24116 Federal Register / Vol. 72, No. 83 / Tuesday, May 1, 2007 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 418 

[CMS–1539–P] 

RIN 0938–AO72 

Medicare Program; Hospice Wage 

Index for Fiscal Year 2008 

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 


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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 prereclassified wage index values) as 

described in the August 8, 1997 hospice 

wage index final rule (62 FR 42860), are 

subject to either a budget neutrality 

adjustment or application of the wage 

index floor. Raw wage index values of 

0.8 or greater are adjusted by the budget 

neutrality adjustment factor. Budget 

neutrality means that, in a given year, 

estimated aggregate payments for 

Medicare hospice services using the 

updated wage index values will equal 

estimated payments that would have 

been made for these services if the 1983 

wage index values had remained in 

effect. To achieve this budget neutrality, 

the raw wage index is multiplied by a 

budget neutrality adjustment factor. The 

budget neutrality adjustment factor is 

calculated by comparing what we would 

have paid using current rates and the 

1983 wage index to what would be paid 

using current rates and 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 x 1.060988 = 

0.4244). 

Raw wage index value below 0.8 

multiplied by the hospice wage index 

floor: (0.4000 x 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 


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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 prereclassified 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 CBSAbased labor market definitions and its 

wage index. We continue to use the 

most recent pre-floor and prereclassified hospital wage index data 

available (FY 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 budgetneutrality 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, prereclassified 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, prereclassified 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 prefloor, 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-toyear. Although our current methodology 

uses local, rural pre-floor, prereclassified hospital wage data, this 

method cannot be updated from year-toyear. 

Therefore, in cases where there is a 

rural area without rural hospital wage 

data, we propose using the average prefloor, 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, prereclassified 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, RIMA) of 1.0783 would be averaged 

resulting in an imputed pre-floor, prereclassified 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 


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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, prereclassified 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 


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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. 

<bullet≤ 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. 


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<bullet≤ Table A reflects the FY 2008 

wage index values for urban areas 

designations. 

<bullet≤ 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; multisite hospices; and consumer groups. 

Based on all of the options considered, 

the committee agreed on the 

methodology described in the 

committee statement, and it was 

adopted into regulation in the August 8, 

1997 final rule. In developing the 

process for updating the wage index in 

the 1997 final rule, we considered the 

impact of this methodology on small 

entities and attempted to mitigate any 

potential negative effects. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 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 


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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 Medicarecertified hospices are identified as 

voluntary, government, or other 

agencies and, therefore, are considered 

small entities. Because the National 

Hospice and Palliative Care 

Organization estimates that 

approximately 79 percent of hospice 

patients are Medicare beneficiaries, we 

have not considered other sources of 

revenue in this analysis. Furthermore, 

the wage index methodology was 

previously determined by consensus, 

through a negotiated rulemaking 

committee that included representatives 

of national hospice associations; rural, 

urban, large, and small hospices; multisite hospices; and consumer groups. 

Based on all of the options considered, 

the committee agreed on the 

methodology described in the 

committee statement, and it was 

adopted into regulation in the August 8, 

1997 final rule. In developing the 

process for updating the wage index in 

the 1997 final rule, we considered the 

impact of this methodology on small 

entities and attempted to mitigate any 

potential negative effects. 

As stated previously, the following 

discussions are limited to demonstrating 

trends rather than projected dollars. We 

used the CBSA designations and wage 

indices as well as the data from FY 2005 

claims processed through 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 


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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. 

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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 Definitions. 

* * * * * 

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 Payment procedures for 

hospice care. 

* * * * * 

(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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24170 Federal Register / Vol. 72, No. 83 / Tuesday, May 1, 2007 / Proposed Rules 

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

BILLING CODE 4120–01–C 


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