urban and 

rural). Our analysis indicated that there 

are 2,598 hospices located in urban 

areas and 1,061 hospices located in 

rural areas. The next two row groupings 

in the table indicate the number of 

hospices by census region, also broken 

down by urban and rural hospices. The 

next grouping shows the impact on 

hospices based on the size of the 

hospice’s program. We determined that 

the majority of hospice payments are 

made at the routine home care rate. 

Therefore, we based the size of each 

individual hospice’s program on the 

number of routine home care days 

provided in FY 2011. The next grouping 

shows the impact on hospices by type 

of ownership. The final grouping shows 

the impact on hospices defined by 

whether they are provider-based or 

freestanding. 

As indicated in Table 1, there are 

3,659 hospices. Approximately 45.4 

percent of Medicare-certified hospices 

are identified as voluntary (non-profit) 

or government agencies. Because the 

National Hospice and Palliative Care 

Organization estimates that 

approximately 84 percent of hospice 

patients in 2010 were Medicare 

beneficiaries, we have not considered 

other sources of revenue in this 

analysis. 

As stated previously, the following 

discussions are limited to demonstrating 

trends rather than projected dollars. We 

used the pre-floor, pre-reclassified 

hospital wage index as well as the most 

complete claims data available (FY 

2011) in developing the impact analysis. 

The FY 2013 payment rates will be 

adjusted to reflect the inpatient hospital 

market basket percentage increase, less 

a productivity adjustment of 0.7 

percentage point and a reduction of 0.3 

percentage point, both mandated by the 

Affordable Care Act. Starting with FY 

2013 (and in subsequent fiscal years), 

the market basket percentage update 

under the hospice payment system as 

described in section 1814(i)(1)(C)(ii)(VII) 

or section 1814(i)(1)(C)(iii) of the Act 

will be annually reduced by changes in 

economy-wide productivity in 

accordance with section 

1886(b)(3)(B)(xi)(II) of the Act. In FY 

2013 through FY 2019, the market 

basket percentage update under the 

hospice payment system will be 

reduced by an additional 0.3 percentage 

point (although for FY 2014 to FY 2019, 

the potential 0.3 percentage point 

reduction is subject to suspension under 

conditions set out under section 

1814(i)(1)(C)(v) of the Act). As 

previously noted, we publish these rates 

through administrative instructions 

rather than in a notice. The final FY 

2013 market basket update is 1.6 

percent which is based on an inpatient 

hospital market basket percentage 

increase of 2.6 percent less the FY 2013 

productivity adjustment of 0.7 

percentage point and less 0.3 percentage 

point. Since the inclusion of the effect 

of a market basket update provides a 

more complete picture of projected total 

hospice payments for FY 2013, the last 

column of Table 1 shows the combined 

impacts of the updated wage data, the 

additional 15 percent BNAF reduction, 

and the 1.6 percent market basket 

update. As discussed in the FY 2006 

hospice wage index final rule (70 FR 

45130, 45133, August 5, 2005), hospice 

agencies may use multiple hospice wage 

index values to compute their payments 

based on potentially different 

geographic locations. 

Before January 1, 2008, the location of 

the beneficiary was used to determine 

the CBSA for routine and continuous 

home care, and the location of the 

hospice agency was used to determine 

the CBSA for respite and general 

inpatient care. Beginning January 1, 

2008, the hospice wage index CBSA 

utilized is based on the location of the 

site of service. As the location of the 

beneficiary’s home and the location of 

the hospice may vary, there will still be 

variability in geographic location for an 

individual hospice. We anticipate that 

the CBSA of the various sites of service 

will usually correspond with the CBSA 

of the geographic location of the 

hospice, and thus we will continue to 

use the location of the hospice for our 

analyses of the impact of the changes to 

the hospice wage index in this Notice. 

For this analysis, we use payments to 

the hospice in the aggregate based on 

the location of the hospice. 

The impact of hospice wage index 

changes has been analyzed according to 

the type of hospice, geographic location, 

type of ownership, hospice base, and 

size. Our analysis shows that most 

hospices are in urban areas and provide 

the vast majority of routine home care 

days. Most hospices are medium-sized 

followed by large hospices. When 

considering hospice ownership, a 

majority are proprietary (for-profit), 

with 1,660 designated as non-profit or 

government hospices and 1,999 as 

proprietary. The vast majority of 

hospices are freestanding. 

b. Hospice Size 

Under the Medicare hospice benefit, 

hospices can provide four different 

levels of care. The majority of the days 

provided by a hospice are routine home 

care (RHC) days, representing about 97 

percent of the services provided by a 

hospice. Therefore, the number of RHC 

days can be used as a proxy for the size 

of the hospice, that is, the more days of 

care provided, the larger the hospice. As 

discussed in the August 4, 2005 final 

rule, we currently use three size 

designations to present the impact 

analyses. The three categories are—(1) 

small agencies having 0 to 3,499 RHC 

days; (2) medium agencies having 3,500 

to 19,999 RHC days; and (3) large 

agencies having 20,000 or more RHC 

days. The FY 2013 updated wage data 

without any BNAF reduction are 

anticipated to decrease payments to 

large hospices by 0.1 percent and 

increase payments to small and medium 

hospices by 0.1 percent (column 3). The 

updated wage data and the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 55 percent) are 

anticipated to decrease estimated 

payments to small hospices by 0.4 

percent, to medium hospices by 0.5 

percent, and to large hospices by 0.7 

percent (column 4). Finally, the updated 

wage data, the additional 15 percent 

BNAF reduction (for a total BNAF 

reduction of 55 percent), and the final 

1.6 percent market basket update are 

projected to increase estimated 

payments by 1.2 percent for small 

hospices, by 1.1 percent for medium 

hospices, and by 0.9 percent for large 

hospices (column 5). 

c. Geographic Location 

Column 3 of Table 1 shows updated 

wage data without the BNAF reduction. 

Urban hospices are anticipated to 

experience a decrease of 0.1 percent but 

there is no effect on rural hospices. 

Urban hospices can anticipate an 

increase in payments in New England, 

Middle Atlantic, Pacific and Outlying 

regions by 0.2 percent; in the West 

North Central region by 0.3 percent; and 

in the West South Central region by 0.4 

percent. Urban hospices can anticipate 

a decrease in payments ranging from 0.5 

percent in the East North Central and 


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East South Central regions, to 0.1 

percent in the Mountain region. 

Column 3 shows estimated 

percentages for rural hospices. Rural 

hospices are estimated to see a decrease 

in payments in four regions, ranging 

from 0.6 percent in the East North 

Central region to 0.1 percent in the East 

South Central region. Rural hospices 

can anticipate an increase in payments 

in five regions ranging from 0.1 percent 

in the Mountain region to 1.4 percent in 

the Pacific region. There is no 

anticipated change in payments for 

Outlying regions due to the FY 2013 

Wage Index update. 

Column 4 shows the combined effect 

of the updated wage data and the 

additional 15 percent BNAF reduction 

on estimated payments, as compared to 

the FY 2012 estimated payments using 

a BNAF with a 40 percent reduction. 

Overall, hospices are anticipated to 

experience a 0.7 percent decrease in 

payments, with urban hospices 

experiencing an estimated decrease of 

0.7 percent and rural hospices 

experiencing an estimated decrease of 

0.4 percent. 

All urban areas other than Outlying 

regions are estimated to see decreases in 

payments, ranging from 1.1 percent in 

the East North Central region to 0.2 

percent in the West South Central 

region. In the Outlying regions, 

payments are anticipated to increase by 

0.2 percent. 

Rural hospices are estimated to 

experience a decrease in payments in all 

regions except Pacific (0.7 percent) and 

New England (0.2 percent) regions. The 

decrease in payments ranges from 1.2 

percent in East North Central region to 

0.1 percent in the West North Central 

and West South Central regions. 

Payments in the Outlying region are 

anticipated to stay relatively stable. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction, and the 1.6 

percent market basket update on 

estimated FY 2013 payments as 

compared to the estimated FY 2012 

payments. We note that the FY 2012 

payments had a 40 percent BNAF 

reduction applied to them. Overall, 

hospices are anticipated to experience a 

0.9 percent increase in payments, with 

urban hospices anticipated to 

experience a 0.9 percent increase in 

payments, and rural hospices 

anticipated to experience a 1.2 percent 

increase in payments. 

Urban hospices are anticipated to 

experience an increase in estimated 

payments in every region, ranging from 

0.5 percent in the East North Central 

and East South Central regions to 1.8 

percent in Outlying regions. Rural 

hospices in every region are estimated 

to see an increase in payments ranging 

from 0.4 percent in the East North 

Central region to 2.3 percent in the 

Pacific region. 

d. Type of Ownership 

Column 3 demonstrates the effect of 

the updated wage data on FY 2013 

estimated payments, versus FY 2012 

estimated payments. We anticipate that 

using the updated wage data would 

decrease estimated payments to 

voluntary (non-profit) hospices and to 

proprietary (for-profit) hospices by 0.1 

percent. Government hospices are 

expected to have no change in 

payments. 

Column 4 demonstrates the combined 

effects of the updated wage data and of 

the additional 15 percent BNAF 

reduction. Estimated payments to 

voluntary (non-profit), proprietary (forprofit) and government hospices are 

anticipated to decrease by 0.7 percent, 

0.6 percent, and 0.6 percent, 

respectively. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 55 percent), and a 

1.6 percent market basket update on 

estimated payments, comparing FY 

2013 to FY 2012 (using a BNAF with a 

40 percent reduction). Estimated FY 

2013 payments are anticipated to 

increase by 0.9 percent for voluntary 

(non-profit) hospices, and by 1.0 percent 

for government hospices and 

proprietary (for-profit) hospices. 

e. Hospice Base 

Column 3 demonstrates the effect of 

using the updated wage data, comparing 

estimated payments for FY 2013 to FY 

2012. Estimated payments are 

anticipated to decrease for freestanding, 

home health agency and skilled nursing 

facility based hospices by 0.1 percent, 

0.1 percent and 0.2 percent, 

respectively. There is no anticipated 

change in payments for hospital based 

facilities. 

Column 4 shows the combined effects 

of the updated wage data and reducing 

the BNAF by an additional 15 percent, 

comparing estimated payments for FY 

2013 to FY 2012. All hospice facilities 

are anticipated to experience decrease 

in payments ranging from 0.9 percent 

for skilled nursing facility based 

hospices to 0.5 percent for hospital 

based hospices. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction, and a 1.6 

percent market basket update on 

estimated payments, comparing FY 

2013 to FY 2012. Estimated payments 

are anticipated to increase for all 

hospices, ranging from 0.7 percent for 

skilled nursing facility based hospices 

to 1.0 percent for hospital based 

hospices. 

f. Effects on Other Providers 

This notice only affects Medicare 

hospices, and therefore has no effect on 

other provider types. 

g. Effects on the Medicare and Medicaid 

Programs 

This notice only affects Medicare 

hospices, and therefore has no effect on 

Medicaid programs. As described 

previously, estimated Medicare 

payments to hospices in FY 2013 are 

anticipated to decrease by $10 million 

due to the update in the wage index 

data, and to decrease by $90 million due 

to the additional 15 percent reduction in 

the BNAF (for a of total 55 percent 

reduction in the BNAF). However, the 

final market basket update of 1.6 

percent is anticipated to increase 

Medicare payments by $240 million. 

Therefore, the total effect on Medicare 

hospice payments is estimated to be a 

$140 million increase. We note that the 

final market basket update and 

associated FY 2013 payment rates are 

officially communicated in the summer 

through an administrative instruction. 

h. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

a004/a-4.pdf), in Table 2 below, we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with this 

notice. Table 2 provides our best 

estimate of the decrease in Medicare 

payments under the hospice benefit as 

a result of the changes presented in this 

notice using data for 3,659 hospices in 

our database. 

TABLE 2—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2012 TO FY 

2013 

[In $millions] 

Category Transfers 

Annualized Monetized 

Transfers.

$¥100.* 


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TABLE 2—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2012 TO FY 

2013—Continued 

[In $millions] 

Category Transfers 

From Whom to Whom Federal Government 

to Hospices. 

* The $100 million estimated reduction in 

transfers includes the additional 15 percent reduction in the BNAF and the updated wage 

data. It does not include the market basket update, which is 1.6 percent for FY 2013. Starting with FY 2013 (and in subsequent fiscal 

years), the market basket percentage update 

under the hospice payment system as described in section 1814(i)(1)(C)(ii)(VII) or section 1814(i)(1)(C)(iii) of the Act will be annually 

reduced by changes in economy-wide productivity as set out at section 1886(b)(3)(B)(xi)(II) 

of the Act. In FY 2013 through FY 2019, the 

market basket percentage update under the 

hospice payment system will be reduced by 

an additional 0.3 percentage point (although 

for FY 2014 to FY 2019, the potential 0.3 percentage point reduction is subject to suspension under conditions set out under section 

1814(i)(1)(C)(v) of the Act). This 1.6 percent is 

based on an inpatient hospital market basket 

percentage increase of 2.6 percent reduced by 

a 0.7 percentage point productivity adjustment 

and by 0.3 percentage point. 

i. Conclusion 

In conclusion, the overall effect of this 

notice is estimated to be the $100 

million reduction in Federal payments 

due to the wage index changes 

(including the additional 15 percent 

reduction in the BNAF). Furthermore, 

the Secretary has determined that this 

will not have a significant impact on a 

substantial number of small entities, or 

have a significant effect relative to 

section 1102(b) of the Act. 

B. Regulatory Flexibility Act Analysis 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, we 

estimate that almost all hospices are 

small entities as that term is used in the 

RFA. The great majority of hospitals and 

most other health care providers and 

suppliers are small entities by meeting 

the Small Business Administration 

(SBA) definition of a small business (in 

the service sector, having revenues of 

less than $7.0 million to $34.5 million 

in any 1 year), or being nonprofit 

organizations that are not dominant in 

their markets. While the SBA does not 

define a size threshold in terms of 

annual revenues for hospices, it does 

define one for home health agencies 

($13.5 million; see http://www.sba.gov/ 

sites/default/files/files/ 

Size_Standards_Table.pdf). For the 

purposes of this notice, because the 

hospice benefit is a home-based benefit, 

we are applying the SBA definition of 

‘‘small’’ for home health agencies to 

hospices; we will use this definition of 

‘‘small’’ in determining if this notice has 

a significant impact on a substantial 

number of small entities (for example, 

hospices). Using CY 2010 Medicare 

hospice data from the Health Care 

Information System (HCIS), we estimate 

that 95 percent of hospices have 

Medicare revenues below $13.5 million 

or are nonprofit organizations and 

therefore are considered small entities. 

The effects of this notice on hospices 

are shown in Table 1. Overall, Medicare 

payments to all hospices would 

decrease by an estimated 0.7 percent 

over last year’s payments in response to 

the wage index we are setting forth in 

this notice, reflecting the combined 

effects of the updated wage data and the 

additional 15 percent reduction in the 

BNAF. The combined effects of the 

updated wage data and additional 15 

percent reduction in the BNAF on small 

and large sized hospices (as defined by 

routine home care days rather than by 

the SBA definition), is an estimated 

reduction of 0.4 percent and 0.7 percent, 

respectively. Medium sized hospices are 

anticipated to experience an estimated 

reduction in payments of 0.5 percent as 

a result of the updated wage data and 

the additional 15 percent reduction in 

the BNAF. Furthermore, when 

examining the distributional effects of 

the updated wage data combined with 

the additional 15 percent BNAF 

reduction, the highest estimated 

reductions in payments are experienced 

by the urban East North Central and East 

South Central regions, and by the rural 

East North Central region. 

HHS’s practice in interpreting the 

RFA is to consider effects economically 

‘‘significant’’ only if they reach a 

threshold of 3 to 5 percent or more of 

total revenue or total costs. As noted 

above, the combined effect of only the 

updated wage data and the additional 

15 percent reduced BNAF (for a total 

BNAF reduction of 55 percent) for all 

hospices is an estimated reduction of 

0.7 percent. Furthermore, since HHS’s 

practice in determining ‘‘significant 

economic impact’’ considers either total 

revenue or total costs, it is necessary for 

total hospice revenues to include the 

effect of the market basket update of 1.6 

percent. As a result, we consider the 

combined effect of the updated wage 

data, the additional 15 percent BNAF 

reduction, and the 1.6 percent FY 2013 

market basket update inclusive of the 

overall impact, thereby reflecting an 

aggregate increase in estimated hospice 

payments of 0.9 percent for FY 2013. 

For small and medium hospices (as 

defined by routine home care days), the 

estimated effects on revenue when 

accounting for the updated wage data, 

the additional 15 percent BNAF 

reduction, and the market basket update 

reflect increases in payments of 1.2 

percent and 1.1 percent, respectively. 

Overall average hospice revenue effects 

will be slightly less than these estimates 

since according to the National Hospice 

and Palliative Care Organization, about 

16 percent of hospice patients are nonMedicare. Therefore, the Secretary has 

determined that this notice will not 

create a significant economic impact on 

a substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. This Notice only 

affects hospices. Therefore, the 

Secretary has determined that this 

notice would not have a significant 

impact on the operations of a substantial 

number of small rural hospitals. 

C. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2012, that threshold is approximately 

$139 million. This notice is not 

anticipated to have an effect on State, 

local, or tribal governments, in the 

aggregate, or on the private sector of 

$139 million or more. 

VI. Federalism Analysis 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a notice 

that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We have reviewed this notice under the 

threshold criteria of EO 13132, 

Federalism, and have determined that it 

will not have an impact on the rights, 

roles, and responsibilities of State, local, 

or tribal governments. 


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Federal Register / Vol. 77, No. 145 / Friday, July 27, 2012 / Notices 44255 

VII. Files Available to the Public via the 

Internet 

This section lists the Addenda 

referred to in the preamble of this 

notice. Beginning in CY 2012, the 

Addenda for the annual hospice wage 

index proposed and final rulemakings 

or notices will no longer appear in the 

Federal Register. Instead, the Addenda 

will be available only through the 

Internet. We will continue to post the 

Addenda through the Internet. 

The following addenda are posted to 

the CMS Web site at http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/Hospice/ 

index.html: 

Addendum A: The FY 2013 Hospice 

Wage Index for Urban Areas 

Addendum B: The FY 2013 Hospice 

Wage Index for Rural Areas 

Readers who experience any problems 

accessing the Addenda that are posted 

on the CMS Web site at http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/Hospice/ 

index.html should contact Anjana Patel 

at (410) 786–2120. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, No. 93.773 Medicare— 

Hospital Insurance Program; and No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: June 5, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: July 16, 2012. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2012–18336 Filed 7–24–12; 4:15 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

[CMS–3259–FN] 

Medicare Program; Application by the 

American Association of Diabetes 

Educators (AADE) for Continued 

Recognition as a National 

Accreditation Organization for 

Accrediting Entities To Furnish 

Outpatient Diabetes Self-Management 

Training 

AGENCY: Centers for Medicare & 

Medicare Services (CMS), HHS. 

ACTION: Final Notice. 

SUMMARY: This final notice announces 

the approval of an application from the 

American Association of Diabetes 

Educators for continued recognition as a 

national accreditation program for 

accrediting entities that wish to furnish 

outpatient diabetes self-management 

training to Medicare beneficiaries. 

DATES: Effective Date: This notice is 

effective on August 27, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Jacqueline Leach, (410) 786–4282. 

Kristin Shifflett, (410) 786–4133. 

Maria Hammel, (410) 786–1775. 

SUPPLEMENTARY INFORMATION

I. Background 

Under the Medicare program, eligible 

beneficiaries may receive outpatient 

diabetes self-management training 

(DSMT) when ordered by the physician 

(or qualified non-physician practitioner) 

treating the beneficiary’s diabetes, 

provided certain requirements are met 

by the provider. Pursuant to our 

regulations at 42 CFR 410.141(e)(3), we 

use national accrediting organizations 

(NAOs) to assess whether provider 

entities meet Medicare requirements 

when providing DSMT services for 

which Medicare payment is made. If a 

provider entity is accredited by an 

approved accrediting organization, it is 

‘‘deemed’’ to meet applicable Medicare 

requirements. 

Under section 1865(a)(1)(B) of the 

Social Security Act (the Act), a NAO 

must have an agreement in effect with 

the Secretary, and meet the standards 

and requirements specified by the 

Secretary in part 410, subpart H, to 

qualify for deeming authority. The 

regulations pertaining to application 

procedures for NAOs for DSMT are 

specified at § 410.142 (CMS process for 

approving national accreditation 

organizations). 

A NAO applying for deeming 

authority must provide us with 

reasonable assurance that the 

accrediting organization requires 

accredited entities to meet requirements 

that are at least as stringent as our 

requirements. 

We may approve and recognize a 

nonprofit organization with 

demonstrated experience in 

representing the interests of individuals 

with diabetes to accredit entities to 

furnish DSMT. The accreditation 

organization, after being approved and 

recognized by CMS, may accredit an 

entity to meet one of the sets of quality 

standards in § 410.144 (Quality 

standards for deemed entities). 

Section 1865(a)(2) of the Act further 

requires that we review the applying 

accreditation organization’s 

requirements for accreditation, as 

follows: 

• Survey procedures. 

• Ability to provide adequate 

resources for conducting required 

surveys. 

• Ability to supply information for 

use in enforcement activities. 

• Monitoring procedures for 

providers found out of compliance with 

the conditions or requirements. 

• Ability to provide CMS with 

necessary data for validation. 

We then examine the NAO’s 

accreditation requirements to determine 

if they meet or exceed the Medicare 

conditions as we would have applied 

them. Section 1865(a)(3)(A) of the Act 

requires that we publish a notice 

identifying the national accreditation 

body making the request within 30 days 

of receipt of a completed application. 

The notice must describe the nature of 

the request and provide at least a 30-day 

public comment period. We have 210 

days from receipt of the request to 

publish a finding of approval or denial 

of the application. If we recognize an 

accreditation organization in this 

manner, any entity accredited by the 

national accreditation body’s CMSapproved program for that service will 

be ‘‘deemed’’ to meet the Medicare 

conditions for coverage. 

II. Provisions of the Proposed Notice 

On February 24, 2012, we published 

a proposed notice in the Federal 

Register (77 FR 11130) entitled, 

‘‘Application by the American 

Association of Diabetes Educators 

(AADE) for Continued Recognition as a 

National Accreditation Organization for 

Accrediting Entities to Furnish 

Outpatient Diabetes Self-Management 

Training,’’ to notify the public of the 

AADE’s request for continued approval 

of its accreditation to deem entities 

furnishing DSMT services. 

III. Analysis of and Responses to Public 

Comments on the Proposed Notice 

We received 1 public comment in 

response to the February 24, 2012 

proposed notice. A summary of the 

comment and our response is set forth 

below. 

Comment: A commenter supported 

the approval of the AADE to deem 

DSMT programs. The commenter stated 

that the AADE provides guidance for its 

members and represents the values of 

the profession. The commenter further 

stated that qualified diabetes educators 

can lead the way toward a healthier 

population by guiding those with 

chronic conditions toward healthier 

lifestyles and stronger self-advocacy. 

Response: We thank the commenter 

for his or her comment. The goal of the 

DSMT program is to provide 


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