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###### Department of Health and Human Services

###### Centers for Medicare & Medicaid Services 

          - 42 CFR Part 418 
          - [CMS-1539-P] 
          - RIN 0938-AO72 

# AGENCY:

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

# ACTION:

Proposed rule. 

# SUMMARY:

This proposed rule would set forth the hospice wage index for fiscal year 2008. This proposed rule would also revise the methodology for updating the wage index for rural areas without hospital wage data and provide clarification of selected existing Medicare hospice regulations and policies. 

# DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on July 2, 2007. 

# ADDRESSES:

In commenting, please refer to file code CMS-1539-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. 

You may submit comments in one of four ways (no duplicates, please):

                            1.                             *Electronically.*                             You may submit electronic comments on specific issues in this regulation to                             *http://www.cms.hhs.gov/​eRulemaking.*                             Click on the link “Submit electronic comments on CMS regulations with an open comment period.” (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.)                         

                            2.                             *By regular mail.*                             You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services,                             *Attention:*                             CMS-1539-P, P.O. Box 8012, Baltimore, MD 21244-1850.                         

Please allow sufficient time for mailed comments to be received before the close of the comment period. 

                            3.                             *By express or overnight mail.*                             You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services,                             *Attention:*                             CMS-                            *1539*                            -P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.                         

                            4.                             *By hand or courier.*                             If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850.                         

(Because access to the interior of the HHH Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) 

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. 

                            For information on viewing public comments, see the beginning of the                             **SUPPLEMENTARY INFORMATION**                             section.                         

# FOR FURTHER INFORMATION CONTACT:

Terri Deutsch, (410) 786-9462. 

# SUPPLEMENTARY INFORMATION:

*Submitting Comments:*                         We welcome comments from the public on all issues set forth in this rule to assist us in fully considering issues and developing policies. You can assist us by referencing the file code CMS-1539-P and the specific “issue identifier” that precedes the section on which you choose to comment.                     

*Inspection of Public Comments:*                         All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received:                         *http://www.cms.hhs.gov/​eRulemaking.*                         Click on the link “Electronic Comments on CMS Regulations” on that Web site to view public comments.                     

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951. 

## I. Background 

### A. General 

#### 1. Hospice Care 

Hospice care is an approach to treatment that recognizes that the impending death of an individual warrants a change in the focus from curative care to palliative care for relief of pain and for symptom management. The goal of hospice care is to help terminally ill individuals continue life with minimal disruption to normal activities while remaining primarily in the home environment. A hospice uses an interdisciplinary approach to deliver medical, social, psychological, emotional, and spiritual services through use of a broad spectrum of professional and other caregivers, with the goal of making the individual as physically and emotionally comfortable as possible. Counseling services and inpatient respite services are available to the family of the hospice patient. Hospice programs consider both the patient and the family as a unit of care. 

Section 1861(dd) of the Social Security Act (the Act) provides for coverage of hospice care for terminally ill Medicare beneficiaries who elect to receive care from a participating hospice. Section 1814(i) of the Act provides payment for Medicare participating hospices. 

#### 2. Medicare Payment for Hospice Care 

Our regulations at 42 CFR part 418 establish eligibility requirements, payment standards and procedures, define covered services, and delineate the conditions a hospice must meet to be approved for participation in the Medicare program. Part 418 subpart G provides for payment in one of four prospectively-determined rate categories (routine home care, continuous home care, inpatient respite care, and general inpatient care) to hospices based on each day a qualified Medicare beneficiary is under a hospice election. 

### B. Hospice Wage Index 

                        Our regulations at § 418.306(c) require each hospice's labor market to be established using the most current hospital wage data available, including any changes to the Metropolitan Statistical Areas (MSAs) definitions, which have been superseded by Core Based Statistical Areas (CBSAs). Section 1814(i)(2)(D) of the Act requires Medicare to pay for hospice care furnished in an individual's home on                               ( print page 24117)                            the basis of the geographic location where the service is furnished. We have interpreted this to mean that the wage index value used is based upon the location of the beneficiary's home for routine home care and continuous home care and the location of the hospice agency for general inpatient and respite care.                     

The hospice wage index is used to adjust payment rates for hospice agencies under the Medicare program to reflect local differences in area wage levels. The original hospice wage index was based on the 1981 Bureau of Labor Statistics hospital data and had not been updated since 1983. In 1994, because of disparity in wages from one geographical location to another, a committee was formulated to negotiate a wage index methodology that could be accepted by the industry and the government. This committee, functioning under a process established by the Negotiated Rulemaking Act of 1990, was comprised of national hospice associations; rural, urban, large and small hospices; multi-site hospices; consumer groups; and a government representative. On April 13, 1995, the Hospice Wage Index Negotiated Rulemaking Committee signed an agreement for the methodology to be used for updating the hospice wage index. 

                        In the August 8, 1997                         **Federal Register**                         (62 FR 42860), we published a final rule implementing a new methodology for calculating the hospice wage index based on the recommendations of the negotiated rulemaking committee. The committee statement was included in the appendix of that final rule (62 FR 42883). The hospice wage index is updated annually. Our most recent annual update notice published in the September 1, 2006                         **Federal Register**                         (71 FR 52080), set forth updates to the hospice wage index for FY 2007. On October 3, 2006, we published a correction notice in the                         **Federal Register**                         (71 FR 58415) and we published a subsequent correction notice on January 26, 2007 (72 FR 3856), to correct technical errors that appeared in the September 1, 2006 notice.                     

#### 1. Changes to Core-Based Statistical Areas 

                        The annual update to the hospice wage index is published in the                         **Federal Register**                         and is based on the most current available hospital wage data, as well as any changes by the Office of Management and Budget (OMB) to the definitions of MSAs. The August 4, 2005 final rule (70 FR 45130) set forth the adoption of the changes discussed in the OMB Bulletin No. 03-04 (June 6, 2003), which announced revised definitions for Micropolitan Statistical Areas and the creation of MSAs and Combined Statistical Areas. In adopting the OMB Core-Based Statistical Area (CBSA) geographic designations, we provided for a 1-year transition with a blended wage index for all providers for FY 2006. For FY 2006, the hospice wage index for each provider consisted of a blend of 50 percent of the FY 2006 MSA-based wage index and 50 percent of the FY 2006 CBSA-based wage index. As discussed in the August 4, 2005 final rule and in the September 1, 2006 notice, we will use the full CBSA-based wage index values as presented in Tables A and B of this proposed rule for FY 2008.                     

#### 2. Raw Wage Index Values 

Raw wage index values (that is, inpatient hospital pre-floor and pre-reclassified wage index values) as described in the August 8, 1997 hospice wage index final rule (62 FR 42860), are subject to either a budget neutrality adjustment or application of the wage index floor. Raw wage index values of 0.8 or greater are adjusted by the budget neutrality adjustment factor. Budget neutrality means that, in a given year, estimated aggregate payments for Medicare hospice services using the updated wage index values will equal estimated payments that would have been made for these services if the 1983 wage index values had remained in effect. To achieve this budget neutrality, the raw wage index is multiplied by a budget neutrality adjustment factor. The budget neutrality adjustment factor is calculated by comparing what we would have paid using current rates and the 1983 wage index to what would be paid using current rates and the new wage index. The budget neutrality adjustment factor is computed and applied annually. For the FY 2008 hospice wage index in the proposed rule, FY 2007 hospice payment rates were used in the budget neutrality adjustment factor calculation. 

Raw wage index values below 0.8 are adjusted by the greater of: (1) The hospice budget neutrality adjustment factor; or (2) the hospice wage index floor (a 15 percent increase) subject to a maximum wage index value of 0.8. For example, if County A has a pre-floor, pre-reclassified hospital wage index (raw wage index value) of 0.4000, we would perform the following calculations using the budget neutrality factor (which for this example is 1.060988) and the hospice wage index floor to determine County A's hospice wage index: 

Raw wage index value below 0.8 multiplied by the budget neutrality adjustment factor: (0.4000 × 1.060988 = 0.4244). 

Raw wage index value below 0.8 multiplied by the hospice wage index floor: (0.4000 × 1.15 = 0.4600). 

Based on these calculations, County A's hospice wage index would be 0.4600. 

#### 3. Hospice Payment Rates 

Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended section 1814(i)(1)(C)(ii) of the Act to establish updates to hospice rates for FYs 1998 through 2002. Hospice rates were to be updated by a factor equal to the market basket index, minus 1 percentage point. However, neither the BBA nor subsequent legislation specified the market basket adjustment to be used to compute payment for FY 2008. Therefore, payment rates for FY 2008 will be updated according to section 1814(i)(1)(C)(ii)(VII) of the Act, which states that the update to the payment rates for subsequent FYs will be the market basket percentage for the fiscal year. Accordingly, the FY 2008 update to the payment rates will be the full market basket percentage increase for FY 2008. This rate update is implemented through a separate administrative instruction and is not part of this notice. Historically, the rate update has been published through a separate administrative instruction issued annually in July to provide adequate time to implement system change requirements. Providers determine their payment rates by applying the wage index in this notice to the labor portion of the published hospice rates. 

#### 4. Proxy for the Hospital Market Basket 

                        As discussed above, the hospice payment rates are adjusted each year based upon the full hospital market basket. In the FY 2007 update notice (72 FR 52082) issued on September 1, 2006, we indicated that beginning in April 2006, with the publication of March 2006 data, the Bureau of Labor Statistic's (BLS's) Employment Cost Index (ECI) began using a different classification system, the North American Industrial Classification System (NAICS), instead of the Standard Industrial Classification System (SIC), which no longer exists. The ECIs had been used as the data source for wages and salaries and other price proxies in the hospital market basket. In the FY 2007 update notice we noted that no changes would be made to the usage of the NAICS-based ECI, however, input was solicited on this issue. We received                               ( print page 24118)                            no comments and as a result, we are not proposing any changes.                     

## II. Provisions of the Proposed Rule 

### A. Annual Update to the Hospice Wage Index 

The hospice wage index presented in this proposed rule would be effective October 1, 2007 through September 30, 2008. We note that we are not proposing any modifications to the hospice wage index methodology. In accordance with our regulations and the agreement signed with other members of the Hospice Wage Index Negotiated Rulemaking Committee, we are using the most current hospital data available to us. For this proposed rule, the FY 2007 hospital wage index was the most current hospital wage data available for calculating the FY 2008 hospice wage index values. We used the FY 2007 pre-reclassified and pre-floor hospital area wage index data for this calculation. 

Payment rates for each of the four levels of care are adjusted annually based upon the hospital market basket for that year and are promulgated administratively to allow for sufficient time for system changes and provider notification. Due to the need to ensure appropriate time for implementing changes, the latest adjustments to these payment rates were not incorporated into this proposed rule. 

As noted above, for FY 2008, the hospice wage index values will be based solely on the adoption of the CBSA-based labor market definitions and its wage index. We continue to use the most recent pre-floor and pre-reclassified hospital wage index data available (FY 2003 hospital wage data). 

A detailed description of the methodology used to compute the hospice wage index is contained in both the September 4, 1996 proposed rule (61 FR 46579) and the August 8, 1997 final rule (62 FR 42860). All wage index values are adjusted by a budget-neutrality factor of 1.066028 and are subject to the wage index floor adjustment, if applicable. We completed all of the calculations described in section 2.B below and included them in the wage index values reflected in Tables A and B of the Addendum. Specifically, Table A reflects the FY 2008 wage index values for urban areas under the CBSA designations. Table B reflects the FY 2008 wage index values for rural areas under the CBSA designations. 

### B. Rural Areas Without Hospital Wage Data 

(If you choose to comment on issues in this section, please include the caption “Rural Areas without Wage Data” at the beginning of your comments.) 

When adopting OMB's new labor market designations, 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 (70 FR 45135, August 4, 2005). For FY 2006 and FY 2007, we adopted a policy to use the FY 2005 pre-floor, pre-reclassified hospital wage index value for rural areas when no rural hospital wage data were available. We also adopted the policy that for urban labor markets without an urban 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 wage index data to use as a reasonable proxy for these areas. We did not receive any public comments regarding our policy to calculate an urban wage index, using an average of all of the urban CBSA wage index data within the State, for urban labor markets without an urban hospital from which a hospital wage index could be derived. Consequently, in the August 2005 final rule and in the August 2006 update notice, we applied the average wage index data from all urban areas lacking hospital wage data in that state. Currently, the only CBSA that is affected by this is CBSA 25980 Hinesville-Fort Stewart, Georgia. We propose to continue this approach for urban areas where there are no hospitals and, thus, no hospital wage index data on which to base the calculations for the FY 2008 and subsequent hospice wage indexes. Therefore, the pre-floor, pre-reclassified wage index data for urban CBSA 25980, Hinesville-Fort Stewart, GA is calculated as the average wage index data of all urban areas in Georgia with a value of 0.9178. 

Under the CBSA labor market areas, there are no rural hospitals in rural locations in Massachusetts and Puerto Rico. Since there was no rural proxy for more recent rural data within those areas, in the August 2005 proposed rule (70 FR 45135), we proposed applying the FY 2005 pre-floor, pre-reclassified hospital wage index value to rural areas where no hospital wage data are available. We did not receive any public comments on this matter, either. Consequently, in the August 2005 final rule and in the August 2006 update notice, we applied the FY 2005 pre-floor, pre-reclassified hospital wage index data for rural areas lacking hospital wage data in that state in both FY 2006 and FY 2007 for rural Massachusetts and rural Puerto Rico. 

Since we have used the same wage index value from FY 2005 for these areas for the previous two fiscal years, we believe it is appropriate to consider alternatives in our methodology to update the wage index for rural areas without hospital wage index data. We believe 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 wage index; (3) be easy to evaluate; and, (4) be easy to update from year-to-year. Although our current methodology uses local, rural pre-floor, pre-reclassified hospital wage data, this method cannot be updated from year-to-year. 

Therefore, in cases where there is a rural area without rural hospital wage data, we propose using the average pre-floor, pre-reclassified wage index data from all contiguous CBSAs to represent a reasonable proxy for the rural area. While this approach does not use rural data, it does use pre-floor, pre-reclassified hospital wage data, it is easy to evaluate, it is easy to update from year-to-year, and it uses the most local data available. 

In determining an imputed rural wage index, we interpret the term contiguous to mean as sharing a border. For example, in the case of Massachusetts, the entire rural area consists of Dukes and Nantucket counties. We have determined that the borders of Dukes and Nantucket counties are contiguous with Barnstable and Bristol counties. Under the proposed methodology, the pre-floor, pre-reclassified wage index values for the counties of Barnstable (CBSA 12700, Barnstable Town, MA) of 1.2539 and Bristol (CBSA 39300, Providence-New Bedford-Fall River, RI-MA) of 1.0783 would be averaged resulting in an imputed pre-floor, pre-reclassified rural wage index of 1.1661 for rural Massachusetts for FY 2008. The impact of utilizing the proposed methodology is captured in the impact analysis (Table 1). As shown in Table B, the proposed wage index value for FY 2008 for rural Massachusetts is 1.2431. If we had retained the current methodology, the rural Massachusetts wage index would have been 1.0891. 

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 CAH, that do not submit the appropriate wage data), should a similar situation arise in the future, we may re-examine this policy. 

                        However, we do not believe that this policy would be appropriate for Puerto Rico. There are sufficient economic                               ( print page 24119)                            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 that we believe that a separate and distinct policy for Puerto Rico is necessary. Consequently, any alternative methodology for imputing a wage index for rural Puerto Rico would need to take into account those differences. Our policy of imputing a rural wage index based on the wage index(es) 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 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. Accordingly, we propose to continue using the most recent pre-floor, pre-reclassified wage index previously available for Puerto Rico, which is 0.4047.                     

### C. Nomenclature Changes 

(If you choose to comment on issues in this section, please include the caption “Nomenclature Changes” at the beginning of your comments.) 

                        In the August 4, 2005 final rule and in the September 1, 2006 update notice, we noted that the Office of Management and Budget (OMB) published a bulletin that changed the titles to certain CBSAs. Since the publication of the Hospice FY 2006 update notice, OMB published additional bulletins that updated the CBSAs. Specifically, OMB added or deleted certain CBSA numbers and revised certain titles. Accordingly, in this proposed rule, we are proposing to clarify that this and all subsequent Hospice rules and notices are considered to incorporate the CBSA changes published in the most recent OMB bulletin, that applies to the hospital wage data used to determine the current hospice wage index. The proposed tables reflect changes made by these bulletins. The OMB bulletins may be accessed at                         *http://www.whitehouse.gov/​omb/​bulletins/​index.html.*

### D. Payment for Hospice Care Based on Location Where Care Is Furnished

(If you choose to comment on issues in this section, please include the caption “Site of Service” at the beginning of your comments) 

Hospice providers receive payment for four levels of care based upon the individual's needs. Section 4442 of the BBA amended section 1814(i)(2) of the Act, effective for services furnished on or after October 1, 1997, required the application of the local wage index value of the geographic location at which the service is furnished for hospice care provided in the home. This provision has been codified in our regulations at 418.302(g). Prior to this provision, local wage index values were applied based on the geographic location of the hospice provider, regardless of where the hospice care was furnished. We believe that for the majority of hospice providers the office and the site for the provision of home and inpatient care occur in the same geographic area. However, with the substantial growth of hospice providers in multiple states and with multiple sites within a State, hospice providers have been able to inappropriately maximize reimbursement by locating their offices in high-wage areas and delivering services in a lower-wage area. We also believe that hospice providers are also able to inappropriately maximize reimbursement by locating their inpatient services either directly or under contractual arrangements in lower wage areas than their offices. 

Section 4442 of the BBA applies the wage index value of a home's geographic location for services provided there, but is silent as to what wage index value should be used for hospice services provided in an inpatient setting. We believe that the application of the wage index values, for rate adjustments on the geographic area, where the hospice care is furnished provides a reimbursement rate that is a more accurate reflection of the wages paid by the hospice for the staff used to furnish care. We also believe that payment should reflect the location of the services provided and not the location of an office. 

As a result, we are proposing that effective January 1, 2008, all payment rates (routine home care, continuous home care, inpatient respite and general inpatient care) be adjusted by the geographic wage index value of the area where hospice services are provided. In other words, the wage component of each payment rate is multiplied by the wage index value applicable to the location in which the hospice services are provided. We are proposing to amend 418.302(g) to reflect this proposed change. 

Currently, hospice claims do not contain information identifying the location of the facility where general inpatient and respite care are provided. Therefore, we are unable to predict the savings or costs associated with the changes associated with this proposed provision. However, we believe that the impact of implementing this proposal will be negligible. 

### E. Clarification of Selected Existing Medicare Hospice Regulations and Policies 

#### 1. Educational Requirements for Nurse Practitioners 

(If you choose to comment on issues in this section, please include the caption “Nurse Practitioners” at the beginning of your comments.)

On December 8, 2003, the Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-173). Section 408 of the MMA, Recognition of Attending Nurse Practitioners as Attending Physicians to Serve Hospice Patients, amended sections 1861(dd)(3)(B) and 1814(a)(7) of the Act to add nurse practitioners (NPs) to the definition of an attending physician for beneficiaries who have elected the hospice benefit. Section 408 of the MMA was implemented through an administrative issuance (Change Request (CR) 3226, Transmittals 22 and 304, September 24, 2004). 

In the FY 2006 Final Rule (70 FR 45130, August 4, 2005), we revised § 418.3 to implement the provisions of section 408 of the MMA. Section 418.3 indicated (under clause (1)(ii) of the definition of “attending physician”) that the nurse practitioner “* * * meet the training, education, and experience requirements as the Secretary may prescribe * * *”. We believe that the definition for nurse practitioners under the Medicare hospice benefit should reflect the definition as established for the Medicare benefit found at § 410.75. To ensure consistency, we propose to revise the definition of “attending physician” at § 418.3 to cross reference the requirement in § 410.75(b). 

#### 2. Care Giver Breakdown and General Inpatient Care 

(If you choose to comment on issues in this section, please include the caption “Care Giver and General Inpatient Care” at the beginning of your comments.)

                        The Medicare hospice benefit places emphasis on the provision of items and services to enable an individual to remain at home in the company of family and friends. Section 1861(dd)(1)(G) of the Act provides for short term inpatient hospice care to be available when an individual's pain and symptoms must be closely monitored or the intensity of interventions that are required cannot be provided in any other settings. In recognition of the stress in providing care for an                               ( print page 24120)                            individual with a terminal diagnosis, inpatient respite care is available for family members, who serve as the primary caregivers, to obtain rest for a period of no more than five days at a time.                     

Medicare policy as described in chapter 9 of the Medicare Benefit Policy Manual, states that skilled nursing care may be required by a patient whose home support has broken down, if this breakdown makes it no longer feasible to furnish needed care in the home setting. If the hospice and the caregiver, working together, are no longer able to provide the necessary skilled nursing care in the individual's home, and if the individual's pain and symptom management can no longer be provided at home, then the individual may be eligible for a short term general inpatient level of care. However, it has come to our attention that some hospice providers are requesting payment for the “general inpatient” level of care for circumstances that do not qualify under the statute, our regulations at § 418.202(e) or Medicare hospice policy. In other words, some hospices are billing Medicare for “caregiver breakdown” at the higher “general inpatient” level, rather than the lower payment for “inpatient respite” or “routine home care” levels of care. 

                        To receive payment for “general inpatient care” under the Medicare hospice benefit, beneficiaries                         *must*                         require an intensity of care directed towards pain control and symptom management that cannot be managed in any other setting. While there is nothing prohibiting a Medicare approved facility from serving as the individual's home, it is the level of care provided to meet the individual's needs which determine payment rates for Medicare services. “Caregiver breakdown” should not be billed as “general inpatient care” regardless of where services are provided, unless the intensity-of-care requirement is met. If the individual is no longer able to remain in his or her home, but the required care does not meet the requirements for “general inpatient care”, hospices should bill this care as “inpatient respite care”, payable for no more than 5 days, until alternative arrangements can be made.                     

As explained, this is a clarification of current Medicare policy and is not anticipated to create new limitations on access to hospice care. However, we are clarifying that the level of care provided, not the location of care, is what determines the appropriate level of payment. Additionally, the circumstances addressed with this policy, and the clarification discussed above, should not be construed as similar to situations where an individual does not have family or friends or other means that are able to take on the role of a caregiver when a hospice election is made. The Medicare hospice benefit provides for care that is medically reasonable and necessary for the palliation and management of the terminal and related conditions, and is structured in such a way to enable the individual with a terminal condition to remain at home, as long as possible, in the company of family and friends. We recognize the difficulties surrounding the provision of hospice care to an individual who is terminally ill and who does not have caregivers at home. This may be a challenge in rural areas. Section 409 of the MMA established the Rural Hospice Demonstration which hopes to test alternative mechanisms for providing hospice services for beneficiaries who lack an appropriate caregiver and who reside in rural areas. However, we intend to monitor the usage of the general inpatient care. 

We are providing this as clarification and therefore are not proposing any changes in existing statute, regulation or policy manual. 

#### 3. Certification of Terminal Illness 

(If you choose to comment on issues in this section, please include the caption “Certification” at the beginning of your comments.)

Section 1814(a)(7)(A)(i) of the Act stipulates that the individual's attending physician and the hospice medical director initially certify the individual's terminal diagnosis with prognosis of six months or less if the disease runs its normal course. The requirements of the physician certification, including supportive documentation were discussed in the hospice care amendment proposed rule (67 CFR 70363) and final rule (70 CFR 70548). In these rules, we indicated that a direct consultation between the hospice medical director and the attending physician was not a requirement and that information supporting the terminal diagnosis could be obtained through the hospice admission nurse. We are aware that the intent of this has been construed by some providers, to permit the admission nurse, utilizing documents such as local coverage decisions, to determine eligibility for hospice services and certify the individual's terminal diagnosis. This interpretation is incorrect. We have permitted the hospice nurses to obtain information to be used by the hospice medical director as part of the medical documents used in his or her determination of the terminal diagnosis and eligibility for the Medicare hospice benefit. The statute is explicit in the requirement that the physician and medical director determine the prognosis and his or her signature on the certification attests to that fact. We will provide further clarification in administrative instructions. 

## III. Collection of Information Requirements 

This document does not impose any information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 35). 

## IV. Response to Comments 

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

## V. Regulatory Impact Analysis 

### A. Overall Impact 

We have examined the impacts of this proposed rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. We estimated the impact on hospices, as a result of the proposed changes to the FY 2008 hospice wage index. As discussed previously, the methodology for computing the wage index was determined through a negotiated rulemaking committee and implemented in the August 8, 1997 final rule (62 FR 42860). This proposed rule updates the hospice wage index in accordance with our regulation and that methodology, incorporating the adoption of the CBSA designations used in the FY 2007 hospital wage index data. 
    - Table 1 categorizes the impact on hospices by various geographic and provider characteristics. We estimate that the total hospice payments will decrease $538,000 as a result of the proposed FY 2008 wage index values. We anticipate that the final rule will more accurately project payment for FY 2008, based upon changes in the wage index values.       ( print page 24121)      
    - Table A reflects the FY 2008 wage index values for urban areas designations.
    - Table B reflects the FY 2008 wage index values for rural areas designations.

Executive Order 12866 (as amended by Executive Order 13258, which merely reassigns responsibility of duties) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We have determined that this notice is not an economically significant rule under this Executive Order. 

The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospices and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $6.5 million to $31.5 million in any 1 year (for details, see the Small Business Administration's regulation at 65 FR 69432, that sets forth size standards for health care industries). For purposes of the RFA, most hospices are small entities. As indicated in Table 1 below, there are 2,819 hospices. Approximately 81 percent of Medicare certified hospices are identified as voluntary, government, or other agencies and, therefore, are considered small entities. Because the National Hospice and Palliative Care Organization estimates that approximately 79 percent of hospice patients are Medicare beneficiaries, we have not considered other sources of revenue in this analysis. Furthermore, the wage index methodology was previously determined by consensus, through a negotiated rulemaking committee that included representatives of national hospice associations; rural, urban, large and small hospices; multi-site hospices; and consumer groups. Based on all of the options considered, the committee agreed on the methodology described in the committee statement, and it was adopted into regulation in the August 8, 1997 final rule. In developing the process for updating the wage index in the 1997 final rule, we considered the impact of this methodology on small entities and attempted to mitigate any potential negative effects. 

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside a CBSA and has fewer than 100 beds. We have determined that this notice would not have a significant impact on the operations of a substantial number of small rural hospitals. We are not preparing an analysis for the RFA because we have determined that this rule will not have a significant economic impact on a substantial number of small entities. 

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule that may result in expenditure in any 1 year by State, local, and tribal governments, in the aggregate, or by the private sector, of $120 million or more. This notice is not anticipated to have an effect on State, local, or tribal governments or on the private sector of $120 million or more. 

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

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget. 

### B. Anticipated Effects 

We are unable to quantify the extent of the usage of the general inpatient level of care in the event of caregiver breakdown and are, therefore, unable to definitively anticipate the impact of our clarification of the general inpatient level of care policy in the event of caregiver breakdown. For this reason, we solicit comment on what the impact of our clarification might be. Based on anecdotal evidence as well as substantial increases in the number of claims submitted for general inpatient care, however, we believe a small proportion of patient days attributed to general inpatient care would be appropriately allocated to inpatient respite care with this clarification. Significant savings could be realized even if only a small proportion of patient days attributed to general inpatient care were allocated to inpatient respite care. 

For example, to determine the impact of allocating 5.0 percent of general inpatient care days to inpatient respite care, we used the FY 2005 patient days, expenditures and number of beneficiaries electing the hospice benefit to estimate the impact of the clarification of existing policy in this proposed rule. The number of inpatient days was adjusted from 1,250,678 to 1,188,144. The number of inpatient respite days was adjusted from 96,646 to 159,180. While inpatient respite expenditures increased from $14,000,000 to $23,058,570, general inpatient care expenditures decreased from $737,300,000 to $700,435,000. In total, if 5.0 percent of patient days that were attributed to general inpatient care in FY 2005 were allocated to the inpatient respite level of care, it would have resulted in net savings of $27,806,430. 

The impact analysis of this notice represents the projected effects of the changes in the hospice wage index from FY 2007 to FY 2008. We estimate the effects by estimating payments for FY 2008 utilizing the FY 2007 wage index values and the full implementation of the CBSA designations while holding all other payment variables constant. 

We note that certain events may combine to limit the scope or accuracy of our impact analysis, because such an analysis is future oriented and, thus, susceptible to forecasting errors due to other changes in the forecasted impact time period. The nature of the Medicare program is such that the changes may interact, and the complexity of the interaction of these changes could make it difficult to predict accurately the full scope of the impact upon hospices. 

                        For the purposes of this proposed rule, we compared estimated payments using the FY 1983 hospice wage index to estimated payments using the FY 2008 wage index and determined the hospice wage index to be budget neutral. Budget neutrality means that, in a given year, estimated aggregate payments for Medicare hospice services using the FY 2008 wage index would equal estimated aggregate payments that would have been made for the same services if the 1983 wage index had remained in effect. Budget neutrality to 1983 does not imply that estimated payments would not increase since the                               ( print page 24122)                            budget neutrality applies only to the wage index portion and not the total payment rate, which accommodates inflation.                     

As discussed above, we use the latest claims file available to us to develop the impact table when we issue the annual yearly wage index update. For the purposes of this proposed rule, data were obtained from the National Claims History file using FY 2005 claims processed through June 2006, which were the most recent available data. We deleted bills from hospice providers that have since closed. For the purposes of this proposed rule, this file is adequate to demonstrate the impact of the FY 2008 wage index values and is not intended to project the anticipated expenditures for FY 2008. We anticipate that the final rule will more accurately project payment for FY 2008. This impact analysis compares hospice payments using the FY 2007 hospice wage index to the estimated payments using the FY 2008 wage index. We note that estimated payments for FY 2008 are determined by using the wage index for FY 2008 and payment rates for FY 2007. As noted in previous sections, payment rates for FY 2008 are published through administrative issuance. 

Table 1 demonstrates the results of our analysis. In column 1 we indicate the number of hospices included in our analysis. In column 2, we indicate the number of routine home care days that were included in our analysis, although the analysis was performed on all types of hospice care. Column 3 estimates payments using the FY 2007 wage index values and the FY 2007 payment rates. Column 4 estimates payments using FY 2008 wage index values as well as the FY 2007 payment rates. Column 5 compares columns 3 and 4 and shows the percentage change in estimated hospice payments made based on the hospice category. 

Table 1 also categorizes hospices by various geographic and provider characteristics. The first row displays the aggregate result of the impact for all Medicare-certified hospices. The second and third rows of the table categorize hospices according to their geographic location (urban and rural). Our analysis indicated that there are 1,858 hospices located in urban areas and 961 hospices located in rural areas. The next two groupings in the table indicate the number of hospices by census region, also broken down by urban and rural hospices. The sixth grouping shows the impact on hospices based on the size of the hospice's program. We determined that the majority of hospice payments are made at the routine home care rate. Therefore, we based the size of each individual hospice's program on the number of routine home care days provided in FY 2006. The next grouping shows the impact on hospices by type of ownership. The final grouping shows the impact on hospices defined by whether they are provider-based or freestanding. As indicated in Table 1 below, there are 2,819 hospices. Approximately 81 percent of Medicare-certified hospices are identified as voluntary, government, or other agencies and, therefore, are considered small entities. Because the National Hospice and Palliative Care Organization estimates that approximately 79 percent of hospice patients are Medicare beneficiaries, we have not considered other sources of revenue in this analysis. Furthermore, the wage index methodology was previously determined by consensus, through a negotiated rulemaking committee that included representatives of national hospice associations; rural, urban, large, and small hospices; multi-site hospices; and consumer groups. Based on all of the options considered, the committee agreed on the methodology described in the committee statement, and it was adopted into regulation in the August 8, 1997 final rule. In developing the process for updating the wage index in the 1997 final rule, we considered the impact of this methodology on small entities and attempted to mitigate any potential negative effects. 

As stated previously, the following discussions are limited to demonstrating trends rather than projected dollars. We used the CBSA designations and wage indices as well as the data from FY 2005 claims processed through June 2006 in developing the impact analysis. For FY 2008 the wage index is the variable that differs between the FY 2007 payments and the FY 2008 estimated payments. FY 2007 payment rates are used for both FY 2007 actual payments and the FY 2008 estimated payments. The FY 2008 payment rates will be adjusted to reflect the full FY 2007 hospital market basket, as required by section 1814(i)(1)(C)(ii)(VII) of the Act. As previously noted, we publish these rates through administrative issuances. 

As discussed in the FY 2006 final rule (70 FR 45129), hospice agencies may utilize multiple wage indices to compute their payments based on potentially different geographic locations of the beneficiary for routine and continuous home care or the CBSA for the location of the hospice agency for respite and general inpatient care. For this analysis, we use payments to the hospice in the aggregate based on the location of the hospice. The impact of hospice wage index changes have been analyzed according to 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. Hospices are almost equal in numbers by ownership with 1,231 designated as non-profit and 1,265 as proprietary. The vast majority of hospices are freestanding. 

#### 1. Hospice Size 

Under the Medicare hospice benefit, hospices can provide four different levels of care days. The majority of the days provided by a hospice are routine home care days (RHC) representing over 70 percent of the services provided by a hospice. Therefore, the number of routine home care days can be used as a proxy for the size of the hospice, that is, the more days of care provided, the larger the hospice. As discussed in the August 4, 2005 final rule, we currently use three size designations to present the impact analyses. The three categories are: Small agencies having 0 to 3,499 RHC days; medium agencies having 3,500 to 19,999 RHC days; and large agencies having 20,000 or more RHC days. Using RHC days as a proxy for size, our analysis indicates that the proposed FY 2008 wage index values are anticipated to have virtually no impact on hospice providers, with a slight decrease of 0.1 percent anticipated for small hospices while no change is anticipated for medium or large hospices. 

#### 2. Geographic Location 

Our analysis demonstrates that the proposed FY 2008 wage index values will result in little change in estimated payments with urban hospices anticipated to experience no change while rural hospices are anticipated to experience a slight increase of 0.2 percent. The greatest increase of 0.9 percent is anticipated to be experienced by the Mountain regions, followed by an increase for East North Central of 0.6 percent and Pacific regions of 0.5 percent. The remaining urban regions are anticipated to experience a decrease ranging from 0.6 percent in the East South Central region to 0.1 percent in the Middle Atlantic region. The greatest decrease of 2.6 percent is anticipated for Puerto Rico. 

                        For rural hospices, the South Atlantic region and Puerto Rico are anticipated to experience no change. Two regions are anticipated to experience a decrease of 0.9 percent for New England and 0.4 percent for the mountain regions. The                               ( print page 24123)                            remaining regions are anticipated to experience an increase ranging from 0.2 percent for the East North Central region to 0.6 percent for the Middle Atlantic and East South Central regions.                     

#### 3. Type of Ownership 

By type of ownership, non-profit hospices are anticipated to experience no change in payment while government hospices are anticipated to experience a slight increase of 0.1 percent. Slight decreases are anticipated for proprietary hospices of 0.1 percent and 0.2 percent for other categories. 

#### 4. Hospice Base 

For hospice-based facilities, a decrease of 0.1 percent in payment is anticipated for freestanding facilities. Home health, hospital and skilled nursing facilities area anticipated to experience an increase of 0.1, 0.2 and 0.7 percent respectively. 
      ( print page 24124)          ( print page 24125)    

### C. Conclusion 

Our impact analysis compared hospice payments by using the FY 2007 wage index to the estimated payments using the FY 2008 wage index. Through the analysis, we estimate that total hospice payments will effectively be budget neutral with a negligible decrease from FY 2007 by $538,000. Additionally, we compared estimated payments using the FY 1983 hospice wage index to estimated payments using the FY 2008 wage index and determined the current hospice wage index to be budget neutral, as required by the negotiated rulemaking committee. As noted above, the payment rates used reflect the FY 2007 rates. The FY 2008 payment rates will be adjusted to reflect the full FY 2008 hospital market basket, as required by section 1814(i)(1)(C)(ii)(VII) of the Act. We publish these rates through administrative issuances. 

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget. 

# List of Subjects for 42 CFR Part 418

      - Health facilities
      - Hospice care
      - Medicare
      - Reporting and recordkeeping requirements

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services would amend 42 CFR part 418 as set forth below: 

# PART 418—HOSPICE CARE 

1. The authority citation for part 418 continues to read as follows: 

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

# Subpart A—General Provision and Definitions 

2. Section 418.3 is amended by revising paragraph (1)(ii) in the definition of “attending physician” to read as follows: 

§ 418.3 

* * * * *

*Attending Physician*                                 means a—(1)(i) * * *                             

(ii) Nurse practitioner who meets the training, education, and experience requirements as described in § 410.75 (b). 

* * * * *

# Subpart G—Payment for Hospice Care 

3. Section 418.302 is amended by revising paragraph (g) to read as follows: 

§ 418.302 

* * * * *

(g) Payment for routine home care, continuous home care, general inpatient care and inpatient respite care is made on the basis of the geographic location where the services are provided. 

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program) 

Dated: March 15, 2007. 

Leslie V. Norwalk, 

Acting Administrator, Centers for Medicare & Medicaid Services. 

Approved: April 11, 2007. 

Michael O. Leavitt, 

Secretary. 

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BILLING CODE 4120-01-P

BILLING CODE: 4120-01-P

[FR Doc. 07-2120 Filed 4-26-07; 4:00 pm] 

BILLING CODE 4120-01-C