[Federal Register Volume 72, Number 83 (Tuesday, May 1, 2007)]
[Proposed Rules]
[Pages 24116-24170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2120]



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Part VII





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 418



Medicare Program; Hospice Wage Index for Fiscal Year 2008; Proposed 
Rule

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

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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


Medicare Program; Hospice Wage Index for Fiscal Year 2008

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

ACTION: Proposed rule.

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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 Sec.  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 
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 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 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

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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, 
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 
Sec.  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 Sec.  
410.75. To ensure consistency, we propose to revise the definition of 
``attending physician'' at Sec.  418.3 to cross reference the 
requirement in Sec.  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

[[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 Sec.  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; 
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

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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 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

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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:


Sec.  418.3  Definitions.

* * * * *
    Attending Physician means a--(1)(i) * * *
    (ii) Nurse practitioner who meets the training, education, and 
experience requirements as described in Sec.  410.75 (b).
* * * * *

Subpart G--Payment for Hospice Care

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


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