Vol. 77 Thursday, 

No. 217 November 8, 2012 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 409, 424, 484, et al. 

Medicare Program; Home Health Prospective Payment System Rate 

Update for Calendar Year 2013, Hospice Quality Reporting Requirements, 

and Survey and Enforcement Requirements for Home Health Agencies; 

Final Rule 


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67068 Federal Register / Vol. 77, No. 217 / Thursday, November 8, 2012 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 409, 424, 484, 488, 489, 

and 498 

[CMS–1358–F] 

RIN 0938–AR18 

Medicare Program; Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2013, 

Hospice Quality Reporting 

Requirements, and Survey and 

Enforcement Requirements for Home 

Health Agencies 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule updates the 

Home Health Prospective Payment 

System (HH PPS) rates, including the 

national standardized 60-day episode 

rates, the national per-visit rates, the 

low-utilization payment amount 

(LUPA), the non-routine medical 

supplies (NRS) conversion factor, and 

outlier payments under the Medicare 

prospective payment system for home 

health agencies effective January 1, 

2013. This rule also establishes 

requirements for the Home Health and 

Hospice quality reporting programs. 

This final rule will also establish 

requirements for unannounced, 

standard and extended surveys of home 

health agencies (HHAs) and sets forth 

alternative sanctions that could be 

imposed instead of, or in addition to, 

termination of the HHA’s participation 

in the Medicare program, which could 

remain in effect up to a maximum of 6 

months, until an HHA achieves 

compliance with the HHA Conditions of 

Participation (CoPs) or until the HHA’s 

provider agreement is terminated. 

DATES: This rule is effective on January 

1, 2013, except for: 

a. The amendments to 42 CFR 488.2, 

488.3, 488.26, and 488.28, and the 

additions of 42 CFR part 488, subparts 

I and J, which are effective July 1, 2013 

(except that § 488.745, § 488.840 and 

§ 488.845 are effective July 1, 2014). 

b. The amendments to 42 CFR 489.53 

and 498.3, which are effective July 1, 

2013. 

FOR FURTHER INFORMATION CONTACT: 

Hillary Loeffler, (410) 786–0456, for 

information about the HH PPS. 

Kristine Chu, (410) 786–8953, for 

information about the HH payment 

reform study and report. 

Robin Dowell, (410) 786–0060, for 

information about HH and Hospice 

quality improvement and reporting. 

Mollie Knight, (410) 786–7948, for 

information about the HH market 

basket. 

Joan Proctor, (410) 786–0949, for 

information about the HH PPS 

Grouper and ICD–10 Conversion. 

Lori Teichman, (410) 786–6684, for 

information about HHCAHPS. 

Patricia Sevast, (410) 786–8135 and 

Peggye Wilkerson, (410) 786–4857, for 

survey and enforcement requirements 

for HHAs. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Executive Summary 

A. Purpose 

B. Summary of the Major Provisions 

C. Summary of Costs and Benefits 

II. Background 

A. Statutory Background 

B. System for Payment of Home Health 

Services 

C. Updates to the HH PPS 

III. Summary of Proposed Provisions and 

Analysis of and Responses to Public 

Comments 

A. Case-Mix Measurement 

B. Outlier Policy 

C. CY 2013 Rate Update 

D. Home Health Face-to-Face Encounter 

E. Therapy Coverage and Reassessments 

F. Payment Reform: Home Health Study 

and Report 

G. International Classification of Diseases, 

10th Edition (ICD–10) Transition Plan 

and Grouper Enhancements 

IV. Quality Reporting for Hospices 

A. Background and Statutory Authority 

B. Public Availability of Data Submitted 

C. Quality Measures for Hospice Quality 

Reporting Program and Data Submission 

Requirements for Payment Year FY 2014. 

D. Quality Measures for Hospice Quality 

Reporting Program for Payment Year FY 

2015 and Beyond 

E. Additional Measures Under 

Consideration and Standardization of 

Data Collection 

V. Survey and Enforcement Requirements for 

Home Health Agencies 

A. Background and Statutory Authority 

B. Summary of Proposed Provisions and 

Analysis of and Responses to Public 

Comments 

C. Provider Agreements and Supplier 

Approval 

D. Solicitation of Comments 

VI. Collection of Information Requirements 

VII. Regulatory Impact Analysis 

VIII. Federalism Analysis Regulations Text 

Acronyms 

In addition, because of the many 

terms to which we refer by abbreviation 

in this final rule, we are listing these 

abbreviations and their corresponding 

terms in alphabetical order below: 

ACH LOS Acute Care Hospital Length of 

Stay 

ADL Activities of Daily Living 

APU Annual Payment Update 

BBA Balanced Budget Act of 1997, Pub. L. 

105–33 

BBRA Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 1999, 

Pub. L. 106–113 

CAD Coronary Artery Disease 

CAH Critical Access Hospital 

CBSA Core-Based Statistical Area 

CASPER Certification And Survey Provider 

Enhanced Reports 

CHF Congestive Heart Failure 

CMI Case-Mix Index 

CMS Centers for Medicare and Medicaid 

Services 

CoPs Conditions of Participation 

COPD Chronic Obstructive Pulmonary 

Disease 

CVD Cardiovascular Disease 

CY Calendar Year 

DM Diabetes Mellitus 

DRA Deficit Reduction Act of 2005, Pub. L. 

109–171, enacted February 8, 2006 

FDL Fixed Dollar Loss 

FI Fiscal Intermediaries 

FR Federal Register 

FY Fiscal Year 

HAVEN Home Assessment Validation and 

Entry System 

HCC Hierarchical Condition Categories 

HCIS Health Care Information System 

HH Home Health 

HHABN Home Health Advance Beneficiary 

Notice 

HHCAHPS Home Health Care Consumer 

Assessment of Healthcare Providers and 

Systems Survey 

HH PPS Home Health Prospective Payment 

System 

HHAs Home Health Agencies 

HHRG Home Health Resource Group 

HIPPS Health Insurance Prospective 

Payment System 

IH Inpatient Hospitalization 

IRF Inpatient Rehabilitation Facility 

LTCH Long-Term Care Hospital 

LUPA Low Utilization Payment Amount 

MEPS Medical Expenditures Panel Survey 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Pub. L. 108–173, enacted December 

8, 2003 

MSA Metropolitan Statistical Areas 

MSS Medical Social Services 

NRS Non-Routine Supplies 

OBRA Omnibus Budget Reconciliation Act 

of 1987, Pub. L. 100–2–3, enacted 

December 22, 1987 

OCESAA Omnibus Consolidated and 

Emergency Supplemental Appropriations 

Act, Pub. L. 105–277, enacted October 21, 

1998 

OES Occupational Employment Statistics 

OIG Office of Inspector General 

OT Occupational Therapy 

OMB Office of Management and Budget 

PAC–PRD Post-Acute Care Payment Reform 

Demonstration 

PEP Partial Episode Payment Adjustment 

PT Physical Therapy 

QAP Quality Assurance Plan 

PRRB Provider Reimbursement Review 

Board 

RAP Request for Anticipated Payment 

RF Renal Failure 


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Federal Register / Vol. 77, No. 217 / Thursday, November 8, 2012 / Rules and Regulations 67069 

RFA Regulatory Flexibility Act, Pub. L. 96– 

354 

RHHIs Regional Home Health 

Intermediaries 

RIA Regulatory Impact Analysis 

SLP Speech Language Pathology Therapy 

SNF Skilled Nursing Facility 

UMRA Unfunded Mandates Reform Act of 

1995 

I. Executive Summary 

A. Purpose 

This rule updates the payment rates 

for home health agencies (HHAs) for 

Calendar Year (CY) 2013 as required 

under section 1895(b) of the Social 

Security Act (the Act). The update to the 

prospective payment system addresses 

the market basket update, case-mix 

adjustments due to variation in costs 

among different units of services, 

adjustments for geographic differences 

in wage levels, outlier payments, the 

submission of quality data, and 

additional payments for services 

provided in rural areas. 

B. Summary of the Major Provisions 

In this final rule, we use the methods 

described in the CY 2012 HH PPS final 

rule (76 FR 68526) to update the 

prospective payment rates for CY 2013 

using a rebased and revised market 

basket described in section III.C.1 of this 

rule. This rule discusses the nominal 

case-mix growth adjustment, policy 

changes regarding therapy 

reassessments and face-to-face 

encounter requirements, grouper 

enhancements, and requirements 

concerning the home health and hospice 

quality reporting programs. We also 

provide an update on the transition plan 

for ICD–10 and the home health study 

concerning home health care access. 

Lastly, this rule establishes alternative 

sanctions, in lieu of termination, for 

HHAs found not to be in compliance 

with Medicare Conditions of 

Participation. 

C. Summary of Costs and Benefits 

TABLE 1—COST AND BENEFITS

Provision description Total costs Total benefits Transfers 

CY 2013 HH PPS payment rate 

update.

N/A ................................................ The benefits of this final rule include paying more accurately 

for the delivery of Medicare 

home health services, providing 

additional regulatory flexibility 

for HHAs to comply with therapy requirements and face-toface encounter documentation 

requirements.

The overall economic impact of 

this final rule is an estimated 

$10 million in decreased payments to HHAs. 

HHA Survey Requirements and Alternative (or Intermediate) Sanctions That May be Imposed 

when HHAs are Out of Compliance with federal Requirements.

The components of the rule, 

which address survey requirements, codify current Survey 

and Certification policies and do 

not represent new costs. We 

estimate that the costs associated with Informal Dispute Resolution (IDR) will not be significantly greater than current actions related to termination actions. We estimate a onetime 

$2 million expense for system 

modifications to monitor Civil 

Money Penalties and annual 

operating expenses of 

$410,972 to maintain the system and provide surveyor training.

The benefits of this rule include 

establishing alternative (or intermediate) sanctions that may be 

imposed when HHAs are out of 

compliance with federal requirements, increasing provider participation related to survey findings via the IDR, and incentives 

for HHAs to maintain or regain 

compliance with the HHA Conditions of Participation through 

measures other than termination.

N/A. 

II. Background 

A. Statutory Background 

The Balanced Budget Act of 1997 

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

5, 1997), significantly changed the way 

Medicare pays for Medicare HH 

services. Section 4603 of the BBA 

mandated the development of the HH 

PPS. Until the implementation of a HH 

PPS on October 1, 2000, HHAs received 

payment under a retrospective 

reimbursement system. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered HH services provided 

under a plan of care (POC) that were 

paid on a reasonable cost basis by 

adding section 1895 of the Social 

Security Act (the Act), entitled 

‘‘Prospective Payment For Home Health 

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

requires the Secretary to establish a HH 

PPS for all costs of HH services paid 

under Medicare. 

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

requires the following: (1) The 

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary; and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage levels 

among HHAs. 

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

addresses the annual update to the 

standard prospective payment amounts 

by the HH applicable percentage 

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

governs the payment computation. 

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

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of an appropriate 

case-mix change adjustment factor for 

significant variation in costs among 

different units of services. 

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

Act requires the establishment of wage 

adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 


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compared to the applicable national 

average level. Under section 

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

may be the factors used under section 

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

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

Secretary the option to make additions 

or adjustments to the payment amount 

otherwise paid in the case of outliers 

due to unusual variations in the type or 

amount of medically necessary care. 

Section 3131(b)(2) of the Patient 

Protection and Affordable Care Act of 

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

111–148, enacted March 23, 2010) 

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

that total outlier payments in a given 

year would not exceed 2.5 percent of 

total payments projected or estimated. 

The provision also made permanent a 

10 percent agency-level outlier payment 

cap. 

In accordance with the statute, as 

amended by the BBA, we published a 

final rule in the July 3, 2000 Federal 

Register (65 FR 41128) to implement the 

HH PPS legislation. The July 2000 final 

rule established requirements for the 

new HH PPS for HH services as required 

by section 4603 of the BBA, as 

subsequently amended by section 5101 

of the Omnibus Consolidated and 

Emergency Supplemental 

Appropriations Act (OCESAA) for Fiscal 

Year 1999, (Pub. L. 105–277, enacted 

October 21, 1998); and by sections 302, 

305, and 306 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 

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

enacted November 29, 1999). The 

requirements include the 

implementation of a HH PPS for HH 

services, consolidated billing 

requirements, and a number of other 

related changes. The HH PPS described 

in that rule replaced the retrospective 

reasonable cost-based system that was 

used by Medicare for the payment of HH 

services under Part A and Part B. For a 

complete and full description of the HH 

PPS as required by the BBA, see the July 

2000 HH PPS final rule (65 FR 41128 

through 41214). 

Section 5201(c) of the Deficit 

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

109–171, enacted February 8, 2006) 

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

the Act, requiring HHAs to submit data 

for purposes of measuring health care 

quality, and links the quality data 

submission to the annual applicable 

percentage increase. This data 

submission requirement is applicable 

for CY 2007 and each subsequent year. 

If an HHA does not submit quality data, 

the HH market basket percentage 

increase is reduced 2 percentage points. 

In the November 9, 2006 Federal 

Register (71 FR 65884, 65935), we 

published a final rule to implement the 

pay-for-reporting requirement of the 

DRA, which was codified at 

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

the statute. The pay-for-reporting 

requirement was implemented on 

January 1, 2007. 

The Affordable Care Act made 

additional changes to the HH PPS. One 

of the changes in section 3131 of the 

Affordable Care Act is the amendment 

to section 421(a) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173, enacted on December 8, 

2003) as amended by section 5201(b) of 

the DRA. The amended section 421(a) of 

the MMA now requires, for HH services 

furnished in a rural area (as defined in 

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

respect to episodes and visits ending on 

or after April 1, 2010, and before 

January 1, 2016, that the Secretary 

increase, by 3 percent, the payment 

amount otherwise made under section 

1895 of the Act. 

B. System for Payment of Home Health 

Services 

Generally, Medicare makes payment 

under the HH PPS on the basis of a 

national standardized 60-day episode 

payment rate that is adjusted for the 

applicable case-mix and wage index. 

The national standardized 60-day 

episode rate includes the six HH 

disciplines (skilled nursing, HH aide, 

physical therapy, speech-language 

pathology, occupational therapy, and 

medical social services). Payment for 

NRS is no longer part of the national 

standardized 60-day episode rate and is 

computed by multiplying the relative 

weight for a particular NRS severity 

level by the NRS conversion factor (See 

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

medical equipment covered under the 

HH benefit is made outside the HH PPS 

payment system. To adjust for case-mix, 

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

patients to a home health resource 

group (HHRG). The clinical severity 

level, functional severity level, and 

service utilization are computed from 

responses to selected data elements in 

the OASIS assessment instrument and 

are used to place the patient in a 

particular HHRG. Each HHRG has an 

associated case-mix weight which is 

used in calculating the payment for an 

episode. 

For episodes with four or fewer visits, 

Medicare pays national per-visit rates 

based on the discipline(s) providing the 

services. An episode consisting of four 

or fewer visits within a 60-day period 

receives what is referred to as a low 

utilization payment adjustment (LUPA). 

Medicare also adjusts the national 

standardized 60-day episode payment 

rate for certain intervening events that 

are subject to a partial episode payment 

adjustment (PEP adjustment). For 

certain cases that exceed a specific cost 

threshold, an outlier adjustment may 

also be available. 

C. Updates to the HH PPS 

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

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. The August 29, 2007 

final rule with comment period set forth 

an update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HHAs for CY 2008. 

The CY 2008 rule included an analysis 

performed on CY 2005 HH claims data, 

which indicated a 12.78 percent 

increase in the observed case-mix since 

2000. Case-mix represents the variations 

in conditions of the patient population 

served by the HHAs. Subsequently, a 

more detailed analysis was performed 

on the 2005 case-mix data to evaluate if 

any portion of the 12.78 percent 

increase was associated with a change 

in the actual clinical condition of HH 

patients. We examined data on 

demographics, family severity, and nonHH Part A Medicare expenditures to 

predict the average case-mix weight for 

2005. We identified 8.03 percent of the 

total case-mix change as real, and 

therefore, decreased the 12.78 percent of 

total case-mix change by 8.03 percent to 

get a final nominal case-mix increase 

measure of 11.75 percent (0.1278 * 

(1¥0.0803) = 0.1175). 

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

underlying change in patient health 

status, we implemented a reduction 

over 4 years in the national 

standardized 60-day episode payment 

rates. That reduction was to be 2.75 

percent per year for 3 years beginning in 

CY 2008 and 2.71 percent for the fourth 

year in CY 2011. In the CY 2011 HH PPS 

final rule (76 FR 68532) we updated our 

analyses of case-mix change and 

finalized a reduction of 3.79 percent, 

instead of 2.71 percent, for CY 2011 and 

deferred finalizing a payment reduction 

for CY 2012 until further study of the 

case-mix change data and methodology 

was completed. 

For CY 2012, we published the 

November 4, 2011 final rule (76 FR 

68526) (hereinafter referred to as the CY 

2012 HH PPS final rule) that set forth 

the update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HH services. In 


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addition, as discussed in the CY 2012 

final rule (76 FR 68528), our analysis 

indicated that there was a 22.59 percent 

increase in overall case-mix from 2000 

to 2009 and that only 15.76 percent of 

that overall observed case-mix 

percentage increase was due to real 

case-mix change. As a result of our 

analysis, we identified a 19.03 percent 

nominal increase in case-mix. To fully 

account for the 19.03 percent nominal 

case-mix growth which was identified 

from 2000 to 2009, we finalized a 3.79 

percent payment reduction in CY 2012 

and 1.32 percent payment reduction for 

CY 2013. 

Following up on our commitment to 

further study case-mix change over time 

and the methodology used to determine 

real versus nominal case-mix change, 

we procured an independent review of 

our methodology by a team at Harvard 

University, lead by Dr. David 

Grabowski. That review led to a slight 

enhancement of the case-mix model, but 

otherwise confirmed the model’s 

accuracy (please see the report located 

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

Medicare-Fee-for-Service-Payment/

HomeHealthPPS/Downloads/HHPPS_

HHAcasemixgrowthFinalReport.pdf). 

III. Summary of Proposed Provisions 

and Analysis of and Responses to 

Public Comments 

A. Case-Mix Measurement 

As described in the CY 2013 HH PPS 

proposed rule issued in the July 13, 

2012 Federal Register (77 FR 41548) 

and in section II.B of this rule, we have 

implemented payment reductions to the 

national standardized 60-day episode 

payment rates over the past 5 years to 

account for nominal case-mix growth, 

that is, case-mix growth unrelated to 

changes in patient acuity. 

When including the latest data 

available, data from 2000 to 2010, we 

determined that there was a 20.08 

percent nominal case-mix change 

during that time period. To fully 

account for the remainder of the 20.08 

percent increase in nominal case-mix 

beyond that which has been accounted 

for in previous payment reductions, we 

estimated that the percentage reduction 

to the national standardized 60-day 

episode rates for nominal case-mix 

change would be 2.18 percent. We 

considered proposing a 2.18 percent 

reduction to account for the remaining 

increase in measured nominal case-mix, 

and solicited comments on that 

proposal. However for CY 2013, we 

proposed to move forward with the 1.32 

percent payment reduction to the 

national standardized 60-day episode 

rates as promulgated in the CY 2012 HH 

PPS final rule. We note that analysis, to 

date, would seem to indicate a high 

likelihood of continued growth in 

nominal case-mix going forward. As 

such, we will continue to monitor real 

and nominal case-mix change and make 

updates as appropriate. We will 

consider any and all analyses as it 

continues to address the issue of the 

increase in nominal case-mix in future 

rulemaking. 

The following is a summary of the 

comments we received regarding the 

case-mix measurement proposal. 

Comment: One commenter stated that 

the payment reductions for nominal 

case-mix growth are based on the 

unsubstantiated assertion that HHAs 

have intentionally ‘‘gamed the system’’ 

by coding their patients at a higher 

clinical severity level in order to receive 

higher payments. 

Response: As we have stated in 

previous regulations, we believe 

nominal coding change results mostly 

from changed coding practices, 

including improved understanding of 

the ICD–9 coding system, more 

comprehensive coding, changes in the 

interpretation of various items on the 

OASIS and in formal OASIS definitions, 

and other evolving measurement issues. 

Our view of the causes of nominal 

coding change does not emphasize the 

idea that HHAs or clinicians in general 

‘‘gamed the system.’’ However, since 

our goal is to pay increased costs 

associated with real changes in patient 

severity, and nominal coding change 

does not demonstrate that underlying 

changes in patient severity occurred, we 

believe it is necessary to exclude 

nominal case-mix effects that are 

unrelated to changes in patient severity. 

Comment: Several commenters stated 

that CMS should not implement acrossthe-board reductions in payments, but 

rather apply the reductions only to 

HHAs that are abusing the system, or 

upcoding. Commenters stated that the 

payment reductions penalize agencies 

where case-mix increases have been less 

than average. A commenter stated that 

those agencies with a low average casemix should be protected from further 

cuts since the cuts are based on a high 

case-mix weight. Other commenters 

stated that across the board cuts do not 

directly address problems with 

upcoding. One commenter stated that 

instead of implementing an across the 

board cut, CMS should redirect its focus 

to approaches that target specific 

practices that have caused the case-mix 

increase and that these methods should 

be implemented in conjunction with 

rebasing. 

Response: For a variety of reasons, as 

we have noted in previous regulations, 

we have not proposed targeted 

reductions for nominal case-mix change. 

Many agencies have small patient 

populations, which would make it 

practically impossible to reliably 

measure nominal case-mix change at the 

agency level. Further, we believe 

changes and improvements in coding 

practices have been widespread, making 

it difficult to clearly categorize agencies 

into high and low coding-change 

groups. As discussed in the CY 2012 

final rule, when performing an 

independent review of our case-mix 

measurement methodology, Dr. David 

Grabowski and his team at Harvard 

University agreed with our reasons for 

not proposing targeted reductions, 

stating their concerns about the small 

sample size of many agencies and their 

findings of significant nominal case-mix 

increases across different classes of 

agencies (please see the report located at 

http://www.cms.gov/Medicare/ 

Medicare-Fee-for-Service-Payment/ 

HomeHealthPPS/Downloads/HHPPS_

HHAcasemixgrowthFinalReport.pdf). 

We note that although we have stated 

in past regulations that a targeted 

system would be administratively 

burdensome, the reasons we have just 

presented go beyond administrative 

complexity. Certain comments seem to 

assume that we can use case-mix levels 

to precisely identify those agencies with 

inappropriate coding practices. We do 

not agree that agency-specific case-mix 

levels can precisely differentiate 

agencies with inappropriate coding 

practices from other agencies that are 

coding appropriately. System wide, 

case-mix levels have risen over time 

while data on patient characteristics 

indicate little change in patient severity 

over time. That is, the main problem is 

not the level of case-mix reached over 

a period of time, but the amount of 

change in the billed case-mix weights 

not attributable to underlying changes 

in actual patient severity. We continue 

to explore potential changes to the HH 

PPS which could deter future nominal 

case-mix growth, such as the 

recalibration implemented in the CY 

2012 final rule, and possible changes in 

conjunction with rebasing. However, we 

believe we still need to implement 

payment reductions to account for 

nominal case-mix change from the 

inception of the HH PPS through 2009. 

Comment: A commenter stated that 

across the board cuts appear to be based 

on high profit margins of agencies that 

are not committed to serving all 

patients. 

Response: We note that the payment 

reductions are based on our assessment 

of real and nominal case-mix growth. 

High profit margins do not play a role 


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67072 Federal Register / Vol. 77, No. 217 / Thursday, November 8, 2012 / Rules and Regulations 

in our calculations of the payment 

reductions. 

Comment: Commenters recommended 

that CMS target specific HHAs by 

reducing case-mix adjustments for 

HHAs with Medicare margins that are 

significantly above average for similarly 

situated HHAs. A commenter cited 

MedPAC’s report of the variation in 

margins for home health providers and 

stated that the vast disparity in 

Medicare margins among HHAs makes 

across the board payment cuts not only 

unwarranted and unfair, but also 

potentially devastating for those whose 

costs exceed Medicare reimbursement. 

Response: Case-mix adjustments are 

based on changes in real and nominal 

case-mix over time. Our analyses of 

coding change among many 

classifications of agencies, as described 

in the CY 2012 proposed and final rules, 

found relatively little difference across 

provider types in the amount of coding 

change. An examination of coding 

change by profitability may have similar 

results, as profitability may reflect 

efficiency rather than upcoding. We 

further note that a classification by 

profitability would be complicated by 

the fact that profitability can vary from 

year to year. 

Comment: A commenter stated that 

applying the 1.32 percent payment 

reduction would be premature and that 

CMS should wait to apply the reduction 

until there are more data to review for 

2011 and in particular 2012, where 

there has been a significant shift in the 

case-mix away from therapy episodes. 

The commenter stated that the 2012 

recalibration will likely change agency 

behavior and, in turn, have an effect on 

the average case-mix weight. The 

commenter urged CMS to wait to make 

further payment reductions until it can 

analyze complete data sets from 2011 

and 2012. 

Response: As we have stated in 

previous rulemaking since the start of 

the HH PPS, we continue to use data 

samples that represent a 2-year lag in 

service dates relative to the year in 

which we conduct the analysis. We note 

that while we analyzed 2010 data, 

which showed that we would need to 

implement a 2.18 percent reduction to 

account for nominal case-mix growth 

through 2010, we only proposed to 

implement a 1.32 percent reduction 

which would account for nominal casemix growth from 2000 to 2009. We agree 

with the commenter that the 

recalibration in CY 2012 may have an 

effect on the average case-mix weight 

and we note that this has been taken 

into account when considering the 1.32 

percent reduction versus than the 2.18 

percent reduction. We would like to 

point out that the 1.32 percent payment 

reduction was finalized in the CY 2012 

rule and we believe that with the steady 

increases in nominal case-mix growth 

over the years, there is a need to 

implement a payment reduction to 

account for this growth. We plan to 

continue to analyze data as it becomes 

available and propose payment 

adjustments accordingly. 

Comment: A commenter stated that 

CMS should use the most current 

metrics in analyzing case-mix growth 

and that they were willing to help with 

this effort. 

Response: Currently, we use claims 

data matched to OASIS assessments and 

Part A information, as well as HCC data, 

in the analysis of real and nominal casemix growth. The commenter did not 

specify what they consider to be the 

most current metrics. However, we will 

continue to solicit concrete suggestions 

for other metrics that can be 

incorporated in our analysis. 

Comment: A commenter stated that 

CMS proposed a 1.32 percent decrease 

in payments to account for nominal 

case-mix growth from 2000 to 2010. 

Response: We would like to clarify 

that the 1.32 percent decrease in 

payments was finalized in the CY 2012 

final rule in order to account for 

nominal case-mix growth from 2000 to 

2009. Our updated analysis shows that 

in order to account for nominal casemix growth from 2000 to 2010, we 

would need to implement a 2.18 percent 

reduction to payments for CY 2013. 

Therefore, for this rule, we are finalizing 

the 1.32 percent case-mix adjustment. 

Comment: A commenter stated that 

the proposed national standardized 60- 

day episode payment rate has only 

increased by a total of 1 percent in 12 

years. 

Response: While the national 

standardized 60-day episode payment 

rate has not increased substantially in 

recent years, overall Medicare HH 

expenditures increased from $10.1 

billion in 2003 to $18.6 billion in 2011, 

an increase of 84 percent, and the 

number of HH users increased 30 

percent during the same time period. 

However, payment for an episode does 

not solely rely on the national 

standardized 60-day episode base 

payment rate. One must take into 

account the average case-mix weight 

when looking at HH PPS payments. The 

average case-mix weight has continually 

increased over the years while our 

analysis shows relatively lower real 

case-mix growth. The average case-mix 

weight in 2000 was 1.0959 while the 

average case-mix weight in 2009 was 

1.3435, a total case-mix change from 

2000 to 2009 of 22.59 percent 

((1.3435¥1.0959)/1.0959). When taking 

into account the 15.76 percent of total 

case-mix change estimated as real from 

2000 to 2009, the nominal case-mix 

change measure is 19.03 percent (0.2259 

* (1¥0.1576) = 0.1903) from 2000 to 

2009. Therefore, we believe a payment 

reduction is necessary to align payments 

with the real case-mix growth we have 

observed. 

Comment: A commenter stated that a 

further payment reduction is 

unwarranted especially with rebasing 

next year. 

Response: We are finalizing a 1.32 

percent payment reduction to the CY 

2013 national standardized 60-day 

episode base payment rate intended to 

account for increases in billed case-mix 

weights, resulting in overpayments, that 

have occurred between 2000 and 2009, 

above and beyond the real change in 

case-mix. Since our analysis indicates 

that margins will remain adequate, and 

our analysis for purposes of rebasing is 

still in process, we see no reason to 

defer the nominal case-mix adjustment 

in this rule. 

Comment: A commenter 

recommended that CMS find alternative 

ways to account for nominal case-mix 

growth that do not impose payment 

reductions to the HH PPS. 

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

the Act gives CMS the authority to 

implement payment reductions for 

nominal case-mix growth by applying 

reductions to the base payment. We 

continue to explore ways to prevent 

future nominal case-mix growth and we 

welcome any suggestions. 

Comment: Some commenters stated 

that CMS should increase its program 

integrity efforts to combat fraud, waste, 

and abuse. Other commenters stated 

that CMS should eliminate the proposed 

payment reduction and instead 

‘‘conduct targeted claims review and 

deny payment for claims where the 

case-mix weight is not supported by the 

plan of care.’’ In addition, some 

commenters recommended that CMS 

use existing medical review to identify 

and target specific agencies with 

abusive coding practices rather than 

imposing an across the board payment 

reduction, and one commenter stated 

that review by Medicare Administrative 

Contractors and edits can be used to 

determine if agencies are upcoding; the 

commenter believes that such a method 

would encourage accurate coding. 

Response: We have taken various 

measures to reduce payment 

vulnerabilities and the federal 

government has launched actions to 

directly identify fraudulent and abusive 

activities. Commenters should be aware 

of tip lines available that can help 


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support investigative efforts of the 

federal government. The Office of the 

Inspector General, HHS Web site at 

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

index.asp, provides information about 

how to report fraud. Another Web site, 

http://www.stopmedicarefraud.gov/ 

index.html, is oriented to Medicare 

patients and their families and provides 

information about recognizing fraud. 

In addition, while we appreciate the 

commenters’ suggestion about the 

claims review, we note that because our 

resources are not sufficient to conduct 

claims review on a scale that would be 

required to counteract the broad-based 

uptrend in case-mix weights, we cannot 

perform the review as suggested. 

Furthermore, we note that our 

statistical methods using available 

administrative data are feasible and 

sufficiently reliable to utilize for the 

purpose of case-mix reductions. 

Comment: A commenter requested 

that CMS adopt the approach outlined 

in the Home Health Care Access 

Protection Act of 2012 (H.R. 6059, 112th 

Cong.), which is sponsored by Rep. 

James McGovern and Rep. Walter Jones, 

and involves working with the home 

health industry to develop criteria and 

evaluating a medical records sample to 

determine reductions, rather than 

relying on hypothetical extrapolations. 

Response: We already have 

commissioned a review of the case-mix 

change methodology, as we described in 

the CY 2012 proposed and final rule. A 

research team of highly qualified 

personnel evaluated our case-mix 

change methodology and found that, 

overall, our models to assess real and 

nominal case-mix growth are robust. We 

have not commissioned work analyzing 

case-mix change based on information 

from a medical records sample. We note 

that a medical records sample could be 

used to determine payment reductions; 

however, there are many difficulties and 

limitations to this analysis. First, to 

produce reliable results, we would need 

to collect a large sample, which would 

require significant financial resources 

that may not be available. We would 

need a sizable sample of records from 

both the IPS period and from a followup year (for example, 2009). In addition, 

based on our past experience in 

retrieving old records, it is difficult to 

find enough records to constitute a valid 

broad-based sample. Further, it is 

possible that using information from a 

medical records sample might not 

return the findings that the proponents 

suggest, because nominal case-mix 

increases partly result from reporting 

practices that have changed throughout 

time from a state of underreporting to a 

state of more complete reporting. 

Therefore, one would expect that the 

source records would likely reflect 

underreporting in the early years, just as 

the OASIS reflected underreporting in 

the early years. 

Comment: A commenter stated that 

the CMS case-mix change methodology 

does not recognize the industry’s 

increasing ability to care for more 

serious medical conditions in the home 

(caused by technology improvements, 

etc.) and ignores changes in patient 

severity. We received a number of 

comments stating that home health 

patients are now more complex with 

more co-morbidities and chronic 

conditions than in previous years and 

that patients that would have previously 

been referred to health care facilities, 

such as skilled nursing facilities, are 

now being cared for at home. Moreover, 

the commenters stated that other 

healthcare settings have developed 

stricter admission requirements, thereby 

increasing the number of home health 

patients with high severity levels. A 

commenter stated that Transitional Care 

Units (TCUs) and Skilled Nursing 

Facilities (SNFs) are refusing to accept 

complex patients from the hospital and 

implied that those patients were being 

diverted to home health care. 

Response: To assess whether patients 

are more complex with more comorbidities and chronic conditions than 

previous years, we examined the change 

in HCC variables over time, examining 

the average values for 2005 and 2010, 

the most recent complete data available. 

We note that our analysis did not find 

evidence that home health patients have 

gotten sicker over time as measured by 

the number of HCC indicators present. 

The mean number of HCC conditions 

present was the same in 2005 as in 

2010. In addition, our analyses showed 

that while the prevalence of some HCCs 

has increased since 2005, the prevalence 

of others has decreased. Based on the 

relationship of individual HCC variables 

to case-mix level, the changes in the 

HCC indicators that have occurred since 

2005 actually lead to a prediction of 

slightly lower expected case-mix. 

Furthermore, data we presented in the 

CY 2011 HH PPS final rule (75 FR 

70379) indicate that hospital lengths of 

stay have been declining slightly and 

lengths of stay in residential post-acute 

settings before home health admission 

have increased between 2001 and 2008. 

We note that the proportion of initial 

non-LUPA home health episodes 

preceded by acute care within the 

previous 60 days has declined between 

2001 and 2008, from 70.0 percent to 

62.7 percent. This indicates more 

patients are being admitted to HHAs 

from non-institutional settings, such as 

from the community. Also, we note that 

acute care stays, which normally 

precede stays in institutional post-acute 

care settings, are decreasing in the stay 

histories of home health patients. 

Therefore, we question whether there is 

any evidence showing an increase in 

home health patient severity as a result 

of more patients coming to home health 

as a result of diversion from other postacute care settings. 

Comment: Commenters stated that 

CMS should suspend or eliminate casemix payment reductions because the 

data used to determine the reductions 

do not recognize real increases in 

severity due to earlier and sicker 

hospital discharges. 

Response: Although we recognize that 

average lengths of stay in acute care 

settings are in decline, our analysis 

shows that agencies are, in fact, caring 

for proportionately fewer, not more, 

post-acute patients. Since 2001, the 

average length of stay (LOS) in acute 

care preceding home health has 

declined by about one day, from 7 days 

to 6 days. Between 2008 and 2009, the 

average length of stay in acute care 

leading directly to home health 

admission declined from 6.07 days to 

5.85 days. However, agencies are caring 

for fewer highly acute patients in their 

caseloads. The proportion of non-LUPA 

episodes in which the patient went from 

acute care directly to home health 

within 14 days of acute hospital 

discharge declined substantially 

between 2001 and 2008, from 32 percent 

to 23 percent. Also, the median acute 

hospital LOS for these non-LUPA 

episodes with a 14-day look back period 

remained unchanged at 5 days between 

2002 and 2008 (see 75 FR 70379). In 

2009, the median LOS declined to an 

estimated four days (see Table 2). The 

distribution of lengths of stay has been 

fairly stable, with declines since 2006 

limited to the upper half of lengths of 

stay. 

We believe the declining proportion 

of home health cases with a recent acute 

discharge is due in part to more patients 

incurring re-certifications after 

admission to home health care, and also 

due to more patients entering care from 

the community. The shortening lengths 

of stay at the right tail (high percentiles) 

of the distribution may reflect changing 

utilization of long-term-care hospitals 

during recent years. The conclusion we 

draw from these data is that while 

patients on average have shorter 

hospital stays, agencies are also facing a 

smaller proportion of home health 

episodes in which the patient has been 

acutely ill in the very recent past. Also, 

the detailed data on the distribution of 

stay lengths suggest that for the most 


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part lengths of stay for such patients 

remained fairly stable through 2009. 

Furthermore, we think that acuity of 

patients has been increasingly mitigated 

by lengthening post-acute stays for the 

substantial number of home health 

patients who use residential post-acute 

care prior to an episode. Our data show 

that patients who enter residential postacute care before home health 

admission have experienced increasing 

lengths of stay in post-acute care since 

2001. Using a 10 percent random 

beneficiary sample, we computed the 

total days of stay (including both acute 

and post-acute care days) for home 

health episodes with common patterns 

of pre-admission utilization during the 

60 days preceding the beginning of the 

episode. We included patients whose 

last stay was an acute care stay, or 

whose next-to-last stay was an acute 

care stay with a follow-on residential 

post-acute care stay, or whose third 

from last stay was an acute care stay 

followed by two post-acute care stays. 

These common patterns accounted for 

55 percent of the initial episodes in 

2001 and 42 percent in 2008. We found 

that total days of stay during the 60 days 

leading up to the episode averaged 12.6 

days in 2001, and rose to 12.8 days in 

2008. This small change in total days of 

stay during a period when acute care 

LOS was declining was due to 

increasing lengths of stay in residential 

post-acute care for these patients. For 

example, within the 30 days before 

admission, an average LOS in the postacute care setting for episodes preceded 

by an acute care stay that was the nextto-last stay, and where the post-acute 

care stay was the very last stay before 

the claim from-date, increased from 12.7 

to 14.3 days. Our interpretation of these 

statistics is that patient acuity has been 

increasingly mitigated by longer postacute stays for the substantial number of 

home health patients that use 

residential post-acute care prior to the 

start of a home health episode. Patient 

acuity was also mitigated by growing 

numbers of home health recertifications. 

Comment: A commenter stated that 

the model used to assess real case-mix 

growth ignores the fact that more 

individuals are becoming eligible for 

Medicare services and there is an 

increasing number of Medicare 

beneficiaries who are over 85 years of 

age and need additional services. 

Response: We note that increasing 

eligibility does not in itself imply more 

severity. Rather, our statistical analysis 

shows that there are more patients with 

about the same severity of illness level. 

With regards to the comment about the 

proportion of older patients, we note 

that we take into account the proportion 

of home health patients over the age of 

85 in our model to estimate real casemix growth. The results of the model 

show that while the proportion of 

patients over age 85 has increased 

somewhat, this change is only 

associated with small changes in real 

case-mix. 

Comment: A commenter stated that 

relevant data shows that home health 

care patients have increased functional 

limitations and more complex clinical 

conditions than in past years. 

Response: As stated in the CY 2012 

proposed rule, a detailed analysis of 

Medicare Expenditure Panel Survey 

(MEPS) data (which is independent of 

our real case-mix model) was performed 

to examine the severity of the Medicare 

home health population. The trends in 

health status from 2000 to 2008 were 

analyzed. 

The analysis showed a slight increase 

in the overall health status of the 

Medicare home health population, and 

in particular, the percent of home health 

Medicare beneficiaries experiencing 

‘‘extreme’’ or ‘‘quite a bit’’ of worklimiting pain decreased substantially, 

from 56.6 percent in 2000 to 45.4 

percent in 2008 (p=0.039). While we 

recognize that there are some limitations 

to this analysis, we concluded that the 

results of this analysis provide no 

evidence of an increase in patient 

severity from 2000 to 2008. 

In addition, we would like to note 

that during the CY 2012 rulemaking 

cycle, we incorporated HCC data, which 

is used by CMS to risk-adjust payments 

to managed care organizations in the 

Medicare program, in our model to 

assess real case-mix growth. Our 

findings of real and nominal case-mix 

growth, even when incorporating HCC 

data, were consistent with past results. 

Most of the case-mix change was 

identified as nominal case-mix change. 

We will continue to solicit 

suggestions for other data that can be 


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incorporated into our analysis of real 

and nominal case-mix growth. 

Comment: A commenter stated the 

models used to determine real case-mix 

change do not consider increased 

therapy needs in the home health 

population. 

Response: The models were intended 

to analyze real changes in case-mix over 

time and do not distinguish whether 

these changes are due to increases in 

therapy use or other factors. We do not 

believe that it would be appropriate to 

include utilization-related variables, 

such as the number of therapy visits, as 

predictors in the model, as such 

variables are provider-determined. In 

addition, the goal of these analyses was 

not to develop refinements to the 

payment system but rather to examine 

changes in measures of patient acuity 

that are not affected by any changes in 

provider coding practices. For example, 

the models do incorporate information 

about change in the types of patients 

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

has access to the claims histories and 

other administrative data for patients in 

our samples, and we welcome 

suggestions about how to better use 

these resources in finding alternative 

variables more indicative of the need for 

therapy, particularly if the suggestions 

involve the use of data and variables 

that are not HHA-determined. 

Comment: Some commenters 

suggested that CMS recognize changes 

in patient severity, improved patient 

assessment, and coding and 

reimbursement changes in its case-mix 

methodology and work with NAHC to 

uncover the reasons for case-mix weight 

changes and to develop a valid 

methodology for payment reform. A 

commenter urged CMS to continue to 

evaluate and refine the case-mix 

methodology so that it targets drivers of 

case-mix change and more effectively 

captures real case-mix change. Another 

commenter stated that CMS should 

consult with stakeholders to agree upon 

factors that should be considered when 

calculating real and nominal case-mix 

growth. 

Response: Through the public 

comment process, we have obtained 

industry views as to the reasons for 

coding changes. As we have pointed out 

in the past, reasons offered, such as 

improved coding, are not a sufficient 

basis for raising payment rates, 

particularly if data does not indicate a 

significant increase in the severity of 

home health patients. To the extent 

case-mix change is due to better 

methods of assessing patients in the 

home health setting, this does not justify 

making reimbursements as though the 

patients really were different in their 

case-mix levels of severity. Over the last 

several years, we have continued to 

evaluate our data and methods, and in 

the CY 2012 proposed and final rule, we 

described that we procured an 

independent review of our methodology 

to assess real and nominal case-mix 

growth performed by a team at Harvard 

University led by Dr. David Grabowski. 

The Harvard team was asked to review 

the appropriateness and strength of 

evidence from the case-mix change 

methodology we used. After their 

examination, they concluded that the 

methodology was robust and valid. We 

plan to continue to evaluate the casemix methodology and potentially refine 

the methodology as needed. We will 

continue to solicit suggestions on 

possible ways to improve our models. 

Comment: Commenters stated that 

providers have had to absorb several 

rounds of payment reductions due to 

upcoding, which have contributed to 

lower growth in home care spending. 

They stated that the growth rate in 

Medicare home care spending has 

dramatically declined to just 1.0 percent 

from 2010 to 2011. 

Response: We note that the purpose of 

the payment reduction is to adjust 

payments to better reflect real changes 

in patient severity. In addition, slower 

Medicare home care spending growth 

may be due to a number of factors. We 

note that we have conducted analyses 

looking at the number of paid claims, 

both nationally and by state, for 2009 

through 2011. Our analyses show that 

the volume of paid claims is consistent 

with previous years. Although paid 

claims generally go up very slightly 

every year and they did not in 2010, this 

could be attributed to many factors, 

including CMS’s fraud and abuse 

efforts, or simply a more general trend 

in Medicare claims volume. 

Comment: One commenter estimated 

that over 40 percent of existing HHAs 

currently operate with negative 

financial margins on Medicare revenues 

and that when all patient costs and 

revenues are considered, overall 

margins for all freestanding HHAs are 

estimated to be 3 percent in 2012. 

Another commenter stated that in the 

states where they operate, more than 

half or nearly half of all home health 

providers are reimbursed less than cost 

by Medicare. Specifically, the 

commenter stated that 59 percent of 

HHAs in Missouri, 45.9 percent of 

HHAs in Illinois, 59.0 percent of HHAs 

in Oklahoma, and 67.1 percent of HHAs 

in Wisconsin are operating with margins 

less than zero. The commenter urged 

CMS to eliminate the proposed 1.32 

percent reduction so that payments 

more closely reflect the ‘‘economic 

realities’’ of HHAs. 

Response: Regarding the commenters’ 

concerns about the effects of the 

proposed reductions on providers’ 

viability and the resultant access risks, 

we note that in their March 2012 Report 

to the Congress, MedPAC projected 

Medicare margins for home health 

agencies in 2012 to average 13.7 

percent. While it is unclear whether the 

projection of average Medicare margins 

of 13.7 percent in 2012 factors in 

potential changes in the therapy level 

distribution due to the CY 2012 

recalibration, and therefore actual 

margins could be slightly different, we 

note that our analysis of payments and 

costs also projects average margins to be 

adequate. Furthermore, when examining 

the impact of the 1.32 percent payment 

reduction, providers need to take into 

account all of the other policies in the 

CY 2013 rule, such as changes to the 

fixed dollar loss (FDL) ratio as well as 

the wage index and payment update. 

When examining all of the CY 2013 

policies finalized in this final rule, our 

data indicates that the impact is 

minimal, with an average effect on 

payments of ¥0.01 percent. In addition, 

when taking into account all of the CY 

2013 policies, Illinois, Wisconsin, and 

Missouri are expected to have a net 

increase in payments in CY 2013 (see 

section IV. Regulatory Impact Analysis). 

Furthermore, based on the results of our 

analysis on estimated margins by state, 

there is no indication that the four states 

mentioned by the commenter will be 

more adversely affected by the CY 2013 

policies compared to other states. 

Comment: A commenter stated that 

while the number of HHAs may 

continue to grow, the growth is limited 

to certain geographic areas and that the 

across the board payment reductions are 

‘‘taking their toll’’ on HHAs with below 

average margins. Another commenter 

stated ‘‘Any efficiency available to 

control the cost of an episode of care has 

been implemented, and rate cuts are 

now having a direct, linear impact of 

providers.’’ 

Response: We note that our analysis 

of margins and MedPAC’s reported 

margins for 2010 indicate that payments 

should be adequate. In addition, we 

reiterate that the purpose of the 

payment reduction is to align payment 

with real, observed changes in patient 

severity. Moreover, while we considered 

a 2.18 percent reduction to the national 

standardized 60-day episode rates based 

on our analysis using 2010 data, we are 

finalizing a 1.32 percent payment 

reduction for this year. 

Comment: A commenter stated that 

the case-mix model used to determine 


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real case-mix growth does not account 

for real case-mix changes in patient 

severity experienced by hospital-based 

home health agencies and that the 

proposed payment reduction would 

adversely impact hospital-based home 

health agencies. Commenters stated that 

the data used to calculate the case-mix 

reduction is skewed to free-standing 

facilities and that free-standing HHAs 

are selective while hospital-based HHAs 

take on all types of patients discharged 

from the hospital. The commenters did 

not think the reduction was appropriate 

for hospital-based home health care. 

Another commenter stated that hospitalbased HHAs average Medicare margin 

was -6.29 percent in 2010 and that it can 

be assumed that overall margins of this 

HHA sector is well below zero percent 

given lower-than-cost Medicaid and 

Medicare Advantage payment rates. 

Response: In the CY 2012 proposed 

and final rule, we described the results 

of the independent review of our 

models to assess case-mix growth 

performed by a team at Harvard 

University led by Dr. David Grabowski. 

We described that the review included 

an examination of the predictive 

regression models and data used in CY 

2011 rulemaking, and further analysis 

consisting of extensions of the model to 

allow a closer look at nominal case-mix 

growth by categorizing the growth 

according to provider types and 

subgroups of patients. Two of the 

extensions that we examined focused on 

free standing and facility-based HHAs. 

The extensions showed a large and not 

dissimilar rate of nominal case-mix 

growth from 2000 to 2008 for the two 

groups, 17.86 percent nominal case-mix 

increase for free-standing HHAs and 

14.17 percent nominal case-mix 

increase for facility-based increase. 

Given the results of our analysis, which 

showed significant nominal case-mix 

growth for freestanding versus hospital 

based HHAs, we believe that the model 

is not skewed to a particular provider 

type and that an across the board 

reduction is appropriate given the 

widespread nominal case-mix growth. 

We note that our analysis on Medicare 

Cost Report data for hospital-based 

HHAs does indicate that Medicare 

margins are lower than those of 

freestanding HHAs. 

Comment: Commenters criticized the 

model’s reliance on hospital data, 

stating that over half of all Medicare 

home health patients are admitted to 

care from a setting other than a hospital 

and many of the patients receive home 

health care far extended past an initial 

episode. Commenters implied that the 

All Patient Refined Diagnosis Related 

Groups (APR–DRG) variables are less 

relevant for multiple episode patients. 

Response: We disagree that the use of 

the hospital information in the case-mix 

change analysis is so limited. Also, with 

the addition of HCC data, we have 

enhanced the robustness of the variable 

set used for the analysis to include 

physician diagnoses and diagnoses of 

other clinicians, as well as Medicaid 

eligibility. Regardless of whether the 

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

an institutional post-acute stay), 

information from a hospital stay 

preceding home health is typically 

relevant to the type of patient being seen 

by the HHA. 

Comment: A commenter stated that 

case-mix reductions do not take into 

account the cost of new regulatory 

burdens, such as documentation for 

face-to-face encounters and HHCAHPS. 

Response: We note that the 1.32 

percent payment reduction is to account 

for nominal case-mix increases 

(increases in case-mix that are not 

related to real changes in patient 

acuity). Case-mix reductions are not 

intended take into account the costs of 

regulatory burdens. The models used to 

assess real case-mix growth take into 

account factors that would affect patient 

severity. 

Comment: A commenter stated that 

nominal case-mix growth cannot be 

assumed using CMS’s methodology 

because of the change from ICD–9 to 

ICD–10. 

Response: Our analysis of case-mix 

used data from 2000 to 2010 to 

determine the amount of real and 

nominal case-mix growth and did not 

take into account a change from ICD–9 

to ICD–10. The change is currently not 

relevant to our analysis of case-mix 

growth. After we transition from ICD–9 

to ICD–10, we may examine the effects 

of the change on case-mix growth as 

data become available and propose 

payment adjustments accordingly. 

Comment: One commenter said that 

the payment reductions to account for 

nominal case-mix growth are arbitrary 

and appear to reduce payments without 

data to show that they are necessary. 

Response: We disagree. The 

prediction model for real case-mix is an 

empirical model, the findings of which 

are based entirely on empirical 

evidence. The real case-mix prediction 

model and its application account for 

changes in the HH patient population by 

quantifying the relationships between 

patient demographics, clinical 

characteristics, and case-mix. The 

relationships in conjunction with 

updated measures of patient 

characteristics are used to quantify real 

case-mix change. The characteristics in 

the model include proxy measures for 

severity, including a variety of 

measures, namely, demographic 

variables, hospital expenditures, 

expenditures on other Part A services, 

Part A utilization measures, living 

situation, type of hospital stay, severity 

of illness during the stay, and risk of 

mortality during the stay. Last year, 

additional diagnosis data, based on 

physician and hospital diagnoses in the 

patient’s claims history, were added in 

the form of HCC indicators. Measurable 

changes in patient severity and patient 

need, factors mentioned by commenters, 

are an appropriate basis for changes in 

payment. Our model of real case-mix 

change has attempted to capture such 

increases. 

We recognize that models are 

potentially limited in their ability to 

pick up more subtle changes in a patient 

population such as those alluded to by 

various commenters. Yet in previous 

regulations we presented additional 

types of data suggestive of only minor 

changes in the population admitted to 

home health, and very large changes in 

case-mix over a short period. We 

included among these pieces of 

evidence information about the 

declining proportion of home health 

episodes associated with a recent acute 

stay for hip fracture, congestive heart 

failure, stroke, and hip replacement, 

which are four situations often 

associated with high severity and high 

resource intensity (72 FR 49762, 49833 

(August 2007)). We presented 

information showing that resource use 

did not increase along with case-mix 

increases (72 FR 49833). We also 

analyzed changes in OASIS item 

guidance that clarified definitions and 

could have led to progress in coding 

practice (72 FR 25356, 25359 (May 

2007)). We found some small and 

scattered changes indicative of 

worsening severity but these changes 

did not commensurate with the increase 

in case-mix weights (72 FR 25359). In 

our discussion, we cited specific 

instances where agencies’ changing 

understanding of coding could have 

contributed to the adverse changes. 

However, as previously stated, Medicare 

payments should be based on patient 

level of severity, and not on coding 

practices. 

In the CY 2011 HH PPS proposed 

rule, we identified a very large, sudden 

1-year change (+0.0533) in the average 

case-mix weight between 2007 and 

2008. This increase is partly attributable 

to the reporting of secondary diagnosis 

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

The use of secondary diagnosis codes in 

the case-mix algorithm was introduced 


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in 2008 as part of the new case-mix 

system. 

In summary, we believe the payment 

reductions to account for nominal casemix growth are not arbitrary and data 

used in our model as well as other data 

indicate only small changes in patient 

severity while we have observed large 

changes in the average case-mix weight 

over time. Therefore, in order to better 

align payment with real changes in 

patient severity, we are finalizing a 1.32 

percent payment reduction for CY 2013. 

Comment: One commenter stated that 

the actual program spending on home 

health is generally less than the 

Congressional Budget Office estimates 

between 1996 to 2009. Therefore they 

questioned CMS’s authority to 

implement payment reductions for 

nominal case-mix growth. They stated 

that in home health, Medicare 

expenditures have been equal to or 

lower than projections and estimates by 

CBO since the beginning of the HH PPS 

and therefore, there is no increase in 

aggregate expenditures that warrants 

application of the statutory authority 

under section 1895(b)(3)(B)(iv) of the 

Act. 

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

the Act gives CMS the authority to 

implement payment reductions if there 

are changes in aggregate payments that 

are a result of nominal case-mix growth. 

Our data show changes in actual 

aggregate payments due to nominal 

case-mix growth, and therefore in the 

CY 2013 HH PPS proposed rule, we 

proposed to move forward with a 1.32 

percent reduction to the HH PPS rates. 

Comment: A commenter stated that 

across the board reduction can cause or 

exacerbate access issues for high-cost 

patients. Another commenter stated that 

they are seeing access problems for 

higher-cost patients. The commenter 

suggested that CMS evaluate the 

payment model to determine whether 

changes are needed to address the 

unintended impact of the across the 

board rates on providers and evaluate 

the payment model based on its ability 

to maintain access to care for all eligible 

Medicare beneficiaries. Commenters 

urged CMS to make modifications to the 

payment system so that there are not 

financial disincentives to accepting a 

disproportionate number of high cost 

patients. 

Response: We appreciate the 

commenter’s concerns. To address 

concerns that some beneficiaries are at 

risk of not having access to Medicare 

home health services and that the 

current HH PPS may encourage 

providers to adopt selective admission 

patterns, section 3131(d) of the 

Affordable Care Act requires the 

Secretary to conduct a study on home 

health agency costs involved with 

providing access to care to low-income 

Medicare beneficiaries or beneficiaries 

in medically underserved areas, and in 

treating beneficiaries with varying levels 

of severity of illness (specifically, 

beneficiaries with ‘‘high levels of 

severity of illness’’). Pending results of 

the study, CMS may make 

recommendations for revisions to the 

HH PPS and recommendations for 

legislation and/or administrative action 

which may address any access issues 

identified in the study. In addition, we 

will continue to monitor for unintended 

consequences of the payment reductions 

and we will seek information from other 

government agencies on access. Finally, 

we will use Open Door Forums and 

other venues to solicit information from 

agencies on any actual access issues 

they witness. 

Comment: A commenter stated that 

CMS should use information from the 

home health study under section 

3131(d) of the Affordable Care Act to 

determine a fair payment rate rather 

than imposing across the board payment 

reductions. 

Response: The home health study 

under section 3131(d) of the Affordable 

Care Act allows CMS to not only look 

at access for vulnerable populations, but 

also look at other issues with the 

payment system and payment 

vulnerabilities. In this study, we plan to 

examine ways to better align payment 

with patient needs. The Report to 

Congress describing the findings of our 

study is projected to be available in 

2014. In the meantime, while examining 

ways to better improve the case-mix 

system, we believe that it is appropriate 

to adjust payment rates to reflect real, 

observed changes in patient severity. 

Comment: One commenter stated that 

they were concerned with the 1.32 

percent payment reduction since it is 

combined with the Affordable Care Act 

mandated 1 percent reduction to the 

market basket update. The commenter 

urged CMS to recognize home health as 

a critical part of the health care 

continuum and that it requires adequate 

reimbursement to succeed in a reformed 

health care delivery system. The 

commenter stated that home health 

agencies should be reimbursed 

adequately for their services and that 

home health services are less expensive 

than acute care alternatives. Another 

commenter stated that overall Medicare 

spending has increased much more than 

Medicare payments to home health 

agencies and that the payment 

reductions to home health care 

spending ‘‘represents negative health 

policy at a time when we should be 

encouraging the provision of health care 

outside of facilities.’’ The commenter 

continued to say that hospital inpatient 

and long-term acute care hospitals will 

see increases in their payments for CY 

2013. The commenter stated that CMS 

should not be cutting the most cost 

effective portions of the health care 

system to provide greater 

reimbursement to the most expensive 

ones. The commenters asked CMS to 

reconsider the 1.32 percent coding 

adjustment and other payment 

reduction changes in the 2013 HH PPS 

rule. 

Response: We thank the commenters 

for their comments. However, we note 

that the 1 percent reduction to the 

market basket update is a mandated 

payment reduction, not intended to be 

offset by other policies, such as the 1.32 

percent payment reduction. In addition, 

the Regulatory Impact section of our 

rule (see section VII.) shows that when 

combined with the market basket 

update and the wage index update, this 

rule will have a minimal impact on 

payment in comparison with previous 

years. In addition, while we updated 

our analysis to include 2010 data, which 

would have resulted in a 2.18 percent 

payment reduction, we are finalizing a 

1.32 percent reduction for this final 

rule. We would also like to remind 

commenters that the goal of the 

payment reduction is to better align 

payment with real changes in patient 

severity. That is, the payment reduction 

is to ensure appropriate payment given 

the real changes in the Medicare home 

health population we observe. We 

would also like to point out that the 

1.32 percent payment reduction is not 

related to the increase in payments for 

hospital inpatient and long term acute 

care hospitals; that is, the payment 

reduction does not free up money to pay 

for other settings. The goal of the 

payment reduction is to pay 

appropriately for the home health 

services provided to Medicare home 

health beneficiaries. 

Comment: Several commenters stated 

that they support and appreciate CMS’s 

proposal to withhold any further 

increase in the payment reduction to 

account for nominal case-mix growth. 

Commenters stated that the 1.32 percent 

payment reduction, rather than the full 

2.18 percent reduction is a welcome 

action from CMS as providers have 

experienced significantly increased 

costs with the face-to-face encounter 

and therapy assessment requirements. 

Another commenter stated that the 

restraint in the payment reduction to 

account for nominal case-mix growth is 

warranted because the 2010 data does 

not yet fully reflect changes in CMS 


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policy that were intended to reduce 

some of the nominal increases in casemix weights. Commenters stated that 

they would like CMS to limit the 2013 

adjustment for nominal case-mix growth 

to 1.32 percent as proposed in the CY 

2013 proposed rule. 

Response: We appreciate the 

commenters’ support of our proposal. 

We would like to clarify that the reason 

the 1.32 percent payment reduction, 

rather than the full 2.18 percent 

reduction, was proposed was not 

because of any potential additional costs 

associated with the face-to-face 

encounter and therapy assessment rules. 

We believe the 2.18 percent payment 

reduction would allow CMS to fully 

account for the nominal case-mix 

growth from 2000 to 2010 and we may 

consider accounting for more nominal 

case-mix growth in future rulemaking. 

However, given certain factors, such as 

the recent recalibration in CY 2012 and 

potential effect on the average case-mix, 

for this final rule, we are finalizing a 

1.32 percent reduction to account for 

nominal case-mix growth, as described 

in the CY 2012 final rule. 

Comment: One commenter stated that 

unwarranted overpayments attributable 

to changes in coding practices should be 

recovered and that payment increases 

unrelated to patient severity also occur 

in other payment systems. The 

commenter stated that the proposed 

adjustment would not account for all of 

the coding increase CMS has identified 

and that the proposed adjustment would 

result in overpayments to home health 

agencies, increasing home health 

expenditures for the federal government 

and beneficiaries. The commenter stated 

that aggregate Medicare margins in 2012 

are projected to exceed 13 percent and 

that with the full reduction of 2.18 

percent, most HHAs would be paid well 

in excess of costs. The commenter stated 

that implementing a small reduction in 

2013 will require that a larger reduction 

occur in future years and therefore, CMS 

should reduce payments by 2.18 percent 

in 2013. 

Response: We thank the commenter 

for the comments. We agree that the 

2.18 percent reduction would allow 

CMS to fully account for the nominal 

case-mix growth through 2010. 

However, due to certain factors such as 

the recalibration in CY 2012, the average 

case-mix weights may have lowered and 

therefore, for this final rule, we are 

finalizing a more conservative payment 

reduction of 1.32 percent. It is unclear 

whether the projection of average 

Medicare margins of 13 percent in 2012 

factors in potential changes in the 

therapy level distribution due to the CY 

2012 recalibration. We will continue to 

assess nominal case-mix growth and 

propose reductions in future rulemaking 

as necessary. 

Comment: One commenter stated that 

the yearly recalculation of revision of 

the payment reduction to account for 

nominal case-mix undermines the 

stability of the payment system and 

CMS’s proposals have made it hard for 

HHAs to predict the payment amounts. 

Response: We disagree there has been 

instability. Since 2008, agencies have 

been informed that payments would be 

reduced over time to offset unwarranted 

reimbursement growth due to nominal 

case-mix growth and every year since 

2008, we have applied a payment 

reduction to account for nominal casemix growth. Also, every year since CY 

2011 rulemaking, we have updated our 

analysis of real and nominal case-mix 

growth as data have become available 

and in CY 2011 and CY 2012 

rulemaking, our updated analysis 

resulted in further payment reductions 

to the national standardized 60-day 

episode rates. We note that for CY 2013, 

we are finalizing a 1.32 percent 

reduction, as described in the CY 2012 

final rule. In addition, we reiterate that 

the purpose of the payment reduction is 

to adjust payments to better reflect real 

changes in patient severity and our goal 

is to pay appropriately for the home 

health services provided to Medicare 

home health beneficiaries. 

Comment: Commenters were 

concerned with the impact of the 1.32 

percent payment reduction on quality of 

care. 

Response: Commenters did not 

provide specific information about why 

they believe payment reductions might 

impact quality of care. Our simulation 

of margins under the payment policies 

in this rule suggests that margins will 

remain adequate, and thereby not have 

an adverse effect on quality of care. We 

also believe that policymaking in the 

quality improvement area should help 

to ensure quality advances. OASIS–C 

outcome reports and HHCAHPS data are 

two important recent developments that 

we anticipate will support high-quality 

services. Over time, value-based 

purchasing policies will be developed, 

further enhancing quality-related 

incentives. We encourage agencies to 

work to their full professional potential 

to deliver a high standard of care to 

their patients. 

Comment: A commenter stated that 

payment reductions will decrease the 

agencies’ ability to educate, focus on 

quality care, implement electronic 

systems of documentation, and focus on 

savings to the Medicare program such as 

decreasing hospitalizations. They stated 

that payment reductions would mean 

fewer resources to develop quality and 

compliance programs. 

Response: A reduction in margins as 

a result of our payment changes may 

have an effect on the availability of 

resources for various types of 

investments. However, our analysis 

indicates that payments to HHAs will 

still be more than adequate under our 

payment changes and would still allow 

for investments. We do not have 

sufficient data to evaluate the effect on 

technology-specific investments from 

the unusually large margins that have 

been in existence under the HH PPS, but 

we welcome information about whether 

the numerous agencies that operated 

with high margins under the HH PPS 

made investments during those years, 

and the nature of those investments. 

Other areas, such as education, quality 

improvement, and decreasing 

hospitalizations, are the focus of 

investment in human capital that 

agencies should be currently 

undertaking in view of program 

initiatives underway or being tested 

(HHCAHPS, HH P4P demo). We 

reiterate that our analysis of payments 

indicates that payments are adequate 

enough to allow for different types of 

quality-strengthening investments, 

whose costliness would depend on the 

agency’s individual situation, including 

how efficiently the agency operates in 

general. We would also like to note that 

the pay for performance (P4P) 

demonstration did not find strong 

evidence that changes participating 

agencies made along the lines of better 

care coordination to improve quality 

and reduce hospitalizations were 

necessarily expensive (http:// 

www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-andReports/Reports/Downloads/ 

HHP4P_Demo_Eval_2008_Vol3.pdf ). 

In the CY 2012 final rule, we finalized 

a 3.79 percent payment reduction to the 

CY 2012 national standard 60-day 

episode rates and a 1.32 percent 

payment reduction to the CY 2013 

national standardized 60-day episode 

rates to account for nominal case-mix 

growth we identified from 2000 to 2009. 

In the CY 2013 proposed rule, we 

updated our analysis using data from 

2000 to 2010, estimating that the 

percentage reduction to account for 

nominal case-mix change would be 2.18 

percent. However, we proposed a 1.32 

percent payment reduction as described 

in the CY 2012 rule. For this final rule, 

we are finalizing a 1.32 percent payment 

reduction for CY 2013 to the national 

standardized 60-day episode rates. This 

reduction enables us to account for 

nominal case-mix growth which we 

have identified through CY 2009 and to 


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collect additional data on case-mix 

change, such as data on the effects of the 

CY 2012 recalibration of the HH PPS 

case-mix weights. 

B. Outlier Policy 

1. Background 

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

for the provision of an addition or 

adjustment to the national standardized 

60-day case-mix and wage-adjusted 

episode payment amounts in the case of 

episodes that incur unusually high costs 

due to patient home health (HH) care 

needs. Prior to the enactment of the 

Affordable Care Act, this section of the 

Act stipulated that projected total 

outlier payments could not exceed 5 

percent of total projected or estimated 

HH payments in a given year. In the July 

2000 final rule (65 FR 41188 through 

41190), we described the method for 

determining outlier payments. Under 

this system, outlier payments are made 

for episodes whose estimated costs 

exceed a threshold amount for each 

Home Health Resource Group (HHRG). 

The episode’s estimated cost is the sum 

of the national wage-adjusted per-visit 

payment amounts for all visits delivered 

during the episode. The outlier 

threshold for each case-mix group or 

partial episode payment (PEP) 

adjustment is defined as the 60-day 

episode payment or PEP adjustment for 

that group plus a fixed dollar loss (FDL) 

amount. The outlier payment is defined 

to be a proportion of the wage-adjusted 

estimated cost beyond the wageadjusted threshold. The threshold 

amount is the sum of the wage and casemix adjusted PPS episode amount and 

wage-adjusted fixed dollar loss amount. 

The proportion of additional costs paid 

as outlier payments is referred to as the 

loss-sharing ratio. 

2. Regulatory Update 

In the CY 2010 HH PPS final rule (74 

FR 58080 through 58087), we discussed 

excessive growth in outlier payments, 

primarily the result of unusually high 

outlier payments in a few areas of the 

country. Despite program integrity 

efforts associated with excessive outlier 

payments in targeted areas of the 

country, we discovered that outlier 

expenditures still exceeded the 5 

percent target and, in the absence of 

corrective measures, would have 

continued do to so. Consequently, we 

assessed the appropriateness of taking 

action to curb outlier abuse. To mitigate 

possible billing vulnerabilities 

associated with excessive outlier 

payments and adhere to our statutory 

limit on outlier payments, we adopted 

an outlier policy that included a 10 

percent agency level cap on outlier 

payments. This cap was implemented in 

concert with a reduced FDL ratio of 

0.67. These policies resulted in a 

projected target outlier pool of 

approximately 2.5 percent. (The 

previous outlier pool was 5 percent of 

total HH expenditures.) 

For CY 2010, we first returned 5 

percent of these dollars back into the 

national standardized 60-day episode 

rates, the national per-visit rates, the 

low utilization payment adjustment 

(LUPA) add-on payment amount, and 

the non-routine supplies (NRS) 

conversion factor. Then, we reduced the 

CY 2010 rates by 2.5 percent to account 

for the new outlier pool of 2.5 percent. 

This outlier policy was adopted for CY 

2010 only. 

3. Statutory Update 

As we noted in the CY 2011 HH PPS 

final rule (75 FR 70397 through 70399), 

section 3131(b)(1) of the Affordable Care 

Act amended section 1895(b)(3)(C) of 

the Act. As revised, ‘‘Adjustment for 

outliers,’’ states that ‘‘The Secretary 

shall reduce the standard prospective 

payment amount (or amounts) under 

this paragraph applicable to home 

health services furnished during a 

period by such proportion as will result 

in an aggregate reduction in payments 

for the period equal to 5 percent of the 

total payments estimated to be made 

based on the prospective payment 

system under this subsection for the 

period.’’ In addition, section 3131(b)(2) 

of the Affordable Care Act amended 

section 1895(b)(5) of the Act by redesignating the existing language as 

section 1895(b)(5)(A) of the Act, and 

revising it to state that the Secretary, 

‘‘subject to [a 10 percent programspecific outlier cap], may provide for an 

addition or adjustment to the payment 

amount otherwise made in the case of 

outliers because of unusual variations in 

the type or amount of medically 

necessary care. The total amount of the 

additional payments or payment 

adjustments made under this paragraph 

with respect to a fiscal year or year may 

not exceed 2.5 percent of the total 

payments projected or estimated to be 

made based on the prospective payment 

system under this subsection in that 

year.’’ 

As such, beginning in CY 2011, our 

HH PPS outlier policy is that we reduce 

payment rates by 5 percent and target 

up to 2.5 percent of total estimated HH 

PPS payments to be paid as outliers. To 

do so, we first returned the 2.5 percent 

held for the target CY 2010 outlier pool 

to the national standardized 60-day 

episode rates, the national per visit 

rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

for CY 2010. We then reduced the rates 

by 5 percent as required by section 

1895(b)(3)(C) of the Act, as amended by 

section 3131(b)(1) of the Affordable Care 

Act. For CY 2011 and subsequent 

calendar years we target up to 2.5 

percent of estimated total payments to 

be paid as outlier payments, and apply 

a 10 percent agency-level outlier cap. 

4. Loss-Sharing Ratio and Fixed Dollar 

Loss (FDL) Ratio 

For a given level of outlier payments, 

there is a trade-off between the values 

selected for the FDL ratio and the losssharing ratio. A high FDL ratio reduces 

the number of episodes that can receive 

outlier payments, but makes it possible 

to select a higher loss-sharing ratio and, 

therefore, increase outlier payments for 

outlier episodes. Alternatively, a lower 

FDL ratio means that more episodes can 

qualify for outlier payments, but outlier 

payments per episode must then be 

lower. 

The FDL ratio and the loss-sharing 

ratio must be selected so that the 

estimated total outlier payments do not 

exceed the 2.5 percent aggregate level 

(as required by section 1895(b)(5)(A) of 

the Act). In the past, we have used a 

value of 0.80 for the loss-sharing ratio, 

which is relatively high, but preserves 

incentives for agencies to attempt to 

provide care efficiently for outlier cases. 

With a loss-sharing ratio of 0.80, 

Medicare pays 80 percent of the 

additional estimated costs above the 

outlier threshold amount. In the CY 

2011 HH PPS final rule (75 FR 70398), 

in targeting total outlier payments as 2.5 

percent of total HH PPS payments, we 

implemented an FDL ratio of 0.67, and 

we maintained that ratio in CY 2012. 

The national standardized 60-day 

episode payment amount is multiplied 

by the FDL ratio. That amount is wageadjusted to derive the wage-adjusted 

FDL, which is added to the case-mix 

and wage-adjusted 60-day episode 

payment amount to determine the 

outlier threshold amount that costs have 

to exceed before Medicare will pay 80 

percent of the additional estimated 

costs. We did not propose a change to 

the loss-sharing ratio in the CY 2013 HH 

PPS proposed rule issued in the July 13, 

2012 Federal Register (77 FR 41548). 

For the proposed rule, based on 

simulations using CY 2010 claims data, 

we estimated that outlier payments in 

2012 will comprise approximately 2.12 

percent of total HH PPS payments. 

However, we did not propose a change 

to the FDL ratio in the CY 2013 HH PPS 

proposed rule. This was, in part, 

because we were not able to verify these 

projections in our paid claims files since 


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implementing the 10 percent agencylevel cap on outlier payments on 

January 1, 2010. Two claims processing 

errors were identified in our 

implementation of the 10 percent 

agency-level cap on outlier payments. 

These errors resulted in inaccuracies in 

outlier payment amounts in our paid 

claims files for CY 2010 and 2011. One 

error allows for certain HHAs to be paid 

beyond the cap, resulting in 

overpayments. The other applies the cap 

to HHAs who have not reached it yet, 

resulting in underpayments. System 

changes were currently underway, and 

thus the CY 2010 data file used in our 

analysis for the CY 2013 HH PPS 

proposed rule reflected outlier 

payments with these claims processing 

errors. In the CY 2013 HHS PPS 

proposed rule we stated that we would 

update our estimate of the FDL ratio for 

the final rule using the best analysis the 

most current and complete year of HH 

PPS data. 

5. Outlier Relationship to the HH 

Payment Study 

As we discussed in the CY 2013 HH 

PPS proposed rule, section 3131(d) of 

the Affordable Care Act requires us to 

conduct a study and report on 

developing HH payment revisions that 

will ensure access to care and payment 

for HH patients with high severity of 

illness. Our Report to Congress 

containing this study’s 

recommendations is projected to be 

available in 2014. Section 

3131(d)(1)(A)(iii) of the Affordable Care 

Act, in particular, states that this study 

may include analysis of potential 

revisions to outlier payments to better 

reflect costs of treating Medicare 

beneficiaries with high levels of severity 

of illness. 

The following is a summary of the 

comments we received regarding the 

outlier policy in the CY 2013 HH PPS 

proposed rule. 

Comment: A commenter stated that 

CMS’s policy of reducing the outlier 

pool from 5 percent to 2.5 percent and 

capping, per provider, outlier revenues 

at 10 percent has negatively impacted 

HH providers. The commenter stated 

that in certain areas, HHAs provide 

services to predominantly high-cost 

beneficiaries with chronic conditions 

like HIV/AIDS or with mental health 

needs and developmental disabilities. 

HHAs that provide services to a highcost population have reported being 

negatively impacted by the 10 percent 

outlier cap. The commenter requested 

that CMS exempt special-needs HHAs 

that serve high-cost patients with 

multiple clinical issues from the 10 

percent outlier cap. The commenter also 

believes that CMS should raise the 

outlier cap so that all HHAs that serve 

high-cost beneficiaries can continue to 

do so without losing outlier funding. 

Response: We do not have the 

statutory authority to change the 2.5 

percent outlier pool, the 5 percent 

reduction to the HH PPS payment rates 

to fund the outlier pool, or the 10 

percent outlier cap. Section 3131(b)(2) 

of the Affordable Care Act amended 

section 1895(b)(5)(A) of the Act to 

require that the total amount of the 

additional payments or payment 

adjustments made with respect to 

outliers in a fiscal year or year may not 

exceed 2.5 percent of the total payments 

projected or estimated to be made based 

on the prospective payment system in 

that year. Section 3131(b)(2)(C) of the 

Affordable Care Act added section 

1895(b)(5)(B) of the Act so that CMS is 

required to apply a 10 percent agencylevel outlier cap in each year. The 

statute does not provide for exemptions 

to the 10 percent cap based on resource 

use or otherwise. 

Comment: A commenter requested 

that CMS develop a remedy to the 

limitations in the current outlier policy 

in actually addressing high cost cases. 

Response: We reiterate that we intend 

to analyze alternatives to our current 

outlier policy as part of the home health 

study mandated by section 3131 of the 

Affordable Care Act. The study calls for 

us to investigate improvements to the 

HH PPS to account for patients with 

varying severity of illness. 

Comment: Several commenters 

supported CMS’s proposal to maintain 

the current FDL ratio in determining 

outlier payments, while several others 

were disappointed that the CY 2013 HH 

PPS proposed rule did not include any 

adjustments to the FDL ratio, especially 

given the analysis that projects that total 

outlier payments in 2011 and 2012 have 

been significantly below the 2.5 percent 

target. Commenters stated that CMS 

should recalculate outlier payment 

levels for 2011 and 2012 now that the 

claims processing errors for outliers 

have been corrected, and consider 

revising the CY 2013 FDL ratio in the 

event that total outlier spending is less 

than 2.5 percent. One commenter 

believed that recent outlier claims 

processing flaws, when resolved, are 

likely to affect the total outlier spending 

in 2011 such that outlier payments will 

comprise more than the estimated 2.12 

percent of total HH PPS payments in 

outlier payments. 

Response: Since the publication of the 

CY 2013 HH PPS proposed rule, we 

were able to correct the two claims 

processing errors that resulted in 

inaccuracies in outlier payment 

amounts in our paid claims files for CY 

2010 and 2011. Analysis of corrected 

claims data and updated simulations 

using CY 2010 claims data show that 

outlier payments in 2013 are estimated 

to comprise approximately 2.18 percent 

of total HH PPS payments. As a result, 

in order to pay up to, but no more than 

2.5 percent of total HH PPS payments as 

outlier payments, the FDL ratio would 

need to be revised to 0.45 for CY 2013. 

Analysis of corrected claims data and 

updated simulations using CY 2010 

claims data show that outlier payments 

in 2013 are estimated to comprise 

approximately 2.18 percent of total HH 

PPS payments. As a result, we are 

finalizing an FDL ratio of 0.45 percent 

in order to pay up to, but no more than 

2.5 percent of total HH PPS payments as 

outlier payments. We believe that our 

new outlier policy for CY 2013 of using 

an FDL ratio of 0.45 and a loss-sharing 

ratio of 0.80 strikes an effective balance 

of compensating for high cost episodes 

while allowing more episodes to qualify 

for outlier payments. 

C. CY 2013 Rate Update 

1. Rebasing and Revising of the Home 

Health Market Basket 

a. Background 

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

requires that the standard prospective 

payment amounts for CY 2013 be 

increased by a factor equal to the 

applicable home health market basket 

update for those HHAs that submit 

quality data as required by the 

Secretary. 

Effective for cost reporting periods 

beginning on or after July 1, 1980, we 

developed and adopted an HHA input 

price index (that is, the home health 

‘‘market basket’’). Although ‘‘market 

basket’’ technically describes the mix of 

goods and services used to produce 

home health care, this term is also 

commonly used to denote the input 

price index derived from that market 

basket. Accordingly, the term ‘‘home 

health market basket’’ used in this 

document refers to the HHA input price 

index. 

The percentage change in the home 

health market basket reflects the average 

change in the price of goods and 

services purchased by HHAs in 

providing an efficient level of home 

health care services. We first used the 

home health market basket to adjust 

HHA cost limits by an amount that 

reflected the average increase in the 

prices of the goods and services used to 

furnish reasonable cost home health 

care. This approach linked the increase 

in the cost limits to the efficient 

utilization of resources. For a greater 


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discussion on the home health market 

basket, see the notice with comment 

period published in the February 15, 

1980 Federal Register (45 FR 10450, 

10451), the notice with comment period 

published in the February 14, 1995 

Federal Register (60 FR 8389, 8392), 

and the notice with comment period 

published in the July 1, 1996 Federal 

Register (61 FR 34344, 34347). 

Beginning with the FY 2002 HH PPS 

payments, we used the home health 

market basket to update payments under 

the HH PPS. We last rebased the home 

health market basket effective with the 

CY 2008 update. For more information 

on the HH PPS home health market 

basket, see our proposed rule published 

in the May 4, 2007 Federal Register (72 

FR 25435 through 25442). 

The home health market basket is a 

fixed-weight Laspeyres-type price 

index; its weights reflect the cost 

distribution for the base year while 

current period price changes are 

measured. The home health market 

basket is constructed in three major 

steps. First, a base period is selected and 

total base period expenditures are 

estimated for mutually exclusive and 

exhaustive spending categories based 

upon the type of expenditure. Then the 

proportion of total costs that each 

spending category represents is 

determined. These proportions are 

called cost or expenditure weights. 

The second step essential for 

developing an input price index is to 

match each expenditure category to an 

appropriate price/wage variable, called 

a price proxy. These proxy variables are 

mainly drawn from publicly available 

statistical series published on a 

consistent schedule, preferably at least 

quarterly. 

In the third and final step, the price 

level for each spending category is 

multiplied by the expenditure weight 

for that category. The sum of these 

products for all cost categories yields 

the composite index level in the market 

basket in a given year. Repeating the 

third step for other years will produce 

a time series of market basket index 

levels. Dividing one index level by an 

earlier index level will produce rates of 

growth in the input price index. 

We described the market basket as a 

fixed-weight index because it answers 

the question of how much more or less 

it would cost, at a later time, to 

purchase the same mix of goods and 

services that was purchased in the base 

period. As such, it measures ‘‘pure’’ 

price changes only. The effects on total 

expenditures resulting from changes in 

the quantity or mix of goods and 

services purchased subsequent to the 

base period are, by design, not 

considered. 

b. Rebasing and Revising the Home 

Health Market Basket 

We believe that it is desirable to 

rebase the home health market basket 

periodically so that the cost category 

weights reflect changes in the mix of 

goods and services that HHAs purchase 

in furnishing home health care. We 

based the cost category weights in the 

current home health market basket on 

CY 2003 data. In the CY 2013 HH PPS 

proposed rule (77 FR 41548), we 

proposed to rebase and revise the home 

health market basket to reflect CY 2010 

Medicare cost report (MCR) data, the 

latest available and most complete data 

on the actual structure of HHA costs. 

The terms ‘‘rebasing’’ and ‘‘revising,’’ 

while often used interchangeably, 

actually denote different activities. The 

term ‘‘rebasing’’ means moving the base 

year for the structure of costs of an input 

price index (that is, in this exercise, we 

proposed to move the base year cost 

structure from CY 2003 to CY 2010) 

without making any other major 

changes to the methodology. The term 

‘‘revising’’ means changing data sources, 

cost categories, and/or price proxies 

used in the input price index. 

For the rebasing and revising, we 

modified the wages and salaries and 

benefits cost categories to reflect revised 

occupational groupings of BLS 

Occupational Employment Statistics 

(OES) data of HHAs. As a result of the 

revised groupings, we also proposed 

changes to the wage and benefit price 

proxies used in the HH market basket. 

We also proposed to break out the 

Administration and General (A&G), 

Operations and Maintenance, and All 

Other (residual) cost category weight 

into more detailed cost categories, based 

on the 2002 Benchmark U.S. 

Department of Commerce, Bureau of 

Economic Analysis (BEA) Input-Output 

(I–O) Table for HHAs. We proposed to 

revise the price proxies for the 

Insurance and Transportation cost 

categories. Finally, we proposed the use 

of four new price proxies for the four 

additional cost categories. 

The major cost weights for the revised 

and rebased home health market basket 

are derived from the Medicare Cost 

Reports (MCR) data for freestanding 

HHAs, whose cost reporting period 

began on or after January 1, 2010 and 

before January 1, 2011. Using this 

methodology allowed our sample to 

include HHA facilities with varying cost 

report years including, but not limited 

to, the federal fiscal or calendar year. 

We referred to the market basket as a 

calendar year market basket because the 

base period for all price proxies and 

weights are set to CY 2010. 

We proposed to maintain our policy 

of using data from freestanding HHAs 

because we have determined that they 

better reflect HHAs’ actual cost 

structure. Expense data for hospitalbased HHAs can be affected by the 

allocation of overhead costs over the 

entire institution. Due to the method of 

allocation, total expenses will be 

correct, but the individual components’ 

expenses may be skewed; therefore, if 

data from hospital-based HHAs were 

included, the resulting cost structure 

could be unrepresentative of the average 

HHA costs. 

Data on HHA expenditures for nine 

major expense categories (Wages and 

Salaries, Employee Benefits, 

Transportation, Operation and 

Maintenance, A&G, Professional 

Liability Insurance (PLI), Fixed Capital, 

Movable Capital, and a residual ‘‘All 

Other’’) were tabulated from the CY 

2010 Medicare HHA cost reports. As 

prescription drugs and DME are not 

payable under the HH PPS, we excluded 

those items from the home health 

market basket and from the 

expenditures. Expenditures for contract 

services were also tabulated from these 

CY 2010 Medicare HHA cost reports and 

allocated to Wages and Salaries, 

Employee Benefits, A&G, and Other 

Expenses. After totals for these cost 

categories were edited to remove reports 

where the data were deemed 

unreasonable (for example, when total 

reported costs were less than zero), we 

then determined the proportion of total 

costs that each category represented. 

The proportions represent the major 

rebased home health market basket 

weights. 

Next, we disaggregated the costs for 

the A&G, Operations and Maintenance 

and ‘‘All Other’’ cost weights using the 

latest available (2002 Benchmark) U.S. 

Department of Commerce, Bureau of 

Economic Analysis (BEA) Input-Output 

(I–O) Table, from which we extracted 

data for HHAs. The BEA I–O data, 

which are updated at 5-year intervals, 

were most recently described in the 

Survey of Current Business article, 

‘‘Benchmark Input-Output Accounts of 

the U.S., 2002’’ (December 2002). These 

data were aged from 2002 to 2010 using 

relevant price changes. The 

methodology we used to age the data 

applied the annual price changes from 

the price proxies to the appropriate cost 

categories. We repeated this practice for 

each year. This methodology reflects a 

slight revision from the methodology 

used to derive the 2003-based HHA 

market basket index. For the 2003-based 

index, we only disaggregated the A&G 


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and ‘‘All Other’’ cost categories using 

BEA I–O data. For the 2010-based index, 

we proposed to also disaggregate the 

Operations and Maintenance cost 

categories using the BEA I–O data. Our 

proposal is based on our examination of 

the MCR data which indicated that 

some providers may be including some 

operations and maintenance costs in the 

A&G category and/or other cost 

categories. The Operations and 

Maintenance cost category (which we 

previously proxied with the CPI for Fuel 

and Other Utilities) from the MCR 

showed a decrease in the cost weight 

obtained directly from the MCR data 

from 2003 to 2010, despite rapid 

increases in utility costs over this time 

period. The revised method would rely 

on the 2002 I–O data, aged by the 

relevant price proxy, to determine the 

Utilities cost weight. The resulting 

methodology shows an increase in the 

Utilities cost weight over the same time 

period, which we believe to be a more 

reasonable result. We believe this 

change in the methodology for 

estimating utility costs for HHAs better 

reflects the 2010 cost structures of 

HHAs. 

This process resulted in the 

identification of 16 separate cost 

categories, which is four more cost 

categories than presented in the 2003- 

based home health market basket. The 

additional cost categories 

(Administrative and Support Services, 

Financial Services, Medical Supplies, 

and Rubber and Plastics) stem from 

further disaggregating the Other 

Products and Other Services cost 

categories presented in the 2003-based 

index into more detail. The 

Administrative and Support Services 

cost weight would include expenses for 

a range of day-to-day office 

administrative services including but 

not limited to billing, recordkeeping, 

mail routing, and reception services. 

The Financial Services cost weight 

would reflect expenses for services 

including but not limited to banking 

services and security and commodity 

brokering. The Medical Supplies cost 

weight would reflect expenses for 

medical and surgical instruments as, 

well as laboratory analysis equipment. 

The Rubber and Plastics cost weight 

would reflect expenses for products 

such as plastic trash cans, and 

carpeting. We proposed these additional 

cost categories in order to proxy price 

inflation in a more granular fashion. We 

provide our proposed price proxies in 

more detail below. 

The differences between the major 

categories for the 2010-based index and 

those used for the current 2003-based 

index are summarized in Table 3. We 

have allocated the Contract Services 

weight to the Wages and Salaries 

Employee Benefits, A&G, and Other 

Expenses cost categories in the 2010- 

based index as we did in the 2003-based 

index. 

The complete 2010-based cost 

categories and weights are listed in 

Table 4. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C After we computed the CY 2010 cost 

category weights for the rebased home 

health market basket, we selected the 

most appropriate wage and price 


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indexes to proxy the rate of change for 

each expenditure category. With the 

exception of the price index for 

professional liability insurance costs, 

the price proxies are based on Bureau of 

Labor Statistics (BLS) data and are 

grouped into one of the following BLS 

categories: 

• Employment Cost Indexes— 

Employment Cost Indexes (ECIs) 

measure the rate of change in employee 

wage rates and employer costs for 

employee benefits per hour worked. 

These indexes are fixed-weight indexes 

and strictly measure the change in wage 

rates and employee benefits per hour. 

They are not affected by shifts in skill 

mix. ECIs are superior to average hourly 

earnings as price proxies for input price 

indexes for two reasons: (a) They 

measure pure price change; and (b) they 

are available by occupational groups, 

not just by industry. 

• Consumer Price Indexes— 

Consumer Price Indexes (CPIs) measure 

change in the prices of final goods and 

services bought by the typical 

consumer. Consumer price indexes are 

used when the expenditure is more 

similar to that of a purchase at the retail 

level rather than at the wholesale level, 

or if no appropriate Producer Price 

Indexes (PPIs) were available. 

• Producer Price Indexes—PPIs 

measures average changes in prices 

received by domestic producers for their 

goods and services. PPIs are used to 

measure price changes for goods sold in 

other than retail markets. For example, 

a PPI for movable equipment is used 

rather than a CPI for equipment. PPIs in 

some cases are preferable price proxies 

for goods that HHAs purchase at 

wholesale levels. These fixed-weight 

indexes are a measure of price change 

at the producer or at the intermediate 

stage of production. 

We evaluated the price proxies using 

the criteria of reliability, timeliness, 

availability, and relevance. Reliability 

indicates that the index is based on 

valid statistical methods and has low 

sampling variability. Widely accepted 

statistical methods ensure that the data 

were collected and aggregated in way 

that can be replicated. Low sampling 

variability is desirable because it 

indicates that sample reflects the typical 

members of the population. (Sampling 

variability is variation that occurs by 

chance because a sample was surveyed 

rather than the entire population.) 

Timeliness implies that the proxy is 

published regularly, preferably at least 

once a quarter. The market baskets are 

updated quarterly and therefore it is 

important the underlying price proxies 

be up-to-date, reflecting the most recent 

data available. We believe that using 

proxies that are published regularly 

helps ensure that we are using the most 

recent data available to update the 

market basket. We strive to use 

publications that are disseminated 

frequently because we believe that this 

is an optimal way to stay abreast of the 

most current data available. Availability 

means that the proxy is publicly 

available. We prefer that our proxies are 

publicly available because this will help 

ensure that our market basket updates 

are as transparent to the public as 

possible. In addition, this enables the 

public to be able to obtain the price 

proxy data on a regular basis. Finally, 

relevance means that the proxy is 

applicable and representative of the cost 

category weight to which it is applied. 

The CPIs, PPIs, and ECIs selected by us 

in this regulation meet these criteria. 

Therefore, we believe that they continue 

to be the best measure of price changes 

for the cost categories to which they 

would be applied. 

As part of the revising and rebasing of 

the home health market basket, we 

proposed to revise and rebase the home 

health blended Wage and Salary index 

and the home health blended Benefits 

index. We proposed to use these 

blended indexes as price proxies for the 

Wages and Salaries and the Employee 

Benefits portions of the 2010-based 

home health market basket, as we did in 

the 2003-based home health market 

basket. A more detailed discussion is 

provided below. 

c. Price Proxies Used To Measure Cost 

Category Growth 

• Wages and Salaries For measuring 

price growth in the 2010-based home 

health market basket, we proposed to 

apply six price proxies to six 

occupational subcategories within the 

Wages and Salaries component, that 

reflect the HHA occupational mix. 

The 2003-based blended wage index 

was comprised of four occupational 

subcategories proxied by five wage 

proxies. For the 2010 blended wage 

index, we proposed to further 

disaggregate the service workers 

occupations into health and social 

assistance service and other service 

occupational groups. We also proposed 

to explicitly disaggregate professional 

and technical (P&T) workers into healthrelated P&T and non health-related P&T 

workers. We proposed to continue to 

use the National Industry-Specific 

Occupational Employment and Wage 

estimates for North American Industrial 

Classification System (NAICS) 621600, 

Home Health Care Services, published 

by the BLS Office of Occupational 

Employment Statistics (OES) as the data 

source for the cost shares of the home 

health specific blended wage and 

benefits proxy. Detailed information on 

the methodology for the national 

industry-specific occupational 

employment and wage estimates survey 

can be found at http://www.bls.gov/oes/ 

current/oes_tec.htm. 

The needed data on HHA 

expenditures for the six occupational 

subcategories (managerial, healthrelated P&T, non health-related P&T, 

health and social assistance service, 

other service occupations, and 

administrative/clerical) for the wages 

and salaries component were tabulated 

from the May 2010 OES data for NAICS 

621600, Home Health Care Services. 

Table 5 compares the 2010 occupational 

assignments of the six CMS designated 

subcategories to the 2003 occupational 

assignments of the four CMS designated 

subcategories. 

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Total expenditures by occupation 

were calculated by taking the OES 

number of employees multiplied by the 

OES annual average salary. The wage 

and salary expenditures were aggregated 

based on the groupings in Table 6. We 

determined the proportion of total wage 

costs that each subcategory represents. 

These proportions listed in Table 6 

represent the major rebased and revised 

home health blended Wage and Salary 

index weights. 


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A comparison of the yearly changes 

from CY 2010 to CY 2013 for the 2003- 

based HH wage and salary blend and the 

2010-based home health wage and 

salary blend is shown in Table 7. The 

average annual increase in the two price 

proxies is similar, and in no year is the 

difference greater than 0.2 percentage 

point. 

• Employee benefits: For measuring 

employee benefits price growth in the 

2010-based home health market basket, 

we proposed to apply applicable price 

proxies to the six occupational 

subcategories that are used for the wage 

blend listed in Table 8. The percentage 

change in the blended price of home 

health employee benefits is applied to 

this component, which is described in 

Table 8. 


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There is no available data source that 

exists for benefit expenditures by 

occupation for the home health 

industry. Thus, to construct weights for 

the home health occupational benefits 

index we calculated the ratio of benefits 

to wages and salaries for CY 2010 for the 

six BLS ECI series we proposed to use 

in the blended wage and benefit 

indexes. To derive the relevant benefit 

weight, we applied the benefit-to-wage 

ratios to each of the six occupational 

subcategories from the 2010 OES wage 

and salary weights, and normalized. For 

example, the ratio of benefits to wages 

from the 2010 home health occupational 

wage and benefit indexes for home 

health managers is 0.976. We apply this 

ratio to the 2010 OES weight for wages 

and salaries for home health managers, 

8.260, and then normalize those weights 

relative to the other five benefit 

occupational categories to obtain a 

benefit weight for home health 

managers of 8.029. 

A comparison of the yearly changes 

from CY 2010 to CY 2013 for the 2003- 

based HH benefit blend and the 2010- 

based home health benefit blend is 

shown in Table 9. The average annual 

increase in the two price proxies is 

similar, and in no year is the difference 

greater than 0.3 percentage point. 

• Administrative and Support: We 

proposed to use the ECI for 

Compensation for Office and 

Administrative Support Services 

(private industry) (BLS series code 

#CIU2010000220000I) to measure price 

growth of this cost category. The 2003- 

based index did not reflect this detailed 

cost category. 

• Financial Services: We proposed to 

use the ECI for Compensation for 

Financial Activities (private industry) 

(BLS series code #CIU201520A000000I) 

to measure price growth of this cost 

category. The 2003-based index did not 

reflect this detailed cost category. 

• Medical Supplies: We proposed to 

use the PPI for Medical Surgical & 

Personal Aid Devices (BLS series code 

#WPU156) to measure price growth of 

this cost category. The 2003-based index 

did not reflect this detailed cost 

category. 

• Rubber and Plastics: We proposed 

to use the PPI for Rubber and Plastic 

Products (BLS series code #WPU07) to 

measure price growth of this cost 


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category. The 2003-based index did not 

reflect this detailed cost category. 

• Operations and Maintenance: We 

proposed to use CPI for Fuel and 

Utilities (BLS series code 

#CUUR0000SAH2) to measure price 

growth of this cost category. The same 

proxy was used for the 2003-based 

market basket. 

• Professional Liability Insurance: We 

proposed to use the CMS Physician 

Professional Liability Insurance price 

index to measure price growth of this 

cost category. The 2003-based index 

used the CPI for Household Insurance as 

the price proxy for this component. We 

proposed to revise the price proxy for 

this category as we believe that it is 

more technically appropriate to proxy 

PLI price changes by an index specific 

to medical liability insurance. We 

currently do not have a PLI index 

specific to the HHA industry so we 

proposed to use the CMS Physician 

Liability Insurance Index as we believe 

this would reasonably reflect the price 

changes associated with medical 

liability insurance purchased by home 

health agencies. 

To accurately reflect the price changes 

associated with physician PLI, each 

year, we solicit PLI premium data for 

physicians from a sample of commercial 

carriers. This information is not 

collected through a survey form, but 

instead is requested directly from, and 

provided by (on a voluntary basis), 

several national commercial carriers. As 

we require for our other price proxies, 

the PLI price proxy is intended to reflect 

the pure price change associated with 

this particular cost category. Thus, it 

does not include changes in the mix or 

level of liability coverage. To 

accomplish this result, we obtain 

premium information from a sample of 

commercial carriers for a fixed level of 

coverage, currently $1 million per 

occurrence and a $3 million annual 

limit. This information is collected for 

every state by physician specialty and 

risk class. Finally, the state-level, 

physician-specialty data are aggregated 

by effective premium date to compute a 

national total, using counts of 

physicians by state and specialty as 

provided in the AMA publication, 

Physician Characteristics and 

Distribution in the U.S. 

• Telephone: We proposed to use CPI 

for Telephone Services (BLS series code 

#CUUR0000SEED) to measure price 

growth of this cost category. The same 

proxy was used for the 2003-based 

market basket. 

• Postage: We proposed to use CPI for 

Postage (BLS series code 

#CUUR0000SEEC01) to measure price 

growth of this cost category. The same 

proxy was used for the 2003-based 

market basket. 

• Professional Fees: We proposed to 

use the ECI for Compensation for 

Professional and Related Workers 

(private industry) (BLS series code # 

CIS2010000120000I) to measure price 

growth of this category. The same proxy 

was used for the 2003-based market 

basket. 

• Other Products: We proposed to use 

the PPI for Finished Goods Less Food 

and Energy (BLS series code #) to 

measure price growth of this category. 

For the 2003-based market basket we 

used the CPI for All Items Less Food 

and Energy to proxy this category. We 

believe that the PPI better reflects 

business input costs than the CPI index 

which better reflects cost faced by 

consumers. 

• Other Services: We proposed to use 

the ECI for Compensation for Service 

Occupations (private) (BLS series code 

#CIU2010000300000I) to measure price 

growth of this category. The same proxy 

was used for the 2003-based market 

basket. 

• Transportation: We proposed to use 

the CPI for Transportation (BLS series 

code #CUUR00000SAT) to measure 

price growth of this category. The 2003- 

based market basket used the CPI for 

Private Transportation (BLS series code 

#CUUS0000SAT1). We proposed to 

revise the price proxy to reflect price 

inflation of both private and public 

transportation costs. We proposed this 

change as further investigation of the 

MCR instructions request providers to 

include both private and public 

transportation costs. 

• Fixed capital: We proposed to use 

the CPI for Owner’s Equivalent Rent 

(BLS series code #CUUS0000SEHC) to 

measure price growth of this cost 

category. The same proxy was used for 

the 2003-based market basket. 

• Movable Capital: We proposed to 

use the PPI for Machinery and 

Equipment (BLS series code #WPU11) 

to measure price growth of this cost 

category. The same proxy was used for 

the 2003-based market basket. 

As we did in the 2003-based home 

health market basket, we allocated the 

Contract Services’ share of home health 

agency expenditures among Wages and 

Salaries, Employee Benefits, A&G and 

Other Expenses. 

d. Rebasing Results 

A comparison of the yearly changes 

from CY 2010 to CY 2013 for the 2003- 

based home health market basket and 

the 2010-based home health market 

basket is shown in Table 10. 


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Table 10 shows that the forecasted 

rate of growth for CY 2013, beginning 

January 1, 2013, for the rebased and 

revised home health market basket is 2.3 

percent, while the forecasted rate of 

growth for the current 2003-based home 

health market basket is 2.1 percent. The 

higher growth rate for the 2010-based 

HHA market basket for CY 2013 is 

primarily attributable to the wage 

blended price proxies. The revised wage 

blended index reflects a larger weight 

associated with health P&T occupations 

(which is proxied by the ECIs for 

Hospital Workers) compared to the 

2003-based index. The wage ECI for 

hospital workers is currently projected 

to grow faster than the other ECIs in the 

blended indexes. 

e. Labor-Related Share 

In the 2003-based home health market 

basket the labor-related share was 

77.082 percent while the remaining 

non-labor-related share was 22.918 

percent. In the revised and rebased 

home health market basket, the laborrelated share is 78.535 percent. The 

labor-related share includes wages and 

salaries and employee benefits, as well 

as allocated contract labor costs. The 

non-labor-related share is 21.465 

percent. The increase in the laborrelated share using the 2010-based HH 

market basket is primarily due to the 

increase in costs associated with 

contract labor. Table 11 details the 

components of the labor-related share 

for the 2003-based and 2010-based 

home health market baskets. 

f. CY 2013 Market Basket Update for 

HHAs 

For CY 2013, we proposed to use an 

estimate of the 2010-based HHA market 

basket to update payments to HHAs 

based on the best available data. 

Consistent with historical practice, we 

estimate the HHA market basket update 

for the HHA PPS based on IHS Global 

Insight, Inc.’s (IGI’s) forecast using the 

most recent available data. IGI is a 

nationally recognized economic and 

financial forecasting firm that contracts 

with CMS to forecast the components of 

the market baskets. 

In the proposed rule, based on IGI’s 

second quarter 2012 forecast with 

history through the first quarter of 2012, 

the HHA market basket update for CY 

2013 was projected to be 2.5 percent. 

Consistent with historical practice, we 

also proposed that if more recent data 

are subsequently available (for example, 

a more recent estimate of the market 

basket), we would use such data, if 

appropriate, to determine the CY 2013 

annual update in the final rule. 

Therefore, we are finalizing a CY 2013 

market basket update of 2.3 percent for 

CY 2013, which is based on IGI’s third 

quarter 2012 forecast with history 

through the 2nd quarter 2012. 


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2. CY 2013 Home Health Payment 

Update Percentage 

Section 3401(e) of the Affordable Care 

Act amended section 1895(b)(3)(B) of 

the Act by adding a new clause (vi) 

which states, ‘‘After determining the 

home health market basket percentage 

increase * * * the Secretary shall 

reduce such percentage * * * for each 

of 2011, 2012, and 2013, by 1 percentage 

point. The application of this clause 

may result in the home health market 

basket percentage increase under clause 

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

may result in payment rates under the 

system under this subsection for a year 

being less than such payment rates for 

the preceding year.’’ Therefore, the final 

CY 2013 market basket update of 2.3 

percent must be reduced by 1 

percentage point. Thus, the CY 2013 

home health payment update is 1.3 

percent. 

The following is a summary of the 

comments we received regarding the CY 

2013 Rate Update proposal. 

Comment: Several commenters 

supported the proposed effort to rebase 

and revise the market basket in order to 

update the cost shares from a 2003 base 

year to a 2010 base year. One 

commenter believed that future 

rebasings and revisions may be needed 

every 5 years or less due to the rapidly 

changing landscape of health care and 

home health services. 

Response: We appreciate the 

commenters’ support for the proposed 

rebasing and revising of the market 

basket to reflect 2010 cost data. We also 

acknowledge the public’s concern 

regarding the changing landscape of 

costs. We will monitor the market 

basket’s cost categories and their 

respective weights in order to ensure 

they remain contemporary and 

representative of the industry’s cost 

structure. 

Comment: One commenter expressed 

concerns about the quality of the cost 

report data that are submitted to CMS. 

The commenter noted that they are 

hopeful that the recent audits of the cost 

reports that CMS has initiated will 

improve the quality of the data. The 

commenter noted that although they 

have concerns about the quality of the 

cost report data they still support the 

proposed rebasing and revising of the 

market basket to 2010. 

Response: In regards to the 

commenter’s concern on the quality of 

the cost report data, when we calculate 

the market basket cost weights, we run 

various trimming scenarios to be sure 

the final market basket cost weights are 

not adversely impacted by outliers. We 

also run matched samples and compare 

trends and cost shares over time. 

Therefore, we believe our resulting 

market basket cost weights are 

representative of the national average of 

freestanding home health agencies. 

Comment: One commenter questioned 

the accuracy with which the market 

basket accounts for transportation costs, 

currently, as well as under the proposed 

methodology. They note that 

transportation costs have become more 

unpredictable with the increasing and 

fluctuating cost of gasoline. 

Response: We believe the 

Transportation cost weight within this 

market basket accurately captures the 

relative costs faced by home health 

providers as we obtain these costs 

directly from the Medicare cost reports. 

Additionally, this particular category’s 

cost weight has been notably consistent, 

ranging from between 2.5 percent and 

2.8 percent over the last several years. 

For the price proxy used to estimate 

price changes for this category of costs, 

although we agree that there is volatility 

in the price of gasoline, we feel that the 

CPI–U for Transportation price index, 

developed and published by the Bureau 

of Labor Statistics appropriately reflects 

these costs. Within this particular CPI, 

motor fuel represents approximately 1/ 

3rd of its cost weight (with new and 

used motor vehicles and motor vehicle 

insurance comprising most of the 

remaining share). This index also 

appropriately meets CMS’s guidelines 

for price proxies (relevance, reliability, 

timeliness, and public availability). 

Comment: Several commenters 

expressed concern that CMS only uses 

data from freestanding home health 

agencies to determine the market basket 

cost shares. One commenter also 

specifically noted the possible 

difference in the labor portion of the 

market basket and the impact on the 

payments based on the geographic 

differences. They noted that while there 

is concern about the attribution of costs 

to hospital-based providers, those shifts 

would appear in the indirect cost 

centers. They also noted that wages and 

salaries and benefits should be 

comparable across freestanding and 

hospital-based providers since they are 

direct costs and therefore the hospitalbased data should be incorporated into 

the calculation of the labor-related 

share. 

Response: Presently, all of CMS’s 

market baskets, or input prices indexes, 

incorporate data from only freestanding 

providers. We monitor the costs and 

cost structures of both freestanding and 

hospital-based providers in the home 

health industry, as well as other 

industries. Despite controlling for the 

differing characteristics of both provider 

types, including their respective patient 

case mix, their geographic locations, 

and other relevant factors, we were not 

able to adequately explain the variation 

in costs between the two provider types. 

Consequently, we believe that it is 

appropriate to base the market basket’s 

structure on free-standing providers 

only. We will continue to monitor and 

attempt to better understand these 

differences going forward. 

Comment: One commenter believed 

that the market basket should be based 

on 2011 cost report data and that 2010 

cost reports do not reflect the increases 

in costs to providers of the face-to-face 

and therapy reassessment requirements. 

Response: The market baskets are 

always based on the most current and 

complete set of cost report data. At the 

time of this rebasing, the most current 

and complete set of data was for 2010. 

We will monitor the 2011 cost reports 

as they become available and, if the cost 

structure of the industry is materially 

different than it was in 2010, we would 

consider proposing a subsequent 

rebasing. 

Comment: Several commenters 

support the resulting increase to the 

labor-related share which results from 

the rebasing of the market basket cost 

shares. 

Response: We believe the cost shares 

that are determined based on this 

rebasing represent the current national 

average cost shares of the industry. 

Thus, we are finalizing those cost shares 

in this final rule. 

Comment: Several commenters 

expressed concerns with the proposal to 

increase the labor-related share from 

77.082 percent to 78.535 percent for CY 

2013 and asked CMS to provide more 

clarity on the calculation methodology. 

One commenter notes that the resulting 

increase to the labor-related share will 

have a significant negative impact on 

providers, particularly those in rural 

areas. 

Response: The home health market 

basket’s labor-related share is based on 

the sum of the weights for Wages & 

Salaries and Benefits. The labor-related 

share is estimated based on actual data 

submitted on the home health Medicare 

cost report for both rural and urban 

freestanding home health facilities and 

is intended to reflect the national 

average. The proposed change in the 

labor-related share is primarily 

attributable to the update of the base 

year to reflect 2010 data. The 2010 data, 

the most recent and comprehensive data 

available at the time of the rebasing, 

show that labor-related costs have 

increased faster than aggregate nonlabor-related costs since 2003. Although 

we will continue to analyze the home 


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health Medicare cost report data on a 

regular basis to ensure it accurately 

reflects the cost structures facing home 

health providers, we believe the 

proposed 78.535 percent labor-related 

share appropriately reflects the current 

national average. 

Comment: One commenter believed 

the market basket should reflect cost 

changes in an episode of care rather 

than annual total costs for the home 

health agency. The commenter 

requested that CMS provide an 

explanation of how the market basket 

index and the changes in episode costs 

relate to one another. They noted that 

the average episode of care in 2010 

could include a different mix of 

disciplines than an average episode of 

care in 2003. 

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

Act requires that the standard 

prospective payment amounts for CY 

2013 be increased by a factor equal to 

the applicable home health market 

basket. Specifically the statute states: 

‘‘The standard prospective payment 

amount (or amounts) shall be adjusted 

for fiscal year 2002 and for fiscal year 

2003 and for each subsequent year 

(beginning with 2004) in a prospective 

manner specified by the Secretary by 

the home health applicable increase 

percentage (as defined in clause (ii)) 

applicable to the fiscal year or year 

involved.’’ Given that the weighted 

changes in episode costs, including the 

changing mix of disciplines required to 

provide home health services, all flow 

into the Medicare cost report, they are 

thus reflected in the market basket’s 

respective cost weights. 

As a result of the comments, we are 

finalizing all of the proposed changes to 

the home health market basket. The base 

year will reflect the 2010 cost shares as 

proposed and all of the price proxies 

that were proposed will be 

implemented. Therefore, consistent 

with our historical practice of 

estimating market basket increases 

based on the best available data, we are 

finalizing a CY 2013 market basket 

update of 2.3 percent for CY 2013, 

which is based on IGI’s third quarter 

2012 forecast with history through the 

2nd quarter 2012. Additionally, we are 

finalizing the labor-related share that 

reflect the 2010 wage and benefit cost 

shares of the market basket, which is 

78.535 percent. 

Comment: A commenter expressed 

concern about the impact of the 

reduction to the market basket update. 

Response: The reduction to the 

market basket update is legislated by 

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

amended by section 3401(e) of the 

Affordable Care Act, which states that 

the Secretary shall reduce the market 

basket percentage by 1 percentage point 

for 2011, 2012, and 2013. 

Comment: We received several 

comments regarding CMS’s efforts in 

rebasing the HH payment rates as 

mandated by the Affordable Care Act. 

We also received comments pertaining 

to the automatic, across-the-board cuts, 

known as sequestration, that are 

included in the Budget Control Act of 

2011. 

Response: The comments are outside 

the scope of this rule. However, we will 

consider the comments concerning 

rebasing in our future rebasing efforts. 

3. Home Health Quality Reporting 

Program (QRP) 

a. Background and Quality Reporting 

Requirements 

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

states that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ 

In addition, section 1895(b)(3)(B)(v)(I) 

of the Act states that ‘‘for 2007 and each 

subsequent year, in the case of a HHA 

that does not submit data to the 

Secretary in accordance with subclause 

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

market basket percentage increase 

applicable under such clause for such 

year shall be reduced by 2 percentage 

points.’’ This requirement has been 

codified in regulations at § 484.225(i). 

HHAs that meet the quality data 

reporting requirements are eligible for 

the full home health market basket 

percentage increase. HHAs that do not 

meet the reporting requirements are 

subject to a 2 percentage point reduction 

to the home health market basket 

increase. 

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

further states that ‘‘[t]he Secretary shall 

establish procedures for making data 

submitted under sub clause (II) available 

to the public. Such procedures shall 

ensure that a home health agency has 

the opportunity to review the data that 

is to be made public with respect to the 

agency prior to such data being made 

public.’’ 

As codified at § 484.250(a), we 

established that the quality reporting 

requirements could be met by the 

submission of OASIS assessments and 

Home Health CAHPS. In the CY 2012 

HH PPS final rule (76 FR 68576), we 

listed selected measures for the HH QRP 

and also established procedures for 

making the information available to the 

public by placing the information on the 

Home Health Compare Web site. The 

selected measures that are made 

available to the public can be viewed on 

the Home Health Compare Web site 

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

HHCompare/Home.asp. 

In the CY 2012 HH PPS final rule (76 

FR68575), we finalized that we will also 

use measures derived from Medicare 

claims data to measure home health 

quality. 

b. OASIS Data Submission and OASIS 

Data for Annual Payment Update 

The Home Health Conditions of 

Participation (CoPs) at § 484.55(d) 

require that the comprehensive 

assessment must be updated and revised 

(including the administration of the 

OASIS) no less frequently than: (1) The 

last five days of every 60 days beginning 

with the start-of-care date, unless there 

is a beneficiary elected transfer, 

significant change in condition, or 

discharge and return to the same HHA 

during the 60-day episode; (2) within 48 

hours of the patient’s return to the home 

from a hospital admission of 24 hours 

or more for any reason other than 

diagnostic tests; and (3) at discharge. 

It is important to note that to calculate 

quality measures from OASIS data, 

there must be a complete quality 

episode, which requires both a Start of 

Care or Resumption of Care OASIS 

assessment and a Transfer or Discharge 

OASIS assessment. Failure to submit 

sufficient OASIS assessments to allow 

calculation of quality measures, 

including transfer and discharge 

assessments, constitutes failure to 

comply with the CoPs. 

Home Health Agencies do not need to 

submit OASIS data for those patients 

who are excluded from the OASIS 

submission requirements under the 

Home Health Conditions of 

Participation (CoPs) § 484.1 through 

§ 484.265. As described in the Medicare 

and Medicaid Programs: Reporting 

Outcome and Assessment Information 

Set Data as Part of the Conditions of 

Participation for Home Health Agencies 

Final Rule (70 FR 76202), these are: 

• Those patients receiving only 

nonskilled services; 

• Those patients for whom neither 

Medicare nor Medicaid is paying for 

home health care (patients receiving 

care under a Medicare or Medicaid 

Managed Care Plan are not excluded 

from the OASIS reporting requirement); 

• Those patients receiving pre- or 

post-partum services; or 

• Those patients under the age of 18 

years. 

As set forth in the Medicare Program; 

Home Health Prospective Payment 


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System Refinement and Rate Update for 

Calendar Year 2008 Final Rule (72 FR 

49863), HHAs that become Medicarecertified on or after May 31 of any year 

are not subject to the OASIS quality 

reporting requirement nor any payment 

penalty for quality reporting purposes 

for the following calendar year. For 

example, HHAs certified on or after May 

31, 2012 are not subject to the 2 

percentage point reduction to their 

market basket update for CY 2013. 

These exclusions only affect quality 

reporting requirements and do not affect 

the HHA’s reporting responsibilities 

under the Conditions of Participation 

and Conditions of Payment (70 FR 

76202). 

c. Home Health Care Quality Reporting 

Program Requirements for CY 2014 

Payment and Subsequent Years 

(1) Submission of OASIS data 

In the CY 2013 HH PPS proposed rule 

(77 FR 41548), we proposed to consider 

OASIS assessments submitted by HHAs 

to CMS in compliance with HHA 

Conditions of Participation and 

Conditions for Payment for episodes 

beginning on or after July 1, 2011 and 

before July 1, 2012 as fulfilling one 

portion of the quality reporting 

requirement for CY 2013. This time 

period will allow for 12 full months of 

data collection and would provide us 

with the time necessary to analyze and 

make any necessary payment 

adjustments to the payment rates for CY 

2013. We proposed to continue this 

pattern for each subsequent year beyond 

CY 2013, considering OASIS 

assessments submitted for episodes 

beginning in the time frame between 

July 1 of the calendar year two years 

prior to the calendar year of the Annual 

Payment Update (APU) effective date 

and June 30 of the calendar year one 

year prior to the calendar year of the 

APU effective date, and received timely 

by CMS (that is, within 30 days of the 

end of that time period), as fulfilling the 

OASIS portion of the quality reporting 

requirement for the subsequent APU. 

Comment: We received one comment 

which supported both of these 

proposals. We received no comments in 

opposition. 

Response: We appreciate the 

supportive comments. 

As a result of the comments received, 

we are finalizing these two proposals as 

proposed. 

(2) Acute Care Hospitalization ClaimsBased measure 

In August 2003, we began to publicly 

report on Home Health Compare a 

number of OASIS–C outcome measures, 

including Acute Care Hospitalization. 

Since that time, we have determined 

that claims data are a more robust 

source of data for accurately measuring 

acute care hospitalizations. For this 

reason we proposed that the claimsbased Acute Care Hospitalization 

measure replace the OASIS-based 

measure on Home Health Compare. The 

OASIS-based measure will continue to 

be reported on the agency-specific 

Certification and Survey Provider 

Enhanced Reporting system (CASPER) 

reports. 

At the time of the publication of the 

proposed rule, there were technical 

issues with Home Health Compare files 

which resulted in our plan to delay the 

reporting of the two claims-based 

measures ‘‘Emergency Department Use 

Without Hospitalization’’ and ‘‘Acute 

Care Hospitalization’’ until such time as 

the technical issues were resolved. We 

stated that the OASIS-based Acute Care 

Hospitalization measure would 

continue to be made available to the 

public via Home Health Compare until 

it is replaced with the claims-based 

measure. 

To summarize, for the CY 2013 

payment update and for subsequent 

annual payment updates, we proposed 

to continue to use a HHA’s submission 

of OASIS assessments between July 1 

and June 30 as fulfilling one portion of 

the quality reporting requirement for 

each payment year. Medicare claims 

data and HHCAHPS data will also be 

used to measure home health care 

quality. 

Comment: We received nine 

comments supportive of the proposal 

and the use of claims-based measures in 

general. One commenter clearly prefers 

the OASIS-based Acute Care 

Hospitalization measure, stating it 

provides more granularity. Two 

commenters opposed publicly reporting 

the claims-based Acute Care 

Hospitalization measure until measure 

specifications and measure detail are 

made available and requested to 

preview the measure before public 

reporting. Several commenters question 

how observation stays will be addressed 

in the measure. We also received 

comment regarding the restriction of 

claims-based measures to Medicare FFS 

patients, the need to harmonize with 

other reporting programs, the need to 

retain OASIS items related to these two 

measures, and the resolution of 

technical issues referenced in the 

proposed rule. 

Response: We have resolved the 

technical challenges that we noted in 

the proposed rule and in August, the 

CASPER reports included Acute Care 

Hospitalization and Emergency 

Department Use Without 

Hospitalization measure rates that we 

calculated using claims data. We will 

also begin to publicly report the claimsbased measure rates for these measures 

on Home Health Compare. 

We wish to clarify that when we 

referred to the Acute Care 

Hospitalization and Emergency 

Department Use Without 

Hospitalization measures as ‘‘replacing’’ 

the OASIS-based measures, what we 

meant is that the measures will be 

calculated using a new source of data. 

The measure concept has not changed. 

The revised technical specifications 

were provided to the National Quality 

Forum (NQF), and after a public 

comment period, the NQF endorsed the 

revised measures in August 2012. The 

Acute Care Hospitalization measure is 

NQF #0171 and the ED Use Without 

Hospitalization measure is NQF #0173. 

The technical specifications for the 

claims-based measures been available 

since September 12 on the CMS Home 

Health Quality Initiative web page at 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HomeHealthQualityInits/ 

HHQIQualityMeasures.html. 

HHAs can currently view their 

performance on both measures 

(calculated using claims data) on their 

agency-specific CASPER reports. To 

further respond to the commenters who 

requested more detail on the measures, 

these measures evaluate the utilization 

of emergency department use without 

hospitalization and acute care 

hospitalization during the 60 days after 

the start of the home health stay. Thus, 

the measures address outcomes of HHA 

patients in a fixed interval after the start 

of their home health care, regardless of 

the length of their home health stay. 

Home health agencies are most often 

paid in a 60-day payment bundle which 

covers all home health services for 60 

days. As a result, the claims-based 

measures address outcomes of home 

health patients during the time period 

in which their home health agency 

receives payment from Medicare, (that 

is, for the 60-day period beginning with 

the start of care date). This is in contrast 

to the OASIS-based measures which 

calculate outcomes based on the time 

period from start of care to discharge, a 

period which may be greater or less than 

60 days. 

Similarly, the measurement begins at 

home health start of care (rather than at 

hospital discharge) as the home health 

agency cannot be held responsible for 

hospitalizations or emergency 

department visits that occur before 

home health care begins. Home Health 

Compare will continue to display these 


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measures using a rolling twelve months 

of data updated on a quarterly basis. 

As with the OASIS-based measure, 

planned hospitalizations are excluded 

from the acute care hospitalization 

claims-based measure numerator. In 

addition, though some hospitalizations 

may be avoidable, it is difficult to 

determine if a hospitalization was out of 

the home health agency’s control or not. 

As a result, agency rates on this measure 

are not expected to reach zero percent. 

Instead, the measure rates can be used 

as guidelines for comparing agencies to 

each other and can be used by agencies 

to improve their quality of care. 

Observation stays that begin in a 

hospital emergency department but do 

not result in an inpatient stay within the 

60 days after the start of home health 

care are counted in the ED Use without 

Hospitalization measure. Observation 

stays that result in an inpatient stay 

within the 60 days after the start of 

home health care are counted in the 

Acute Care Hospitalization measure. By 

comparing HHAs on both utilization 

measures, consumers can gain an 

accurate picture of how often patients of 

each HHA receive care in an emergency 

department or hospital in the 60 days 

following the start of home health care. 

Medicare claims data are reliable 

because home health agencies are 

required to submit claims in order to 

receive payment for Medicare 

beneficiaries. Claims data are extremely 

detailed and include patient identifiers, 

provider identifiers, services rendered, 

diagnoses, and payment, as well as 

additional information. Because 

encounter claims data are only readily 

available for Medicare FFS 

beneficiaries, the measure rates 

generated from claims for both the 

Acute Care Hospitalization and 

Emergency Department Use Without 

Hospitalization measures will only 

reflect Medicare FFS data. 

We are considering whether to begin 

calculating other OASIS–C outcome 

measures using claims data and we are 

also considering the feasibility of 

proposing to adopt readmission 

measures, which might include a 30-day 

measure of rehospitalization that would 

apply to home health patients who 

begin home health immediately after an 

inpatient hospital stay. We note that this 

measure would be similar to ‘‘HospitalWide All-Cause Unplanned 

Readmission’’ measure that we recently 

adopted for the Hospital Inpatient 

Quality Reporting Program. 

We believe that the OASIS items 

related to acute care hospitalization and 

emergency department use should 

remain in the OASIS dataset. It is 

important for agencies to be aware of 

their patient’s hospitalizations and 

emergency department visits in order to 

adjust care plans in response to changes 

in the patient’s condition, medication 

regimen, and care needs. Maintaining 

the items in the OASIS also allows 

agencies to monitor their hospitalization 

and ED use rates in real-time rather than 

waiting for a claims-based measure to be 

calculated and reported in CASPER. The 

OASIS item related to emergency 

department use is still used for the 

Emergency Department Use With 

Hospitalization measure reported on 

CASPER. Agencies can approximately 

compare their rates on the OASIS-based 

and claims-based Acute Care 

Hospitalization measures, as reported 

on the CASPER reports, to gauge if their 

patients received treatment in an 

emergency department or hospital 

significantly more often than they were 

aware of. This comparison could be 

useful in HHAs’ performance 

improvement activities. 

As a result of the comments received, 

we are finalizing that the claims-based 

Acute Care Hospitalization measure 

replace the OASIS-based measure on 

Home Health Compare as proposed. 

d. Home Health Care CAHPS Survey 

(HHCAHPS) 

In the HH PPS Rate Update for CY 

2012 Final Rule (76 FR 68577), we 

stated that the expansion of the home 

health quality measures reporting 

requirements for Medicare-certified 

agencies includes the Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS®) Home Health Care 

(HHCAHPS) Survey for the CY 2012 

annual payment update (APU). In CY 

2012 we moved forward with the 

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

the HH PPS rate update for CY 2012. We 

are maintaining the stated HHCAHPS 

data requirements for CY 2013 that were 

set out in the CY 2012 HH PPS final 

rule, for the continuous monthly data 

collection and quarterly data 

submission of HHCAHPS data. 

(1) Background and Description of 

HHCAHPS 

As part of the United States 

Department of Health and Human 

Services’ (DHHS) Transparency 

Initiative, we have implemented a 

process to measure and publicly report 

patient experiences with home health 

care, using a survey developed by the 

Agency for Healthcare Research and 

Quality’s (AHRQ’s) CAHPS® program, 

and endorsed by the National Quality 

Forum (NQF) (number 0517). The 

HHCAHPS survey is part of a family of 

CAHPS® surveys that asks patients to 

report on and rate their experiences 

with health care. The HHCAHPS survey 

presents home health patients with a set 

of standardized questions about their 

home health care providers and about 

the quality of their home health care. 

Prior to this survey, there was no 

national standard for collecting 

information about patient experiences 

that would enable valid comparisons 

across all home health agencies (HHAs). 

The history and development process 

for HHCAHPS has been given in 

previous rules, but it is also available on 

our Web site https:// 

homehealthcahps.org and also, in the 

annually updated HHCAHPS Protocols 

and Guidelines Manual, which is 

downloadable from https:// 

homehealthcahps.org. 

For public reporting purposes, we 

present five measures—three composite 

measures and two global ratings of 

care—from the questions on the 

HHCAHPS survey. The publicly 

reported data are adjusted for 

differences in patient mix across home 

health agencies. Each of the three 

composite measures consists of four or 

more questions on one of the following 

related topics: 

• Patient care (Q9, Q16, Q19, and 

Q24); 

• Communications between providers 

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

and Q23); and 

• Specific care issues on medications, 

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

Q12, Q13, and Q14). 

The two global ratings are the overall 

rating of care given by the HHA’s care 

providers (Q20), and the patient’s 

willingness to recommend the HHA to 

family and friends (Q25). 

The HHCAHPS survey is not 

supposed to measure the aspects of 

home health clinical care that can be 

captured through a medical record. 

Rather, the HHCAHPS survey focuses 

on areas where the home health patient 

is the best or only source for the 

information. We believe that the 

HHCAHPS survey is a valid measure of 

a patient’s perspectives of home health 

care. The developmental work for the 

HHCAHPS survey began in mid-2006, 

and the first HHCAHPS survey was 

field-tested (to validate the length and 

content of the survey) in 2008 by the 

AHRQ and the CAHPS® grantees, and 

the final HHCAHPS survey was used in 

a national randomized mode experiment 

in 2009 through 2010. 

The HHCAHPS survey is currently 

available in several languages. At the 

time of the CY 2010 HH PPS final rule, 

HHCAHPS was only available in 

English and Spanish translations. In the 

proposed rule for CY 2010, we stated 


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that we would provide additional 

translations of the survey over time in 

response to suggestions for any 

additional language translations. We 

now offer HHCAHPS in English, 

Spanish, Chinese, Russian, and 

Vietnamese languages. We will continue 

to consider additional translations of the 

HHCAHPS in response to the needs of 

the home health patient population. 

All of the requirements about home 

health patient eligibility for the 

HHCAHPS survey and conversely, 

which home health patients are 

ineligible for the HHCAHPS survey are 

delineated and detailed in the 

HHCAHPS Protocols and Guidelines 

Manual, which is downloadable from 

https://homehealthcahps.org. Home 

health patients are eligible for 

HHCAHPS if they received at least two 

skilled home health visits in the past 

two months, which are paid for by 

Medicare or Medicaid. 

Home health patients are ineligible for 

inclusion in HHCAHPS surveys if one of 

these conditions pertains to them: 

• Are under the age of 18; 

• Are deceased prior to pulling 

sample; 

• Receive hospice care; 

• Received routine maternity care 

only; 

• Are not considered survey eligible 

because the state in which the patient 

lives restricts release of patient 

information for a specific condition or 

illness that the patient has; or 

• Requested that their names not be 

released to anyone. 

We stated in previous rules that 

Medicare-certified agencies are required 

to contract with an approved HHCAHPS 

survey vendor. This requirement is also 

codified. Beginning in summer 2009, 

interested vendors applied to become 

approved HHCAHPS survey vendors. 

HHCAHPS survey vendors are required 

to attend introductory and all update 

trainings conducted by CMS and the 

HHCAHPS Survey Coordination Team, 

as well as to pass a post-training 

certification test. We now have 

approximately 40 approved HHCAHPS 

survey vendors. The list of approved 

HHCAHPS survey vendors is available 

at https://homehealthcahps.org. 

(2) HHCAHPS Oversight Activities 

We stated in prior final rules that 

vendors would be required to 

participate in HHCAHPS oversight 

activities to ensure compliance with 

HHCAHPS protocols, guidelines, and 

survey requirements. The purpose of the 

oversight activities is to ensure that 

approved survey vendors follow the 

HHCAHPS Protocols and Guidelines 

Manual. As stated previously in the CY 

2010, CY 2011, and CY 2012 final rules, 

all approved survey vendors must 

develop a Quality Assurance Plan (QAP) 

for survey administration in accordance 

with the HHCAHPS Protocols and 

Guidelines Manual. An HHCAHPS 

survey vendor’s first QAP must be 

submitted within 6 weeks of the data 

submission deadline date after the 

vendor’s first quarterly data submission. 

The QAP must be updated and 

submitted annually thereafter and at any 

time that changes occur in staff or 

vendor capabilities or systems. A model 

QAP is included in the HHCAHPS 

Protocols and Guidelines Manual. The 

QAP should include the following: 

• Organizational Background and 

Staff Experience 

• Work Plan 

• Sampling Plan 

• Survey Implementation Plan 

• Data Security, Confidentiality and 

Privacy Plan 

• Questionnaire Attachments 

As part of the oversight activities, the 

HHCAHPS Survey Coordination Team 

conducts on-site visits to the approved 

HHCAHPS survey vendors. The purpose 

of the site visits is to allow the 

HHCAHPS Coordination Team to 

observe the entire Home Health Care 

CAHPS Survey implementation process, 

from the sampling stage through file 

preparation and submission, as well as 

to assess how the HHCAHPS data are 

stored. The HHCAHPS Survey 

Coordination Team reviews the survey 

vendor’s survey systems, and assesses 

administration protocols based on the 

HHCAHPS Protocols and Guidelines 

Manual posted at https:// 

homehealthcahps.org. The systems and 

program review includes, but is not 

limited to the following: 

• Survey management and data 

systems; 

• Printing and mailing materials and 

facilities; 

• Telephone call center facilities; 

• Data receipt, entry and storage 

facilities; and 

• Written documentation of survey 

processes. 

After the site visits, HHCAHPS 

vendors are given a defined time period 

in which to correct any identified issues 

and provide follow-up documentation 

of corrections for review. HHCAHPS 

survey vendors are subject to follow-up 

site visits on an as-needed basis. 

We proposed to codify the current 

guideline that all approved HHCAHPS 

survey vendors fully comply with all 

HHCAHPS oversight activities at 

§ 484.250(c) of our regulations. 

(3) HHCAHPS Requirements for CY 

2014 

For the CY 2014 APU, we proposed to 

continue monthly HHCAHPS data 

collection and reporting for four 

quarters. The data collection period for 

CY 2014 would include the second 

quarter 2012 through the first quarter 

2013 (the months of April 2012 through 

March 2013). HHAs would be required 

to submit their HHCAHPS data files to 

the Home Health CAHPS Data Center for 

CY 2014 for the second quarter 2012 by 

11:59 p.m., Eastern Time on October 18, 

2012; for the third quarter 2012 by 11:59 

p.m., Eastern Time on January 17, 2013; 

for the fourth quarter 2012 by 11:59 

p.m., Eastern Time on April 18, 2013; 

and for the first quarter 2013 by 11:59 

p.m., Eastern Time on July 18, 2013. 

We would exempt HHAs receiving 

Medicare certification on or after April 

1, 2012 from the full HHCAHPS 

reporting requirement for the CY 2014 

APU, because these HHAs were not 

Medicare-certified in the period of April 

1, 2011 through March 31, 2012. These 

HHAs would not need to complete a 

Participation Exemption Request Form 

for the CY 2014 Annual Payment 

Update. We proposed to maintain this 

stated exemption for new HHAs. 

HHAs that had fewer than 60 

HHCAHPS-eligible unduplicated or 

unique patients in the period of April 1, 

2011 through March 31, 2012 would be 

exempt from the HHCAHPS data 

collection and submission requirements 

for the CY 2014 APU. Such agencies 

would be required to submit their 

patient counts for the period of April 1, 

2011 through March 31, 2012 on the 

Participation Exemption Request form 

posted at https://homehealthcahps.org 

by 11:59 p.m., Eastern Time on January 

17, 2013. This deadline would be firm, 

as would be all of the quarterly data 

submission deadlines. 

(4) HHCAHPS Requirements for CY 

2015 

For the CY 2015 APU, we proposed to 

continue to require the continuous 

monthly HHCAHPS data collection and 

reporting for four quarters. The data 

collection period for CY 2015 would 

include the second quarter 2013 through 

the first quarter 2014 (the months of 

April 2013 through March 2014). HHAs 

would be required to submit their 

HHCAHPS data files to the Home Health 

CAHPS Data Center for CY 2014 for the 

second quarter 2013 by 11:59 p.m., 

Eastern Time on October 17, 2013; for 

the third quarter 2013 by 11:59 p.m., 

Eastern Time on January 16, 2014; for 

the fourth quarter 2013 by 11:59 p.m., 

Eastern Time on April 17, 2014; and for 


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the first quarter 2014 by 11:59 p.m., 

Eastern Time on July 17, 2014. 

We proposed to continue to exempt 

HHAs receiving Medicare certification 

on or after April 13, which is after the 

period in which HHAs do their patient 

count (April 1, 2012 through March 31, 

2013) on or after April 1, 2013 from the 

full HHCAHPS reporting requirement 

for the CY 2015 APU, because these 

HHAs are not Medicare-certified 

throughout the period of April 1, 2012 

through March 31, 2013. These HHAs 

do not need to complete a Participation 

Exemption Request Form for the CY 

2015 Annual Payment Update. We 

proposed to maintain this stated 

exemption for new HHAs. 

Likewise, all HHAs that had fewer 

than 60 HHCAHPS-eligible 

unduplicated or unique patients in the 

period of April 1, 2012 through March 

31, 2013 would be exempt from the 

HHCAHPS data collection and 

submission requirements for the CY 

2015 APU. Agencies with fewer than 60 

HHCAHPS-eligible, unduplicated or 

unique patients in the period of April 1, 

2012 through March 31, 2013 would be 

required to submit their patient counts 

on the Participation Exemption Request 

form for CY 2015 posted at https:// 

homehealthcahps.org by 11:59 p.m., 

Eastern Time on January 16, 2014. This 

deadline would be firm, as would be all 

of the quarterly data submission 

deadlines. 

(5) HHCAHPS Reconsiderations and 

Appeals Process 

We believe that HHAs should monitor 

their respective HHCAHPS survey 

vendors to ensure that vendors submit 

their HHCAHPS data on time, by 

accessing their HHCAHPS Data 

Submission Reports on https:// 

homehealthcahps.org. This will help 

HHAs ensure that their data are 

submitted in the proper format for data 

processing to the HHCAHPS Data 

Center. 

We believe that the reconsiderations 

process for HHCAHPS should not be 

burdensome to HHAs. We have modeled 

the HHCAHPS reconsiderations process 

after the one that is used for Hospital 

CAHPS, in use for nearly 7 years. We 

have described the HHCAHPS 

reconsiderations process requirements 

in the notification memorandum that 

the RHHIs/MACs sent to the affected 

HHAs, on behalf of CMS. HHAs have 30 

days to send their reconsiderations to 

CMS. CMS has and will continue to 

fully examine all HHA reconsiderations. 

(6) Summary of Proposed Changes in CY 

2013 

We proposed one change in the CY 

2013 HH PPS proposed rule issued in 

the July 13, 2012 Federal Register (77 

FR 41548). We proposed to codify the 

current guideline that all approved 

HHCAHPS survey vendors fully comply 

with all HHCAHPS oversight activities, 

and include this at § 484.250(c). 

(7) For Further Information on the 

HHCAHPS Survey 

We strongly encourage HHAs to learn 

about the survey and view the 

HHCAHPS Survey Web site at the 

official Web site for the HHCAHPS at 

https://homehealthcahps.org. Home 

health agencies can also send an email 

to the HHCAHPS Survey Coordination 

Team at HHCAHPS@rti.org, or 

telephone toll-free (1–866–354–0985) 

for more information about HHCAHPS. 

The following is a summary of the 

comments we received regarding the 

Home Health Care CAHPS Survey 

(HHCAHPS) proposal. 

Comment: We received several 

comments that expressed confusion 

over CMS’s statement that we would 

codify the HHCAHPS guideline that 

home health agencies ensure that survey 

vendors are fully compliant with all 

HHCAHPS requirements because 

vendors are approved by CMS. These 

commenters noted that an agency 

should accept CMS’s approval as 

verification that the vendor meets all 

HHCAHPS requirements and should not 

be held responsible for any compliance 

failures of a CMS-approved vendor. 

Response: In the proposed rule, we 

proposed to codify the current guideline 

that all approved HHCAHPS survey 

vendors fully comply with all 

HHCAHPS oversight activities. We 

proposed to include this survey 

requirement at § 484.250(c). This was 

correct. However, we were not clear in 

the proposed rule about the HHA’s role. 

HHAs do not need to participate in 

vendor oversight activities. We have 

corrected this in the final rule. We have 

clarified this language in the preamble 

of the final rule based on comments, 

that the HHCAHPS approved vendors 

have to comply with HHCAHPS 

oversight activities. We in error noted in 

the preamble of the proposed rule that 

HHAs have to comply with HHCAHPS 

oversight activities. However, HHAs are 

responsible for monitoring their vendors 

to ensure that vendors submit their data 

on time, using the information that is 

available to them on the HHCAHPS data 

submission reports accessible through 

https://homehealthcahps.org. If we 

become aware of a significant vendor 

issue that would put HHAs at risk for 

not meeting the APU requirements, we 

will immediately alert the affected 

HHAs. If we find that a vendor does not 

comply with HHCAHPS protocols and 

guidelines, or correct in a timely 

manner any deficiencies that are found 

during oversight activities, then we will 

remove that vendor from the approved 

list of HHCAHPS survey vendors. 

Comment: One commenter believed 

that there needs to be enough flexibility 

within the reconsideration process to 

provide relief to HHA providers that 

have made reasonable efforts to ensure 

that their survey vendors have complied 

with the HHCAHPS requirements. 

Response: We review each HHA 

submission for the reconsideration 

process in a standardized manner so 

that all HHAs are treated fairly in the 

review process. If we become aware of 

a significant vendor issue that would 

put HHAs at risk for not meeting the 

APU requirements, we will immediately 

alert the affected HHAs. If we find that 

a vendor does not comply with 

HHCAHPS protocols and guidelines, or 

correct in a timely manner any 

deficiencies that are found during 

oversight activities, then we will remove 

that vendor from the approved list of 

HHCAHPS survey vendors. 

Comment: One commenter stated that 

there is continued concern that the 

HHCAHPS survey places another 

unfunded administrative burden on 

HHAs—a mandate that requires 

significant time to work with CMS’s 

approved vendor selected by the HHA 

provider. 

Response: The collection of the 

patient’s perspectives of care data for 

similar CAHPS surveys, such as 

Hospital CAHPS, follow the same model 

where providers pay the approved 

survey vendors for the data collection, 

and CMS pays for the HHCCAHPS 

survey vendor training, technical 

support and assistance for HHAs and for 

HHCAHPS survey vendors, oversight of 

HHCAHPS survey vendors, and data 

analysis of the HHCAHPS survey data. 

HHAs are strongly encouraged to report 

their respective HHCAHPS costs on 

their cost reports but should note that 

the HHCAHPS costs are not 

reimbursable under the HH PPS. We 

encourage HHAs to ‘‘shop around’’ for 

the best cost value for them before 

contracting with an approved 

HHCAHPS vendor to conduct the 

survey on their behalf. 

Comment: We received a comment 

requesting that CMS consider reporting 

the percent of patients that would 

probably recommend this agency to 

family and friends, in addition to 

reporting the percent of patients that 


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would definitely recommend this 

agency to family and friends. 

Response: Thank you for your 

feedback. We will take it under 

consideration. 

Comment: We received a comment 

that is in full support of the HHCAHPS 

and would suggest that CMS continue to 

report updates on HHCAHPS in the 

open door forums. Also, this commenter 

said that it might be very helpful to 

include HHCAHPS as a scope of work 

with the QIOs so that best practices to 

increase consumer satisfaction could be 

established and shared. 

Response: We appreciate supportive 

comments about HHCAHPS. The survey 

provides an opportunity for patients to 

share their perspectives about the care 

provided. We appreciate your 

suggestion to include HHCAHPS in the 

SOW for the QIOs and will take it under 

consideration. 

We are finalizing the proposed 

requirements for HHCAHPS as proposed 

in the CY 2013 HH PPS proposed rule. 

We are also codifying the current 

guideline that all approved HHCAHPS 

survey vendors fully comply with all 

HHCAHPS oversight activities. We are 

including this at § 484.250(c). The 

regulation is identically stated in the 

proposed rule and in this final rule. 

4. Home Health Wage Index 

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

of the Act require the Secretary to 

provide appropriate adjustments to the 

proportion of the payment amount 

under the HH PPS that account for area 

wage differences, using adjustment 

factors that reflect the relative level of 

wages and wage-related costs applicable 

to the furnishing of home health 

services. In the CY 2013 HH PPS 

proposed rule (77 FR 41548), as in 

previous years, we proposed to base the 

wage index adjustment to the labor 

portion of the HH PPS rates on the most 

recent pre-floor and pre-reclassified 

hospital wage index. We would apply 

the appropriate wage index value to the 

labor portion of the HH PPS rates based 

on the site of service for the beneficiary 

(defined by section 1861(m) of the Act 

as the beneficiary’s place of residence). 

Previously, we determined each HHA’s 

labor market area based on definitions 

of Metropolitan Statistical Areas (MSAs) 

issued by the Office of Management and 

Budget (OMB). We have consistently 

used the pre-floor, pre-reclassified 

hospital wage index data to adjust the 

labor portion of the HH PPS rates. We 

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

results in an appropriate adjustment to 

the labor portion of the costs, as 

required by statute. 

In the CY 2006 HH PPS final rule (70 

FR 68132), we began adopting revised 

labor market area definitions as 

discussed in the Office of Management 

and Budget (OMB) Bulletin No. 03–04 

(June 6, 2003). This bulletin announced 

revised definitions for Metropolitan 

Statistical Areas (MSAs) and the 

creation of Micropolitan Statistical 

Areas and Core-Based Statistical Areas 

(CBSAs). The bulletin is available 

online at www.whitehouse.gov/omb/ 

bulletins/b03–04.html. In addition, 

OMB published subsequent bulletins 

regarding CBSA changes, including 

changes in CBSA numbers and titles. 

This rule incorporates the CBSA 

changes published in the most recent 

OMB bulletin. The OMB bulletins are 

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

omb/bulletins/index.html. 

Finally, we would continue to use the 

methodology discussed in the CY 2007 

HH PPS final rule (71 FR 65884) to 

address those geographic areas in which 

there were no inpatient prospective 

payment system (IPPS) hospitals and, 

thus, no hospital wage data on which to 

base the calculation of the HH PPS wage 

index. For rural areas that do not have 

IPPS hospitals, and therefore, lack 

hospital wage data on which to base a 

wage index, we would use the average 

wage index from all contiguous CBSAs 

as a reasonable proxy. For rural Puerto 

Rico, we do not apply this methodology 

due to the distinct economic 

circumstances that exist there, but 

instead continue using the most recent 

wage index previously available for that 

area (from CY 2005). 

For urban areas without IPPS 

hospitals, we use the average wage 

index of all urban areas within the state 

as a reasonable proxy for the wage index 

for that CBSA. For CY 2012, the only 

urban area without IPPS hospital wage 

data is Hinesville-Fort Stewart, Georgia 

(CBSA 25980). 

The wage index values for rural areas 

and the CBSAs and their associated 

wage index values are available via the 

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

Medicare/Medicare-Fee-for-ServicePayment/HomeHealthPPS/HomeHealth-Prospective-Payment-SystemRegulations-and-Notices.html 

The following is a summary of the 

comments we received regarding the 

wage index policy in the CY 2013 HH 

PPS proposed rule. 

Comment: Commenters expressed 

concern about the inequities between 

the hospital wage index and the home 

health wage index. Several commenters 

believed that the pre-floor, prereclassified hospital wage index is 

inadequate for adjusting home health 

costs. Commenters cited labor market 

distortions created by reclassification of 

hospitals in areas in which HHAs are 

not reclassified. However, while 

hospitals have the opportunity to 

reclassify to neighboring CBSAs or take 

advantage of the rural floor, HHAs do 

not have this ability. Commenters stated 

that this has resulted in inadequate 

home health cost adjustment that 

negatively impact HHAs ability to 

recruit and retain nurses and therapists 

in a highly competitive health care labor 

market. CMS’s reasoning for refusing to 

apply reclassification to HHAs is that 

reclassification applies only to hospitals 

by statute. However, if hospital relative 

wages are thought to be a reasonable 

proxy for relative wages of HHAs, the 

impact of hospital reclassifications in an 

area should be applied to the hospital 

wage index which in turn is applied to 

the home health reimbursement. 

Response: As we have previously 

stated (see the CY 2009 HH PPS final 

rule at 74 FR 58105), the regulations 

that govern the HH PPS do not provide 

a mechanism for allowing providers to 

seek geographic reclassification or to 

utilize the rural floor provisions that 

exist for IPPS hospitals. The rural floor 

provision can be found in section 4410 

of the Balanced Budget Act of 1997 

(BBA) (Pub. L. 105–33) and is specific 

to hospitals. The reclassification 

provision can be found in section 

1886(d)(10) of the Act is also specific to 

hospitals. In its June 2007 report titled, 

‘‘Report to Congress: Promoting Greater 

Efficiency in Medicare’’, MedPAC 

recommended that Congress ‘‘repeal the 

existing hospital wage index statute, 

including reclassification and 

exceptions, and give the Secretary 

authority to establish new wage index 

systems.’’ We will continue to review 

and consider MedPAC’s 

recommendations on a refined 

alternative wage index methodology for 

the HH PPS in the future. 

Comment: A commenter believes that 

CMS’s decision 7 years ago to switch 

from Metropolitan Statistical Areas to 

Core-Based Statistical Areas for the 

wage index calculation has had serious 

financial ramifications for HHAs in 

certain areas. 

Response: We believe that adjusting 

payments based on the CBSA areas is 

the best available method of 

compensating for differences in labor 

markets. We adopted the OMB-revised 

definitions of the labor market areas 

(CBSAs) in our CY 2006 HH PPS final 

rule (70 FR 68137). We implemented a 

one-year transition policy consisting of 

a 50/50 blend of the MSA-based and the 

new CBSA-based wage indexes for that 

year. The HH PPS has been utilizing the 


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CBSA based wage index in its entirety 

since calendar year 2007. 

Comment: Several commenters stated 

that the year-to-year swings in the wage 

index are unpredictable. Commenters 

also urged CMS to implement a policy 

to limit the wage index variation 

between provider types within CBSAs 

and adjacent markets. Commenters 

suggested that CMS establish ‘‘change 

corridors’’ to limit the annual change in 

wage index values in a given year. 

Response: Updating the hospital wage 

index is done in a budget neutral 

manner. Establishing ‘‘change 

corridors’’ or limits on how much a 

particular wage index could increase or 

decrease from year-to-year would not be 

consistent with budget neutrality. 

Comment: A commenter stated that 

the wage index is often based on 

inaccurate or incomplete hospital cost 

report data. 

Response: We utilize efficient means 

to ensure and review the accuracy of the 

hospital cost report data and resulting 

wage index. The home health wage 

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

calculated based on cost report data 

from hospitals paid under the IPPS. All 

IPPS hospitals must complete the wage 

index survey (Worksheet S–3, Parts II 

and III) as part of their Medicare cost 

reports. Cost reports will be rejected if 

Worksheet S–3 is not completed. In 

addition, our intermediaries perform 

desk reviews on all hospitals’ 

Worksheet S–3 wage data, and we run 

edits on the wage data to further ensure 

the accuracy and validity of the wage 

data. Furthermore, HHAs have the 

opportunity to submit comments on the 

hospital wage index data during the 

annual IPPS rulemaking period. 

Therefore, we believe our review 

processes result in an accurate reflection 

of the applicable wages for the areas 

given. 

Comment: Several commenters 

supported a review of the entire wage 

index system and urge CMS to expedite 

that review and implement a system 

that not only recognizes variations 

between localities, but also treats all 

provider types within a local market 

equitably. 

Response: Two studies were 

undertaken to address concerns that the 

current wage index system does not 

effectively reflect the true variation in 

labor costs. First, section 3137(b) of the 

Affordable Care Act required the 

Secretary to submit to the Congress a 

report that includes a plan to 

comprehensively reform the Medicare 

wage index applied under section 

1886(d) of the Act. In developing the 

plan, the Secretary was directed to take 

into consideration the goals for 

reforming the wage index that were set 

forth by the Medicare Payment Advisory 

Commission (MedPAC) in its June 2007 

report entitled ‘‘Report to Congress: 

Promoting Greater Efficiency in 

Medicare’’ and to ‘‘consult with relevant 

affected parties.’’ Second, the Secretary 

commissioned the Institute of Medicine 

(IOM) to ‘‘evaluate hospital and 

physician geographic payment 

adjustments, the validity of the 

adjustment factors, measures and 

methodologies used in those factors, 

and sources of data used in those 

factors.’’ Reports on both of these 

studies recently have been released. We 

refer readers to the FY 2013 IPPS final 

rule for summaries of the studies, their 

findings, and recommendations on 

reforming the wage index system (77 FR 

28116). 

Comment: A commenter stated that 

differences in the occupational 

personnel pool and costs between 

hospitals and HHAs make use of the 

hospital wage index inappropriate in 

the home health setting. Hospitals 

benefit from institutional efficiencies 

and rural hospitals have a 

reclassification mechanism to avoid 

exposure to the drastic rural rate in most 

states. Despite repeated comments from 

HHAs opposing the use of the hospital 

wage index each year, CMS has not yet 

developed a home health specific wage 

index, citing the expense and 

administrative burden of data 

collection. The commenter stated that 

CMS has the discretion to establish a 

home health wage index and that the 

use of the hospital wage index to adjust 

non-hospital reimbursement rates was 

originally intended to be an interim 

measure while CMS examined industryspecific wage data for HHAs, SNFs, IRFs 

and other post-acute services. The 

commenter cited the following rules: 65 

FR 41127 (July 12, 2000), 65 FR 46770 

(July 31, 2000), and 66 FR 41316 

(August 7, 2001). 

Response: Please note that the July 31, 

2000 rule (65 FR 46770) is a SNF rule 

and the August 7, 2001 rule (66 FR 

41316) is an IRF rule so they do not 

apply to the HH PPS. The HH PPS rule 

at 65 FR 41127 was published on July 

3, 2000 and we did not intend or imply 

that our adoption of the pre-floor, prereclassified hospital wage index to be an 

interim measure. As we stated in the 

July 3, 2000 HH PPS final rule (65 FR 

41173), ‘‘To be consistent with the wage 

index adjustment under the current 

interim payment system, we proposed 

and will retain applying the appropriate 

wage index value to the labor portion of 

the PPS rates based on the geographic 

area in which the beneficiary received 

home health services.’’ We further noted 

that ‘‘In establishing the final HHA PPS 

rates, we used the most recent pre-floor, 

pre-reclassified hospital wage index 

without regard to whether these 

hospitals have been reclassified to a 

new geographic area by the Medicare 

Geographic Reclassification Board.’’ As 

stated above, we refer readers to the FY 

2013 IPPS Final Rule (77 FR 28116) for 

summaries of the two studies 

undertaken to address concerns that the 

current hospital wage index system does 

not effectively reflect the true variation 

in labor costs, their findings, and 

recommendations on reforming the 

wage index system. 

Comment: A commenter noted that 

beginning in FY 2004, CMS dropped 

critical access hospitals (CAHs) from the 

calculation of the wage index. As CAHs 

are located in rural areas, the absence of 

CAH wage data further compromises the 

accuracy and appropriateness of using 

hospital wage data to determine labor 

costs of HHAs located in rural areas. 

Response: Although the pre-floor, prereclassified hospital wage index data 

does not include CAHs, we believe it 

most appropriately reflects the relative 

level of wages and wage-related costs 

applicable to the furnishing of home 

health services and provide appropriate 

adjustments to the episode payment 

amounts under the HH PPS to account 

for area wage differences. Therefore, for 

this final rule, we are adopting the prefloor, pre-reclassified hospital wage 

index. 

Comment: A commenter suggested, 

pending development of an industry 

specific wage index, that CMS should 

investigate adding a population density 

factor to the calculation of the payment 

formula. This would provide incentive 

to HHAs to service beneficiaries 

residing in low density (primarily rural) 

areas, while at the same time reducing 

excess reimbursement for services 

provided in densely populated urban 

and congregate living facilities. The 

commenter states that travel time and 

mileage costs incurred for providing 

home health services to patients that are 

grouped in the lowest population 

density group is more than double that 

of the highest population density group. 

Response: We have received and 

responded to this comment in prior 

rules. We appreciate the commenter’s 

comment, but we do not have evidence 

that a population density adjustment is 

an appropriate adjustment to a wage 

index. Section 3131(d) of the Affordable 

Care Act requires the Secretary to 

conduct a study on HHA costs involved 

with providing ongoing access to care to 

low-income Medicare beneficiaries or 

beneficiaries in medically underserved 


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areas, and in treating beneficiaries with 

varying levels of severity of illness. 

Because medically underserved areas 

may be associated with population 

density, the purview of the above 

mentioned study may possibly include 

feasibility of such an adjustment as part 

of that research. While rural agencies 

cite the added cost of long distance 

travel to treat their patients, urban/nonrural agencies also cite added costs such 

as needed security measures and the 

volume of traffic that they must absorb. 

We will consider this suggestion in 

future research activities. 

Comment: A commenter requested 

that the county in which its HHA is 

located be reclassified into a different 

CBSA. The commenter believes that the 

ability to attract and retain qualified 

competent health care professionals will 

be adversely affected if the county is not 

reclassified into another CBSA. 

Response: We adopted the OMBrevised definitions of the labor market 

areas (CBSAs) in our CY 2006 HH PPS 

final rule (70 FR 68137). We 

implemented a one-year transition 

policy consisting of a 50/50 blend of the 

MSA-based and the new CBSA-based 

wage indexes. The HH PPS has been 

utilizing the CBSA based wage index in 

its entirety since calendar year 2007. We 

do not have the authority to redesignate 

a county into a different CBSA. 

We are implementing our proposal to 

base the wage index adjustment to the 

labor portion of the HH PPS rates on the 

most recent pre-floor and prereclassified hospital wage index. 

5. Final CY 2013 Payment Update 

a. National Standardized 60-Day 

Episode Rate 

The Medicare HH PPS has been in 

effect since October 1, 2000. As set forth 

in the July 3, 2000 final rule (65 FR 

41128), the base unit of payment under 

the Medicare HH PPS is a national 

standardized 60-day episode rate. As set 

forth in § 484.220, we adjust the 

national standardized 60-day episode 

rate by a case-mix relative weight and a 

wage index value based on the site of 

service for the beneficiary. 

In the CY 2008 HH PPS final rule with 

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

revised the home health market basket. 

To provide appropriate adjustments to 

the proportion of the payment amount 

under the HH PPS to account for area 

wage difference, we apply the 

appropriate wage index value to the 

labor portion of the HH PPS rates. As 

discussed in section III.C.1, we are 

finalizing a labor-related share of the 

case-mix adjusted 60-day episode rate of 

78.535 percent and a non-labor-related 

share of 21.465 percent. The final CY 

2013 HH PPS rates use the same casemix methodology and application of the 

wage index adjustment to the labor 

portion of the HH PPS rates as set forth 

in the CY 2008 HH PPS final rule with 

comment period. Following are the 

steps we take to compute the case-mix 

and wage adjusted 60-day episode rate: 

(1) Multiply the national 60-day 

episode rate by the patient’s applicable 

case-mix weight. 

(2) Divide the case-mix adjusted 

amount into a labor (78.535 percent) 

and a non-labor portion (21.465 

percent). 

(3) Multiply the labor portion by the 

applicable wage index based on the site 

of service of the beneficiary. 

(4) Add the wage-adjusted portion to 

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

rate, subject to any additional applicable 

adjustments. 

In accordance with section 

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

constitutes the annual update of the HH 

PPS rates. The HH PPS regulations at 

§ 484.225 set forth the specific annual 

percentage update methodology. In 

accordance with § 484.225(i), for a HHA 

that does not submit home health 

quality data, as specified by the 

Secretary, the unadjusted national 

prospective 60-day episode rate is equal 

to the rate for the previous calendar year 

increased by the applicable home health 

market basket index amount minus two 

percentage points. Any reduction of the 

percentage change will apply only to the 

calendar year involved and will not be 

considered in computing the 

prospective payment amount for a 

subsequent calendar year. 

As discussed in the July 3, 2000 HH 

PPS final rule, for episodes with four or 

fewer visits, Medicare pays the national 

per-visit amount by discipline, referred 

to as a low utilization payment amount 

(LUPA). We update the national pervisit rates by discipline annually by the 

applicable home health market basket 

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

based on the site of service for the 

beneficiary, as set forth in § 484.230. For 

CY 2013, we proposed to adjust the 

labor portion of the updated national 

per-visit rates used to calculate LUPAs 

by the most recent pre-floor and prereclassified hospital wage index. We 

will update the LUPA add-on payment 

amount and the NRS conversion factor 

by the applicable home health payment 

update of 1.3 percent for CY 2013. 

Medicare pays the 60-day case-mix 

and wage-adjusted episode payment on 

a split percentage payment approach. 

The split percentage payment approach 

includes an initial percentage payment 

and a final percentage payment as set 

forth in § 484.205(b)(1) and (2). We may 

base the initial percentage payment on 

the submission of a request for 

anticipated payment (RAP) and the final 

percentage payment on the submission 

of the claim for the episode, as 

discussed in § 409.43. The claim for the 

episode that the HHA submits for the 

final percentage payment determines 

the total payment amount for the 

episode and whether we make an 

applicable adjustment to the 60-day 

case-mix and wage-adjusted episode 

payment. The end date of the 60-day 

episode as reported on the claim 

determines which calendar year rates 

Medicare would use to pay the claim. 

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

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A partial episode payment 

adjustment as set forth in § 484.205(d) 

and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

b. Final Updated CY 2013 National 

Standardized 60-Day Episode Payment 

Rate 

In calculating the annual update for 

the CY 2013 national standardized 60- 

day episode payment rates, we first look 

at the CY 2012 rates as a starting point. 

The CY 2012 national standardized 60- 

day episode payment rate is $2,138.52. 

Next, we update the payment amount 

by the final CY 2013 home health 

payment update of 1.3 percent. 

As previously discussed in section 

III.A. (‘‘Case-Mix Measurement’’) of this 

final rule, we have updated our analysis 

of the change in case-mix that is not due 

to an underlying change in patient 

health status. The analysis revealed an 

additional increase in nominal change 

in case-mix, increasing the reduction 

needed in CY 2013 to fully account for 

nominal case-mix change from 1.32 

percent, using data through 2009, to 

2.18 percent, using data through 2010. 

However, we will reduce rates by 1.32 

percent in CY 2013 as promulgated in 

the CY 2012 HH PPS Final Rule. The 

national 60-day episode payment 

amount is adjusted by the case-mix 

weight of the patient and by the wage 

index of the geographic area in which 

the beneficiary is located. The final CY 

2013 national standardized 60-day 

episode payment rate for an HHA that 

submits the required quality data is 


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shown in Table 12. The final CY 2013 

national standardized 60-day episode 

payment rate for an HHA that does not 

submit the required quality data is 

updated by the final CY 2013 home 

health payment update (1.3 percent) 

minus 2 percentage points and is shown 

in Table 13. 

c. National Per-Visit Rates 

The national per-visit rates are used to 

pay LUPAs and are also used to 

compute imputed costs in outlier 

calculations. The per-visit rates are paid 

by type of visit or home health 

discipline. The six home health 

disciplines are as follows: 

• Home Health Aide (HH aide); 

• Medical Social Services (MSS); 

• Occupational Therapy (OT); 

• Physical Therapy (PT); 

• Skilled Nursing (SN); and 

• Speech Language Pathology 

Therapy (SLP). 

In order to calculate the CY 2013 

national per-visit rates, the CY 2012 

national per-visit rates for each 

discipline are updated by the final CY 

2013 home health payment update of 

1.3 percent. The national per-visit rates 

are adjusted by the wage index based on 

the site of service of the beneficiary. The 

per-visit rates are not case-mix adjusted 

nor are they subject to the 1.32 percent 

reduction related to the nominal 

increase in case-mix. The per-visit 

payment amounts for LUPAs are 

separate from the LUPA Add-On 

amount which is paid for episodes that 

occur as the only episode or initial 

episode in a sequence of adjacent 

episodes. The CY 2013 national per-visit 

rates are shown in Table 14. 


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d. LUPA Add-On Payment Amount 

Update 

Beginning in CY 2008, LUPA episodes 

that occur as the only episode or initial 

episode in a sequence of adjacent 

episodes are adjusted by adding an 

additional amount to the LUPA 

payment before adjusting for area wage 

differences. We update the LUPA 

payment amount by the CY 2013 home 

health payment update of 1.3 percent. 

The LUPA add-on payment amount is 

not subject to the 1.32 percent reduction 

related to the nominal increase in casemix. For CY 2013, the add-on to the 

LUPA payment for HHAs that submit 

the required quality data will be 

updated by the CY 2013 home health 

payment update of 1.3 percent. The CY 

2013 LUPA add-on payment amount is 

shown in Table 15. The add-on to the 

LUPA payment for HHAs that do not 

submit the required quality data will be 

updated by the CY 2013 home health 

payment update (1.3 percent) minus two 

percentage points. 


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e. Nonroutine Medical Supply 

Conversion Factor Update 

Payments for nonroutine medical 

supplies (NRS) are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. We first increase CY 

2012 NRS conversion factor ($53.28) by 

the payment update of 1.3 percent. The 

final updated CY 2013 NRS conversion 

factor for 2013 appears in Table 16. 

Using the NRS conversion factor 

($53.97) for CY 2013, the payment 

amounts for the various severity levels 

are shown in Table 17. 

For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2012 NRS conversion 

factor. We increase the CY 2012 NRS 

conversion factor ($53.28) by the CY 

2013 home health payment update of 

1.3 percent minus 2 percentage points. 

The CY 2013 NRS conversion factor for 


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HHAs that do not submit quality data is 

shown in Table 18. 

The payment amounts for the various 

severity levels based on the updated 

conversion factor for HHAs that do not 

submit quality data are calculated in 

Table 19. 

6. Rural Add-On 

Section 421(a) of the MMA required, 

for home health services furnished in a 

rural areas (as defined in section 

1886(d)(2)(D) of the Act), with respect to 

episodes or visits ending on or after 

April 1, 2004 and before April 1, 2005, 

that the Secretary increase the payment 

amount that otherwise would have been 

made under section 1895 of the Act for 

the services by 5 percent. 

Section 5201 of the DRA amended 

section 421(a) of the MMA. The 

amended section 421(a) of the MMA 

required, for home health services 

furnished in a rural area (as defined in 

section 1886(d)(2)(D) of the Act), on or 

after January 1, 2006 and before January 

1, 2007, that the Secretary increase the 

payment amount otherwise made under 

section 1895 of the Act for those 

services by 5 percent. 

Section 3131(c) of the Affordable Care 

Act amended Section 421(a) of the 

MMA to provide an increase of 3 

percent of the payment amount 

otherwise made under section 1895 of 

the Act for home health services 

furnished in a rural area (as defined in 

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

episodes and visits ending on or after 

April 1, 2010 and before January 1, 

2016. 

The statute waives budget neutrality 

related to this provision, as the statute 

specifically states that the Secretary 

shall not reduce the standard 

prospective payment amount (or 

amounts) under section 1895 of the Act 

applicable to home health services 

furnished during a period to offset the 

increase in payments resulting in the 

application of this section of the statute. 

The 3 percent rural add-on is applied 

to the national standardized 60-day 

episode rate, national per-visit rates, 

LUPA add-on payment, and NRS 

conversion factor when home health 

services are provided in rural (nonCBSA) areas. Refer to Tables 20 through 

24 for these payment rates. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

The following is a summary of the 

comments we received regarding the HH 

PPS payment rates. 

Comment: Commenter supports the 

continuation of the rural add-on and 

CMS’s recognition of the challenges 

faced by rural providers. 

Response: We value the crucial role 

that rural providers fill in providing 

care to beneficiaries who reside in rural 

areas. The current rural add-on is 

legislated by section 3131(c) of the 

Affordable Care Act amended section 

421(a) of the MMA to provide an 

increase of 3 percent of the payment 

amount otherwise made under section 

1895 of the Act for home health services 

furnished in a rural area for episodes 

and visits ending on or after April 1, 

2010 and before January 1, 2016. 

Comment: A commenter urges CMS to 

consider a 5 percent rural add-on. 

Response: To bolster payment rates 

for services provided to beneficiaries 

who reside in rural areas, section 421(a) 

of the MMA, as amended by section 

3131(c) of the Affordable Care Act, 

provides for a 3 percent rural add-on for 

episodes and visits ending on or after 

April 1, 2010 and before January 1, 

2016. The statute waives budget 

neutrality related to this provision. The 

amount of the rural add-on is stipulated 

by section 421(a) of the MMA. 

Comment: A commenter believes that 

HHAs that serve beneficiaries in rural 

areas are in a particularly precarious 

financial situation. The commenter 

stated that rural HHAs operating costs 

are higher than urban HHAs. In 

addition, the commenters are concerned 

about access to care for rural 

beneficiaries. One commenter goes on to 

state that rural HHAs often function as 

the primary caregivers for elderly 

homebound patients who have high 

resource needs which also increase the 

cost of rural home health services. 

Response: As we stated above, we 

value the crucial role that rural 

providers fill in providing care to 

beneficiaries who reside in rural areas. 

We will be looking to improve the 

accuracy of payment to HHAs in the 

future, through a number of efforts. In 

particular, section 3131(d) of the 

Affordable Care Act requires the 

Secretary to study and report on the 

development of HH payment revisions 

that would ensure access to care and 

payment for severity of illness. The 

study is to be on HHA costs involved 

with providing ongoing access to care to 

low-income Medicare beneficiaries or 

beneficiaries in medically underserved 

areas, and in treating beneficiaries with 

varying levels of severity of illness. As 

part of this study, we are required to 

consult with appropriate stakeholders, 

such as groups representing HHAs and 

groups representing Medicare 

beneficiaries. At the conclusion of this 

study, we must submit a Report to the 

Congress by March 1, 2014. Based on 

the findings of this study, the Secretary 

may provide for a demonstration project 

to test whether making payment 

adjustments for HH services under the 

Medicare program would substantially 

improve access to care for patients with 

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income or underserved Medicare 

beneficiaries. 

We are implementing the payment 

rates as they appear in sections III.C.5 

and III.C.6 above. 

D. Home Health Face-to-Face Encounter 

1. Additional Flexibility 

As a condition for payment, the 

Affordable Care Act requires that, prior 

to certifying a patient’s eligibility for the 

home health benefit, the physician must 

document that the physician himself or 

herself or an allowed nonphysician 

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

encounter with the patient. Specifically, 

sections 1814(a)(2)(C) and 1835 (a)(2)(A) 

of the Act, as amended by the 

Affordable Care Act state that a nurse 

practitioner or clinical nurse specialist, 

as those terms are defined in section 

1861(aa)(5) of the Act, working in 

collaboration with the physician in 

accordance with state law, or a certified 

nurse-midwife (as defined in section 

1861(gg) of the Act) as authorized by 

state law, or a physician assistant (as 

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

Act) under the supervision of the 

physician may perform the face to face 

encounter and inform the certifying 

physician, who documents the 

encounter as part of the certification of 

eligibility. In the CY 2012 HH PPS final 

rule (76 FR 68597), we stated that, in 

addition to the certifying physician and 

allowed NPPs, the physician who cared 

for the patient in an acute or post-acute 

care facility, and who had privileges in 

such facility, could also perform the 

face-to-face encounter and inform the 

certifying physician, who would 

document the encounter as part of the 

certification of eligibility, that the 

encounter supported the patient’s 

homebound status and need for skilled 

services. 

For patients admitted to home health 

following care in an acute or post-acute 

care facility, the home health industry 

has asked whether it would be 

acceptable for an allowed NPP, working 

in the acute or post-acute facility, to 

perform the face-to-face encounter in 

collaboration with the acute or postacute care physician and communicate 

his or her clinical findings to the acute 

or post-acute care physician and, then, 

for the acute or post-acute care 

physician to communicate the NPP’s 

findings to the certifying physician. In 

practice, it is our understanding from 

these stakeholders that acute or postacute care physicians utilize NPPs to 

obtain information about the patient’s 

clinical condition. As such, the industry 

suggested that it would be reasonable 

and appropriate for an allowed NPP 

working in an acute or post-acute 

facility to perform the face-to-face 

encounter and communicate the clinical 

findings to the acute or post-acute care 

physician who would then 

communicate information regarding the 

patient’s homebound status and need 

for skilled services to the certifying 

physician. We do not believe the statute 

precludes this situation from occurring. 

Therefore, in the CY 2013 HH PPS 

proposed rule (77 FR 41548)), for 

patients admitted to home health from 

an acute or post-acute facility we 

proposed to modify the regulations at 

§ 424.22(a)(1)(v) to allow an NPP in an 

acute or post-acute facility to perform 

the face-to-face encounter in 

collaboration with or under the 

supervision of the physician who has 

privileges and cared for the patient in 

the acute or post-acute facility, and 

allow such physician to inform the 

certifying physician of the patient’s 

homebound status and need for skilled 

services. 

The following is a summary of the 

comments we received regarding the 

additional flexibility proposed. 

Comment: Most commenters 

expressed support of the additional 

flexibility proposed. One commenter 

stated that the proposal will be difficult 

to implement and educate physicians on 

and that physicians often do not want 

to certify based on information provided 

to them from a different physician or 

allowed NPP. 

Response: We thank the commenters 

for their support and acknowledge since 

the implementation of the face-to-face 

encounter requirements in CY 2011 (75 

FR 70372) we have heard that many 

HHAs and practitioners believe that the 

requirements are confusing and hard for 

providers to understand. As result, we 

recently released a revised set of Q&As 

and a MLN Matters article. We created 

this guidance with the goal of increasing 

the understanding of the face-to-face 

requirements among physicians and to 

provide additional flexibilities that 

certifying physicians can utilize in 

completing the face-to-face encounter 

documentation. For example, if the 

certifying physician is hesitant to use 

information provided to them from 

another physician or allowed NPP, the 

certifying physician can use a hospital’s 

discharge summary as the face-to-face 

documentation as long as it is clearly 

titled and dated as such, and contains 

all the documentation requirements and 

is signed by the certifying physician. 

The Q&As are available at: http:// 

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

Downloads/QandAsFull-revised062712.pdf and the MLN Matters article 

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

Outreach-and-Education/MedicareLearning-Network-MLN/ 

MLNMattersArticles/Downloads/ 

SE1219.pdf. 

Comment: One commenter 

recommended that CMS permit allowed 

NPPs in the acute or post-acute setting 

to speak directly with the certifying 

physician about the patient’s clinical 

and homebound status and need for 

skilled care. Another commenter 

recommended that CMS allow the 

physician to sign off on the NPP’s 

clinical findings and permit the NPP to 

send his or her clinical findings with 

the physician signature directly to the 

certifying physician. The commenter 

also stated that HHAs should not have 

to ensure that the acute or post-acute 

care physician is the supervising 

physician of the NPP that performed the 

face-to-face encounter. 

Response: In the acute or post-acute 

care setting, current policy permits 

allowed NPPs to perform the face-toface encounter and directly inform the 

certifying physician of the clinical 

findings and how such findings support 

that the patient is homebound and 

needs skilled services. It would also be 

permissible for the physician in the 

acute or post-acute care facility that 

cared for the patient in that setting to 

sign off on the NPPs clinical findings, 

which would be sent to the certifying 

physician by the NPP who is 

collaborating directly with the certifying 

physician. However, it is still the 

responsibility of the certifying physician 

to document the date that the face-toface encounter occurred and that the 

condition for which the patient was 

being treated in the face-to-face 

encounter is related to the primary 

reason the patient requires home health 

services and that the clinical findings of 

the encounter support that the patient is 

homebound and in need of either 

intermittent skilled nursing services or 

therapy services. Likewise, the 

completion of the face-to-face encounter 

documentation is required to be 

completed by the physician that is 

certifying the patient for home health 

services, rather than the HHA. As such, 

the certifying physician should only be 

documenting an actual face-to-face 

encounter that was performed by an 

allowed NPP or the physician that cared 

for the patient in the acute or post-acute 

care setting as defined in 

§ 424.22(a)(1)(v) in satisfying the face-toface encounter requirements. 

Comment: One commenter expressed 

concern that claims could be denied 

because the communication between the 

acute or post-acute care physician and 

the community certifying physician 


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might not be evident as it could occur 

via telephone or in person (rather than 

via email or written correspondence). 

Response: It is the responsibility of 

the certifying physician to document 

that the face-to-face encounter occurred 

and to satisfy the content requirements. 

It would be acceptable for the certifying 

physician to obtain information verbally 

either from a physician in the acute or 

post-acute care facility that cared for the 

patient in that setting, or an allowed 

NPP who is either collaborating directly 

or under the supervision of either the 

certifying physician or the physician 

who cared for the patient in the acute 

or post-acute care setting, and document 

what was conveyed orally as long as all 

the content requirements are met. 

Comment: Some commenters stated 

that the face-to-face encounter 

documentation requirements create 

substantial burden for HHAs in ensuring 

documentation compliance. Often 

times, physicians are confused as to 

what is required of them, view the 

paperwork as duplicative, and are 

uncooperative, which cause significant 

resources being invested by the HHA 

into obtaining the required 

documentation. Further, if the face-toface encounter documentation is not 

obtained, the HHA is penalized for 

physician noncompliance. One 

commenter stated that electronic 

medical records and meaningful use 

standards should result in the 

information being readily available to 

support the patient’s homebound status 

and need for skilled services, negating 

the need for a separate documentation 

requirements. Other commenters 

suggested that CMS allow a signed and 

dated discharge summary or physician’s 

office note to stand as evidence of the 

face-to-face encounter, and one 

commenter questioned why it was 

necessary to document a face-to-face 

encounter when a patient was admitted 

from an acute or post-acute care setting, 

as the patient was obviously under the 

care of a physician during his or her 

stay. Moreover, several commenters 

asked CMS to rescind our face-to-face 

encounter documentation requirements 

or allow providers to bill for Medicare 

eligible services when the physician 

does not comply with completing the 

face-to-face documentation. Finally, 

some commenters suggested that if the 

face-to-face documentation is not 

provided by the certifying physician to 

the HHA within 5 days of referral, the 

HHA would provide a Home Health 

Advance Beneficiary Notice (HHABN) 

Option 2 at that time. 

Response: We thank the commenters 

for their comments, but these comments 

are outside the scope of this rule. 

However, we would like to remind 

commenters that we do not have the 

authority to rescind the requirement for 

certifying physicians to document the 

face-to-face encounter, nor exempt 

HHAs from responsibility for the faceto-face encounter requirements 

regardless of the setting from which the 

patient was admitted or for physician 

noncompliance, as section 6407 of the 

Affordable Care Act mandates it is a 

condition for payment. As we stated 

above, a recently revised set of Q&As 

and a MLN Matters article were 

released, which specify certain 

flexibilities that certifying physicians 

can utilize in completing the face-toface encounter documentation. For 

example, the certifying physician can 

use the discharge summary as the faceto-face documentation as long as it is 

clearly titled and dated as such, and 

contains all the documentation 

requirements and is signed by the 

certifying physician. In response to 

commenters who suggested that an 

HHABN Option 2 be delivered to the 

patient if the face-to-face encounter 

documentation is not provided by the 

certifying physician to the HHA within 

5 days, HHAs may issue an HHABN 

Option 2 to the patient after only 5 days; 

however, the current regulations at 

§ 424.22(a)(1)(v) allow a face-to-face 

encounter to occur no more than 90 

days prior to the home health start of 

care date or within 30 days of the start 

of the home health care and HHAs 

should recognize that they are 

responsible for providing information to 

Medicare beneficiaries prior to the start 

of care about the extent to which 

Medicare may pay for services and 

thereafter prior to a change in payment 

status under the Patient Rights 

Condition of Participation set out in 

§ 484.10(e). We want to reiterate that the 

HHABN Option 2 does not transfer 

liability to the beneficiary when 

technical requirements for payment, 

such as the face-to-face encounter 

documentation, are not met. 

Comment: Several commenters 

requested that, due to difficulties in 

obtaining face-to-face encounter 

documentation from physicians, the 

face-to-face documentation 

requirements should be limited to the 

date which the encounter occurred and 

that the condition for which the patient 

was being treated in the face-to-face 

encounter is related to the primary 

reason the patient requires home health 

services. Some commenters suggested 

that CMS allow the preprinted 

certification statement (from the former 

CMS 485/plan of treatment) to suffice as 

documentation of the patient’s 

homebound status. In addition, several 

commenters suggested that CMS allow a 

‘‘non-PCP specialist’’ medical director 

to sign the face-to-face encounter 

documentation, allow additional types 

of practitioners to conduct the face-toface encounter, allow an HHA’s Medical 

Director to complete the face-to-face 

encounter, including documentation of 

such encounter, and permit allowed 

NPPs and other types of practitioners to 

certify patients for home health services. 

Other commenters suggested that CMS 

allow physicians to delegate the 

documentation requirements to allowed 

NPPs. 

Response: Some of these comments 

are outside the scope of this rule. 

However, we would like to respond to 

the comments that request CMS not to 

require the face-to-face documentation 

to contain why the clinical findings of 

such encounter support that the patient 

is homebound and in need of 

intermittent skilled nursing services or 

therapy services or that we allow a 

preprinted statement from the former 

CMS 485/plan of treatment to suffice as 

documentation of the patient’s 

homebound status. As we stated in the 

CY 2011 final rule implementing the 

face-to-face encounter documentation 

requirements (76 FR 68594), using the 

words ‘‘document the encounter’’ in the 

statute instead of ‘‘attest to the 

encounter’’ suggests that the Congress 

intended the face-to-face encounter 

documentation to include factual 

information about the patient’s 

condition as seen during the encounter 

which would support the physician’s 

certification of the patient’s eligibility 

for home health services (that is, 

homebound status and need for skilled 

services). Likewise, as the statute 

requires the certifying physician to 

document the face-to-face encounter, it 

would not be permissible to delegate 

this responsibility to an allowed NPP or 

to use preprinted statements. In 

response to the comments suggesting 

that additional types of practitioners, an 

HHA Medical Director, or a ‘‘non-PCP 

specialist’’ MD should be able to 

conduct and/or document the face-toface encounter, we do not have the 

authority to further define the types of 

practitioners allowed to perform the 

face-to-face encounter and because 

documentation of a the face-to-face 

encounter is required for certification, 

the certifying physician is responsible 

for documenting the face-to-face 

encounter. In addition, we do not have 

the statutory authority to permit 

allowed NPPs or other types of 

practitioners to certify patients for home 

health services, nor is it permissible for 


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HHA Medical Directors to certify 

patients for home health services, of 

which the face-to-face encounter 

documentation is one component, as 

longstanding regulations at § 424.22 

impose financial restrictions on the 

relationship between an HHA and the 

certifying physician. The face-to-face 

encounter provision in the Affordable 

Care Act was designed as an anti-fraud 

provision and CMS is committed to 

ensuring that Medicare reimbursement 

is available only to patients actually in 

need of home health services. 

Comment: Some commenters asked 

that we further define ‘‘exceptional 

circumstances’’ in which the face-toface encounter can be waived to include 

circumstances where the patient moves, 

changes physician, or is re-hospitalized 

within 30 days of the start of the home 

health episode. Several commenters also 

asked that CMS expand the window of 

time during which a face-to-face 

encounter can occur to 60 days after 

admission to home health. Other 

commenters stated that many 

beneficiaries that are homebound and/or 

live in remote areas are not able to travel 

to their doctor’s offices or have limited 

transportation options to satisfy the 

face-to-face encounter requirements and 

some commenters suggested that 

Medicare reimburse for the expense of 

a non-urgent stretcher or wheelchair 

transport to a physician’s office to fulfill 

the face-to-face encounter requirements, 

while others suggested that CMS allow 

individuals to meet the face-to-face 

encounter requirements through 

telehealth technologies that could be 

made available in patient’s homes. 

Response: Some of these comments 

are outside the scope of this rule. We 

will consider the commenters 

suggestions on further defining 

‘‘exceptional circumstances’’ in which 

face-to-face encounter requirements 

could be waived for future rulemaking. 

However, we will take the opportunity 

to briefly respond to some of the 

commenters’ other concerns. Regarding 

the timeframe allowed to conduct the 

face-to-face encounter, we believe the 

current timeframe of 90 days prior to the 

start of care and 30 days after the start 

of care is appropriate and best meets the 

needs of program integrity efforts and 

quality goals associated with the 

provision. For those patients that are 

homebound and require non-urgent 

stretcher or wheelchair transport to 

reach the physician’s office, we do not 

have the statutory authority to 

reimburse for these services under the 

Medicare home health benefit as they 

are not defined as ‘‘home health 

services’’ according to section 1861(m) 

of the Act. In response to allowing 

telehealth in patient’s home, we note 

that section 1834(m) of the Act limits 

the provision of telehealth services to 

certain originating sites where the 

service can be provided. 

Comment: Several commenters asked 

CMS to review its claims data to 

determine whether the implementation 

of the face-to-face encounter 

requirements has impacted access to 

care. 

Response: We have conducted 

analyses looking at the number of paid 

claims, both nationally and by state, for 

2009 through 2011. Our analyses show 

that face-to-face requirements have not 

had an adverse effect on access to 

Medicare HH services as the volume of 

paid claims is consistent with previous 

years. 

After carefully considering all of the 

comments received, we are finalizing 

the additional flexibility as proposed. 

We will modify the regulations at 

§ 424.22(a)(1)(v) to allow an NPP in an 

acute or post-acute facility to perform 

the face-to-face encounter in 

collaboration with or under the 

supervision of the physician who has 

privileges and cared for the patient in 

the acute or post-acute facility, and 

allow such physician to inform the 

certifying physician of the patient’s 

homebound status and need for skilled 

services. 

2. Regulatory Text Change 

Additionally, we proposed to revise 

our regulatory language at 

§ 424.22(a)(1)(v)(D) as to not be 

prescriptive as to what entity must date 

and title the face-to-face documentation. 

The face-to-face documentation must 

still be signed by the certifying 

physician, and the content requirements 

are not changing. 

Comment: Commenters were 

supportive of the proposed regulatory 

text change. 

Response: We thank the commenters 

for their support. 

We are finalizing regulatory text 

change as proposed. The regulation text 

in part 424 will be changed to not be 

prescriptive as to what entity needs to 

date and title the face-to-face 

documentation, but will still require the 

same content and the certifying 

physician’s signature. 

E. Therapy Policy Changes 

1. Therapy Coverage and Reassessments 

In the CY 2011 HH PPS final rule (75 

FR 70389), we clarified policies related 

to how therapy services are to be 

provided and documented, and began 

requiring additional therapy 

documentation to support medical 

necessity to address continuing 

concerns regarding the provision of 

unnecessary therapy in the home health 

setting. However, concerns regarding 

when therapy services are covered if a 

therapist misses a reassessment visit 

persist. As a result, in the CY 2013 HH 

PPS proposed rule issued in the July 13, 

2012 Federal Register (77 FR 41548), we 

proposed to revise our regulations at 

§ 409.44(c)(2)(i)(E) to state that if a 

qualified therapist missed a 

reassessment visit, therapy coverage 

would resume with the visit during 

which the qualified therapist completed 

the late reassessment, not the visit after 

the therapist completed the late 

reassessment. In addition, we proposed 

to revise our regulations at 

§ 409.44(c)(2)(i)(E) to state that in cases 

where multiple therapy disciplines are 

involved, if the required reassessment 

visit was missed for any one of the 

therapy disciplines for which therapy 

services were being provided, therapy 

coverage would cease only for that 

particular therapy discipline. Therefore, 

as long as the required therapy 

reassessments were completed in a 

timely manner for the remaining 

therapy disciplines, therapy services 

would continue to be covered for those 

therapy disciplines. We expect minimal 

changes to claims submissions as a 

result of these policy changes. 

The following is a summary of the 

comments we received regarding the 

therapy coverage proposals. 

Comment: Commenters were 

supportive of our proposals to resume 

coverage of therapy with the visit during 

which the qualified therapist completed 

the late reassessment rather than with 

the visit after the therapist completed 

late reassessment and in cases where 

multiple therapy disciplines are 

involved, if the required reassessment 

visit was missed for any one of the 

therapy disciplines for which therapy 

services were being provided, therapy 

coverage would cease only for that 

particular therapy discipline. In 

particular, one commenter stated that 

these proposals will ‘‘remove a barrier 

to providing necessary, appropriate, and 

timely home health services’’ and 

‘‘allows patients to get the care they 

need without risking a decline in 

status.’’ 

Response: We agree the reassessment 

visit should be covered, as therapy was 

also provided during that visit even 

though it was not timely. In addition, 

we also agree that if left unchanged, the 

current policies have the potential to 

negatively impact beneficiaries’ access 

to therapy services. That is, if an agency 

anticipates a visit will not be covered 

because one qualified therapist has not 


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completed the required reassessment, it 

might be reluctant for any therapy visits 

to occur until that missed reassessment 

visit is completed. This is obviously not 

in the best interest of the beneficiary. 

Comment: Some commenters were 

confused as to when therapy coverage 

would resume under the proposals if 

one or more therapy discipline missed 

the required reassessment. For example, 

if a patient receives occupational 

therapy on visit 11 (with reassessment 

requirements met) and on visit 14, 

speech-language pathology services on 

visit 13 (with reassessment 

requirements met) and 15, and physical 

therapy is provided on visit 12 (but did 

not meet reassessment requirements) 

and on visit 16 (assessment completed). 

The commenters questioned whether 

the CY 2013 HH PPS proposed rule 

would allow for ongoing coverage of 

occupational therapy and speechlanguage pathology and would allow for 

coverage of physical therapy on visit 16, 

when the reassessment was completed. 

Response: Under the scenario above, 

the commenters are correct and the 

proposal would allow for ongoing 

coverage of occupational therapy and 

speech-language pathology and would 

allow for coverage of physical therapy 

on visit 16, when the reassessment was 

completed. The physical therapy 

provided on visit 12 would be noncovered. 

We are finalizing the therapy coverage 

proposals as proposed. The regulation 

text at § 409.44(c)(2)(i)(E) will be revised 

to state that if a qualified therapist 

missed a reassessment visit, therapy 

coverage would resume with the visit 

during which the qualified therapist 

completed the late reassessment, not the 

visit after the therapist completed the 

late reassessment. In addition, the 

regulation text at § 409.44(c)(2)(i)(E) will 

be revised to state that in cases where 

multiple therapy disciplines are 

involved, if the required reassessment 

visit was missed for any one of the 

therapy disciplines for which therapy 

services were being provided, therapy 

coverage would cease only for that 

particular therapy discipline. 

2. When Therapy Reassessment Visits 

Are To Be Conducted 

Currently our regulations at 

§ 409.44(c)(2)(i)(C)(2) and 

§ 409.44(c)(2)(i)(D)(2) state that in cases 

where the patient is receiving more than 

one type of therapy, the qualified 

therapist from each discipline must 

provide all of the therapy, and 

functionally reassess the patient during 

the visit associated with that discipline 

that is scheduled to occur close to the 

14th Medicare-covered therapy visit, but 

no later than the 13th Medicare-covered 

therapy visit and a qualified therapist 

from each discipline must provide all of 

the therapy and functionally reassess 

the patient during the visit associated 

with that discipline that is scheduled to 

occur close to the 20th Medicarecovered therapy visit, but no later than 

the 19th Medicare-covered therapy visit. 

However, because we received 

numerous inquiries from the home 

health industry on what CMS 

considered ‘‘close to,’’ we believed that 

more precise guidance was needed. As 

a result, we proposed to revise the 

regulations at § 409.44(c)(2)(i)(C)(1) and 

§ 409.44(c)(2)(i)(D)(1) to clarify that in 

cases where the patient is receiving 

more than one type of therapy, qualified 

therapists must complete their 

reassessment visits during the 11th, 

12th, or 13th visit for the required 13th 

visit reassessment and the 17th, 18th, or 

19th visit for the required 19th visit 

reassessment. 

The following is a summary of the 

comments we received regarding the 

therapy reassessment proposal. 

Comment: Several commenters were 

supportive of the proposal specifying 

where the patient is receiving more than 

one type of therapy, qualified therapists 

must complete their reassessment visits 

during the 11th, 12th, or 13th visit for 

the required 13th visit reassessment and 

the 17th, 18th, or 19th visit for the 

required 19th visit reassessment. 

Response: We thank the commenters 

for their support. We received numerous 

questions from the home health 

industry about what CMS considered 

‘‘close to’’ the 13th and 19th visit under 

current policy. We believe that the range 

proposed, which mirrors the flexibility 

already in regulation for therapy 

provided in rural areas, in most cases 

provides sufficient flexibility for 

qualified therapists from each discipline 

to functionally reassess the patient. 

Comment: Several commenters stated 

that often times different therapy 

modalities will have different 

frequencies depending on patient need. 

As such, the proposal specifying ranges 

in which the 13th and 19th 

reassessment visits can be conducted 

when the patient is receiving more than 

one type of therapy restricts the 

flexibility in completing assessments 

that the ‘‘close to’’ language provides. In 

addition, commenters stated that the 

proposal may result in HHAs providing 

an extra unnecessary visit or delaying 

visits to ensure that the agency is in 

compliance with completing the 

required assessments during the 

specified window of time. Commenters 

provided several schedule examples 

illustrating instances where therapies 

provided at varying frequencies would 

result in having the HHA either provide 

extra unnecessary therapy visits or 

delaying therapy visits in order for each 

discipline to comply with the proposed 

timeframe for reassessments in multitherapy cases. 

Response: We find compelling the 

commenters’ concerns regarding the 

feasibility for patients receiving more 

than one type of therapy of qualified 

therapists from each of the therapy 

discipline reassessing the patient within 

the proposed timeframes when 

modalities differ significantly in 

frequency; in those cases we do not 

expect an HHA to schedule an extra 

unnecessary visit or delay a visit in 

order to reassess the patient within the 

proposed timeframes. Therefore, in 

instances where patients are receiving 

more than one type of therapy, and the 

frequency of a particular discipline, as 

ordered by a physician, does not make 

it feasible for the reassessment to occur 

during the specified timeframes without 

providing an extra unnecessary visit or 

delaying a visit, it would still be 

acceptable and satisfy the reassessment 

requirement, for the qualified therapist 

for that discipline to provide the 

therapy service and functionally 

reassess the patient during the visit 

associated with that discipline that is 

scheduled to occur close to the 14th 

Medicare-covered therapy visit, but no 

later than the 13th Medicare-covered 

therapy visit and for a qualified 

therapist from each discipline to 

provide all of the therapy service and 

functionally reassess the patient during 

the visit associated with that discipline 

that is scheduled to occur close to the 

20th Medicare-covered therapy visit, but 

no later than the 19th Medicare-covered 

therapy visit. 

Comment: Several commenters stated 

that there is a shortage of qualified 

therapists, especially in rural areas, 

making compliance with therapy 

reassessment requirements difficult. 

Additionally, several commenters stated 

that too many evaluations were required 

in a short time period and that the 

current therapy regulations have added 

administrative burden, caused 

scheduling problems, increased clinical 

and clerical time, require software 

changes and as a result, there are 

numerous non-covered visits being 

provided by HHAs. Moreover, 

commenters stated that often failure to 

comply is outside the control of the 

HHA or therapist, such as unexpected 

patient illness, hospitalization, or 

therapist availability. 

Response: We thank the commenters 

for their comments, but these comments 

are outside the scope of this rule. 


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However, regarding the administrative 

burden of these requirements we would 

like to remind the commenters that the 

reasons for the therapy reassessments 

outlined in the CY 2011 HHS PPS final 

rule (75 FR 70372) were not only to 

address payment vulnerabilities that 

have led to high use and sometimes 

overuse of therapy services, but also to 

ensure more qualified therapist 

involvement for beneficiaries receiving 

high amounts of therapy, which results 

in better patient outcomes. Regarding 

factors that are outside of the HHA’s 

control that may result in failure to 

comply with the reassessment 

requirements, as we stated above, the 

regulation text will be amended to state 

that if a qualified therapist missed a 

reassessment visit, therapy coverage 

would resume with the visit during 

which the qualified therapist completed 

the late reassessment, not the visit after 

the therapist completed late 

reassessment. In addition, changes to 

the regulation text at § 409.44(c)(2)(i)(E) 

will be made to state that in cases where 

multiple therapy disciplines are 

involved, if the required reassessment 

visit was missed for any one of the 

therapy disciplines for which therapy 

services were being provided, therapy 

coverage would cease only for that 

particular therapy discipline. These two 

changes should help in reducing the 

number of non-covered visits that 

would have otherwise occurred when 

reassessment visits were missed. 

Comment: Several commenters stated 

that in cases where the patient is not 

available for therapy services or 

documented factors preclude a visit, 

payment would not be denied if the 

qualified therapist conducts the therapy 

assessment during the next visit. 

Response: As we stated above, the 

regulation text will be amended to state 

that if a qualified therapist missed a 

reassessment visit, therapy coverage 

would resume with the visit during 

which the qualified therapist completed 

the late reassessment, not the visit after 

the therapist completed late 

reassessment. In addition, changes to 

the regulation text at § 409.44(c)(2)(i)(E) 

will be made to state that in cases where 

multiple therapy disciplines are 

involved, if the required reassessment 

visit was missed for any one of the 

therapy disciplines for which therapy 

services were being provided, therapy 

coverage would cease only for that 

particular therapy discipline. 

Comment: Several commenters 

suggested other improvements to 

streamline the therapy reassessment 

requirements, including requiring a 

functional reassessment during the 2nd 

and 4th weeks of treatment in each 

episode and during the final week of the 

episode or 5-day OASIS window, and 

amending the regulation to require a 

qualified therapist to perform the 

assessment and treatment or the 

qualified therapist perform the 

assessment and observe the assistant 

providing the treatment. Several 

commenters also recommended that a 

new therapy payment system should be 

established. 

Response: These comments are 

outside the scope of this rule. We will 

take the commenters suggestions into 

consideration for future rulemaking. 

However, we would like to reiterate that 

we continue to believe that the 

requirement for a qualified therapist 

(instead of an assistant) to perform the 

needed therapy service at key points in 

the patient’s course of treatment, as well 

as to assess, measure, and document the 

effectiveness of the therapy provided, 

promotes more effective and efficient 

care. 

Comment: One commenter asked that 

CMS clarify that ‘‘progress’’ need not be 

documented or expected when the 

patient meets the criteria for 

maintenance therapy as permitted by 

the regulations. Specifically, CMS 

should revise the preamble text in the 

CY 2013 HH PPS proposed rule (77 FR 

41571) that currently reads that ‘‘we 

cease coverage of therapy services if 

progress towards plan of care goals 

cannot be measured, unless the 

documentation supports the expectation 

that progress can be expected in a 

reasonable and predictable timeframe.’’ 

Response: To clarify, the regulation 

text at § 409.44(c)(2)(iv)(B) current states 

‘‘clinical records must include 

documentation using objective measures 

that the patient continues to progress 

towards goals. If progress cannot be 

measured, and continued progress 

towards goals cannot be expected, 

therapy services cease to be covered 

except when (1) Therapy progress 

regresses or plateaus, and the reasons 

for lack of progress are documented to 

include justification that continued 

therapy treatment will lead to 

resumption of progress toward goals; or 

(2) Maintenance therapy as described in 

§ 409.44(c)(2)(iii)(B) or (C) is needed. 

We are finalizing our proposal to 

revise the regulations at 

§ 409.44(c)(2)(i)(C)(1) and 

§ 409.44(c)(2)(i)(D)(1) to clarify that in 

cases where the patient is receiving 

more than one type of therapy, qualified 

therapists must complete their 

reassessment visits during the 11th, 

12th, or 13th visit for the required 13th 

visit reassessment and the 17th, 18th, or 

19th visit for the required 19th visit 

reassessment with the following 

modification. However, we will also 

modify the regulation text to state that 

in instances where patients receive 

more than one type of therapy, if the 

frequency of a particular discipline, as 

ordered by a physician, does not make 

it feasible for the reassessment to occur 

during the specified timeframes without 

providing an extra unnecessary visit or 

delaying a visit, then it will still be 

acceptable for the qualified therapist 

from each discipline to provide all of 

the therapy and functionally reassess 

the patient during the visit associated 

with that discipline that is scheduled to 

occur closest to the 14th Medicarecovered therapy visit, but no later than 

the 13th Medicare-covered therapy visit. 

Likewise, a qualified therapist from 

each discipline must provide all of the 

therapy and functionally reassess the 

patient during the visit associated with 

that discipline that is scheduled to 

occur closest to the 20th Medicarecovered therapy visit, but no later than 

the 19th Medicare-covered therapy visit. 

3. Technical Correction to G-code 

Description 

As part of our ‘‘Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2011,’’ (75 FR 

70389) we also provided notice of 

changes to existing G-codes and new Gcodes related to skilled nursing and 

therapy services (75 FR 43248). In 

Change Request 7182, we finalized these 

new and revised G-codes. These codes 

included G0158, which had as its 

description, ‘‘Services performed by a 

qualified occupational therapist 

assistant in the home health or hospice 

setting, each 15 minutes.’’ After the 

publication of these codes, a national 

therapy association informed us that the 

use of the word, ‘‘therapist’’ rather than 

‘‘therapy’’ is technically incorrect for 

the occupational therapy profession. 

This association requested that we 

change the terminology in the G-code. 

Because this description includes the 

terminology, ‘‘occupational therapist 

assistant,’’ we proposed to make a 

technical correction to this terminology 

in G0158, so that the new description 

would instead include the terminology, 

‘‘occupational therapy assistant,’’ 

making it also consistent with § 484.4. 

We received one comment on the 

proposed technical correction to the 

G0158 description. The commenter was 

supportive of the proposed correction 

and commended CMS on its action to 

make the code consistent with § 484.4 

and national occupational therapy 

practice standards. 

We are finalizing the technical 

correction to the description for G0158 

as proposed. 


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F. Payment Reform: Home Health Study 

and Report 

Section 3131(d) of the Affordable Care 

Act requires the Secretary to conduct a 

study on HHA costs involved with 

providing access to care to low-income 

Medicare beneficiaries or beneficiaries 

in medically underserved areas, and in 

treating beneficiaries with varying levels 

of severity of illness (specifically, 

patients with ‘‘high levels of severity of 

illness’’). In the CY 2013 HH PPS 

proposed rule, we provided a 

description of the varied areas for which 

we have the authority to explore as part 

of our payment reform activities (77 FR 

41572). We continue to conduct 

analyses, which include evaluating the 

current HH PPS and developing 

payment reform options which might 

minimize vulnerabilities and more 

accurately align payment with patient 

resource costs. The Report to Congress 

regarding the study must be submitted 

no later than March 1, 2014. We will 

provide updates regarding our progress 

in future rulemaking and open door 

forums. 

The following is a summary of the 

comments we received regarding this 

study and report. 

Comment: Commenters supported the 

study on access to care for vulnerable 

populations and stated that they 

appreciate this undertaking. 

Commenters also said that they 

appreciate the specific mention of 

CMS’s demonstration authority of 

potential revisions to the HH PPS and 

they saw the study as a solution to many 

of the problems in the current payment 

system. One commenter stated that the 

across the board cuts for nominal casemix growth as well as the upcoming 

reductions likely resulting from rebasing 

will continue to create incentives for 

providers to avoid vulnerable patients, 

whose projected cost of care exceeds 

average-based payments, causing access 

problems for higher cost patients and 

threatening the viability of this 

Medicare program. Another commenter 

stated that they are seeing access 

problems for higher cost patients. 

Commenters stated that they support 

any effort by CMS to address the needs 

of vulnerable patient populations and 

recommended that the study be 

expedited, if feasible. One commenter 

stated that they anticipate that the study 

would include ‘‘an examination of care 

management models, provider options 

(including expanded utilization of nurse 

practitioners), and payment methods 

that support helping underserved and 

medically fragile persons remain in 

their community.’’ The commenter 

stated that they ‘‘look forward to 

participating in creative solutions that 

address medical, social and 

environmental issues that directly 

impact overall health status and risk for 

avoidable hospitalization.’’ Other 

commenters urged CMS to consider 

information from this study when 

rebasing. Similarly, a commenter stated 

that CMS should use information from 

the study, and possible demonstration, 

to determine a fair payment rate. 

Commenters also encouraged CMS ‘‘to 

make fundamental modifications to the 

payment system to assure that all 

patients who need home health are 

served and that the agencies that serve 

them are not ‘‘financially punished’’ for 

accepting disproportionate numbers of 

high cost patients.’’ Commenters stated 

that they would like CMS to engage the 

home health community/industry in 

developing both regulatory and 

legislative remedies to other systematic 

problems in the HH PPS. Another 

commenter recommended that CMS 

provide updates to the stakeholder 

community on the plan and design of 

the study through different venues, such 

as a Special Open Door Forum. The 

commenter believed that physical 

therapists and home health clinicians 

should be active participants in the 

collection and analysis of data for the 

study. 

Response: We will take the 

commenters’ suggestions into 

consideration when performing the 

home health study. As described in the 

CY 2012 proposed rule, we plan to 

provide updates regarding our progress 

in future rulemaking and open door 

forums. We note that we are open to 

hearing about any instances of access to 

care issues that vulnerable beneficiaries 

may face, particularly if they are 

associated with costs and 

reimbursement, and potential solutions 

to access issues. 

G. International Classification of 

Diseases, 10th Edition (ICD–10) 

Transition Plan and Grouper 

Enhancements 

On September 5, 2012 the Department 

of Health and Human Services 

published a final rule ‘‘Administrative 

Simplification Adoption of a Standard 

for a Unique Health Plan Identifier; 

Addition to the National Provider 

Identifier Requirements; and a Change 

to the Compliance Date for ICD–10–CM 

and ICD–10–PCS Medical Data Code 

Set’’ (77 FR 54664) that sets a new 

compliance date for ICD–10–CM and 

ICD–10–PCS of October 1, 2014. We 

continue to work with the HH PPS 

Grouper maintenance contractor to 

revise the HH PPS Grouper to 

accommodate ICD–10–CM codes. Our 

current plans are to describe the testing 

approach for the HH PPS Grouper to 

accommodate and process ICD–10 codes 

on the ICD–10 section of the CMS Web 

site in conjunction with the release of 

the draft grouper in the summer/fall 

2013. We plan to update providers of 

any changes to our current plans 

through the following forums: The ICD– 

10 Home Health section of the CMS 

Web site, the Home Health, Hospice and 

DME Open Door Forums, and provider 

outreach sessions for ICD–10. 

In December 2008, we updated and 

released Attachment D: Selection and 

Assignment of OASIS Diagnoses to 

promote accurate selection and 

assignment of the patient’s diagnosis 

(https://www.cms.gov/Medicare/ 

Medicare-Fee-for-Service-Payment/ 

HomeHealthPPS/ 

OASIS_Attachment_D_Guidance.html). 

This guidance was designed to ensure 

that providers limited the number of 

diagnoses assigned to the payment 

diagnosis field (M1024 on OASIS–C). In 

addition, Attachment D reminded HHA 

clinicians/coders to comply with ICD– 

9–CM coding guidelines when assigning 

primary and secondary diagnoses to the 

OASIS items (M1020 and M1022 on 

OASIS–C), respectively. Analysis 

conducted by our HH PPS Grouper 

maintenance contractor revealed that 

many HHAs do not comply with these 

guidelines. Specifically, the analysis 

demonstrated that HHAs are not 

limiting the number of diagnoses 

assigned to the payment diagnosis field 

and are also reporting resolved 

conditions in that field. We have 

reviewed the diagnosis codes identified 

in the HH PPS Grouper and coding 

guidelines confirm that the only codes 

that cannot be reported as a primary or 

secondary diagnosis code are the 

fracture codes. As discussed in the CY 

2012 HH PPS proposed rule, we 

proposed two enhancements for the HH 

PPS Grouper which we believe will 

encourage compliance with coding 

guidelines. 

First, we proposed to restrict the 

payment diagnosis field to only permit 

fracture diagnoses codes, which 

according to ICD–9–CM coding 

guidelines, cannot be reported in a 

home health setting as a primary or 

secondary diagnosis. To further ensure 

compliance with proper coding 

guidelines, we proposed to pair the 

fracture codes with appropriate 

diagnosis codes and only when these 

pairings appear in the primary payment 

diagnosis field will the grouper award 

points. 

Second, we proposed a revision to the 

HH PPS Grouper logic to score Diabetes, 

Skin 1 or Neuro 1 diagnosis codes when 


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submitted immediately following a vcode in the primary diagnosis field the 

same as they are currently scored when 

a v-code is reported in the primary 

diagnosis field and the supporting 

diagnosis code is reported in the 

payment diagnosis field. As we stated in 

the proposed rule, these grouper 

enhancements will enforce appropriate 

use of our payment diagnosis field 

based upon our long standing policy 

and as described in our Attachment D. 

We believe that in doing so, we will be 

in a much more favorable position to 

eventually retire the payment diagnosis 

field when we move to ICD–10 and 

there is no longer a need for the 

payment diagnosis field for the 

reporting of fracture codes. Finally, we 

believe these actions will help ensure 

ICD–9 and ICD–10 coding guidelines are 

followed; and will assist in the eventual 

transition of grouping the diagnoses on 

the claim, versus OASIS, in determining 

the appropriate HIPPS code for 

payment. 

The following is a summary of the 

comments we received regarding the 

ICD–10 Transition Plan and Grouper 

Enhancements. 

Comment: Several commenters 

supported our plans for the ICD–10–CM 

transition and look forward to further 

updates through the final rule and 

provider outreach sessions. Although 

some commenters supported our plans 

to retire the payment diagnosis field, 

other commenters noted that the OASIS 

payment field was introduced as a 

payment vehicle for diagnoses that 

could no longer be reported in the 

primary or secondary positions because 

of HIPAA requirements. Many 

commenters also stated that Attachment 

D was designed to permit the 

submission of resolved conditions in the 

payment diagnosis field and that a 

majority of the conditions reported in 

the payment diagnosis field represent 

resolved conditions. Many commenters 

expressed concern that the proposed 

policy to restrict the payment diagnosis 

field needed additional clarification and 

specificity regarding the reporting of the 

v-code and the limited use of the 

payment diagnosis field since 

Attachment D is not sufficient. Several 

commenters also urged us to update 

Attachment D to reflect changes in the 

OASIS and ICD–9–CM coding guidance. 

Response: We appreciate that some 

commenters recognize the need for 

compliance with ICD–9–CM coding 

guidelines and recognize that there is a 

need to update Attachment D and the 

HH PPS Grouper specifications to reflect 

the restrictions for the payment 

diagnosis field. We conducted a review 

of Attachment D to determine whether 

further clarification or updates are 

necessary and conclude that the 

guidance issued did not fully 

communicate that the reporting of 

resolved conditions in the payment 

diagnosis field should be limited. 

However, we disagree that the payment 

diagnosis field was designed to permit 

‘‘any’’ resolved condition to be reported. 

In CY 2009, 85 percent of OASIS 

records did not contain any diagnosis 

codes in the payment diagnosis field or 

contained only diagnoses codes that had 

not been found to be associated with 

additional resources use and as such as 

are not included in our grouper nor 

impacted by this policy. We analyzed 

the 15 percent of OASIS records that 

included grouper diagnosis codes in the 

payment diagnosis field and found that 

25 percent of those OASIS records 

represent fracture conditions which can 

continue to be reported and scored. 

Thirty-six percent represent persistent 

conditions, such as diabetic cataract, in 

which the underlying condition 

(diabetes) could be reported as a 

primary or secondary diagnosis and 

thus are not impacted by this policy. 

Thirty-nine percent represent 

conditions that can be reported in the 

primary or secondary diagnosis fields if 

the diagnosis is active rather than 

resolved and is appropriate for care in 

the home health setting. 

Based on our review and the 

commenters’ recommendations, we 

agree that Attachment D should be 

updated to reflect the most current 

version of OASIS and any changes and 

clarifications in coding guidance. 

Our analysis found that if HHAs were 

to ensure compliance with coding 

guidelines, there would not be a need to 

report a resolved condition with the 

exception of fractures. Several 

commenters provided a few examples 

where they believe the proposed policy 

would result in a decrease in case mix 

points. One such example is of a low 

therapy patient admitted to home health 

for post-operative care following 

surgical resolution of an intestinal 

obstruction would also have a surgical 

wound that receives a lower score. 

Although this example and others could 

result in a lower score, the diagnosis 

codes being reported in the payment 

diagnosis field suggests that these are 

extremely rare types of episodes and the 

impact is negligible. We found that 

more than 99.6 percent of assessments 

would continue to receive the same 

case-mix weight when the payment 

diagnosis field is restricted to fracture 

codes only, resulting in a 0.04 percent 

decrease in payments to HHAs. 

Oftentimes, the HHA selected and 

reported a condition within the same 

diagnosis group as the condition 

reported in the payment diagnosis field 

or should have selected another 

diagnosis within the codes included in 

the grouper diagnosis group to report as 

a resolving condition in primary or 

secondary diagnosis fields. In either 

case, restricting the awarding of points 

to fracture conditions will ensure that 

HHAs avoid selection of diagnosis codes 

that are not in compliance with coding 

guidelines. 

Comment: Several commenters noted 

concerns that CMS is proposing changes 

for the payment diagnosis field when 

there is not a problem. One commenter 

presented data reported in the Medicare 

and Medicaid Statistical Supplement to 

demonstrate that there has been a 

decrease in v-code reporting from 2000 

through 2009. 

Response: Although, there has been a 

decrease in the number of OASIS 

records submitted that utilize the 

payment diagnosis field over the last 4 

years the volume is still at odds with 

guidance to code sparingly. We must 

ensure that the HHAs report diagnosis 

codes that comply with ICD–9–CM 

coding guidelines. Thus, the restriction 

proposed for the payment diagnosis 

field reporting ensures greater 

compliance with coding guidelines. 

Furthermore, the restriction supports 

our future plans to use diagnosis 

information from the claims, rather than 

OASIS, to determine the appropriate 

HIPPS code for payment. 

Comment: Many commenters 

provided several examples where they 

would be impacted, if this policy is 

implemented, such as osteoarthritis 

related to hip replacement, 

cholelithiasis due to a cholecystectomy, 

breast neoplasm following a 

mastectomy, amputation due to a nonpressure ulcer and meningitis. Many 

commenters stated that when the 

payment diagnosis field was added to 

the OASIS, it was an assurance to the 

industry to accommodate the reporting 

of v-codes and receive points for 

resolved conditions such as those 

resolved by surgery. 

Response: The home health payment 

is based on resources required to care 

for the patient in their current 

condition. For example, if the patient 

has a resolved orthopedic condition 

(osteoarthritis of the hip resolved 

following hip replacement) the episode 

will receive points based on any active 

comorbid diagnoses plus clinical status 

(such as surgical wound), functional 

impairments (such as problems with 

ambulation or transferring), and therapy 

needs. Given the fact that some HHAs 

may have incorrectly interpreted the 

guidance in Attachment D, and were 


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reporting resolved conditions, such as 

those resolved by surgery, which may 

have resulted in the awarding of points; 

this final rule clarifies that with the 

exception of fracture codes, resolved 

conditions are not appropriate for 

coding in the home health setting, and 

will not be awarded points when 

reported. 

Comment: Many commenters 

expressed concern that we did not 

provide a cost analysis prior to 

proposing this policy because they 

believe that the restricted use of the 

payment diagnosis field to fracture 

codes would result in a large reduction 

in payments to HHAs such as two 

hundred dollars for certain episodes. 

We also received comments that express 

concern that the policy is not budget 

neutral or assumed that the proposed 

policy would be budget neutral. One 

commenter raised concerns that the 

payment diagnosis field changes may 

have an impact on agency risk 

adjustment of quality measures that are 

publicly reported. The commenters 

expressed concern that by not 

permitting the reporting of resolved 

conditions we would be preventing 

HHAs from reporting important 

information that further describes the 

patient. In addition, a few commenters 

noted that changing our HH PPS 

reimbursement when rebasing is being 

studied is not reasonable. 

Response: As we indicated in 

response to comments received on 

resolved conditions, if the resolved 

condition is still impacting the patient, 

these impacts are captured by the 

clinical and functional data reported in 

the OASIS rather than the diagnosis. As 

stated above, we found that more than 

99.6 percent of assessments would 

continue to receive the same case-mix 

weight when the payment diagnosis 

field is restricted to fracture codes only, 

resulting in a 0.04 percent decrease in 

payments to HHAs. These payments 

should not have been made because 

they do not reflect resources to care for 

the patient, nor do these coding 

practices comply with ICD–9 coding 

guidelines, and thus reflect 

inappropriate coding practices. Our 

primary purpose is to ensure 

compliance with ICD–9–CM coding 

guidelines. Implementing these changes 

in a budget neutral manner is not 

applicable in this instance because 

HHAs should not receive 

reimbursement for a resolved condition 

with the exception of fracture 

conditions. 

Abt Associates analyzed data from a 

20 percent sample of all home health 

episodes from 2009, or 1.2 million 

episodes. The total number of episodes 

with an acceptable v-code paired with 

any ICD–9–CM code in the case mix 

grouper was approximately 174,000 

episodes. These data were drawn from 

the Home Health Datalink, a file that 

links the OASIS assessments to the 

corresponding home health claim. Abt 

Associates conducted three separate sets 

of analyses. The first analysis assumes 

that only fracture codes are recognized 

as payment diagnoses and did not 

reflect any accompanying change in 

agency coding behavior. This analysis 

showed that 99.3 percent of assessments 

would continue to receive the same 

case-mix weight. The second analysis 

assumes that agencies code for fracture 

and also assumes that, for many 

resolved conditions, agencies will be 

able to code underlying persistent 

conditions as primary or secondary 

diagnoses (for example, coding diabetes 

after a diabetic cataract has been 

removed). This analysis showed that 

99.6 percent of assessments would 

continue to receive the same case-mix 

weight. Finally, the third analysis makes 

the first two analytical assumptions 

above and also assumes that, for some 

additional conditions currently reported 

in the payment diagnosis field, agencies 

will be able to code alternate codes that 

scores points for the same diagnosis 

group. This analysis also showed that 

99.6 percent of assessments would 

continue to receive the same case-mix 

weight. Although commenters asserted 

that there would be a significant impact, 

the three sets of analyses found that HH 

episodes would essentially continue to 

be scored the same once this policy is 

implemented as revised. 

The risk adjustment models for the 

quality measures that are publicly 

reported use all the diagnoses that 

appear on the OASIS (in the primary, 

secondary, payment diagnosis field as 

well as the inpatient diagnosis). 

Although we do not necessarily agree 

that by preventing resolved conditions 

related to the plan of care to be reported 

we are losing significant information 

that describes the patient, we are willing 

to modify our policy in the short term 

to allow these conditions to be reported 

in the payment diagnosis field but will 

restrict the awarding of points only to 

fracture conditions. We believe that 

modifying our policy to permit this type 

of reporting in the payment diagnosis 

field will address the concern expressed 

by commenters that wanted to be able 

to report additional clinical information 

and public health information about the 

patient while still allowing the agency 

to move forward with our plans to group 

the claim, versus OASIS, to determine 

the appropriate HIPPS code for 

payment. 

Comment: We received several 

comments in support of the proposed 

logic changes specific to the reporting 

requirements for secondary conditions 

found in Neuro, Skin 1, or Ortho 1. 

Several commenters noted that once 

ICD–10–CM is implemented, the 

payment diagnosis field will no longer 

be needed for the reporting of fracture 

diagnosis codes. However, they advise 

us that our proposal to restrict the use 

of the payment diagnosis field to only 

fracture diagnosis codes if paired with 

an appropriate v-code in the primary 

and payment diagnosis fields is not 

representative of all the sequencing 

requirements for fracture aftercare. 

Specifically, some encounters are 

reported as a secondary diagnosis 

because they may not be the primary 

reason for admission. Therefore, we 

should include v-codes reported as a 

secondary condition when paired with 

a fracture code in the payment diagnosis 

field. A few commenters would have 

liked to see a draft listing of the v-code 

pairings in our proposed rule. 

Response: We appreciate the 

supportive comments to eventually 

eliminate the payment diagnosis field 

once ICD–10 is fully implemented and 

the recommendation to review the 

sequencing requirements. We agree that 

restricting the payment diagnosis field 

to only fracture diagnosis codes 

reported as primary is not representative 

of the all the sequencing requirements 

for fracture aftercare. We will revise the 

HH PPS grouper logic to award points 

when fracture codes in the payment 

diagnosis field are paired with v-codes 

in either the primary or secondary 

diagnosis fields. As requested by a few 

commenters, we have provided a list of 

valid fracture conditions within our 

grouper paired with appropriate v-codes 

(See Table 25). 

Comment: Several commenters 

recommend that we rescind or delay the 

proposed change to restrict the payment 

diagnosis field to fracture codes only. 

Response: We appreciate the 

feedback. However, we believe that we 

have sufficiently described and 

explained our rationale for restricting 

the awarding of points for fracture codes 

only. As we stated above, this proposal 

will allow us to eventually eliminate the 

payment diagnosis field once ICD–10 is 

fully implemented and ensure that 

agencies are in full compliance, where 

possible, with coding guidelines before 

ICD–10 is implemented. 

Comment: Several commenters noted 

that logic within Home Assessment 

Validation and Entry System (HAVEN) 

has contributed to the confusion 


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surrounding v-code reporting by 

suggesting that the software would not 

group the record (that is, determine the 

appropriate home health resource 

group) when a v-code was reported in 

the primary position. The commenters 

noted that vendors have adopted similar 

logic within their own software to 

require v-code reporting even when the 

ICD–9–CM v-code does not require a 

diagnosis code to explain the reason for 

aftercare. 

Response: We appreciate the feedback 

and will consider whether any changes 

should be made to edits within HAVEN. 

Comment: We also received 

comments outside the scope of the 

proposed policy. Specifically, a 

commenter suggested that we should 

Return to Provider (RTP) claims when 

edits do not permit the proper 

adjudication versus implementing this 

policy. In addition, other commenters 

suggested that CMS should 

acknowledge the use of certified coders 

in homecare by permitting them to 

correct inaccurate coding. 

Response: These comments are 

outside the scope of this rule, and 

therefore, we are not addressing these 

issues in this rule. 

We are implementing the Grouper 

enhancements as proposed with two 

modifications. We will be modifying our 

policy for the payment diagnosis field to 

reflect that when v-codes are reported as 

a primary or secondary diagnosis and 

paired with a fracture code in our 

pairing listing, the grouper will award 

points. We will also be modifying our 

policy for the payment diagnosis field to 

permit the reporting of resolved 

conditions related to the plan of care 

that may be significant in describing the 

patient but will restrict the awarding of 

points to fracture conditions. 

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BILLING CODE 4120–01–C 

IV. Quality Reporting for Hospices 

A. Background and Statutory Authority 

Section 3004 of the Affordable Care 

Act amended the Act to authorize a 

quality reporting program for hospices. 

As added by section 3004(c), new 

section 1814(i)(5)(A)(i) of the Act 

requires that beginning with FY 2014 

and each subsequent FY, the Secretary 

shall reduce the market basket update 

by 2 percentage points for any hospice 

that does not comply with the quality 

data submission requirements with 

respect to that fiscal year. Depending on 

the amount of the annual update for a 

particular year, a reduction of 2 

percentage points could result in the 

annual market basket update being less 

than 0.0 percent for a FY and may result 

in payment rates that are less than 

payment rates for the preceding FY. Any 

reduction based on failure to comply 

with the reporting requirements, as 

required by section 1814(i)(5)(B) of the 

Act, would apply only for the particular 

FY involved. Any such reduction will 

not be cumulative and will not be taken 

into account in computing the payment 

amount for subsequent FYs. 

Section 1814(i)(5)(C) of the Act 

requires that each hospice submit data 

to the Secretary on quality measures 

specified by the Secretary. Such data 

must be submitted in a form and 

manner, and at a time specified by the 

Secretary. Any measures selected by the 

Secretary must have been endorsed by 

the consensus-based entity which holds 

a contract regarding performance 

measurement with the Secretary under 

section 1890(a) of the Act. This contract 


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is currently held by the National Quality 

Forum (NQF). However, section 

1814(i)(5)(D)(ii) of the Act provides that 

in the case of a specified area or medical 

topic determined appropriate by the 

Secretary for which a feasible and 

practical measure has not been endorsed 

by the consensus-based entity, the 

Secretary may specify a measure(s) that 

is(are) not so endorsed as long as due 

consideration is given to measures that 

have been endorsed or adopted by a 

consensus-based organization identified 

by the Secretary. Under section 

1814(i)(5)(D)(iii) of the Act, the 

Secretary must publish selected 

measures that will be applicable with 

respect to FY 2014 no later than October 

1, 2012. 

B. Public Availability of Data Submitted 

Under section 1814(i)(5)(E) of the Act, 

the Secretary is required to establish 

procedures for making any quality data 

submitted by hospices available to the 

public. Such procedures will ensure 

that a hospice will have the opportunity 

to review the data regarding the 

hospice’s respective program before it is 

made public. In addition, under section 

1814(i)(5)(E) of the Act, the Secretary is 

authorized to report quality measures 

that relate to services furnished by a 

hospice on the CMS Web site. We 

recognize that public reporting of 

quality data is a vital component of a 

robust quality reporting program and are 

fully committed to developing the 

necessary systems for public reporting 

of hospice quality data. We also 

recognize it is essential that the data we 

make available to the public be 

meaningful data and that comparing 

performance between hospices requires 

that measures be constructed from data 

collected in a standardized and uniform 

manner. The development and 

implementation of a standardized data 

set for hospices must precede public 

reporting of hospice quality measures. 

We will announce the timeline for 

public reporting of data in future 

rulemaking. 

C. Quality Measures for Hospice Quality 

Reporting Program and Data 

Submission Requirements for the 2014 

Payment Year. 

1. Quality Measures Required for 

Payment Year 2014 

In the Hospice Wage Index for Fiscal 

Year 2012 Final Rule (76 FR 47302, 

47320 (August 4, 2011)), to meet the 

quality reporting requirements for 

hospices for the FY 2014 payment 

determination as set forth in section 

1814(i)(5) of the Act, we finalized the 

requirement that hospices report two 

measures: 

• An NQF-endorsed measure that is 

related to pain management, NQF 

#0209: The percentage of patients who 

report being uncomfortable because of 

pain on the initial assessment (after 

admission to hospice services) who 

report pain was brought to a comfortable 

level within 48 hours. The data 

collection period for this measure is 

October 1, 2012 through December 31, 

2012, and the data submission deadline 

is April 1, 2013. The data for this 

measure are collected at the patient 

level, but are reported in the aggregate 

for all patients cared for within the 

reporting period, regardless of payor. 

• A structural measure that is not 

endorsed by NQF: Participation in a 

Quality Assessment and Performance 

Improvement (QAPI) program that 

includes at least three quality indicators 

related to patient care. Specifically, 

hospice programs are required to report 

whether or not they have a QAPI 

program that addresses at least three 

indicators related to patient care. In 

addition hospices are required to check 

off, from a list of topics, all patient care 

topics for which they have at least one 

QAPI indicator. The data collection 

period for this measure is October 1, 

2012 through December 31, 2012, and 

the data submission deadline is January 

31, 2013. Hospices are not asked to 

report their level of performance on 

these patient care related indicators. 

The information being gathered will be 

used by CMS to ascertain the breadth 

and content of existing hospice QAPI 

programs. This stakeholder input will 

help inform future measure 

development. 

Hospice programs will be evaluated 

for purposes of the quality reporting 

program based on whether or not they 

respond, not on how they respond or on 

performance level. No additional 

measures are required for the 2014 

payment year. 

2. Data Submission Requirements for 

Payment Year 2014 

We will provide a Hospice Data 

Submission Form to be completed using 

a web-based data entry site. Training for 

use of this web based data submission 

form will be provided to hospices 

through webinars and other 

downloadable materials before the data 

submission date. Though similar to the 

data entry site utilized during the 

hospice voluntary reporting period, the 

site will be changed to accommodate the 

addition of the NQF #0209 measure, as 

well as to simplify the data entry 

requirements for the structural measure. 

Hospices will be asked to provide 

identifying information, and then 

complete the web based data entry for 

the required measures. For hospices that 

cannot complete the web based data 

entry, a downloadable data entry form 

will be available upon request. 

The data submission form as well as 

details regarding education and 

resources related to the data collection 

and data submission for both the NQF 

#0209 measure and the structural 

measure will be provided on the CMS 

Web site at http://www.cms.gov/ 

Medicare/Quality-Initiatives-PatientAssessment-Instruments/HospiceQuality-Reporting/. 

D. Quality Measures for Hospice Quality 

Reporting Program for Payment Year FY 

2015 and Beyond 

1. Quality Measures Required for 

Payment Year FY 2015 and Subsequent 

Years 

To meet the quality reporting 

requirements for hospices for the FY 

2015 payment determination and each 

subsequent year, as set forth in section 

1814(i)(5) of the Act, in the CY 2013 HH 

PPS proposed rule (77 FR 41548), we 

proposed that hospices report the 

following: 

• The NQF-endorsed measure that is 

related to pain management, NQF 

#0209: The percentage of patients who 

report being uncomfortable because of 

pain on the initial assessment (after 

admission to hospice services) who 

report pain was brought to a comfortable 

level within 48 hours. 

• The structural measure: 

Participation in a Quality Assessment 

and Performance Improvement (QAPI) 

Program that Includes at Least Three 

Quality Indicators Related to Patient 

Care. Specifically, hospice programs 

would report whether or not they have 

a QAPI program that addresses at least 

three indicators related to patient care. 

We are not extending the requirement 

that hospices provide a list of their 

patient care indicators. We solicited 

comment on the proposed selection of 

measures. 

Comment: We received six comments 

in support of and one comment opposed 

to continuing the requirement for the 

structural measure. We received eight 

comments in support of and one 

comment opposed to continuing the 

requirement for the NQF 0209 measure. 

The majority of commenters agreed with 

our proposal that no additional 

measures be required for Payment Year 

2015 reporting. Commenters were also 

supportive of CMS’s decision not to 

extend the requirement that hospices 

provide a list of their patient care 

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structural measure reporting. Some 

commenters raised concerns about each 

of the measures individually. For the 

structural measure, one commenter did 

not support the inclusion of this 

measure for Payment Year 2015 

reporting. This commenter felt that 

while the measure was not burdensome 

to hospices, the potential of this 

measure to affect quality of care 

provided to hospice patients was 

questionable. We also received ten 

comments that did not specifically 

oppose the continuation of the NQF 

0209 measure but did request that 

various aspects of the specifications of 

the measure be changed. 

Response: While we recognize that 

the structural measure has limitations, it 

also provides CMS a nationally 

representative first look into the content 

of hospice providers’ QAPI programs 

and provides CMS the opportunity to 

take that information into consideration 

for the future development of the 

quality reporting program. We 

appreciate the feedback on selection of 

the NQF #0209 Pain Measure and 

acknowledge potential issues with 

measure specifications that were 

detailed by commenters. Measure 

development and endorsement 

processes include the creation of 

measure specifications. 

As a result of the comments received, 

we are finalizing this proposal as 

proposed. 

2. Data Submission Requirements for 

Payment year FY 2015. 

As previously noted, in the Hospice 

Wage Index for Fiscal Year 2012 Final 

Rule, we finalized the following: 

• All hospice quality reporting 

periods subsequent to that for Payment 

Year FY 2014 be based on a calendar 

year rather than a calendar quarter. For 

example, January 1, 2013 through 

December 31, 2013 will be the data 

collection period used for determination 

of the hospice market basket update for 

each hospice in FY 2015, etc.; and 

• Hospices submit data in the fiscal 

year prior to the payment 

determination. For FY 2015 and beyond, 

the data submission deadline will be 

April 1 of each year. For example, April 

1, 2014 will be the data submission 

deadline used for determination of the 

hospice market basket update for each 

hospice in FY 2015, etc. 

E. Additional Measures Under 

Consideration and Standardization of 

Data Collection 

While initially we will build a 

foundation for quality reporting by 

requiring hospices to report one NQFendorsed measure and one structural 

measure, we seek to achieve a 

comprehensive set of quality measures 

to be available for widespread use for 

quality improvement and informed 

decision making. The provision of 

quality care to hospice patients and 

families is of utmost importance to 

CMS. For annual payment 

determinations beyond FY 2015, we are 

considering an expansion of the 

required measures to include some 

additional measures endorsed by NQF. 

The measures of particular interest are 

NQF numbers 1634, 1637, 1638, 1639, 

and 0208 and can be found by searching 

the NQF site at www.qualityforum.org. 

We welcomed comments on whether 

all, some, any, or none of these 

measures should be considered for 

future rulemaking. A potential timeline 

and titles of future measures under 

consideration are included below. 

To support the standardized 

collection and calculation of quality 

measures specifically focused on 

hospice services, we believe the 

required data elements would 

potentially require a standardized 

assessment instrument. We are 

committed to developing a quality 

reporting program for hospices that 

utilizes standardized methods to collect 

data needed to calculate endorsed 

quality measures. To achieve this goal, 

we have been working on the initial 

development and testing of a hospice 

patient-level data item set. This patient 

level data item set could be used by all 

hospices at some point in the future to 

collect and submit standardized data 

items about each patient admitted to 

hospice. These data could be used for 

calculating quality measures. Many of 

the items currently in testing are already 

standardized and included in 

assessments used by a variety of other 

providers. Other items have been 

developed specifically for hospice care 

settings, and obtain information needed 

to calculate the hospice-appropriate 

quality measures that were endorsed by 

NQF in February 2012. We are 

considering a target date for 

implementation of a standardized 

hospice data item set as early as CY 

2014, dependent on development and 

infrastructure logistics. We welcomed 

comments on the potential 

implementation of a hospice patientlevel data item set in CY 2014. 

Comment: In response to our 

invitation to comment, we received 19 

comments in support of using a 

standardized patient level data set, 

noting efforts to standardize data 

collection would aid in ensuring the 

validity of quality reporting. These 

comments offered suggestions on design 

and implementation, stressing that we 

should make every effort to streamline 

the item set so that it contains only data 

elements appropriate for hospice 

patients and required to calculate 

quality measures for reporting, thereby 

minimizing burden. Finally, most 

commenters were not supportive of 

implementing the data item set in CY 

2014 due to the time needed to 

adequately prepare providers and other 

stakeholders for implementation. 

Commenters suggested implementing a 

standardized item set that would collect 

the data elements needed to calculate 

the NQF endorsed measures at least a 

full year prior to implementing the 

additional measures, or reducing the 

number of measures expected to be 

implemented at one time. We received 

two comments expressing opposition to 

the use of a standardized data set. 

Response: We appreciate the 

comments we received about the 

standardized item set. We are 

committed to developing a Hospice 

Quality Reporting Program that utilizes 

standardized items as the basis for 

collecting and reporting quality 

measures. We have recently concluded 

a pilot test of a draft item set with nine 

hospices around the country providing 

services in various care settings. The 

main purposes of the pilot were to get 

a clear understanding of the process of 

implementation of the item set by the 

hospices and of the burden experienced 

by the hospices as they implemented 

the item set and collected data on 

patients. The quantitative and 

qualitative results of the pilot test will 

be used to inform the continued 

development of the item set. 

Our intent is to develop an item set 

that would collect data elements that are 

already part of hospice practice and 

could be used to calculate the NQF 

endorsed QMs for hospice. We are in 

agreement that the item set should not 

add burden for patients and families 

and should be based on information 

hospices already collect as part of their 

patient assessment and care provision 

practices to the extent possible. 

We will consider the suggestions 

offered in comment to the proposed rule 

as we proceed with the development 

and steps required to implement a 

standardized patient level data item set. 

In developing the standardized data 

item set, we have included data items 

that will support the following endorsed 

measures: 

• 1617 Patients Treated With an 

Opioid who are Given a Bowel Regimen 

• 1634 Pain Screening 

• 1637 Pain Assessment 

• 1638 Dyspnea Treatment 

• 1639 Dyspnea Screening 


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Starting with data collection in 2015, 

we envision these measures as possible 

measures that we would implement 

subject to future rulemaking. We 

welcomed comments on the potential 

future implementation of these 

measures and the associated projected 

timeframe for implementation. 

Comment: In response to our 

invitation to comment, we received 30 

comments related to the list of potential 

future measures. Commenters were 

generally supportive of these measures 

stating that they are important areas to 

measure for hospices and are already 

being measured by many providers. 

Commenters also pointed out that the 

measures being considered are limited 

primarily to organizational processes 

related to physical symptoms. They 

urged the future adoption of more 

outcomes oriented measures. A majority 

of the comments advised that the list of 

measures focuses only on the physical 

realm and is missing critical elements of 

hospice care. They noted that the 

measures being considered do not 

accurately reflect the holistic care 

provided to patients and families 

receiving hospice services and urged 

CMS to consider additional measures 

endorsed by NQF that address the 

psychosocial, spiritual and patient 

preference aspects of hospice; fourteen 

commenters specifically named NQF 

#1641 (patient preferences) and #1647 

(spiritual issues addressed). 

Commenters also urged CMS to consider 

the development of additional measures 

to address the shortage of endorsed 

measures that reflect important aspects 

of care such as care coordination and 

meeting patient preferences as pointed 

out by the Measures Application 

Partnership (MAP) report from June 

2012. Most commenters supported a 

phased-in approach, indicating that the 

proposed timeline is too aggressive to 

allow for adequate preparation by 

hospice providers, vendors and other 

stakeholders. 

Response: We appreciate the 

comments received about the measures 

being considered for inclusion in the 

future expansion of the Hospice Quality 

Reporting Program. As more measures 

are submitted to NQF and endorsed for 

use as part of quality reporting 

programs, we will consider these 

measures for future years as well. In 

addition, we appreciate the comments 

received about the need for the quality 

measures to reflect outcomes of care and 

care beyond physical symptom 

management. We recognize the shortage 

of endorsed measures that reflect the 

essence of high quality hospice care, 

and will continue to look for 

opportunities to work with measure 

developers to address this challenge. 

We appreciate the comments about 

the timeline for implementation, and 

the many valid concerns hospices have 

about being adequately prepared, 

supported and trained to implement the 

item set and the measures. In addition, 

we appreciate the comments about the 

timeframe required for industry 

preparation including the work needed 

by vendors to help prepare for patient 

level data collection. We will take these 

comments into consideration as we 

further refine the implementation steps 

and timeline. 

We are also considering future 

implementation of measures based on 

an experience of care survey such as the 

Family Evaluation of Hospice Care 

Survey (FEHC). The NQF endorsed 

measure #0208 Family Evaluation of 

Hospice Care is such a measure. 

Implementation of an experience of care 

measure and the associated use of a 

specified survey could precede or 

follow the implementation of a 

standardized data set. We do not 

envision implementation of both a data 

set and an experience of care survey in 

the same year and would project 

implementation in succession in order 

to avoid excessive burden to hospices. 

We solicited comment on the succession 

of implementation of these two 

potential requirements. 

Comment: In response to our 

invitation to comment, we received 19 

comments related to use of a patient/ 

family experience of care survey and 

measure. The #0208 measure, which is 

derived from the specific Family 

Evaluation of Hospice Care (FEHC) 

survey, was generally supported but 

most commenters indicated that they 

would only support the use of the FEHC 

if it were administered by a third party. 

Others felt third party administration is 

burdensome. Six commenters expressed 

problems with the FEHC survey, 

primarily that it is too long and 

therefore burdensome. Several 

commenters suggested that the survey 

should be electronic. One commenter 

opposed the use of any standardized 

survey. 

Response: We appreciate comments 

received on the use of a patient/family 

experience of care survey and associated 

measure. We will utilize the suggestions 

offered as we proceed with the 

development and steps required to 

implement a hospice-specific patient/ 

family experience of care survey and 

resulting measures. 

Comment: Some commenters offered 

suggestions related to the succession of 

implementation of the two potential 

requirements: A standardized patient 

level data set and a standardized 

patient/family experience of care 

survey. Several commenters requested 

delay in the introduction of a data set 

beyond 2014. Other commenters 

preferred the implementation of the 

standardized data item set before the 

experience of care survey, indicating 

that the standardized data item set poses 

a greater challenge for implementation 

for hospices since many hospices 

already use the FEHC or similar survey. 

Some commenters preferred 

implementing an experience of care 

measure first. Two commenters 

suggested both be implemented in 

CY2014. 

Response: We appreciate the 

comments received on the succession of 

implementation of these two potential 

requirements. We recognize the 

challenges associated with 

implementing a standardized data item 

set and an experience of care survey. We 

will carefully consider the suggestions 

offered as we finalize a timeline for 

introduction of a data set and a patient/ 

family experience of care survey. 

Summary Tables: 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

V. Survey and Enforcement 

Requirements for Home Health 

Agencies (HHAs) 

A. Background and Statutory Authority 

To participate in the Medicare 

program as an HHA provider, an agency 

or organization must meet the definition 

of an HHA in section 1891(o) of the Act. 

Additionally, section 1891(a) of the Act 

sets out specific participation 

requirements for HHAs, referred to as 

conditions of participation (CoPs), 

which are implemented in 42 CFR part 

484. The CoPs apply to an HHA as an 

entity, as well as to the services 

furnished to each individual under the 

care of the HHA, unless the CoP is 

specifically limited to Medicare/ 

Medicaid beneficiaries, such as the 

Outcome and Assessment Information 

Set (OASIS) requirements at § 484.11, 

§ 484.20 and § 484.55. Under section 

1891(b) of the Act, the Secretary is 

responsible for assuring that the CoPs 

and their enforcement are adequate to 

protect the health and safety of 

individuals under the care of an HHA 

and to promote the effective and 

efficient use of public monies. 

The Secretary is authorized to enter 

into an agreement with a State Survey 

Agency (SA) under section 1864(a) of 

the Act or a national accreditation 

organization (AO) under section 1865(a) 

of the Act, with oversight by CMS 

Regional Offices, to determine whether 

HHAs meet the federal participation 

requirements for Medicare. Section 

1902(a)(33)(B) of the Act provides for 

SAs to perform the same survey tasks 

for facilities participating or seeking to 

participate in the Medicaid program. 

The results of Medicare and Medicaidrelated surveys are used by CMS and the 

Medicaid State Agency, respectively, as 


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the basis for a decision to enter into, 

deny, or terminate a provider agreement 

with the agency. To assess compliance 

with federal participation requirements, 

surveyors conduct onsite inspections 

(surveys) of agencies. In the survey 

process, surveyors directly observe the 

actual provision of care and services to 

patients and the effect or possible effects 

of that care to assess whether the care 

provided meets the assessed needs of 

individual patients. An SA periodically 

surveys HHAs and certifies its findings 

to CMS and to the State Medicaid 

Agency if the HHA is seeking to acquire 

or maintain Medicare or Medicaid 

certification, respectively. The general 

requirements regarding the survey and 

certification process are codified at 42 

CFR part 488 and specific survey 

instructions are detailed in our State 

Operations Manual (SOM) (IOM Pub. 

100–07) and in policy transmittals. 

Certain providers and suppliers, 

including HHAs, are also deemed by us 

to meet the federal requirements for 

participation if they are accredited by an 

AO whose program is approved by us to 

meet or exceed federal requirements 

under section 1865(a). However, these 

deemed providers and suppliers are 

subject to validation surveys under 

§ 488.7. 

B. Summary of Proposed Provisions and 

Analysis of and Responses to Public 

Comments 

In the following sections, we provide 

a brief summary of the proposed 

provisions, followed by our responses to 

public comments received on each 

issue. For a detailed discussion of the 

proposed rule, see the July 13, 2012 

proposed rule (77 FR 41575). 

1. General Provisions and Comments 

Sections 4022 and 4023 of OBRA ’87 

amended the Act by adding sections 

1891(c) through (f) to establish 

requirements for surveying and 

certifying HHAs as well as to establish 

the authority of the Secretary to utilize 

varying enforcement mechanisms to 

terminate participation and to impose 

alternative sanctions if HHAs were 

found out of compliance with the CoPs. 

In the July 13, 2012 proposed rule, we 

proposed to add new subparts I and J to 

42 CFR part 488 to implement sections 

1891(c) through (f) of the Act. New 

subpart I would provide survey and 

certification guidance while new 

subpart J would outline the basis for 

enforcement of compliance standards 

for HHAs that are not in substantial 

compliance with the CoPs. Also, we 

proposed to amend certain sections of 

42 CFR part 488, subpart A to include 

references to HHAs, where appropriate, 

since the current regulations only 

reference the survey, certification and 

enforcement procedures for long term 

care facilities. Specifically, we proposed 

to amend § 488.2 to include the 

statutory reference to home health 

services (section 1861(m) of the Act), 

HHAs (section 1861(o) of the Act), and 

the Conditions of Participation (CoPs) 

for HHAs and home health quality 

(section 1891 of the Act). We also 

proposed to revise § 488.3(a)(1) to 

include the statutory citations 

concerning HHAs mentioned above. In 

addition, we proposed to amend 

§ 488.26 by revising paragraphs (c)(2) 

and (e) to include references to 

‘‘patient’’ and ‘‘patients’’ which is how 

individuals receiving services from an 

HHA are referenced. Finally, we 

proposed to revise the heading for 

§ 488.28 to include reference to HHAs 

with deficiencies. We did not receive 

any comments on these sections and are 

therefore finalizing the proposed 

provisions. 

We received the following general 

comments on the proposed rule. 

Comments: Several commenters 

stated that CMS should delay the 

implementation of the proposed rule 

until a joint CMS/Industry task force 

could be formed to rework the 

regulation and develop procedures and 

guidance to Regional Offices and SAs. A 

few commenters submitted comments in 

the form of procedural questions 

regarding SA and CMS operations to 

implement the regulation. 

Response: We will engage industry, 

patient advocacy organizations, and 

other stakeholders in the 

implementation process and we will do 

this through the interpretive guidance 

process. We do not agree that an overall 

delay of the regulation is warranted, as 

this could be a lengthy delay which 

would only further impede 

implementation of an enforcement 

policy that is highly advisable to protect 

beneficiaries, aligns home health 

enforcement with other programs, is 

mandated by the Social Security Act, 

and is long overdue. However, we will 

stage the effective date of the civil 

money penalty (§ 488.845), the Informal 

Dispute Resolution (IDR) provisions 

(§ 488.745), and the suspension of 

payment for new admissions (§ 488. 

840) to permit more time for both 

dialogue and design of information 

system changes for effective 

administration of these provisions. We 

will also develop associated interpretive 

guidance that will address many of the 

concerns raised by commenters 

regarding the actual procedures that will 

be followed to implement the 

alternative sanctions. We will share 

proposed guidance with the HHA 

industry and patient advocacy 

organizations for comment. The 

effective date of the civil money penalty 

(§ 488.845), suspension of payment for 

new admissions (§ 488.840), and 

Informal Dispute Resolution (IDR) 

provisions (§ 488.745) will be July 1, 

2014. The effective date of all other 

survey and enforcement provisions in 

parts 488, 489, and 498 will be July 1, 

2013. 

2. Subpart I—Survey and Certification 

of HHAs 

a. Basis and Scope (§ 488.700) 

We proposed in § 488.700 to specify 

the statutory authority for and general 

scope of standards proposed in 42 CFR 

part 488 that establishes the 

requirements for surveying HHAs to 

determine whether they meet the 

Medicare conditions of participation. 

We are finalizing this rule as proposed. 

In general, this final rule is based on the 

rulemaking authority in section 1891 of 

the Act as well as specific statutory 

provisions identified in the preamble 

where appropriate. 

Comments: Several commenters 

complimented CMS on the 

implementation of unannounced 

inspections and more specific survey 

protocols. Other commenters stated that 

the CoPs should be revised. 

Response: We appreciate the 

comments regarding the sections of the 

regulation which addressed 

unannounced surveys and more specific 

survey protocols. 

Regarding the comments requesting 

revisions to the CoPs, we appreciate the 

commenters concerns, but find that 

those comments are beyond the scope of 

this final rule. Any changes to the CoPs 

would be made through subsequent 

notice and comment rulemaking, to give 

stakeholders an opportunity to provide 

comments on any proposed changes. 

b. Definitions (§ 488.705) 

We proposed to add § 488.705 which 

defines certain terms. Sections 

1891(c)(1) and (2) of the Act specify the 

requirements for types and frequency of 

surveys to be performed in HHAs, 

utilizing the terms ‘‘standard’’, 

‘‘abbreviated standard’’, ‘‘extended’’, 

‘‘partial extended’’ and ‘‘complaint’’ 

surveys, as well as specifying the 

minimum components of the standard 

and extended surveys. Therefore, we 

proposed to add definitions for these 

surveys at § 488.705. 

In addition to those terms, we 

proposed definitions for ‘‘conditionlevel deficiency,’’ ’’deficiency,’’ 

‘‘noncompliance,’’ ‘‘standard-level 


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deficiency,’’ ‘‘substandard care,’’ and 

‘‘substantial compliance.’’ The 

definitions of the different surveys, as 

well as the additional proposed 

definitions, have been a part of 

longstanding CMS policy. Except for the 

few modifications noted in our 

responses below, we are finalizing 

§ 488.705 as proposed. 

Comments: A few commenters could 

not tell from the definition of ‘‘standardlevel deficiency’’ whether an alternative 

sanction could be imposed for standardlevel deficiencies alone. 

Response: Proposed § 488.810(b) 

specifically provides that alternative 

sanctions are applied on the basis of 

noncompliance with the conditions of 

participation. Where a condition-level 

deficiency is determined, an alternative 

sanction may be imposed. However, 

there may be occasions where serious 

noncompliance with a single standard 

could be cited as a condition-level 

deficiency, and such a finding could 

lead to the imposition of a sanction. For 

example, if a noncompliance with a 

standard is determined to constitute a 

significant or a serious finding that 

adversely affects, or has the potential to 

adversely affect, patient outcomes, then 

it may be considered a condition-level 

deficiency. While alternative sanctions 

are generally not based on standardlevel deficiencies alone, noncompliance 

with a standard that is determined to be 

so serious as to constitute a conditionlevel deficiency could result in 

termination from Medicare or an 

alternative sanction, or both. 

Comment: Several commenters were 

unclear as to the meaning of an 

‘‘abbreviated standard survey,’’ 

‘‘substandard care’’ and ‘‘extended 

survey.’’ 

Response: The abbreviated standard 

survey focuses on particular tasks that 

relate, for example, to complaints 

received, or a change of ownership, or 

management. It does not cover all the 

aspects reviewed in the standard survey, 

but rather concentrates on a particular 

area or areas of concern. The surveyor 

may investigate any area of concern and 

make a compliance decision regarding 

any regulatory requirement, whether or 

not it is related to the original purpose 

of the survey or complaint. The 

abbreviated standard survey can be 

expanded and changed to a standard, 

partial extended or extended survey 

when necessary. We have revised the 

definition to reflect that an abbreviated 

standard survey may address fewer 

standards or conditions than a standard 

survey. Regarding the commenters’ 

concerns with ‘‘substandard care,’’ we 

agree that the definition is not entirely 

clear and should be refined. In this final 

rule, we are clarifying the definition to 

explain that a finding of substandard 

care is a condition-level finding that is 

identified on a standard survey that 

includes one or more deficiencies which 

result in actual or potential harm to 

patients. Condition level deficiencies 

may also be cited based on findings of 

a complaint, abbreviated, extended or 

partial extended survey, but 

section1891(c)(2)(D) of the Act provides 

that substandard care found as a result 

of a standard survey will always trigger 

an extended survey. We appreciate that 

substandard care could be defined in 

terms of just a few CoPs rather than any 

CoP, and that a narrower definition 

would reduce the number of extended 

surveys. However, we consider all CoPs 

to be important. We regard the statutory 

directive for an extended survey 

pursuant to a finding of substandard 

care to mean that CMS should make a 

deeper inquiry (via an extension of the 

survey) when findings are serious, and 

that we ought to calibrate the extent of 

the inquiry to the degree of risk to 

patients. Therefore, we made two 

changes in this final rule. First, we 

retained the broad scope of the 

definition of substandard care (so as to 

refer to any CoP for which 

noncompliance was identified), but 

refined the definition to focus on actual 

harm or potential for harm to the 

patient. Second, we revised the 

definition of extended survey to state 

that an extended survey reviews 

‘‘additional’’ rather than ‘‘all’’ CoPs that 

were not examined during the standard 

survey. Whether the extended survey 

then examines all, or a focused number, 

of the additional CoPs not examined 

during the standard survey can then be 

determined on the basis of the nature 

and extent of serious risk to patients 

that is identified in the standard survey. 

c. Standard Surveys (§ 488.710) 

We proposed in § 488.710, that a 

standard survey will be conducted not 

later than 36 months after the date of the 

previous standard survey, as specified at 

section 1891(c)(2)(A) of the Act. Section 

1891(c)(2)(C) of the Act requires for 

standard surveys, to the extent 

practicable, to review a case-mix 

stratified sample of individuals to 

whom the HHA furnishes services, 

which is proposed in § 488.710(a)(1). 

The statute specifies that we actually 

visit the homes of sampled patients, and 

that we conduct a survey of the quality 

of services being provided (as measured 

by indicators of medical, nursing, and 

rehabilitative care). In proposed 

§ 488.710(a), we specified minimum 

requirements and provided that visits to 

homes of patients will be done only 

with the consent of the patient, their 

guardian or legal representative. The 

purpose of the home visit is to evaluate 

the extent to which the quality and 

scope of services furnished by the HHA 

has attained and maintained the highest 

practicable functional capacity of each 

patient, as reflected in the patient’s 

written plan of care and clinical records. 

Other forms of communication with 

patients, such as through telephone 

calls, could be used to complete 

surveys, if determined necessary by the 

SA or CMS Regional Office. We had also 

proposed in § 488.710(b) that the survey 

agency’s failure to follow its own survey 

procedures will not invalidate otherwise 

legitimate determinations that 

deficiencies existed in an HHA. For 

example, if the Statement of 

Deficiencies was not forwarded to the 

provider within 10 days of the end of 

the exit conference, this will not 

invalidate the underlying 

determinations. 

Comments: Two commenters stated 

that CMS should conduct HHA surveys 

more frequently than at a minimum of 

every 36 months as proposed. 

Response: While we agree that 

frequent HHA surveys are desirable, we 

also recognize that some HHAs have 

much a better history of compliance 

with the CoPs than others. Rather than 

performing more frequent surveys in 

every HHA, we will seek to conduct 

more frequent surveys of those 

particular HHAs for which available 

information indicates that they may 

have higher risks of quality of care 

problems than other HHAs. Such a more 

focused approach will enable us to 

focus our efforts and resources on those 

HHAs which require greater oversight 

and assistance. 

d. Partial Extended Survey (§ 488.715) 

We proposed in § 488.715 that the 

partial extended survey will be 

conducted to determine if deficiencies 

and/or deficient practice(s) exist that 

were not fully examined during the 

standard survey. It will be conducted 

when a standard-level noncompliance 

was identified; or, if the surveyor 

believed that a deficient practice existed 

at a standard or condition-level that was 

not examined during the standard 

survey. During the partial extended 

survey, the surveyor will review, at a 

minimum, additional standard(s) under 

the same CoP in which the deficient 

practice was identified during the 

standard survey. The surveyors could 

also review any additional standards 

under the same or related condition 

which will assist in making a 

compliance decision. Under § 488.24, 

which applies to most other providers 


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and suppliers and upon which this 

provision is modeled, the SA certifies 

that a provider is not in compliance 

with the CoPs where the deficiencies are 

of such character as to substantially 

limit the provider’s capacity to furnish 

adequate care or which adversely affect 

the health and safety of patients. A CoP 

may be considered to be out of 

compliance (and thus at a conditionlevel) for one or more standard-level 

deficiencies, if, in a surveyor’s 

judgment, the standard-level deficiency 

constitutes a significant or a serious 

finding that adversely affects, or has the 

potential to adversely affect, patient 

outcomes. Surveyors are to use their 

professional judgment, in concert with 

the federal forms, policies and 

interpretive guidelines, in their 

assessment of a provider’s compliance 

with the CoPs. The same procedures 

will be used for HHAs. We are finalizing 

this section as proposed. 

Comments: One commenter stated 

that there was no timeframe stated for 

the completion of a partially extended 

survey. The commenter recommended 

that CMS add a timeframe to the final 

regulation. 

Response: A partial extended survey 

is conducted when (1) standard-level 

deficiencies are found during a standard 

survey and the surveyor determines that 

a more comprehensive review of the 

CoPs examined under the standard 

survey would result in condition-level 

deficiencies, or (2) it is necessary to 

determine if standard or condition-level 

deficiencies are present in the CoPs not 

examined in the standard survey. The 

standard survey can be expanded to 

become a partial extended survey and 

thus is conducted on the same interval 

as the standard survey. Therefore it is 

not necessary to add any timeframe for 

the completion of a partially extended 

survey. This is also true if a complaint 

or abbreviated survey identifies issues 

beyond the original scope of the survey. 

These surveys would then be 

considered partial extended surveys. 

e. Extended Surveys (§ 488.720) 

We proposed in § 488.720, that the 

extended survey will review compliance 

with conditions and standards 

applicable to the HHA. It could be 

conducted at any time, at the discretion 

of CMS or the SA, but will be conducted 

when any condition-level deficiency 

was found during a standard survey. 

The extended survey will review and 

identify the HHA’s policies, procedures, 

and practices that produced the 

substandard care, which we define in 

§ 488.705 as noncompliance with one or 

more conditions of participation at the 

condition-level. We regard the statutory 

directive for an extended survey 

pursuant to a finding of substandard 

care to mean that CMS should make a 

deeper inquiry (via an extension of the 

survey) when findings are serious, and 

that we ought to calibrate the extent of 

the inquiry to the degree of risk to 

patients. Whether the extended survey 

then examines all, or a focused number, 

of the additional CoPs not examined 

during the standard survey can then be 

determined on the basis of the nature 

and extent of serious risk to patients 

that is identified in the standard survey. 

The extended survey will be conducted 

no later than 14 calendar days after the 

completion of a standard survey which 

found the HHA had furnished 

substandard care. Additionally, the 

survey will review any associated 

activities that might have contributed to 

the deficient practice. 

Comments: Several comments were 

received regarding the definition of 

substandard care and the association of 

that definition with an extended survey. 

In addition, as noted above in reference 

to § 488.710, some commenters stated 

that more frequent surveys should be 

conducted. 

Response: As we noted above, in 

reference to the discussion of § 488.705, 

we have refined the definition of 

substandard care in § 488.705 in order 

to provide additional clarity. We are 

also clarifying the regulatory language at 

§ 488.720, associated with the extended 

survey, to state that the extended survey 

reviews ‘‘additional’’ conditions that 

were not evaluated during the standard 

survey. The extended survey may 

review all conditions of participation, or 

may review a targeted number of 

conditions, that were not examined in 

the standard survey. We are making this 

refinement in response both to the 

request for greater clarity and to the 

exhortation from some commenters, 

previously discussed above in reference 

to § 488.710, that more frequent surveys 

be conducted. If every extended survey 

reviewed every condition of 

participation, we would consume scarce 

survey resources examining some 

conditions that are low risk in a 

particular HHA. The result is that we 

would conduct fewer standard and 

extended surveys than we will be able 

to conduct when the extended survey 

may focus on those additional 

conditions (not examined during the 

standard survey) that we judge to 

present higher risk of noncompliance 

compared to other conditions in the 

specific HHA that is being surveyed. By 

such judicious targeting of survey 

attention, we believe we will increase 

the surveyors’ ability to identify 

problems that are serious and also allow 

us to increase frequency of surveys 

through targeting additional surveys 

where they are most needed. We have 

also changed § 488.720(b) to instruct 

that the extended survey must be 

conducted no later than 14 calendar 

days after completion of a standard 

survey which found the HHA was out 

of compliance with a condition of 

participation. 

f. Unannounced Surveys (§ 488.725) 

Section 1891(c)(1) of the Act requires 

that standard surveys be unannounced. 

Moreover, CMS policy (State Operations 

Manual (SOM) section 2700A) requires 

that all HHA surveys be unannounced; 

this policy is set out at proposed 

§ 488.725, which also provides that 

surveys be conducted with procedures 

and scheduling that renders the onsite 

surveys as unpredictable in their timing 

as possible. In addition, section 

1891(c)(1) of the Act requires CMS to 

review state scheduling and survey 

procedures to ensure that the agency has 

taken all reasonable steps to avoid 

giving advance notice to HHAs of 

impending surveys through these 

procedures. Generally, as with respect 

to other provider-types, State Survey 

Agencies make every effort to lessen the 

predictability of a survey occurring at a 

specific time, day, or month. Moreover, 

section 1891(c)(1) of the Act states that 

any individual who notifies (or causes 

to be notified) an HHA of the time or 

date of the standard survey is subject to 

a civil money penalty (CMP) not to 

exceed $2,000. Accordingly, the 

proposed regulations at § 488.725 reflect 

these survey requirements. We did not 

receive any comments in response to 

our proposals in § 488.725. Therefore, 

we are finalizing these provisions as 

proposed. 

g. Survey Frequency and Content 

(§ 488.730) 

In § 488.730, we proposed to establish 

the requirements for survey frequency 

and the substantive content of the 

survey, as discussed in § 488.710, 

§ 488.715, and § 488.720. Section 

1891(c)(2) of the Act requires HHAs to 

be subject to a standard survey at least 

every 36 months and the frequency of a 

standard survey to be commensurate 

with the need to assure the delivery of 

quality home health services. This 36 

month interval is based upon the last 

day of the last standard survey. This 

section of the Act also gives CMS the 

authority to conduct a survey as often as 

necessary to assure the delivery of 

quality home health services by 

determining whether an HHA complies 

with the CoP or to confirm the 

correction of previous deficiencies. A 


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standard survey or abbreviated standard 

survey may be conducted within two 

months of a change in ownership, 

administration or management of an 

HHA, as specified in 1891(c)(2)(B)(ii) of 

the Act, and must be conducted within 

two months of a significant number of 

complaints reported against the HHA (as 

determined by CMS), and will also be 

conducted as otherwise directed by 

CMS to determine compliance with the 

CoP, such as the investigation of a 

complaint. Extended surveys and partial 

extended surveys may also be 

conducted at any time at the discretion 

of CMS or the SA in order to determine 

compliance with the CoPs. However, 

under section 1891(c)(2)(D) of the Act, 

extended surveys and partial extended 

surveys must be conducted when an 

HHA is found to have furnished 

substandard care. 

Comments: Several commenters 

stated that CMS should require more 

frequent surveys specific to complaints 

and substandard care issues (i.e., greater 

than the statutorily mandated 36 

months). Commenters also suggested 

some complaints be investigated within 

48 hours. 

Response: As was stated earlier, we 

agree that frequent HHA surveys are 

desirable. However, instead of 

performing more frequent surveys in 

every HHA, we will seek to conduct 

more frequent surveys of those HHAs 

that available information indicates 

have a higher risk of quality of care 

issues. With regard to the investigation 

of complaints, we currently maintain a 

complaint tracking and prioritization 

system which prioritizes complaints 

according to the level of risk for the 

patients at the HHA. Complaints that 

indicate the possibility of an immediate 

jeopardy situation are given the highest 

priority and are investigated as soon as 

possible. With regard to the 

commenter’s suggestion that complaints 

which indicate potential immediate 

jeopardy be investigated within 48 

hours, we agree that prompt attention to 

these complaints is very important. We 

consider the SOM to be the most 

appropriate venue for specifying the 

timeframes by which all types of 

complaints should be investigated. We 

will take the commenter’s suggestion 

into consideration as we develop such 

interpretive guidance. 

h. Surveyor Qualifications (§ 488.735) 

Section 1891(c)(2)(C)(iii) of the Act 

requires ‘‘an individual who meets the 

minimum qualifications established by 

the Secretary’’ to conduct a survey of an 

HHA. We interpret this statutory 

language to mean that each individual 

on a survey team must meet certain 

minimum CMS qualifications. We set 

forth our criteria for surveyor minimum 

qualifications in proposed § 488.735. 

We are adding that the surveyor must 

successfully complete the relevant CMSsponsored Basic HHA Surveyor 

Training Course and any associated 

course prerequisites prior to conducting 

an HHA survey. These prerequisites will 

be further explained in guidance. 

In proposed § 488.735, we also set out 

the circumstances that will disqualify a 

surveyor from surveying a particular 

HHA as required by section 

1891(c)(2)(C)(iii) of the Act. A surveyor 

will be prohibited from surveying an 

HHA if the surveyor currently serves, or 

within the previous two years has 

served, on the staff of or as a consultant 

to, the HHA undergoing the survey. 

Specifically, the surveyor could not 

have been a direct employee, 

employment agency staff at the HHA, or 

an officer, consultant or agent for the 

surveyed HHA regarding compliance 

with CoPs. A surveyor will be 

prohibited from surveying an HHA if he 

or she has a financial interest or an 

ownership interest in that HHA. The 

surveyor will also be disqualified if he 

or she has a family member who has a 

financial interest or ownership interest 

with the HHA to be surveyed or has a 

family member who is a patient of the 

HHA to be surveyed. 

Comments: Several commenters 

stated that although surveyors are 

adequately trained and are competent, 

there is still inconsistency among 

surveyors nationally. Several 

commenters stated that CMS should 

develop formal competencies for 

surveyors and publish these 

competencies. A few commenters 

suggested that surveyors be tested on 

the competencies and skills for the 

program they will survey. A few 

commenters recommended that 

surveyors be required to have 

continuing education hours annually. A 

few commenters suggested that there 

should be additional CMS commitment 

of time and resources to train surveyors 

on the CoPs in collaboration with 

provider associations. 

Response: We appreciate these 

comments regarding surveyor 

competencies. However, we believe that 

the SOM rather than the regulation 

should contain this level of specificity 

concerning surveyor competencies, and 

we will consider additional 

specification for training as we further 

develop the interpretive guidance. We 

currently require successful completion 

of a national HHA Basic training course 

(with pre-requisites) before a surveyor is 

allowed to survey a program 

independently. This is a comprehensive 

course and there are pre and post tests 

to ensure surveyor understanding. 

Additionally, all SAs conduct reviews 

of HHA surveyor work before it is 

released as a final set of findings. This 

process serves as the quality assurance 

for the SA. Requirements for HHA 

surveyor educational and experience 

backgrounds are determined by the SAs 

that employ them. Therefore, we are not 

accepting these recommendations. 

Comments: A few commenters stated 

that surveyors should be disqualified if 

he/she worked at a competitor of the 

HHA being surveyed within the last two 

years. One commenter stated that the 

surveyor should be disqualified if he/ 

she worked at any HHA within the last 

two years. One commenter requested 

clarification as to what constitutes a 

family member. 

Response: While we appreciate the 

comments regarding surveyor 

disqualifications, we do not agree that 

additional criteria for surveyor 

disqualification beyond those specified 

in the statute are necessary or indicated 

at this time. The Act specifies at section 

1891(c)(2)(C)(iii)(II), that the survey be 

conducted by an individual, ‘‘who is not 

serving (or has not served within the 

previous 2 years) as a member of the 

staff of, or as a consultant to, the home 

health agency surveyed respecting 

compliance with the conditions of 

participation specified to section 

1861(o) or subsection (a) of this section, 

and (III) who has no personal or familiar 

interest in the home health agency 

surveyed.’’ Therefore, we are not 

accepting the recommendation for these 

additional requirements. In regards to 

the definition of ‘‘family member,’’ in 

the above statement, we will utilize the 

definition of family member located at 

§ 411.351 in the development of 

interpretive guidance for this regulation. 

This definition includes husband or 

wife; birth or adoptive parent, child, or 

sibling; stepparent, stepchild, 

stepbrother, or stepsister; father-in-law, 

mother-in-law, son-in-law, daughter-inlaw, brother-in-law, or sister-in-law; 

grandparent or grandchild; and spouse 

of a grandparent or grandchild. 

Comment: A few commenters 

recommended that CMS allocate funds 

annually for national training of the 

HHA industry on the CoPs and 

alternative sanction policies. 

Response: We appreciate the interest 

of the HHA industry for CMS training. 

We look forward to partnering with the 

national associations to promote 

knowledge and education regarding the 

CoPs and the provisions of this rule. We 

do issue periodic communications to 

providers and host regular open door 

forums to communicate important 


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information and engage in dialogue with 

the HHA industry, patient advocacy 

organizations, and the public. We also 

use webinars to train survey staff and 

these webinars are posted on our Web 

site and are available to the HHA 

industry. Since the recommendation to 

allocate funds for the HHA industry 

falls outside the scope of the proposed 

regulation, we are not accepting that 

aspect of the recommendation. 

Comments: One commenter suggested 

that CMS require the use of the 2011 

Survey protocols when conducting 

surveys to ensure consistency. 

Response: Use of the survey protocols 

is currently our policy. 

i. Certification of Compliance or 

Noncompliance (§ 488.740) 

We proposed in § 488.740 to cross 

reference the rules for certification, 

documentation of findings, periodic 

review of compliance and approval, 

certification of noncompliance, and 

determining compliance for HHAs as set 

forth, respectively at § 488.12, § 488.18, 

§ 488.24 and § 488.26 of this part. These 

general rules must be followed when a 

State Agency certifies compliance or 

noncompliance of the HHA with the Act 

and CoPs. 

Comment: One commenter stated that 

the language does not explain when or 

on what basis condition-level 

deficiencies will be identified. 

Response: Guidance on how 

surveyors determine condition-level and 

standard-level deficiencies is provided 

in the State Operations Manual (SOM), 

Appendix B. These new rules do not 

change that practice. With the 

establishment of alternative sanctions, 

we will continue to address this issue in 

the development of interpretive 

guidance. In addition, we will consult 

with stakeholders prior to publication of 

any guidance on this issue. 

Based on these comments, we are 

finalizing this section as proposed. 

j. Informal Dispute Resolution (IDR) 

(§ 488.745) 

We proposed in § 488.745 to make 

available to HHAs an IDR process to 

address disputes related to conditionlevel survey findings following an 

HHA’s receipt of the official statement 

of deficiencies. We have proposed 

adding an IDR process that will provide 

HHAs an informal opportunity to 

resolve disputes in the survey findings 

for those HHAs that are seeking 

recertification from the SA for 

continued participation in Medicare and 

for those HHAs that are currently under 

SA monitoring (either through a 

complaint or validation survey). 

Whenever possible, we want to provide 

every opportunity to settle 

disagreements at the earliest stage, prior 

to a formal hearing, conserving time and 

money potentially spent by the HHA, 

the State agency, and CMS. The goal of 

IDR is to offer an HHA the opportunity 

to refute one or more condition-level 

deficiencies cited on the official 

Statement of Deficiencies. An IDR 

between an HHA and the SA or RO, as 

appropriate, will allow the HHA an 

opportunity to provide an explanation 

of any material submitted to the SA and 

respond to the reviewer’s questions. 

In § 488.745, we proposed to provide 

HHAs with the option to dispute 

condition-level survey findings upon 

their receipt of the official Statement of 

Deficiencies. When survey findings 

indicate a condition-level deficiency (or 

deficiencies), CMS or the State, as 

appropriate, will notify the HHA in 

writing of its opportunity to request an 

IDR of those deficiencies. This notice 

will be provided to the HHA at the time 

the Statement of Deficiencies is issued 

to the HHA. The HHA’s request for IDR 

must be submitted in writing, should 

include the specific deficiencies that are 

disputed, and should be submitted 

within the same 10 calendar day period 

that the HHA has for submitting an 

acceptable plan of correction. 

An HHA’s initiation of the IDR 

process will not postpone or otherwise 

delay the effective date of any 

enforcement action. The failure to 

complete an IDR will not delay the 

effective date of any enforcement action. 

Further, if any findings are revised or 

removed based on IDR, the official 

Statement of Deficiencies is revised 

accordingly and any enforcement 

actions imposed solely as a result of 

those revised or removed deficiencies 

are adjusted accordingly. We believe 

that the IDR procedures will maintain 

the balance between an HHA’s due 

process concerns and the public’s 

interest in the timely correction of HHA 

deficiencies. 

Comments: Several commenters 

applauded our introduction of an 

Informal Dispute Process (IDR) but 

added that CMS should delay the 

imposition of a sanction until the 

completion of the IDR process. 

Response: We do not agree with the 

commenters regarding a delay of the 

imposition of a sanction until after IDR 

is completed. Section 1891(f)(3) directs 

us to ensure that our procedures for 

imposing sanctions be designed so as to 

minimize the time between 

identification of deficiencies and 

imposition of the sanctions. We are 

providing for IDR beginning with the 

provider’s receipt of the official 

Statement of Deficiencies, in order to 

give facilities an opportunity to rebut 

survey findings early in the process. 

While IDR is not required under the 

statute, by adding this feature to the 

enforcement process we are balancing 

the needs of agencies to avoid 

unnecessary disputes and protracted 

litigation, on one hand, with the 

interests of HHA patients, which we 

believe to be paramount, in assuring the 

most rapid correction of deficiencies. 

The IDR is meant to be an informal 

process whereby the provider has an 

informal opportunity to address the 

surveyor’s findings, either by disputing 

them or providing additional 

information. This process is offered 

immediately after the survey and a 

request for IDR must be made within the 

same 10 calendar day period that the 

HHA has for submitting a plan of 

correction, as we provide in 

§ 488.745(d). In those occasions where 

an IDR may occur after a remedy is 

imposed, the IDR will still be conducted 

in time for the IDR results to be taken 

into account in the remedial action. In 

the case of civil money penalties that 

may be imposed with an accrual 

effective date beginning on the last day 

of the survey, we explicitly provide at 

§ 488.845(f) that the due date for the 

collection of a CMP is 15 days after a 

final administrative decision. This 

provides time for an IDR or 

administrative hearing to take place 

before the due date for collection. We 

also specify at § 488.745(c) that if any 

findings are revised or removed by CMS 

or the state (for surveys conducted by 

the SA) based on IDR, the CMS–2567 is 

revised accordingly. Furthermore, if 

CMS accepts the SA’s revised CMS– 

2567 and any enforcement actions 

imposed solely as a result of those cited 

deficiencies, CMS will adjust such 

enforcement actions accordingly. 

Comments: Several commenters 

referenced the IDR process as an 

independent dispute resolution and 

submitted comments regarding the use 

of third parties not associated with the 

SA. One commenter stated that the HHA 

could share the cost of the independent 

dispute resolution. 

Response: We wish to provide 

clarification for these commenters. The 

proposed rule discussed ‘‘informal 

dispute resolution’’ and not 

independent informal dispute 

resolution. The proposed process will 

be conducted internally by the SA or 

CMS as indicated. Each SA is 

responsible for setting up its own IDR 

process. We do not preclude SAs from 

involving independent contractors. 

Comments: Several commenters 

stated that the IDR process should be 


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available for standard-level deficiencies 

as well as condition-level deficiencies. 

Response: We thank the commenters 

for this recommendation. However, we 

do not agree that the IDR process should 

be expanded to standard-level 

deficiencies. The purpose of the IDR is 

for the HHA to dispute condition-level 

findings that may be the impetus for an 

alternative sanction. Standard-level 

findings alone do not trigger an 

alternative sanction. Some findings of 

noncompliance with specific standards 

(that is, standard level findings), 

however, may be cited at the conditionlevel if they are repeat deficiencies or 

are evaluated as being extremely 

serious. If noncompliance is cited at the 

condition-level, such condition-level 

classification will be clearly 

communicated to the HHA and will be 

accompanied by rights to request an IDR 

as well as appeal. Additional guidance 

will be provided in survey protocols. 

Comment: Several commenters 

requested further clarification of how 

the IDR process will be implemented. 

Response: We understand the interest 

of the commenters in specific 

procedures for the implementation of 

the IDR process. CMS will develop them 

as a part of the interpretive guidance 

associated with the final regulation. 

Comments: Several commenters 

requested specific timeframes for the 

IDR process due to the delays that may 

occur at the SA level in getting the 

Statement of Deficiencies to the HHA. 

Response: We agree that these 

timeframes are essential to the effective 

implementation of the IDR process. We 

will develop these instructions through 

interpretive guidance, internal policy 

directives and SA performance 

standards. 

Comments: A few commenters 

requested that CMS expedite the IDR 

process. 

Response: We agree that timeframes 

for the expeditious accomplishment of 

the IDR process are essential. We will 

develop instructions through 

interpretive guidance, internal policy 

directives and SA performance 

standards. 

Comments: One commenter 

recommended that the patient, their 

representative and the State 

ombudsman should be notified of the 

IDR so that they might provide valuable 

input into the IDR process. 

Response: We understand the interest 

voiced by the commenter. The IDR 

process is provided primarily as an 

opportunity for the provider to provide 

additional information and to dispute 

condition-level deficiencies. This is not 

an adversarial setting and it will not be 

necessary for the SA or CMS to seek 

additional input from other parties. 

However, we will consider the inclusion 

of such members in interpretive 

guidance as appropriate. 

Comments: One commenter felt the 10 

day response time required for the 

provider to request IDR and submit 

evidence was too brief. 

Response: We appreciate the concern 

of the commenter regarding the 

response time provided. However, 

because of the need to address disputed 

findings timely and enable the provider 

to begin corrections to regain 

compliance as soon as possible, we do 

not feel that a shorter time period will 

be prudent. 

Based on the comments above, we are 

finalizing this section as proposed. 

3. Subpart J—Alternative Sanctions for 

Home Health Agencies With 

Deficiencies 

a. Statutory Basis (§ 488.800) 

We proposed to add rules for 

enforcement actions for HHAs with 

deficiencies, including alternative 

sanctions, at new subpart J. Under 

sections 1866(b)(2)(B) and 1891(e) of the 

Act and § 489.53(a)(3), we may 

terminate an HHA’s provider agreement 

if that HHA is not in substantial 

compliance with the Medicare 

requirements (that is, the failure to meet 

one or more conditions of participation 

is considered a lack of substantial 

compliance). We may also terminate an 

HHA that fails to correct its deficiencies 

within a reasonable time (ordinarily no 

more than 60 days), even if those 

deficiencies are at the standard- (rather 

than condition-) level at § 488.28. Prior 

to OBRA ’87, the only action available 

to CMS to address HHAs out of 

compliance with federal requirements 

was termination of their Medicare 

provider agreement. Section 4023 of 

OBRA ’87 added subsections 1891(e) 

and (f) to the Act, which expanded the 

Secretary’s options to enforce federal 

requirements for HHAs. Under section 

1891(e)(1) of the Act, if the Secretary 

determines on the basis of a standard, 

extended, or partial extended survey or 

otherwise, that a home health agency 

that is certified for participation under 

this title is no longer in compliance 

with the requirements specified in or 

pursuant to section 1861(o) or section 

1891(a) of the Act and determines that 

the deficiencies involved immediately 

jeopardize the health and safety of the 

individuals to whom the agency 

furnishes items and services, the 

Secretary shall take immediate action to 

remove the jeopardy and correct the 

deficiencies through the remedy 

specified in section 1891(f)(2)(A)(iii) or 

terminate the certification of the agency, 

and may provide, in addition, for one or 

more of the other sanctions described in 

section 1891(f)(2)(A). We proposed to 

set out the statutory basis for the new 

subsection at § 488.800, which is 

sections 1891(e) and (f) of the Act. 

Section 1891(e) provides for termination 

of home health agencies that fail to 

comply with conditions of participation. 

This section also provides for ensuring 

that the procedures with respect to the 

conditions under which each of the 

alternative sanctions developed by the 

Secretary shall be designed to minimize 

the time between identification of 

deficiencies and imposition of these 

sanctions, including imposition of 

incrementally more severe fines for 

repeated or uncorrected deficiencies. 

Furthermore, we proposed that this 

section specifies that these sanctions are 

in addition to any others available 

under state or federal law, and, except 

for civil money penalties, are imposed 

prior to the conduct of a hearing. 

Comments: Two commenters stated 

that CMS had exceeded the 

authorization of the statute with the 

extensive sanctions, the excessive 

amounts of civil money penalties and 

dependence on the subjective 

determinations of state surveyors. 

Another commenter stated that CMS 

improperly, and without statutory 

authority, limits enforcement to 

condition-level deficiencies. 

Response: We do not agree that the 

alternative sanctions in this final rule 

exceed the authority of the statute. 

Section 1891(f)(1)(A) directs the 

Secretary to develop a range of 

sanctions to impose on a HHA that is 

not in compliance with the federal 

requirements, which must include civil 

money penalties, suspension of 

payments for new admissions and 

temporary management. We do not 

believe that this is an exhaustive list. 

Therefore we are adding through 

rulemaking two additional sanctions to 

be included within that range of 

sanctions. Under the HHA enforcement 

context, we have added the additional 

remedies of directed plan of correction 

and directed in-service training, which 

have both been successfully used in our 

enforcement of the nursing home 

requirements. In our experience with 

skilled nursing facilities, we realize that 

some compliance problems are a result 

of imperfect knowledge on the part of 

health services staff relative to state-ofthe-art practices and resident outcome 

expectations. This is also the case with 

services provided to HHA patients. We 

believe that the HHA provider would 

benefit from a directed in-service 

training program conducted by sources 


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with an in-depth knowledge of the 

area(s) which require specific training 

so that positive change is achieved and 

maintained. Similarly, under a directed 

plan of correction, an HHA would be 

guided by individuals with knowledge 

of necessary corrective actions (for 

example, us, the SA, or a temporary 

manager (with CMS approval)) to ensure 

that the underlying cause of cited 

deficiency or deficiencies does not 

recur. This remedy sets forth the 

expected correction actions which an 

HHA must take to achieve compliance 

and the dates by which the actions must 

be taken. 

We disagree with the comment that 

the proposed rule limits the 

enforcement to condition-level 

deficiencies without statutory authority. 

Section 1891 does not specify the level 

of noncompliance that would trigger the 

imposition of an enforcement remedy; 

rather, it provides that remedies are to 

be imposed when an HHA is not in 

compliance with the requirements of 

section 1861(o) and 1891(a), which 

includes implementing regulations at 

Part 484. We consider an HHA to be in 

substantial compliance with the CoPs 

when all deficiencies cited are at a 

standard-level. Thus it will not be 

consistent for CMS to impose alternative 

sanctions based upon standard-level 

deficiencies alone when the HHA is 

considered to be in compliance with the 

CoPs. 

Comment: Several commenters stated 

that, because of the risk that sanctions 

could cause HHAs to close, CMS should 

either not implement the sanctions at all 

or should progressively implement the 

sanctions that are non-monetary 

sanctions first and then later implement 

monetary sanctions (civil money 

penalties and suspension of payment). 

Another commenter stated that CMS 

should only impose alternative 

sanctions in situations where an HHA 

has shown reckless disregard of its 

responsibilities or intentionally ignored 

its compliance obligations. One 

commenter stated that the statute 

allowed CMS the discretion to impose 

sanctions incrementally. One 

commenter stated that no sanction 

should be imposed when the natural 

and foreseeable outcome of the 

sanction(s) is closure of the agency. One 

commenter stated that sanctions are 

meant to be an alternative to the ‘‘deathknell penalty’’ of termination. 

Response: We appreciate the concerns 

of the commenters that alternative 

sanctions may cause HHAs to close, 

although we believe that risk to be lower 

than the risk of closure if the alternative 

were not available and CMS terminated 

Medicare participation altogether. 

Alternative sanctions allow providers 

who have been cited for noncompliance 

to make the necessary corrections to 

achieve compliance and avoid 

termination from the Medicare program. 

There is a range of sanctions available 

which we may impose based upon the 

nature and severity of the 

noncompliance. Because it is not our 

intent that alternative sanctions force 

HHA closure, we have made revisions to 

the CMP amounts by expanding the 

ranges within the regulatory text so as 

to permit CMS greater flexibility in 

correlating amount of the CMP with the 

extent and seriousness of 

noncompliance. Additional information 

will be provided in interpretive 

guidance. We must terminate any HHA 

provider who is not in compliance with 

the CoPs at the end of 6 months 

following the imposition of an 

alternative sanction. With regard to the 

suggestion of incremental sanctions, the 

statute at section 1891(f)(1) allows a 

range of possible sanction options. Our 

policy is generally one of progressive 

action. We will be developing guidance 

for this process in the SOM. 

Development of guidance also provides 

an appropriate opportunity to engage 

stakeholders in the process and we will 

do so. Section 1891(f)(1) of the Act 

requires that we develop and implement 

a range of sanctions to include at 

minimum civil money penalties, 

suspension of payments for new 

admission and temporary management. 

Incremental imposition of sanctions and 

choice of specific sanctions will be 

discussed in the interpretive guidance. 

Comment: Several commenters stated 

that CMS should only impose 

alternative sanctions after one or more 

survey revisits validate that compliance 

has not been re-gained by the agency. 

Response: We do not agree that the 

imposition of sanctions should always 

be delayed until after revisits are 

conducted. Many of the alternative 

sanctions, such as civil money penalties 

and suspension of payments that are 

imposed upon a finding of 

noncompliance will end only upon an 

HHA’s correction. This process was 

intended to prompt immediate 

correction. An important goal of the 

alternative sanctions is to encourage 

more expeditious correction of any 

noncompliance with the conditions of 

participation. 

Comment: One commenter stated that 

the contentious nature of the alternative 

sanctions may damage the relationship 

between CMS and the HHA industry. 

Response: We work to maintain an 

open and positive relationship with the 

HHA industry. These sanctions, which 

are statutorily required, are established 

with the purpose of increasing 

compliance by the HHAs with the CoPs, 

which is a goal which we share with the 

HHA industry. We plan to continue 

dialogue with all stakeholders as we 

prepare for implementation. 

Comment: Several commenters were 

concerned that CMS is implementing 

alternative sanctions for HHAs using 26 

years of, ‘‘flawed experience with 

nursing home enforcement.’’ 

Response: We have found that the 

nursing home enforcement sanctions 

have been instrumental in addressing 

and changing compliance in the nursing 

home industry. By using our experience 

with the nursing home sanction 

program in the development of the HHA 

sanctions, we were able to identify those 

concerns and issues which will require 

specific interpretive guidance and more 

consistent application of the sanctions. 

Comments: Several commenters 

stated that the alternative sanctions will 

drive surveyors to cite deficiencies at a 

higher level in order to increase revenue 

for the SA. One commenter stated that 

the sanctions would change the role of 

the surveyor from one of educator/ 

partner to a bounty hunter. 

Response: Determinations on whether 

to impose alternative sanctions and the 

specific sanction to be imposed will not 

be left to the sole discretion of an HHA 

surveyor. First, condition-level-findings 

by the surveyor are reviewed by the SA 

Office before the SA sends their 

noncompliance certification and 

enforcement recommendation to the 

CMS RO. Second, all final decisions 

regarding whether or not to impose a 

sanction and what type of sanction to be 

imposed, will be made by the applicable 

CMS RO. Any funds collected as a result 

of civil money penalties imposed upon 

an HHA are distributed to the state 

Medicaid Agency and to the US 

Treasury under section 1128A(f) and 

§ 488.845(g). In order to avoid any 

appearance that the imposition of 

sanctions would become a revenue 

source, it is our policy under this rule 

in § 488.845(g)(2) that no penalty funds 

may be utilized for survey and 

certification operations or as the state’s 

Medicaid non-federal medical 

assistance or administrative match. We 

believe these are effective protocols to 

safeguard the integrity of the HHA 

enforcement process. 

Comment: Several commenters stated 

that CMS should do joint and recurring 

training courses on alternative sanctions 

with the HHA industry, Accrediting 

Organizations and surveyors. 

Response: We appreciate this 

recommendation. We will provide this 

training through a web based 


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application and provide for additional 

dialog with stakeholders. 

Based on the comments above, we are 

finalizing this section as proposed. 

b. Definitions (§ 488.805) 

We proposed in § 488.805 to define 

the frequently used terms, including 

‘‘directed plan of correction,’’ 

‘‘immediate jeopardy,’’ ‘‘new 

admission,’’ ‘‘per instance,’’ ‘‘plan of 

correction,’’ ‘‘repeat deficiency’’ and 

‘‘temporary management.’’ 

Although section 1891 of the Act uses 

the term ‘‘intermediate sanctions,’’ for 

consistency with other enforcement 

rules, this final rule uses ‘‘alternative 

sanctions,’’ which we consider to have 

the same meaning. 

Based on the comments below, we are 

revising the definitions for ‘‘repeat 

deficiency,’’ and ‘‘temporary 

management’’ and are finalizing the 

remaining definitions as proposed. 

Comments: Several commenters 

requested that CMS clarify the meaning 

of ‘‘repeat deficiency’’ and ‘‘immediate 

jeopardy’’ as well as ‘‘temporary 

management.’’ 

Response: We agree that the proposed 

definition of ‘‘repeat deficiency’’ was 

somewhat confusing and have revised 

the regulatory text to further clarify that 

‘‘repeat deficiency’’ means a conditionlevel deficiency cited on the survey that 

is substantially the same as or similar to, 

a finding of standard-level or conditionlevel deficiency citation issued on the 

most recent previous standard survey or 

on any intervening survey since the 

most recent standard survey. 

Additionally, we will publish further 

guidance in the SOM to surveyors for 

identifying and citing repeat 

deficiencies. Current CMS policy on the 

determination of immediate jeopardy 

has been in effect for a significant 

period of time and clearly defines the 

criteria for such a determination. 

Generally, immediate jeopardy 

situations are infrequent in HHAs. For 

example, there were only 11 immediate 

jeopardy determinations cited in 2011, 

during the course of over 5,500 surveys 

of HHAs. Based upon our experience, 

the existing guidance in the SOM, and 

the infrequency of this determination, 

we believe the definition of immediate 

jeopardy is sufficiently clear. Regarding 

the definition of temporary 

management, we have revised the 

definition to provide clarity that the 

governing body must ensure that the 

temporary manager has authority to 

hire, terminate or reassign staff, obligate 

funds, alter procedures, and manage the 

HHA to correct deficiencies identified 

in the HHA’s operations. 

c. General Provisions (§ 488.810) 

We proposed in § 488.810 the general 

rules for enforcement actions against an 

HHA with condition-level deficiencies. 

Sections 1891(e)(1) and (2) of the Act 

provide that if CMS finds that an HHA 

is not in compliance with the Medicare 

home health CoPs and the deficiencies 

involved either do or do not 

immediately jeopardize the health and 

safety of the individuals to whom the 

agency furnishes items and services, 

then we may terminate the provider 

agreement, impose an alternative 

sanction(s), or both. Therefore, our 

decision to impose one or more 

sanctions, including termination, will 

be based on condition-level 

deficiencies, found in an HHA during a 

survey. We will be able to impose one 

or more sanctions for each deficiency 

constituting noncompliance or for all 

deficiencies constituting 

noncompliance. 

It is also important to note that HHAs 

acquire certification for participation in 

Medicare via a SA survey or via 

accreditation by a CMS-approved AO. 

Accreditation by a CMS-approved AO is 

voluntary and not necessary to 

participate in the Medicare program. 

The AO communicates any conditionlevel findings to the applicable CMS 

Regional Office. When an accredited 

HHA is to lose its accreditation status 

from the AO due to condition-level 

findings found by the SA during a 

complaint or validation survey and that 

remain uncorrected, oversight of that 

HHA is transferred to CMS, through the 

SA. In such a case where deemed status 

is removed, we will follow the usual 

procedures for such oversight, as 

indicated in sections 3257 and 5100 of 

the SOM, and under the processes in 

this final rule, as appropriate. Once a 

sanction is imposed on an accredited 

HHA and deemed status is removed, 

oversight and enforcement of that HHA 

will be performed by the SA and not the 

accrediting organization, until the HHA 

achieves compliance and the alternative 

sanction(s) is removed or until the HHA 

is terminated from the Medicare 

program. 

It is our policy that any deficiencies 

found at a branch of the HHA will be 

counted against the HHA provider as a 

business entity. Therefore, regardless of 

whether the deficient practice is 

identified at the branch or the parent 

location, all sanctions imposed will 

apply to the parent HHA. However, 

these sanctions will not apply to any 

non-branch subunit that was associated 

with an HHA if such subunit is 

independently required to meet the 

CoPs for HHAs. In such case, the 

subunit could have sanctions imposed 

on it independently based on deficient 

practices found at that subunit. For 

HHAs that operate branch offices in 

multiple states, we will base 

enforcement decisions on surveys 

conducted by the state in which the 

parent office is located. 

Comments: We received one comment 

requesting clarification of the regulation 

text at § 488.810(d) pertaining to the 

application of sanctions to subunits, 

particularly the second sentence. 

Response: We agree that the second 

sentence of the regulation text of this 

section of the proposed rule was 

confusing and unnecessary, so we have 

removed the second sentence for 

clarification. 

We proposed in § 488.810(e) that an 

HHA that is not compliant with the 

CoPs will be required to submit an 

acceptable plan of correction (POC) to 

CMS. We defined plan of correction in 

§ 488.805 as a plan developed by the 

HHA and approved by CMS that is the 

HHA’s written response to survey 

findings detailing corrective actions to 

cited deficiencies and that specifies the 

date by which those deficiencies will be 

corrected. A POC is required for any 

deficiency, whether it is at the 

condition-level or standard-level. More 

specifically, a POC will detail how an 

HHA has or will correct each deficiency, 

how the HHA will act to protect patients 

in similar situations, how the HHA will 

ensure that each deficiency does not 

recur, how the HHA will monitor 

performance to sustain solutions, and in 

what timeframe corrective actions will 

be taken by the HHA. We will determine 

if the POC was acceptable based on the 

information presented in the POC. 

We proposed in § 488.810(f) that we 

will provide written notification to the 

HHA of our intent to impose a sanction. 

This notice will specify the specific 

sanction, the statutory basis for the 

sanction, and appeal rights. The notice 

periods specified in § 488.825(b) and 

§ 488.830(b) begin the day after the HHA 

receives the notice. 

An HHA may appeal the 

determination of noncompliance 

leading to the imposition of a sanction 

under the provisions of 42 CFR part 498. 

A pending hearing does not delay the 

effective date of a sanction against an 

HHA, and sanctions continue to be in 

effect regardless of any pending appeals 

proceedings. Civil money penalties 

continue to accrue during the pendency 

of an appeal, but will not be collected 

until a final agency determination, as 

we note in § 488.845(f). 

Comments: Several commenters 

requested additional clarification 

regarding our statement that the SA 


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would follow ‘‘usual procedures’’ when 

an accredited HHA loses its deemed 

status due to uncorrected conditionlevel deficiencies. 

Response: For HHAs who are 

accredited by an AO with a CMSapproved program, the SA and CMS 

may still conduct complaint surveys or 

validation surveys of these agencies. 

Condition-level deficiencies may be 

cited by a SA or CMS Regional Office 

during a complaint investigation or 

validation survey of a deemed agency. 

In these cases, the SA or Regional Office 

removes deemed status of the agency 

and the SA or Regional Office resumes 

oversight activity of this provider. We 

may impose alternative sanctions or 

begin termination proceedings of the 

accredited HHA just as we do with a 

non-deemed agency. 

Based on the comments below, we are 

finalizing this section as proposed. 

Comment: Several commenters stated 

that deemed HHAs receive an unfair 

advantage as they are allowed a sanction 

free opportunity to correct before 

termination and alternative sanctions 

are not applied. 

Response: While CMS-approved AOs 

may have a different approach in 

enforcement actions, agencies will still 

face enforcement actions, including 

termination, by us for noncompliance. 

Under § 488.8(a), CMS reviews and 

evaluates an AO for, among other 

things, the equivalency of the AO’s 

accreditation requirements to that of 

CMS’s requirements and the 

comparability of the AO survey 

procedures to those of the SA. 

Additionally, the AO must agree to 

provide CMS with a copy of the most 

current accreditation survey report 

together with any other information 

related to the survey as we may require 

(including corrective action plans). 

Furthermore, AOs notify us in writing 

within 10 days of a deficiency cited 

during an AO survey where the 

deficiency poses an immediate jeopardy 

to the patients or a hazard to the general 

public. In addition, we perform 

validation and complaint surveys of 

accredited providers. If a conditionlevel finding is cited during a complaint 

or validation survey, the HHA loses 

deemed status and oversight is resumed 

by the SA or Regional Office and the 

HHA will then be subject to imposition 

of alternative sanctions. 

Comments: A few commenters stated 

that any condition-level finding that 

leads to the imposition of a sanction at 

a sub-unit (that is not a branch office) 

should have that sanction be applied 

against the parent as a business entity as 

well. 

Response: We disagree with the 

commenters. Sub-units are considered 

independent entities for the purpose of 

Medicare Provider Enrollment and have 

separate certification numbers and 

separate provider agreements from the 

parent HHA. Sub-units are 

independently required to meet the 

CoPs and thus any sanctions imposed 

for deficient practices would apply only 

to that sub-unit. 

d. Factors To Be Considered in Selecting 

Sanctions (§ 488.815) 

Section 1891(e)(2) of the Act provides 

that if we find that an HHA is not in 

compliance with the Medicare home 

health CoPs and the deficiencies 

involved do not immediately jeopardize 

the health and safety of the individuals 

to whom the agency furnishes items and 

services, we may terminate the provider 

agreement, impose an alternative 

sanction(s), or both, at CMS’s discretion, 

for a period not to exceed 6 months. The 

choice of any alternative sanction or 

termination will reflect the impact on 

patient care and the seriousness of the 

HHA’s patterns of noncompliance and 

will be based on the factors proposed in 

§ 488.815. We could impose termination 

of the provider agreement (that is, begin 

termination proceedings that would 

become effective at a future date, but not 

later than 6 months from the 

determination of noncompliance) and 

apply one or more sanctions for HHAs 

with the most egregious deficiencies, for 

an HHA that was unwilling or unable to 

achieve compliance within a maximum 

timeframe of 6 months, whether or not 

the violations constituted an 

‘‘immediate jeopardy’’ situation. We 

proposed in § 488.815, consistent with 

section 1891(f)(3) of the Act, procedures 

for selecting the appropriate alternative 

sanction, including the amount of any 

CMP and the severity of each sanction, 

which have been designed to minimize 

the time between the identification of 

deficiencies and the final imposition of 

sanctions. To determine which sanction 

or sanctions to apply, we will consider 

the following: 

• Whether the deficiencies pose 

immediate jeopardy to patient health 

and safety; 

• The nature, incidence, degree, 

manner, and duration of the deficiencies 

or noncompliance; 

• The presence of repeat deficiencies, 

the HHA’s compliance history in 

general, and specifically with reference 

to the cited deficiencies, and any history 

of repeat deficiencies at either the 

parent or branch location; 

• Whether the deficiencies are 

directly related to a failure to provide 

quality patient care; 

• Whether the HHA is part of a larger 

organization with documented 

performance problems; 

• Whether the deficiencies indicate a 

system wide failure of providing quality 

care. 

Based on the comments below, we are 

finalizing this section as proposed. 

Comment: Several commenters stated 

that CMS should include requirements 

that decision makers be subject to 

rigorous training on established 

standards. Other commenters wanted 

more specific clarity on how decisions 

will be made in order to promote 

consistency. 

Response: We appreciate the 

commenter’s requests for more detailed 

instruction on the selection of sanctions. 

We will provide greater details in 

interpretive guidance that will be 

developed for the regulations. We will 

also provide extensive training for our 

SAs and Regional Offices on the factors 

for the selection of sanctions. 

Comment: Several commenters stated 

that the factors related to quality of care 

issues are vague. 

Response: Because each 

determination that an HHA agency has 

failed to provide quality patient care is 

unique, based on individual patient and 

agency observations and occurrences, 

we are not able to include an all 

inclusive listing of such failures within 

the regulation. Therefore we will not 

accept this recommendation. 

Comment: Several commenters did 

not agree that the fact that the HHA is 

part of a larger organization should be 

included as a factor to be considered in 

the selection of sanctions. 

Response: We included this factor to 

address those situations where the 

policies of the umbrella organization 

may be incompatible with the unique 

operation of the HHA to the extent of 

causing noncompliance. 

Comments: Several commenters 

questioned why a system wide-failure 

was included as a factor in the selection 

of alternative sanctions. 

Response: We included the systemwide failure as a relevant factor because 

such a failure may indicate that the 

current HHA administration is not able 

to make the needed corrections. 

Furthermore, temporary management 

directed in-service and directed plan of 

correction may be crucial in order for 

the HHA to make necessary corrections 

to regain compliance. 

Comments: One commenter stated 

that CMS should consider access to care 

as a factor in the selection of sanctions. 

Response: While we are always 

mindful of access to care concerns, it is 

unlikely that access to additional HHAs 

would not be available should a 


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sanction make an agency temporarily or 

permanently unavailable for new 

admissions. An important goal of 

alternative sanctions is to encourage 

more expeditious compliance with the 

CoPs regardless of access issues. We do 

not believe that patients in remote areas 

should be accorded any less quality of 

care than patients in other areas. 

Section 1891(f)(3) of the Act provides 

for the imposition of incrementally 

more severe fines for repeated or 

uncorrected deficiencies. We define 

‘‘repeat deficiency’’ in § 488.805 as a 

standard or condition-level deficiency 

that was cited on a survey that was 

substantially the same as, or similar to, 

a finding of noncompliance issued on 

the most recent previous standard 

survey or any intervening survey since 

the most recent standard survey. Any 

standard-level findings will be 

evaluated for condition-level 

noncompliance based on the HHA’s 

failure to correct and sustain 

compliance. As noted in 488.815(c), we 

will consider the presence of repeat 

deficiencies as a factor in selecting 

sanctions and civil money penalties. 

Based on the comments below, we are 

finalizing this section as proposed. 

Comments: Several commenters 

stated that the definition of ‘‘repeat 

deficiency’’ was not clear. The 

commenters wanted to know if the same 

tag had to be cited, what time frame was 

referenced and if standard-level 

deficiencies would cause the imposition 

of sanctions. 

Response: We appreciate this 

comment and have revised the 

definition of ‘‘repeat deficiency’’ to 

clarify that a repeat deficiency is a 

condition-level citation that is the same 

as, or similar to, a previous standard or 

condition-level deficiency cited on the 

most recent previous standard survey or 

any intervening survey since the most 

recent standard survey. Further 

information will be provided in 

guidance as it is developed. This 

guidance will be shared with 

stakeholders for comment. 

e. Available Sanctions (§ 488.820) 

Section 1891(f)(1)(A) of the Act 

provides that CMS shall ‘‘develop a 

range of intermediate [or alternative] 

sanctions’’ that may be imposed in 

addition to, or instead of, termination 

when CMS finds that an HHA is no 

longer in compliance with the CoPs. 

Section 1891(f)(2) of the Act explicitly 

provides for the following sanctions to 

be included in the range of sanctions: 

Civil money penalties, suspension of 

payment for new admissions, and 

temporary management. We proposed in 

§ 488.820 those specific alternate 

sanctions and we are finalizing them in 

this final rule. In addition to those 

specified in the statute, we are adding 

the following additional alternative 

sanctions: A directed plan of correction 

and directed in-service training. The list 

of alternative sanctions that could be 

imposed for a noncompliant HHA is in 

§ 488.820. 

Based on the comment below, we are 

finalizing this section as proposed. 

Comments: One commenter requested 

that CMS develop a tracking system for 

alternative sanctions. 

Response: CMS has developed a 

tracking system for alternative sanctions 

in long term care within our automated 

survey system (ASPEN) and plan to 

expand this system to include 

alternative sanctions for home health. 

f. Actions When Deficiencies Pose 

Immediate Jeopardy (§ 488.825) and 

Termination (§ 489.53) 

Under section 1891(e)(1) of the Act, if 

CMS determines that an HHA’s 

deficiencies immediately jeopardize the 

health or safety of its patients, then CMS 

must take immediate action to remove 

the immediate jeopardy situation and 

prompt correction of the deficiencies by 

imposing a sanction or terminating the 

HHA’s certification, or both. We 

proposed in § 488.825(a) to implement 

the statutory requirement by specifying 

that if the immediate jeopardy situation 

is not addressed and resolved within 23 

days from the last day of the survey 

because the HHA is unable or unwilling 

to correct the deficiencies, CMS will 

terminate the HHA’s provider 

agreement. In addition, CMS could 

impose one or more other alternative 

sanctions including a civil money 

penalty (CMP), temporary management 

and/or suspension of all Medicare 

payments before the effective date of 

termination. We proposed these 

provisions in § 488.825. 

We also proposed in § 488.825(b) a 

two day notice requirement for 

sanctions, except for civil money 

penalties, that are imposed when there 

is an immediate jeopardy situation. For 

terminations, we will give notice of the 

termination within 2 days before the 

effective date of the termination, as we 

proposed in § 489.53(d)(2)(iii), which is 

consistent with the requirement for 

skilled nursing facilities in 

§ 489.53(d)(2)(ii). Under our existing 

survey process, providers are advised of 

any immediate jeopardy findings upon 

discovery of the immediate jeopardy 

situation during the survey or as part of 

the exit conference at the end of the 

survey. This will give an HHA time to 

remove the immediate jeopardy and 

correct the deficiencies that gave rise to 

the immediate jeopardy finding. If the 

HHA fails to remove the immediate 

jeopardy situation, we will terminate 

the provider agreement no later than 23 

days from the last day of the survey. We 

proposed to amend § 489.53 by adding 

a new basis for termination at paragraph 

(a)(17), establishing that we will 

terminate an HHA’s provider agreement 

if the HHA failed to correct a deficiency 

or deficiencies within the required time 

frame. 

The notice of our intent to impose a 

sanction at § 488.825(b) will include the 

nature of the noncompliance, the 

sanctions to be imposed, the effective 

date of the sanction, and the right to 

appeal the determination leading to the 

sanction. In order to assure an HHA 

achieved prompt compliance, we expect 

that we will give HHAs written notice 

of impending enforcement actions 

against them as quickly as possible 

following the completion of a survey of 

any kind. 

Finally, in § 488.825(c), we will 

require an HHA whose provider 

agreement is terminated to 

appropriately and safely transfer its 

patients to another local HHA within 30 

days of termination. The HHA will be 

responsible for providing information, 

assistance and any arrangements 

necessary for the safe and orderly 

transfer of its patients. The state will be 

required to assist the HHA with this 

process. This is consistent with existing 

regulations at § 488.55(a)(2) providing 

for payments to be made up to 30 days 

for HHA services furnished under a plan 

established before the effective date of 

termination. 

Based on the comments below, we are 

finalizing these sections as proposed. 

Comments: Several commenters 

stated that HHAs do not have control 

over the patient’s home environment 

and accordingly immediate jeopardy 

situations identified in the patient’s 

home cannot be considered to be under 

the control of the HHA. 

Response: We disagree with the 

commenters and note that generally 

most immediate jeopardy findings made 

against a certified HHA are based upon 

actions that either the HHA took or 

failed to take to meet the CoPs, such as 

failure to take patient care actions 

which were indicated by either the care 

plan for the patient or current standards 

of practice. Other situations that may 

cause immediate jeopardy may include, 

but are not limited to, situations listed 

in current CMS guidance, located in the 

SOM, Appendix Q. 

Comments: Several commenters 

stated there is confusion as to the 

definition of immediate jeopardy and 

the difference between immediate 


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jeopardy and condition-level findings. 

Several commenters also expressed a 

concern that the determination of 

immediate jeopardy is surveyor 

dependent. 

Response: Our policy on the 

determination of immediate jeopardy 

has been in effect a considerable length 

of time and is clear that patient (even 

one patient) health and safety must be 

at risk of injury or harm to support the 

determination. (See SOM Appendix Q). 

Surveyor findings which indicate a 

possible finding of immediate jeopardy 

are vetted by the state and CMS 

Regional Office before the final 

determination is made. Thus, a finding 

of immediate jeopardy is not made by 

the surveyor in isolation. As a general 

matter, immediate jeopardy 

determinations occur infrequently in 

home health agencies. For example, 

there were only 11 immediate jeopardy 

determinations in HHAs made in 2011. 

Comment: A few commenters asked 

that CMS reconsider the 2 day notice of 

termination with an immediate jeopardy 

finding. 

Response: The 2 day termination 

notice for immediate jeopardy findings 

is a long standing CMS policy that has 

been successful with other providers 

and has been used with immediate 

jeopardy determinations of HHAs for 

many years. We find that the 2 day 

notice is prudent considering the short 

23 day time frame to attain compliance 

and also given the serious risk to patient 

health and safety. The purpose of the 2 

day notice is to inform the HHA of the 

immediate jeopardy situation, its 

egregious nature and that the HHA will 

be terminated in 23 days unless the 

immediate jeopardy is corrected. 

g. Actions When Deficiencies Are at the 

Condition-Level, but Do Not Pose 

Immediate Jeopardy (§ 488.830) 

While section 1891(e)(2) of the Act 

provides for termination of the HHA’s 

provider agreement as an enforcement 

option in non-immediate jeopardy 

situations, we are interested in 

providing incentives for HHAs to 

achieve and maintain full compliance 

with the requirements specified under 

sections 1861(o) and 1891(a) of the Act 

before termination becomes necessary. 

Accordingly, the provisions we 

proposed at § 488.830 reflect this 

enforcement policy and address the 

definition of ‘‘noncompliance,’’ the 

requirement of 15 day notice of 

sanctions, the criteria for continuation 

of payment, and the termination time 

frame when there is no immediate 

jeopardy. 

Section 1891 of the Act does not 

require CMS to discontinue alternative 

sanctions when it also proposes to 

terminate an HHA’s participation in 

Medicare; thus, these sanctions, as 

finalized, will continue while we 

initiate termination proceedings. 

Therefore, alternative sanctions could 

be imposed before the termination 

became effective, but could not continue 

for a period that exceeded six months. 

Also, to protect the health and safety of 

individuals receiving services from the 

HHA, alternative sanctions will apply 

until the HHA achieves compliance or 

has its Medicare participation 

terminated, whichever occurs earlier. 

For example, the suspension of payment 

sanction will end when the HHA 

corrected all condition-level 

deficiencies or was terminated from the 

program. 

We proposed in § 488.830(b) that for 

a deficiency or deficiencies that do not 

pose immediate jeopardy, we will give 

the HHA at least 15 days advance notice 

of any proposed sanctions, except civil 

money penalties (which is discussed 

below under § 488.845), which will 

remain effective until the effective date 

of an impending termination (at 6 

months) or until the HHA achieved 

compliance with CoPs, whichever was 

earlier. This is consistent with the 

general rule for providers and suppliers 

in § 489.53(d). 

Section 1891(f)(3) of the Act provides 

that the Secretary shall develop and 

implement specific procedures for 

determining the conditions under which 

alternative sanctions are to be applied, 

including the amount of any penalties 

and the severity of each sanction. 

Sections 488.830 to 488.865, describe 

each possible sanction and procedures 

for imposing them. 

Finally, in § 488.830(e), we will 

require an HHA whose provider 

agreement is terminated to 

appropriately and safely transfer its 

patients to another local HHA within 30 

days of termination. The HHA will be 

responsible for providing information, 

assistance and any arrangements 

necessary for the safe and orderly 

transfer of its patients. The state will be 

required to assist the HHA with this 

process. 

Based on the comments below, we are 

finalizing § 488.830 with minor 

technical modifications for grammar. 

Comments: Several commenters 

recommended that CMS not impose any 

sanction until the HHA had received 

revisits from the survey agency and the 

determination was made that the HHA 

had not corrected the noncompliance 

even after an opportunity to correct. 

Response: We do not agree that the 

imposition of alternative sanctions 

should be delayed until after the 

conclusion of revisits. The primary goal 

of alternative sanctions is to encourage 

more expeditious correction of 

noncompliance. Such a delay as the 

commenter recommends will not be 

consistent with the intent of the statute. 

h. Temporary Management § 488.835 

We proposed in § 488.835 when and 

how we apply temporary management, 

the duration and effect of this sanction, 

and the payment procedures for 

temporary managers’ salaries and other 

additional costs. As we provide in 

§ 488.805, temporary management 

means the temporary appointment by 

CMS or a CMS authorized agent of an 

authorized substitute manager or 

administrator (based on qualifications 

described in § 484.4 and § 484.14(c)) 

who will be under the direction of the 

HHA’s governing body and who will 

have authority to hire, terminate or 

reassign staff, obligate HHA funds, alter 

HHA procedures, and manage the HHA 

to correct deficiencies identified in the 

HHA’s operation. 

We will impose temporary 

management when we determine that an 

HHA has condition-level deficiencies 

and that the deficiencies or the 

management limitations of the HHA are 

likely to impair the HHA’s ability to 

correct the deficiencies and return the 

HHA to full compliance with the CoPs 

within the required timeframe. We will 

impose temporary management to bring 

an HHA into compliance with program 

requirements in non-IJ cases within 6 

months, as we indicate in § 488.835(c). 

We will also choose to impose 

temporary management as a sanction for 

deficiencies that pose immediate 

jeopardy to patient health and safety, as 

permitted under § 488.825(a)(3). 

The individual appointed as a 

temporary manager will be required to 

have work experience and education 

that will qualify such individual to 

oversee the correction of deficiencies so 

that the HHA could achieve substantial 

compliance with the Medicare 

requirements. Each SA will maintain a 

list of recommended individuals who 

will be eligible to serve as temporary 

managers, and annually submit the list 

to CMS. 

If the HHA refuses to relinquish 

authority and control to the temporary 

manager, we will terminate the HHA’s 

provider agreement. If a temporary 

manager was appointed, but the HHA 

failed to correct the condition-level 

deficiencies within 6 months from the 

last day of the survey, the HHA’s 

Medicare participation will be 

terminated. Additionally, if the HHA 

resumes management control without 

CMS’s approval, it will be deemed to be 


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a failure to relinquish authority and 

control to the temporary manager and 

we will impose termination and could 

impose any additional sanctions. The 

appointment of a temporary manager 

will not relieve the HHA of its 

responsibility to achieve compliance. 

We proposed in § 488.835(c) that 

temporary management will end when: 

• We determined that the HHA was 

in substantial compliance with all CoPs 

and had the management capability to 

remain in full compliance; 

• The HHA provider agreement is 

terminated; or 

• The HHA resumed management 

control without CMS approval. 

We believe that § 488.805 and 

§ 488.835 will provide the temporary 

manager with the authority necessary to 

manage the HHA and cause positive 

changes. The temporary manager will 

have the authority to hire, terminate, or 

reassign staff; obligate HHA funds; alter 

HHA policies and procedures; and 

otherwise manage an HHA to correct 

deficiencies identified in the HHA’s 

operations. Furthermore, temporary 

management will be provided at the 

HHA’s expense. Before the temporary 

manager is installed, the HHA will have 

to agree to pay his/her salary directly for 

the duration of the appointment. We 

believe that the responsibility for the 

HHA to pay the expenses of the 

temporary manager is an inherent 

management responsibility of the 

agency for which the HHA is regularly 

reimbursed by Medicare and though 

such temporary outside management 

might be necessary in some cases to 

bring the HHA back into compliance 

with the conditions of participation. We 

have indicated that the salary for the 

temporary manager will not be less than 

the amount equivalent to the prevailing 

salary paid by providers in the 

geographic area for positions of this 

type, based on the based on the 

Geographic Guide by the Department of 

Labor (BLS Wage Data by Area and 

Occupation). In addition, the HHA will 

have to pay for any additional costs that 

will have reasonably been incurred if 

such person had been in an employment 

relationship, and any other costs 

incurred by such a person in furnishing 

services under such an arrangement or 

as otherwise set by the state. An HHA’s 

failure to pay the salary of the 

temporary manager will be considered 

by CMS to be a failure to relinquish 

authority and control to temporary 

management. 

Comments: There were numerous 

comments expressing opposition to the 

use of temporary management as an 

alternative sanction. Some commenters 

stated that this takes control away from 

the HHA Governing Body. Some 

commenters stated that temporary 

manager should be allowed control only 

over the CoPs. 

Response: Section 1891(f)(2)(A) of the 

Act requires the Secretary to include 

temporary management as an available 

alternative sanction for non-compliant 

HHAs. This particular sanction will be 

used in situations where the current 

administration of the HHA has 

demonstrated an inability to achieve or 

maintain compliance with the CoPs. 

The HHA accepts the alternative 

sanction in lieu of immediate 

termination from Medicare and agrees to 

relinquish the operation of the agency to 

a qualified temporary manager. The 

temporary manager works under the 

direction of the HHA Governing Body to 

take whatever actions are indicated to 

regain compliance with the CoPs. 

Based on the comments below, we are 

finalizing this section as discussed 

below. We note that we are replacing 

the term ‘‘deficiency’’ used in the 

proposed rule at § 488.835(a)(1) with 

‘‘noncompliance’’ in this final rule as a 

technical modification. 

Comments: Several commenters 

expressed concern about the liability of 

the HHA when a temporary manager is 

appointed and assumes control. 

Response: The temporary manager 

works under the direction of the HHA’s 

existing Governing Body, which has 

ultimate liability responsibility. 

Therefore, we do not agree that this 

sanction creates new liability for the 

HHA. 

Comment: Several commenters 

expressed concern regarding the 

availability and costs of the temporary 

manager. 

Response: CMS policy places the 

responsibility upon each SA to ensure 

the availability of qualified temporary 

managers by maintaining of list of 

possible candidates. We maintain that it 

is critical that temporary managers be 

reimbursed at prevailing rates in order 

to ensure qualified candidates. The cost 

of the temporary manager must be borne 

by the HHA as a component of their 

inherent management responsibilities. 

Comments: One commenter 

recommended that CMS use temporary 

management in only extraordinary 

circumstances, that any temporary 

manager be bonded and that the HHA be 

given the choice of three possible 

temporary managers. 

Response: We will develop 

interpretive guidance for this provision 

that will provide specific direction to 

the SAs and Regional Offices. This 

guidance will emphasize that temporary 

management is used to address 

situations where the current 

management of the agency has shown 

an inability to achieve or maintain 

compliance with the CoPs. We do not 

agree that it is necessary to add a 

requirement to this regulation that the 

temporary manager be bonded. 

Comments: One commenter 

recommended that CMS impose no 

additional sanctions in conjunction 

with temporary management. They also 

recommended that CMS not terminate 

the HHA if the temporary manager is at 

fault for not bringing the HHA back into 

compliance. 

Response: Section 1891 of the Act 

does not prohibit the concurrent 

imposition of more than one sanction. 

For example, it may be appropriate for 

the appointment of a temporary 

manager to be imposed in combination 

with a directed plan of correction. We 

do not agree that the HHA should not 

be terminated if the temporary manager 

fails to bring the agency back into 

compliance. The failure may be due to 

the HHA’s policies, processes, or 

procedures or issues outside the control 

of the temporary manager. The agency 

can accept this alternative sanction in 

lieu of termination as a method to 

promptly regain compliance with the 

requirements. Section 1891(e) of the Act 

requires that no alternative sanction 

may be in effect for a period of more 

than 6 months and thus must be 

terminated if compliance is not 

achieved within this 6 month window 

of the sanction. 

Comment: Several commenters 

objected to the regulation at 

§ 488.835(d)(3) where we indicated that 

we would not allow the costs of the 

temporary manager as an allowable cost 

on the cost report. 

Response: We agree and are removing 

§ 488.835(d)(3). Removal of this 

prohibition is also responsive to 

concerns from several commenters 

about the potential for sanctions to 

cause closure of a HHA, and is 

consistent with CMS treatment of 

temporary managers in nursing homes. 

i. Suspension of Payment for all New 

Admissions and New Payment Episodes 

(§ 488.840) 

We proposed in § 488.840 provisions 

describing when and how we would 

apply a suspension of payment for new 

Medicare admissions and new PPS 

episodes of care. If an HHA has a 

condition-level deficiency or 

deficiencies (regardless of whether or 

not immediate jeopardy exists), we may 

suspend payments for new Medicare 

patient admissions to the HHA that 

were made on or after the effective date 

of the sanction. The suspension of 

payment will be for a period not to 


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exceed 6 months and will end when the 

HHA either achieved substantial 

compliance or was terminated. We will 

provide the HHA with written notice of 

our intent to impose this sanction at 

least 2 calendar days before the effective 

date of the sanction in immediate 

jeopardy situations (§ 488.825(b)) or at 

least 15 calendar days before the 

effective date of the sanction in nonimmediate jeopardy situations 

(§ 488.830(b)). Our notice of suspension 

of payment for new admissions and new 

payment episodes will generally include 

the following: the nature of the 

noncompliance; the effective date of the 

sanction; and the right to appeal the 

determination leading to the sanction. 

We added the definition of a ‘‘new 

admission’’ in § 488.805 to mean an 

individual who becomes a patient (is 

admitted) or readmitted to the HHA 

under Medicare on or after the effective 

date of a suspension of payment 

sanction. We proposed to expand the 

definition of ‘‘new admission’’ to 

include new payment episodes because 

we believed that each new payment 

episode (the 60 day payment episode of 

HHA care) marks the beginning of a new 

assessment and a new care plan for the 

patient. 

Furthermore, patients who are 

admitted before the effective date of the 

suspension and who have temporarily 

interrupted their treatment but are not 

discharged will be considered neither a 

new admission nor will the resumption 

of their services be subject to the 

suspension of payment. 

Further, section 1891(f)(2)(C) of the 

Act provides that a suspension of 

payment sanction shall terminate when 

CMS finds that the HHA is in 

substantial compliance with all of the 

requirements specified in, or developed 

in accordance with, sections 1861(o) 

and 1891(a) of the Act. That is, the 

suspension of payment sanction will 

end when the HHA was determined to 

have corrected all condition-level 

deficiencies, or upon termination, 

whichever is earlier. 

Before the suspension becomes 

effective, we will notify the HHA of the 

imposition of this sanction under 

§ 488.840(b)(1). Once such a sanction is 

imposed, the HHA will be required to 

notify any new patient admission and 

patients with new payment episodes 

that Medicare payment will not be 

available to this HHA because of the 

imposed suspension before care could 

be initiated. Moreover, the HHA is 

precluded from charging the Medicare 

patient for those services unless it could 

show that, before initiating or 

continuing care, it had notified the 

patient or his/her representative both 

orally and in writing in a language that 

the patient or representative could 

understand, that Medicare payment may 

not be available. The suspension of 

payment will end when we terminate 

the provider agreement or CMS finds 

the HHA to be in compliance with all 

CoPs. 

In § 488.840(b)(3), if we terminate the 

provider agreement, or if the HHA 

achieves substantial compliance with 

the CoPs (as determined by CMS) 

thereby ending the suspension period, 

the HHA will not be eligible for any 

payments for services provided to new 

Medicare patients admitted during the 

time the suspension was in effect, or for 

existing Medicare patients beginning a 

new payment episode during their care. 

This policy is consistent with the 

legislative history of OBRA ’87, which 

states that ‘‘suspended payments [are] 

not [to] be repaid to any agency once it 

has come back into compliance and the 

suspension has been lifted. It is the 

Committee’s belief that if such 

repayment were permitted, there would 

be little incentive for deficient agencies 

to come back into compliance as quickly 

as possible.’’ See H.R. Rep. No. 100– 

391(I) at 423 (1987). In accordance with 

the Committee’s intent, we have 

interpreted the term ‘‘suspend’’ to mean 

to temporarily stop Medicare payments, 

without the possibility of recovering the 

suspended payments. Once compliance 

with the CoPs is achieved after the 

suspension takes effect, we will resume 

payment to the HHA prospectively from 

the date that CMS determines 

correction. 

We proposed in § 488.840(c) that the 

suspension of payment will end either 

when we terminate the provider 

agreement or when we find the HHA to 

be in substantial compliance with all of 

the CoPs. Based on the comments 

below, we have modified this section as 

noted below and have also modified the 

proposed definition of ‘‘new admission’’ 

in § 488.805 to reflect the modifications 

under this section. 

Comments: Two commenters agreed 

that the imposition of suspension of 

payment for new admissions to the 

agency as well as suspension for new 

payment episodes for patients already 

being seen by the agency would be 

effective as alternative sanctions. 

However, the vast majority of 

commenters responded that the use of 

payment suspension for new payment 

episodes would be detrimental to the 

agency in their efforts to make 

corrections necessary to confirm 

compliance and would be disruptive to 

patients. 

Response: We appreciate these 

comments and agree that the use of 

suspension of payment for new patient 

admissions would be an effective 

sanction while suspension of new 

payment episodes may be disruptive to 

patients as they would have to transfer 

to different HHAs with different staff. It 

would also be difficult for the HHA to 

maintain a caseload of patients to 

ensure compliance with requirements. 

Therefore, we will keep the suspension 

of payment for new patients as an 

option, but remove references to new 

payment episodes from the suspension 

of payment sanction as well as the 

definition of ‘‘new admission’’ in 

§ 488.805. 

j. Civil Money Penalties (CMPs) 

§ 488.845 

We proposed in § 488.845 provisions 

for imposition of CMPs. Under sections 

1891(e) and 1891(f)(2)(A)(i) of the Act, 

CMS may impose a CMP against an 

HHA that is determined to be out of 

compliance with one or more CoPs, 

regardless of whether the HHA’s 

deficiencies pose immediate jeopardy to 

patient health and safety. 

Comment: Many comments were 

received stating the belief that decisions 

about imposition of and amounts of 

CMPs imposed will be at the discretion 

of individual surveyors and that this 

would lead to adversarial and 

contentious relationships. 

Response: We appreciate the 

comments and repeat that decisions 

regarding whether to impose alternative 

sanctions and the specific sanction to be 

imposed will not be left to the HHA 

surveyor alone. First, condition-levelfindings are vetted at both the state and 

Regional level. Second, all decisions 

regarding whether to impose a sanction 

and the type of sanction to be imposed, 

will be made by the applicable CMS 

Regional Office. 

Comments: Additional comments 

were received requesting clarification of 

when CMPs would be imposed. 

Response: We have set forth the 

framework for the imposition of CMPs. 

Further instructions will be published 

in interpretive guidance. 

Comments: Many comments were 

received reflecting that the proposed 

amounts of CMPs were excessive; would 

put HHAs out of business; would take 

away funds from indigent care; would 

affect access to care in rural areas and 

should not be imposed prior to the end 

of the appeal process. 

Response: It is not our intent to put 

agencies out of business through the use 

of alternative sanctions. CMPs are an 

effective sanction because HHA’s are 

subject to its financial impact. The 

CMPs are an incentive for the HHA to 

promptly correct the noncompliance. 


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Per day CMPs carry a built-in incentive 

to correct noncompliance promptly 

since the faster the correction the sooner 

the CMP can stop accruing. It is also our 

intent when imposing alternative 

sanctions to provide agencies with time 

to correct any condition-level 

noncompliance and thus avoid the 

interruption of services to patients that 

might occur if the HHA were to be 

terminated from Medicare. It is the 

responsibility of the HHA to make any 

necessary corrections in an expeditious 

manner and regain compliance with the 

CoPs. 

However, in response to the 

commenters’ concerns, we have revised 

the proposed regulation in order to 

expand the lower range of CMP amounts 

in the middle category. Such added 

additional flexibility may permit CMS 

to better correlate the level of 

seriousness of the noncompliance with 

the amount of the CMP. We may also 

impose a civil money penalty for the 

number of days of immediate jeopardy. 

The CMP amount cannot exceed 

$10,000 for each day of noncompliance. 

A deficiency found during a survey at 

a parent HHA or any of its branches 

results in a noncompliance issue for the 

entire HHA, which can be subject to the 

imposition of a CMP. 

In this section, we have proposed 

both a per day and a per instance CMP 

at § 488.845(a). The per day CMP will be 

imposed for each day of noncompliance 

with the CoPs. Additionally, should a 

survey identify a particular instance or 

instances of noncompliance during a 

survey, we will impose a CMP for that 

instance or those individual instances of 

noncompliance. We have defined per 

instance in § 488.805 as a single event 

of noncompliance identified and 

corrected during a survey, for which the 

statute authorizes CMS to impose a 

sanction. While there may be a single 

event which leads to noncompliance, 

there can also be more than one instance 

of noncompliance identified and more 

than one CMP imposed during a survey. 

For penalties imposed per instance of 

noncompliance, we are adding penalties 

from $1,000 to $10,000 per instance. 

Such penalties would be assessed for 

one or more singular events of 

condition-level noncompliance that 

were identified at the survey and where 

the noncompliance was corrected 

during the onsite survey. The total CMP 

amount cannot exceed $10,000 for each 

day of noncompliance per instance. 

Comments: Commenters were 

opposed to per day penalties as the 

penalties would lead to a rapid drain on 

HHA capital. Other commenters were 

opposed to per instance CMPs. Several 

commenters included examples of per 

episode payment rates and how these 

payments would be insufficient to meet 

the financial obligations of any CMP 

imposed against the HHA. One 

commenter seemed to confuse per 

instance with self-reported situations of 

noncompliance. 

Responses: Civil money penalties 

were designed to present an incentive to 

correct a deficiency in a short amount 

of time. As indicated previously, we 

have expanded the lower range of 

permitted per day CMP amounts to 

enable CMS to better correlate the 

seriousness of noncompliance with the 

amount of the CMP. The expanded 

lower end of the range may be 

particularly important if CMS imposes a 

CMP that begins at the lower or middle 

range and then increases in amount over 

time the longer the noncompliance 

remains uncorrected. In such a case, 

prompt remedial action by the HHA can 

limit the total amount of per day CMP 

that accrues. Per instance penalties 

permit us to focus on individual 

instances of noncompliance without 

having to track the duration of time the 

HHA remains out of compliance. As we 

found with SNFs and NFs, prior to 

establishing per instance CMPs it has 

largely been the case that, except where 

immediate jeopardy has been involved 

or the provider has been found to be a 

poor performing facility, CMPs had not 

been imposed where facilities have been 

able to correct deficiencies before a 

predetermined date for the completion 

of corrections. As a result, we believed 

many facilities had avoided the 

imposition of CMPs, that were 

otherwise warranted, and subsequent to 

achieving compliance these same 

facilities failed to maintain substantial 

compliance (otherwise known as ‘‘yoyo’’ compliance). Thus, when the per 

instance CMP is selected for nursing 

homes, we do not envision a period to 

correct prior to imposition. We believe 

this will also be the case with HHA 

enforcement. What we mean by an 

‘‘instance’’ in this regulation is a single 

deficiency identified by the tag number 

used as a reference on the statement of 

deficiencies. While we consider an 

instance as a singular event of 

noncompliance, there can be more than 

one instance of noncompliance 

identified during a survey. For example, 

during the course of a survey, CMS or 

a state may identify several instances of 

noncompliance, each in distinct 

regulatory areas. As a general matter, we 

anticipate imposing per instance 

penalties most frequently in the 

situation where a surveyor identifies a 

condition-level deficiency during the 

survey and the HHA took sufficient 

action to correct the deficiency during 

the time of the survey. 

Since the range of possible 

deficiencies is great and depends upon 

the specific circumstances at a 

particular time, it will be impossible to 

assign a specific monetary amount for 

each type of noncompliance that could 

be found. Thus, we believe that each 

deficiency will fit into a range of CMP 

amounts, which we discuss below. 

We will consider the following factors 

when determining a CMP amount, in 

addition to those factors that we will 

consider when choosing a type of 

sanction in § 488.815: 

• The size of the agency and its 

resources. 

• The availability of other HHAs 

within a region, including service 

availability in a given region. 

• Accurate and credible resources 

such as PECOS and Medicare cost 

reports and claims information, that 

provide information on the operations 

and the resources of the HHA. 

• Evidence that the HHA has a builtin, self-regulating quality assessment 

and performance improvement system 

to provide proper care, prevent poor 

outcomes, control patient injury, 

enhance quality, promote safety, and 

avoid risks to patients on a sustainable 

basis that indicates the ability to meet 

the conditions of participation and to 

ensure patient health and safety. When 

several instances of noncompliance 

would be identified at a survey, more 

than one per-day or per instance CMP 

could be imposed as long as the total 

CMP did not exceed $10,000 per day. 

Also, a per-day and a per-instance CMP 

would not be imposed simultaneously 

for the same deficiency. 

Based on the comments below, we are 

finalizing this section with the 

modifications noted below. 

Comment: One commenter did not 

feel that size was an appropriate factor 

to use in determining the type of 

sanction. The commenter felt it 

discriminated against larger HHAs. 

Response: The size of the HHA can 

significantly increase the scope of the 

noncompliance and impact a greater 

number of patients. In addition, we 

believe that the motivating force of the 

sanction may vary with the scope and 

resources of the HHA. Therefore we 

have retained size as a consideration. 

Comment: One commenter felt that 

the availability of other agencies within 

a region would be used to discriminate 

against HHAs when there were many 

agencies in the area as opposed to not 

using the sanction when there was a 

shortage of HHAs. 

Response: We appreciate the 

comment and we have removed this 


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factor from the list of factors to be 

considered. 

Comment: One commenter did not 

think that accurate resources and data 

was a valid factor. 

Response: We appreciate the 

comment. However, this information 

may give CMS valuable information as 

it relates to operations, for example, cost 

allocations. Therefore, we are not 

accepting this recommendation. 

Comments: One commenter was 

opposed to use of the factor of the 

internal Quality Assessment/ 

Performance Improvement program 

(QAPI). 

Response: We wish to ensure that 

problems in HHAs are addressed 

promptly and that program 

improvements are sustained over time. 

Our experience with other types of 

providers has shown that an effectivelyfunctioning QAPI system assists 

providers to restore compliance more 

quickly and to sustain compliance 

longer. Many organ transplant hospitals, 

for example, have a recent and 

exemplary history of implementing 

QAPI in a manner that is demonstrably 

saving lives. While this is not currently 

a specific requirement within the 

conditions of participation for HHAs, 

we believe that HHAs that have an 

effective QAPI program are more likely 

to improve the quality of their care and 

outcomes and to sustain those 

improvements over time. We wish to 

retain CMS discretion to accord an HHA 

that has implemented an effectivelyfunctioning QAPI program with some 

recognition of the value in having done 

so on its own volition. Our experience 

with QAPI in other programs points to 

the positive association between QAPI, 

quality of care, and outcomes. For organ 

transplant programs, for example, we 

examined the relationship between 

findings of noncompliance for outcomes 

and findings of noncompliance in QAPI 

for the first 334 transplant programs 

surveyed under the new regulation that 

became effective on June 26, 2007. Of 

the transplant programs that were cited 

for having 1 year patient deaths or graft 

failures that exceeded the expected 

number, 19 percent were also cited for 

noncompliance with QAPI 

requirements, compared to only 8 

percent for programs that were not cited 

for outcomes. In other words, organ 

transplant programs that did not have 

an effectively-functioning QAPI 

program were 2.4 times more likely to 

have patient outcomes that exceed the 

tolerance limits of the regulation. 

By explicit inclusion of this factor in 

our consideration of CMPs, we 

recognize that QAPI promotes the same 

goals as alternative sanctions. Therefore, 

we have retained QAPI as a factor in our 

considerations. 

Comment: Several commenters did 

not feel that more than one penalty 

should be imposed at one time. 

Response: The statute does not 

prohibit the imposition of more than 

one alternative sanction and there may 

be instances where a combination of 

sanctions may be appropriate, such as 

the appointment of a temporary 

manager and a directed plan of 

correction. 

At § 488.845(b)(2), we have provided 

CMS the discretion to increase or reduce 

the amount of the CMP during the 

period of noncompliance depending on 

whether the level of noncompliance had 

changed at the time of a revisit survey. 

We could increase a CMP in increments 

based upon an HHA’s inability or failure 

to correct deficiencies, the presence of 

a system wide failure in the provision 

of quality care or a determination of 

immediate jeopardy with potential for 

harm. We may also decrease a CMP in 

increments to the extent that SAs find, 

pursuant to a revisit, that substantial 

and sustainable improvements have 

been implemented even though the 

HHA is not yet in full compliance if 

sufficient efforts have been made to 

address the causes of deficiencies and 

sustain improvement. If an HHA 

resolved the immediate jeopardy 

situation, but not the condition-level 

deficiencies, we may reduce those 

penalties from the upper range to a 

lower range imposed in non-immediate 

jeopardy situations. 

Comments: Several comments were 

received related to the timing of a revisit 

survey, which is required to determine 

correction of condition-level 

deficiencies and how it would affect the 

length of time a per day CMP accrues. 

Response: We appreciate the 

comments and will develop guidance in 

the SOM to direct the SAs to schedule 

these revisits in a timely manner. 

Section 1891(f)(2)(A)(i) of the Act 

specifies that the sanctions shall include 

a CMP in an amount not to exceed 

$10,000 for each day of noncompliance. 

Therefore, we added at 

§ 488.845(b)(2)(iii) that no CMP 

assessment exceed $10,000 per day of 

noncompliance. Because the Act directs 

us to establish the amounts of fines and 

the levels of severity, we are 

establishing a three-tier system with 

subcategories which will establish the 

amount of a CMP. In § 488.845 (b)(3), 

(b)(4), and (b)(5), we have added the 

following ranges of civil money penalty 

amounts based on three levels of 

seriousness—upper, middle and lower: 

• Upper range—For a deficiency that 

poses immediate jeopardy to patient 

health and safety, we would assess a 

penalty within the range of $8,500 to 

$10,000 per day of condition-level 

noncompliance. 

Specifically, based on the comments 

and our responses below, we will 

impose a CMP at $10,000 per day for a 

deficiency or deficiencies that posed an 

immediate jeopardy to patients and that 

resulted in actual harm. For a deficiency 

or deficiencies that pose an immediate 

jeopardy situation and result in a 

potential for harm (but no actual harm), 

we will impose a CMP of $9,000 per 

day. For an isolated employee incident 

of noncompliance in violation of 

established HHA policy, we will impose 

a CMP of $8,500 per day. 

• Middle range—For repeat and/or a 

condition-level deficiency that did not 

pose immediate jeopardy, but is directly 

related to poor quality patient care 

outcomes, we would assess a penalty 

within the range of $1,500 to $8,500 per 

day of noncompliance with the CoPs. 

• Lower range—For repeated and/or 

condition-level deficiencies that did not 

constitute immediate jeopardy and were 

deficiencies in structures or processes 

that did not directly relate to poor 

quality patient care, we would assess a 

penalty within the range of $500 to 

$4,000 per day of noncompliance. 

Comments: As indicated previously, 

several commenters felt that the CMP 

amounts are excessive and they did not 

agree with the manner in which CMS 

structured the amount categories. 

Several commenters disagreed with the 

way CMS categorized each of the COPs 

within the CMP list of possible CMPs. 

One commenter stated that therapy 

service (§ 484.32) was omitted from the 

grid. 

Response: The specified grouping of 

CoPs noted in the proposed rule is 

consistent with the groups of high risk 

CoPs currently used in the HHA Survey 

protocols. We regret the inadvertent 

omission of therapy services and will 

add this CoP to the guidance text with 

the grouping that includes nursing and 

other clinical services. Regarding the 

proposed ranges of CMPs, we have 

removed the specific sub-categories 

within the middle and lower ranges at 

§ 488.845(b)(4)(i) and (ii) and 

§ 488.845(b)(5)(i) and (ii), as we felt that 

this level of specificity would be more 

appropriate in subsequent interpretive 

guidance. We added instead specific 

amounts within the upper range to 

provide more guidance for imposing the 

CMP amount within that range. We 

provide that a $10,000 per day CMP will 

be imposed for noncompliance that is 

immediate jeopardy and that results in 

actual harm. For noncompliance that is 

immediate jeopardy but is not actual 


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harm, but is a potential for harm, we 

will impose $9,000 per day in CMPs. 

Finally, for noncompliance that is 

immediate jeopardy and is an isolated 

incident that is in violation of 

established HHA policies, we will 

impose a CMP of $8,500 per day. We 

will develop interpretive guidance 

which will provide flexibility within the 

ranges for the specific penalty to be 

imposed to better correlate the 

consequences with the seriousness of 

the noncompliance. 

When we impose a CMP, we will send 

the HHA written notification of the 

intent to impose it, including the 

amount of the CMP being imposed and 

the proposed effective date of the 

sanction. After a final agency 

determination is made, a final notice 

will be sent with the final amount due 

and the rate of interest to be charged on 

unpaid balances (as published in the 

Federal Register). The notice will 

include reference to the nature of the 

noncompliance; the statutory basis for 

the penalty; the amount of the penalty 

per day/instance of noncompliance; the 

criteria we considered when 

determining the amount per-day or perinstance; the date on which the penalty 

will begin to accrue; when the penalty 

would stop accruing; when the penalty 

would be collected; and instructions for 

responding to the notice, including a 

statement of the HHA’s appeal rights, 

including an opportunity to participate 

in the IDR process and, as discussed 

below, the right to a hearing, and the 

implications of waiving a hearing. In 

accordance with our existing regulations 

at § 498.22(b)(3) and § 498.40 and at 

§ 488.845(c)(2), once a notice of intent to 

impose the CMP had been sent to the 

HHA, the HHA will have 60 days from 

the receipt of the notice to request an 

administrative hearing under § 498.40 or 

waive its right to an administrative 

hearing in writing and receive a 35 

percent reduction in the CMP amount. 

This reduction will be offered to 

encourage HHAs to address deficiencies 

more expeditiously and to save the cost 

of hearings and appeals. Upon such 

reduction, the CMP will be due within 

15 days of the receipt of the HHA’s 

written request for waiver. The HHA 

could waive its right to a hearing in 

writing within 60 calendar days from 

the date of the notice initial 

determination. 

The per day CMP would begin to 

accrue on the day of the survey that 

identified the HHA noncompliance, and 

would end on the date of correction of 

all deficiencies, or the date of 

termination. We are adding at 

488.845(d) that in immediate jeopardy 

cases, if the immediate jeopardy was not 

removed, the CMP will continue to 

accrue until we terminate the provider 

agreement (within 23 calendar days 

after the last day of the survey which 

first identified the immediate jeopardy). 

Under 488.845(d)(4), if immediate 

jeopardy did not exist, the CMP will 

continue to accrue until the HHA 

achieved substantial compliance or 

until we terminated the provider 

agreement. Additionally, we are adding 

language at § 488.845(d)(2) to specify 

that the per-day and per-instance CMP 

will not be imposed simultaneously in 

conjunction with a survey. In no 

instance will the period of 

noncompliance be allowed to extend 

beyond 6 months from the last day of 

the original survey that determined 

noncompliance. If the HHA has not 

achieved compliance with the CoPs 

within those 6 months, we would 

terminate the HHA. The accrual of the 

CMP stops on the day the HHA provider 

agreement is terminated or the HHA 

achieves substantial compliance, 

whichever is earlier. Total CMP 

amounts will be computed after a final 

agency determination; that is, after: (1) 

Compliance was verified; (2) the HHA 

provider agreement was involuntarily 

terminated; or (3) administrative 

remedies had been exhausted. If the 

HHA had achieved substantial 

compliance, we would send a separate 

notice to the HHA describing the 

amount of penalty per day, the number 

of days the penalty accrued, the total 

amount due, the due date of the penalty, 

and the interest rate for any unpaid 

balance. For a per-instance CMP, we 

would include the amount of the 

penalty, the total amount due, the due 

date of the penalty, and the rate of 

interest for any unpaid balance. In the 

case of the HHA that was terminated, 

we would send the HHA any CMP 

notice of final amount or a due and 

payable notice information in the 

termination notice, as described in 

§ 489.53(d). 

In § 488.845(f), we have added that a 

CMP will become due and payable 15 

days from the notice of final 

administrative decision, which is after: 

• The time to appeal had expired 

without the HHA appealing its initial 

determination; 

• CMS received a request from the 

HHA waiving its right to appeal the 

initial determination; 

• A final decision of an 

Administrative Law Judge and/or DAB 

Appellate Board upheld CMS’s 

determinations; 

• After an HHA achieves substantial 

compliance; or 

• The HHA was terminated from the 

program and no appeal request was 

received. 

A request for hearing will not delay 

the imposition of the CMP, but will only 

affect the collection schedule of any 

final amounts due to CMP. If an HHA 

timely waived its right to a hearing 

under § 488.845(c)(2)(ii), we will reduce 

the final CMP amount by 35 percent. 

This reduction would be reflected once 

the CMP stops accruing: when the HHA 

achieved compliance, or the effective 

date of the termination. 

The final CMP receivable amount will 

be determined when the per-day CMP 

accrual period ends (either when the 

HHA achieved compliance or was 

terminated). 

Within 10 days of receipt of the notice 

of the imposition of a penalty, the HHA 

could request an IDR. Within 60 days of 

receipt of the notice of imposition of a 

penalty, the HHA could either submit a 

written request to waive its appeal and 

receive a 35 percent reduction on the 

final CMP amount or it could file a 

request directly to the Departmental 

Appeals Board in the Office of the 

Secretary, Department of Health and 

Human Services with a copy to the state 

and CMS. In accordance with 

§ 498.40(b), the HHA’s appeal request 

will identify the specific issues of 

contention, the findings of fact and 

conclusions of the law with which the 

agency disagreed, and the specific bases 

for contending that the survey findings 

and determinations were invalid. A 

hearing will be completed before any 

penalty was collected. However, 

sanctions will continue regardless of the 

timing of any appeals proceedings if the 

HHA had not met the CoPs. Requesting 

an appeal will not delay or end the 

imposition of a sanction. A CMP will 

begin to accrue on the date of the survey 

which identified the noncompliance. 

These include penalties imposed on a 

per day basis, as well as penalties 

imposed per instance of noncompliance. 

Comment: Several commenters 

requested clarification on what day the 

penalty would begin to accrue. 

Response: We appreciate the requests 

for clarification. A CMP will begin to 

accrue on the last day of the survey and 

would end on the day compliance was 

attained or the HHA was terminated. 

(1) Offsets 

To maintain consistency in recovering 

a CMP among other types of providers 

who are subject to a CMP, we are adding 

that the amount of any penalty, when 

determined, could be deducted (offset) 

from any sum CMS or the State 

Medicaid Agency owed to the HHA. 

Interest would be assessed on the 


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unpaid balance of the penalty beginning 

on the due date. The rate of interest 

assessed on any unpaid balance will be 

based on the Medicare interest rate 

published in the Federal Register, as 

specified in § 405.378(d). We will 

recover a CMP as set forth in section 

1128A (f) of the Act. Those CMP 

receipts not recovered due to HHA 

failure to pay or inadequate funds for 

offset will be collected through the Debt 

Collection Improvement Act of 1996 

which requires all debt owed to any 

federal agency that is more than 180 

days delinquent to be transferred to the 

Department of the Treasury for debt 

collection services. 

If payment was not received by the 

established due date, we will initiate 

action to collect the CMP through offset 

of monies owed or owing to the HHA. 

To initiate such an offset, we will 

instruct the appropriate Medicare 

Administrative Contractors/Fiscal 

Intermediaries and, when applicable, 

the State Medicaid Agencies to deduct 

unpaid CMP balances from any money 

owed to the agency. 

We received no comments on this 

section of the proposed regulation and 

are finalizing as written. 

(2) Disbursement of Recovered CMP 

Funds 

Under 488.845(g)(1), we proposed to 

divide the CMP amounts recovered and 

any corresponding interest between the 

Medicare and Medicaid programs, based 

on a proportion that is commensurate 

with the comparative federal 

expenditures under Titles XVIII and XIX 

of the Act, using an average of years 

2007 to 2009 based on Medicaid 

Statistical Information System (MSIS) 

and HHA Prospective Payment System 

(PPS) claims. Based on the proportions 

of HHA claims payments attributed to 

Medicare and Medicaid, respectively, 

for the FY 2007–2009 period, we 

proposed that approximately 63 percent 

of the CMP amounts recovered would be 

deposited as miscellaneous receipts to 

the U.S. Department of the Treasury and 

approximately 37 percent would be 

returned to the State Medicaid Agency 

to improve the quality of care for those 

who need home-based care. We also 

proposed that, beginning 1 year after 

these rules are finalized and become 

effective, these proportions would be 

updated annually based on the most 

recent 3 year period for which we 

determine that the Medicare and 

Medicaid expenditure data were 

essentially complete. 

Comments: Several comments we 

received indicated that they were 

opposed to the states sharing in the 

revenues from CMPs. Specifically the 

commenters indicated it would provide 

an incentive to surveyors and state 

agencies to impose fines so that the state 

agency would retain the funds for 

survey and certification activities. 

Response: Under section 1128A(f) of 

the Act, collected CMP amounts are 

returned both to the State Medicaid 

Agency and to the US Treasury, as 

appropriate. Also, under 

§ 1817(k)(3)(C)(ii) a portion of collected 

CMP funds may be used by CMS in antifraud functions. The amounts are 

disbursed in accordance with 

§ 488.845(g). We disagree with the 

commenters that states would have an 

incentive to recommend CMP remedies 

in order to gain revenue. We would 

make the enforcement determination to 

impose a CMP remedy based on the 

survey findings. Additionally, we 

specifically prohibit in this rule the use 

of collected CMP amounts for Survey 

and Certification operations or the State 

Medicaid match. 

(3) Costs of Home Health Surveys 

We proposed to amend § 431.610(g)— 

Relations with standard-setting and 

survey agencies—to require that 

Medicaid State Plans explicitly include 

Medicaid’s appropriate contribution to 

the cost of home health surveys. We 

proposed to add a reference to HHAs, 

along with NFs and ICFs/IIDs at 

§ 431.610(g). We estimated that the 

appropriate national Medicaid share of 

total Medicare and Medicaid HHA 

survey costs is approximately 37 

percent of the combined Medicare/ 

Medicaid cost of surveys for duallycertified programs, based on the same 

cost allocation methodology we 

proposed to use for the disbursement to 

states of CMP collections, as described 

above. While this is a national estimate, 

the Medicaid share of the combined 

Medicare and Medicaid expense for 

each individual state could instead be 

based on the state-specific dollar 

amount paid by Medicaid for home 

health services provided by HHAs in the 

state compared to the combined 

Medicare/Medicaid total for the most 

recent 3-year fiscal period, prior to the 

year in question, for which CMS 

determines that the relevant data are 

essentially complete. 

Comments: Two commenters stated 

that they did not think the states should 

share in the costs of performing surveys. 

One stated that these costs to the states 

would encourage surveyors to cite more 

condition-level deficiencies and not all 

states have voluntarily chosen to require 

Medicare HHA participation. One 

commenter stated that in many cases the 

states are already paying the survey 

costs for those agencies that are licensed 

but not Medicare certified. 

Response: Surveys are required for 

determining a provider’s or supplier’s 

compliance with program participation 

requirements and the HHA surveys 

benefit both Medicare and Medicaid 

programs where the HHAs seek such 

dual certification. Thus, in accordance 

with OMB Circular A–87, the costs for 

surveys of HHAs that are certified for 

both Medicare and Medicaid should be 

shared between Medicare and Medicaid. 

However, to provide more time for 

dialogue with states and for any 

necessary adjustments to State Medicaid 

Plans, we are currently removing the 

proposed rule provision at § 431.610(g) 

in this final rule. 

With regard to the concern that 

surveyors might be incentivized to cite 

more condition-level deficiencies and 

levy CMPs, as we have indicated 

previously, individual surveyors will 

not make the final decision as to 

whether a sanction may be imposed. 

The final decisions as to sanctions 

under Medicare are made by us. Finally, 

with regard to the comment that states 

are already paying the survey costs for 

those HHAs that are licensed, but not 

Medicare-certified, we appreciate that 

such payments are being made. We 

expect that states will continue to pay 

for the survey costs of unique state 

licensure requirements. Such 

expectations were not intended to be 

changed by the proposed rule. 

k. Directed Plan of Correction § 488.850 

We proposed in § 488.850 to include 

a directed plan of correction as an 

available sanction. This sanction is a 

part of the current nursing home 

alternative sanction procedures and has 

been an effective tool to encourage 

correction of deficient practices. 

Specifically, we may impose a directed 

plan of correction on an HHA which is 

out of compliance with the conditions 

of participation. A directed plan of 

correction sanction will require the 

HHA to take specific actions in order to 

bring the HHA back into compliance 

and correct the deficient practice(s) if 

the HHA failed to submit an acceptable 

plan of correction. As indicated in 

§ 488.850(b)(2) an HHA’s directed plan 

of correction will have to be developed 

by us or by the temporary manager, with 

our approval. The directed plan of 

correction will set forth the outcomes to 

be achieved, the corrective action 

necessary to achieve these outcomes, 

and the specific date the HHA will be 

expected to achieve such outcomes. For 

example, a directed plan of correction 

for a deficiency finding involving poor 

drug regimen review will likely indicate 


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that the HHA would be required to: (1) 

Develop policies and procedures for 

assessing each patient and before 

accepting any new admissions; (2) 

assess every patient’s drug regimen 

according to the regulations at 

§ 484.55(c); and (3) train staff in correct 

policies and procedures and implement 

them. The HHA will be responsible for 

achieving compliance. If the HHA failed 

to achieve compliance within the 

timeframes specified in the directed 

plan of correction, we will impose one 

or more additional alternative sanctions 

until the HHA achieved compliance or 

was terminated from the Medicare 

program. Before imposing this sanction, 

we will provide appropriate notice to 

the HHA of this sanction under 

§ 488.810(f). 

Comments: One commenter felt that 

the development of the plan of 

correction should be solely the 

responsibility of the HHAs Board of 

Directors. Another commenter felt this 

sanction was not needed since the plan 

of correction was already required to be 

approved by the state agency. 

Response: We appreciate the 

comments received. Imposition of this 

sanction will occur when, based upon 

the facts of the finding, a specific 

corrective action will be required by the 

SA or CMS in order for the agency to 

regain compliance. The SA or CMS may 

also impose this sanction when the 

HHA fails to submit an acceptable plan 

of correction. 

l. Directed In-Service Training § 488.855 

We proposed in § 488.855 the 

requirements for conducting directed inservice training for HHAs with 

deficiencies. We have found that 

compliance problems are frequently a 

result of a lack of knowledge on the part 

of the health care provider relative to 

advances in health care technology and 

best practices for favorable patient 

outcomes, such as advances in infection 

control and reducing pressure ulcers. In 

§ 488.855(a) directed in-service training 

would be imposed where staff 

performance resulted in noncompliance 

and it is determined that a directed inservice training program would correct 

this deficient practice through retraining 

the staff in the use of clinically and 

professionally sound methods to 

produce quality outcomes. Directed inservice training could be imposed alone 

or in addition to other alternative 

sanctions. 

At § 488.855(a)(3), HHAs will be 

required to use in-service programs 

conducted by instructors with an indepth knowledge of the area(s) that 

would require specific training, so that 

positive changes would be achieved and 

maintained. HHAs will be required to 

participate in programs developed by 

well-established centers of health 

services education and training. These 

centers include, but are not limited to, 

schools of medicine or nursing, area 

health education centers, and centers for 

aging. We will only recommend 

possible training locations to an HHA 

and not require that the HHA utilize a 

specific school/center/provider. The 

HHA itself will pay for the directed inservice training for its staff. The 

ultimate evaluation of the usefulness of 

the training program would be in the 

demonstrated competencies of the 

HHA’s staff in achieving the desired 

patient care outcomes after completion 

of the training program. In § 488.855(b), 

if the HHA did not achieve compliance 

after such training, we could impose 

one or more additional sanctions. 

Comments: One commenter objected 

to this sanction on the grounds that it 

felt the RNs at their agency were already 

educated at the BS level and that the 

expense of the sanction to require 

consultation from the university level 

would be prohibitive. 

Response: We appreciate the 

comment and feel the commenter may 

have misunderstood the context of the 

proposed language. Directed in-service 

will need to be at a high level of 

expertise, not necessarily at the 

university level. We included this 

requirement to require additional 

professional support/training for current 

HHA staff. Since the usefulness of the 

training will be demonstrated by the 

improved competency of the HHA staff, 

we encourage the HHA to find and 

evaluate the directed-in service 

programs that will best suit the HHA’s 

needs. 

Comment: One commenter feels that 

CMS should have a greater level of 

commitment to provide training on 

CoPs with the industry. 

Response: We make every effort to 

include the HHA industry in their 

educational efforts. When webinars are 

utilized for surveyor training, these 

webinars are available to the industry 

for their use. Nonetheless, we appreciate 

the comment and will consider 

additional means to reach out to HHAs. 

m. Continuation of Payments to HHAs 

With Deficiencies § 488.860 

We proposed in § 488.860 provisions 

concerning the continuation of 

Medicare payments to HHAs with 

condition-level deficiencies. Section 

1891(e)(4) of the Act provides that the 

Secretary may continue Medicare 

payments to HHAs not in compliance 

with the conditions of participation for 

up to six months if: 

• The survey agency finds it more 

appropriate to impose alternative 

sanctions to assure compliance with 

program requirements than to terminate 

the HHA from the Medicare program, 

and 

• The HHA submits a plan of 

correction to the Secretary, and to the 

office the Secretary has delegated the 

authority to approve the plan of 

correction and the plan has been 

approved; and 

• The HHA agrees to repay the federal 

government the payments under this 

arrangement should the HHA fail to take 

the corrective action as set forth in its 

approved plan of correction by the time 

of the revisit. 

We proposed these three criteria in 

§ 488.860(a). If any of these three 

requirements set forth in the Act and in 

our final rule are not met, an HHA with 

condition-level deficiencies will not 

receive any federal payments from the 

time that deficiencies were initially 

identified. We will also terminate the 

agreement before the end of the 6-month 

correction period, which begins on the 

last day of the survey, in accordance 

with § 488.865 if the requirements at 

§ 488.860(a)(1) are not met. If any 

sanctions are also imposed, they will 

stop accruing or end when the HHA 

achieves compliance with all 

requirements, or when the HHA’s 

provider agreement is terminated, 

whichever is earlier. 

Finally, if an HHA provides an 

acceptable plan of correction but cannot 

achieve compliance with the CoPs 

within 6 months of the last day of the 

survey, we have proposed in 

§ 488.830(d) that we will terminate the 

provider agreement. 

Comments: One commenter wanted 

greater clarification of this section. They 

indicated that this sanction seemed to 

make the imposition of alternative 

sanctions mandatory, unless the HHA 

meets the criteria set forth in this 

section. 

Response: Alternative sanctions are 

not mandatory, but may be imposed if 

we believe it is a more appropriate 

action to prompt and to bring the HHA 

into compliance. The significant benefit 

of most alternative sanctions is that 

payment may continue to the HHA 

while the sanction is in place. Without 

the choice of alternative sanctions, the 

HHA is subject only to termination, 

either within 90 days or immediately in 

the case of immediate jeopardy. Section 

1891(e)(4)(c) of the Act provides that if 

alternative sanctions are imposed, and 

the HHA submits an acceptable plan of 

correction, then the HHA agrees to 

repay the payments received if the HHA 

ultimately fails to take corrective action 


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in accordance with the approved plan of 

correction and its established 

timetables. 

n. Termination of Provider Agreement 

(§ 488.865) 

We proposed in § 488.865(a), to 

address the termination of an HHA’s 

Medicare provider agreement, as well as 

the effect of such termination. 

Termination of the provider agreement 

would end all payments to the HHA, 

including any payments that were 

continued under § 488.860. Termination 

will also end any alternative sanctions 

imposed against the HHA, regardless of 

any proposed timeframes for the 

sanction(s) originally specified. In 

§ 488.865(b) we will terminate the 

provider agreement if (1) the HHA failed 

to correct condition-level deficiencies 

(that are not immediate jeopardy) within 

6 months if the HHA is not in 

compliance with the conditions of 

participation; (2) the HHA failed to 

submit an acceptable plan of correction 

for approval by us under § 488.810; (3) 

the HHA failed to relinquish control to 

the temporary manager, if that sanction 

is imposed or (4) the HHA failed to meet 

the eligibility criteria for continuation of 

payments under § 488.860. If CMS or 

the SA determined deficiencies existed 

which posed immediate jeopardy to 

patient health and safety, we will 

terminate the provider agreement in 

accordance with § 488.825. The 

provider could also voluntarily 

terminate its agreement. CMS and the 

SA will, if necessary, work with all 

Medicare-approved HHAs that were 

terminated to ensure the safe discharge 

and orderly transfer of all patients to 

another Medicare-approved HHA. 

The procedures for terminating a 

provider agreement are set forth in 

§ 489.53 and we are continuing to use 

those procedures for an enforcement 

action terminating an HHA at 

§ 488.865(d). These procedures form the 

basis for termination by CMS and 

specify a provider’s notice and appeal 

rights. Under § 488.865(e), we added 

that the HHA could appeal the 

termination of its provider agreement in 

accordance with 42 CFR part 498. 

Comments: Several commenters 

alleged that CMS would not be affording 

due process to the HHA with the 

implementation of sanctions, including 

CMPs, before the HHA has been allowed 

full access to appeal and the appeal is 

resolved. One commenter stated that the 

HHA should be made ‘‘whole’’ in the 

event that the HHA prevails in the 

appeal. 

Response: We disagree that the HHA 

is denied due process because the 

sanctions are applied prior to the 

completion of the appeals process, 

primarily because we believe the intent 

of the Act is to impose remedies as soon 

as possible in order to protect the 

patients. We believe that post-sanction 

hearings are entirely compatible with 

due process. Courts that have addressed 

this issue have concluded that, because 

the provider has numerous 

opportunities to prevent mistakes from 

occurring and to present its side of the 

story both during the survey process, at 

the exit interview, and by submitting 

written statements and a plan of 

correction, due process is satisfied by 

the availability of post-sanction 

hearings. See, for example, Caton Ridge 

Nursing Home v. Califano, 596 F.2d 608 

(4th Cir. 1979), Green v. Cashman, 605 

F.2d 945 (6th Cir. 1979), Northlake 

Community Hospital v. United States, 

654 F.2d 1234 (7th Cir. 1981), Geriatrics, 

Inc. v. Harris, 640 F.2d 262 (10th Cir. 

1981), cert. denied454 U.S. 832, 102 

S.Ct. 1295, Americana Healthcare Corp. 

v. Schweiker, 688 F.2d 1072, 1082–83 

(7th Cir. 1982), cert. denied, 459 U.S. 

1201 (1983), Cathedral Rock of North 

College Hill, Inc. v. Shalala, 223 F.3d 

354, 364–65 (6th Cir. 2000). Although 

the Supreme Court has not directly 

decided the issue of due process 

requirements when a provider is 

terminated, the Court has decided in 

O’Bannon v. Town Court, 447 U.S. 773, 

100 S.Ct. 2467 (1980), that nursing 

home residents are not entitled to a pretermination hearing. The Court reached 

this result notwithstanding the fact that 

residents were the intended 

beneficiaries of the provider agreement 

through their entitlement to high quality 

care. Moreover, consistent with the 

balancing of interests formula first 

enunciated by the Supreme Court in 

Mathews v. Eldridge, 434 U.S. 319 

(1976), we have concluded, first and 

foremost, that the private interest that 

HHAs have in their continued 

participation in the Medicare and 

Medicaid programs must give way to the 

Government’s interest in protecting the 

health and safety of the patient 

population. Additionally, in light of the 

opportunities available to providers to 

question the accuracy of survey findings 

at various points during the survey 

process (including during the survey, 

exit conference, and through informal 

meetings with state or federal officials), 

we believe that the chances for an 

erroneous deprivation are quite small 

when compared to the enormous delay 

in the correction of noncompliance that 

could occur were hearings to be 

routinely held prior to the institution of 

remedies. The use of an informal 

dispute resolution process, as we 

discussed earlier in this preamble, 

should serve to reduce even further the 

chances of an erroneous deprivation. 

The statutory provisions clearly 

reflect the desire expressed in the 

enactment’s legislative history that 

remedies be applied swiftly once 

deficiencies are identified. Specifically, 

section 1891(f)(3) of the Act requires 

that the Secretary develop criteria 

detailing the manner in which remedies 

are to be imposed and that they be 

designed so as to minimize the time 

between the identification of violations 

and final imposition of the remedies. 

We believe it would be incompatible 

with these pronouncements were we to 

devise an appeal scheme that would 

provide for hearings before the 

imposition of remedies. Moreover, we 

conclude that this is the case regardless 

of whether the HHA’s deficiencies pose 

immediate jeopardy to resident health 

or safety since the Act makes no 

distinction on this basis and because the 

delay in imposing remedies once 

noncompliance has been identified 

could be considerable. 

Although not required by law, we also 

added a provision for Informal Dispute 

Resolution so as to offer an additional 

safeguard that enables the HHA to 

provide information to dispute any 

condition-level finding that prompts a 

sanction. We are also adding an 

exception to the general notice 

provision and amending § 489.53(a) by 

adding a new paragraph (17) 

establishing that when an HHA failed to 

correct any deficiency (either standardlevel or condition-level), we could 

terminate its provider agreement. 

The notification requirements in 

§ 489.53(d)(1) requires that we give 

notice to any provider and the public at 

least 15 days before the effective date of 

a termination of a provider agreement. 

We added a new clause in 

§ 489.53(d)(2)(iii) which will provide for 

a timing exception to this general notice 

rule. Specifically, we added that for 

HHA terminations based on deficiencies 

that posed immediate jeopardy to 

patient health and safety, we will give 

notice to the HHA of such termination 

at least 2 days before the effective date 

of the termination. As currently 

provided in § 489.53(d)(4), we will give 

concurrent notice to the public when 

such termination occurred. 

Comment: One commenter wanted 

assurance of a smooth transition of 

patients if an HHA is terminated. 

Response: It is current CMS policy for 

the SA and CMS Regional Office, if 

applicable, to assist with the safe and 

timely transfer of HHA patients in the 

event of HHA termination. Current 

policy requires SA and the CMS 


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Regional Offices to assist with the safe 

transition of patients to new HHAs, if 

needed. 

C. Provider Agreements and Supplier 

Approval 

We are amending § 498.3, Scope and 

applicability, by revising paragraphs 

(b)(13), (b)(14) introductory text, 

(b)(14)(i), and (d)(10) to include specific 

reference to HHAs and to cross-refer to 

our regulation at § 488.740 concerning 

appeals. 

We did not receive any comments in 

response to our proposals in this 

section. Therefore, we are finalizing 

these provisions as proposed. 

D. Solicitation of Comments 

Presently, we are required only to give 

notice of an HHA termination to the 

public 15 days before the effective date 

of an involuntary termination. We have 

solicited comments related to additional 

public notices. We considered that 

when a suspension of payments for new 

admissions and new payment episodes 

or a civil money penalty is imposed, we 

could, at our discretion, issue a public 

notice. The issuance of additional 

publicly-reported notices when certain 

sanctions are imposed would offer 

information to patients who were 

choosing a provider of home health 

services, as well as to current recipients 

of home health care. A home health 

patient does not necessarily know when 

a survey has been conducted at an HHA 

and if deficiencies had been determined 

or any sanctions imposed unless a 

surveyor visited the patient during a 

survey or the patient requested a copy 

of a Statement of Deficiencies from the 

SA or HHA. We also solicited comments 

on the definition of a ‘‘per instance’’ of 

noncompliance when imposing a CMP 

sanction. 

Comments: We received many 

comments opposed to any public notice 

other than for termination. Several 

commenters thought that public notice 

would be posted on Home Care 

Compare. Several comments indicated 

that a public notice would damage an 

agency’s reputation. 

Response: We appreciate the 

comments received and want to clarify 

that by public notice we meant a notice 

published in the local newspaper, 

similar to the notices published for 

termination. We agree with these 

comments and we will not include in 

the regulation a requirement for public 

notice when alternative sanctions are 

imposed. 

VI. Collection of Information 

Requirements 

While this final rule contains 

information collection requirements, 

this rule does not revise any of the 

information collection requirements or 

burden estimates with regard to: 

§ 424.22(a) (OCN 0938–1083), § 488.710 

(OCN 0938–0355; CMS–1515 and CMS– 

1572), and § 488.810(e) (OCN 0938– 

0391; CMS–2567). Nor does this final 

rule revise any of the information 

collection requirements or burden 

estimates pertaining to OASIS as 

discussed in preamble section III.C.3. 

and approved under OCN 0938–0760 or 

Home Health Care CAHPS as discussed 

in the same preamble section but 

approved under OCN 0938–1066. All of 

the requirements and burden estimates 

associated with these collections are 

currently approved by OMB and are not 

subject to additional OMB review under 

the authority of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). 

In § 488.710, for each HHA the SA 

must (existing requirement) conduct 

standard surveys according to their 

agreements with CMS under sections 

1864 and 1891(c)(1) of the Act. CMS 

believes that the additional survey 

agency administrative activity required 

to impose alternative sanctions created 

by this rule will not generate a 

significant amount of additional 

paperwork burden at the state survey 

agency or at the HHA level. Imposing 

sanctions may require that states engage 

in some additional communication and 

carry out follow-up surveys, and CMS 

Regional Offices may need additional 

time for determining, imposing and 

tracking sanctions. In estimating appeal 

volume and costs, we note that in 2010 

only 260 providers out of 11,821 had 

condition level-deficiencies, and only 

seven of these involved immediate 

jeopardy situations. 

SAs survey HHAs to determine 

compliance with the CoPs under part 

484 and follow the guidance contained 

in the State Operations Manual, S&C 

Memoranda, and Interpretive 

Guidelines. This rule codifies some 

existing CMS policies and establishes 

new requirements that are consistent 

with OBRA ‘87 mandates as discussed 

in the Background and Statutory 

Authority sections of this preamble. 

State Surveyor recordkeeping 

requirements already exist in Forms 

CMS–1515 and CMS–1572 (OCN 0938– 

0355) and in CMS–2567 (OCN 0938– 

0391). CMS anticipates enhancing 

survey protocols and Interpretive 

Guidelines and providing additional 

S&C Memoranda and Surveyor Training 

in response to the issuance of new 

regulations, when necessary. 

In § 488.735, state and federal 

surveyors would be required to 

complete the CMS-sponsored Basic 

HHA Surveyor Training Course before 

they can serve on a HHA survey team. 

The CMS Central Office currently 

provides national training to all state 

surveyors for all of the provider types 

that are surveyed for Medicare and 

Medicaid. Those training courses are 

funded entirely by the Central Office 

and there is no burden to states since 

our annual budgets to the states (for the 

performance of survey activities) 

includes the cost of the salaries and the 

travel for participating in all national 

training courses, with minimal state 

expense. These training courses are 

designed to teach the surveyors how to 

conduct the survey process in 

accordance with the applicable 

regulations and associated Interpretive 

Guidance. During the course of the 

survey, all of the data collection tools 

that may be used (see the reference to 

CMS–1515, –1572, and –2567 above) 

have been approved by OMB through 

the PRA process. 

Section 488.810(e) requires each HHA 

that has deficiencies constituting 

noncompliance to submit a plan of 

correction for approval by CMS. This is 

a current requirement for both standard 

and condition level deficiencies, so the 

burden associated with this requirement 

that is above and beyond the existing 

effort put forth by the HHA is to prepare 

and submit a plan of correction would 

be to notify their governing body, 

potentially prepare for IDR or to issue a 

check for a CMP. While there is 

paperwork burden associated with this 

plan of correction requirement, it is 

already required and currently approved 

under OCN 0938–0391 (CMS–2567). 

Information Collection Requests Exempt 

From the Paperwork Reduction Act 

In accordance with 5 CFR 1320.4(a)(2) 

and (c), the following information 

collection activities are exempt from the 

requirements of the Paperwork 

Reduction Act since they are associated 

with administrative actions: (1) Section 

488.745(a) regarding HHA request to 

dispute condition-level survey findings; 

(2) § 488.810(g) regarding appeals; (3) 

§ 488.845(c)(2)(i) regarding the 

submission of a written request for a 

hearing or waiver of a hearing; (4) 

§ 488.840(b)(1)(ii) regarding HHA 

disclosure requirements; (5) § 488.845(c) 

regarding hearings; and (6) § 488.855 

regarding HHA deficiencies and 

directed in-service training. 

The information collection 

requirement in § 488.825(c) regarding 


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the transfer of care is exempt from the 

requirements of the Paperwork 

Reduction Act since it is associated with 

an administrative action (5 CFR 

1320.4(a)(2) and (c)) and we estimate 

fewer than ten provider agreements will 

be terminated annually (5 CFR 

1320.3(c)). 

Information Collection Requests 

Regarding the Quality Reporting for 

Hospices 

In section IV of the preamble, we note 

that section 3004 of the Affordable Care 

Act amends the Act to authorize a 

quality reporting program for hospices. 

Section 1814(i)(5)(C) of the Act requires 

that each hospice submit data to the 

Secretary on quality measures specified 

by the Secretary. Such data must be 

submitted in a form and manner, and at 

a time specified by the Secretary. As 

added by section 3004(c), new section 

1814(i)(5)(A)(i) of the Act requires that 

beginning with FY 2014 and each 

subsequent FY, the Secretary shall 

reduce the market basket update by two 

percentage points for any hospice that 

does not comply with the quality data 

submission requirements with respect to 

that fiscal year. 

In implementing the Hospice quality 

reporting program, CMS seeks to collect 

measure-related information with as 

little burden to the providers as possible 

and which reflects the full spectrum of 

quality performance. Our purpose in 

collecting this data is to help achieve 

better health care and improve health 

through the widespread dissemination 

and use of performance information. 

The Hospice Data Submission form 

intended for data submission by January 

31, 2013 (for the structural measure 

related to patient care-focused QAPI 

indicators) and for data submission by 

April 1, 2013 (for the NQF #0209 

measure related to pain) was approved 

by OMB on September 28, 2012, under 

OCN 0938–1153. Technically, the form 

is not associated with this rule but is 

discussed within the preamble to 

provide background information. 

VII. Regulatory Impact Analysis 

A. Introduction 

We have examined the impact of this 

final rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995; Pub. L. 104–4), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). This 

final rule does not reach the economic 

threshold and thus is not considered a 

major rule. We are not required to 

prepare an analysis for the RFA. 

However, as a courtesy we are providing 

the public with the impact analysis. In 

accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

B. Statement of Need 

This final rule adheres to the 

following statutory requirements. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered HH services provided 

under a plan of care (POC) that were 

paid on a reasonable cost basis by 

adding section 1895 of the Act, entitled 

‘‘Prospective Payment For Home Health 

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

requires the Secretary to establish a HH 

PPS for all costs of HH services paid 

under Medicare. In addition, section 

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

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary, and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage levels 

among HHAs. Section 1895(b)(3)(B) of 

the Act addresses the annual update to 

the standard prospective payment 

amounts by the HH applicable 

percentage increase. Section 1895(b)(4) 

of the Act governs the payment 

computation. Sections 1895(b)(4)(A)(i) 

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of appropriate casemix adjustment factors for significant 

variation in costs among different units 

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

of the Act requires the establishment of 

wage adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. 

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

amended by section 3131 of the 

Affordable Care Act, gives the Secretary 

the option to make changes to the 

payment amount otherwise paid in the 

case of outliers because of unusual 

variations in the type or amount of 

medically necessary care. Section 

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

HHAs to submit data for purposes of 

measuring health care quality, and links 

the quality data submission to the 

annual applicable percentage increase. 

Also, section 3131 of the Affordable 

Care Act requires that HH services 

furnished in a rural area (as defined in 

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

respect to episodes and visits ending on 

or after April 1, 2010, and before 

January 1, 2016, receive an increase of 

3 percent of the payment amount 

otherwise made under section 1895 of 

the Act. 

C. Overall Impact 

The update set forth in this final rule 

applies to Medicare payments under HH 

PPS in CY 2013. Accordingly, the 

following analysis describes the impact 

in CY 2013 only. We estimate that the 

net impact of the provisions in this rule 

is approximately $10 million in CY 

2013 savings. The -$10 million impact 

reflects the distributional effects of an 

updated wage index ($70 million 

decrease), the 1.3 percent HH payment 

update ($260 million increase), the 

revised FDL ratio ($50 million increase), 

and the 1.32 percent case-mix 

adjustment applicable to the national 

standardized 60-day episode rates ($250 

million decrease). The $10 million in 

savings is reflected in the first row of 

column 3 of Table 28 as a 0.01 percent 

decrease in expenditures when 

comparing the current CY 2012 HH PPS 

to the CY 2013 HH PPS. The RFA 

requires agencies to analyze options for 

regulatory relief of small entities, if a 

rule has a significant impact on a 

substantial number of small entities. For 

purposes of the RFA, small entities 

include small businesses, nonprofit 

organizations, and small governmental 

jurisdictions. Most hospitals and most 

other providers and suppliers are small 

entities, either by nonprofit status or by 

having revenues of less than $7.0 

million to $34.5 million in any 1 year. 


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For the purposes of the RFA, our 

updated data show that approximately 

98 percent of HHAs are considered to be 

small businesses according to the Small 

Business Administration’s size 

standards with total revenues of $13.5 

million or less in any 1 year. Individuals 

and states are not included in the 

definition of a small entity. The 

Secretary has determined that this rule 

will not have a significant economic 

impact on a substantial number of small 

entities. We define small HHAs as either 

non-proprietary or proprietary with total 

revenues of $13.5 million or less in any 

1 year. We estimate that approximately 

25 percent of HHAs are classified as 

non-proprietary. Analysis of Medicare 

claims data reveals a 0.05 percent 

decrease in estimated payments to small 

HHAs in CY 2013. 

A discussion on the alternatives 

considered is presented in section VII.E. 

below. The following analysis, with the 

rest of the preamble, constitutes our 

RFA analysis. 

In this final rule, we stated that our 

analysis shows that nominal case-mix 

continues to grow under the HH PPS. 

Specifically, nominal case-mix has 

grown from the 19.03 percent growth 

identified in our analysis for CY 2012 

rulemaking to 20.08 percent for this 

year’s rulemaking (see further 

discussion in section III.A.). As such, 

we believe it is appropriate to reduce 

the HH PPS rates using the 1.32 percent 

payment reduction promulgated in the 

CY 2012 HH PPS Final Rule (76 FR 

68532) in moving towards more 

accurate payment for the delivery of 

home health services. Our analysis 

shows that smaller HHAs are impacted 

more than larger HHAs by the 

provisions of this rule. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of RFA. 

For purposes of section 1102(b) of the 

Act, we define a small rural hospital as 

a hospital that is located outside of a 

metropolitan statistical area and has 

fewer than 100 beds. This final rule 

applies to HHAs. Therefore, the 

Secretary has determined that this final 

rule will not have a significant 

economic impact on the operations of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2012, that 

threshold is approximately $139 

million. This final rule is not 

anticipated to have an effect on state, 

local, or tribal governments in the 

aggregate, or by the private sector, of 

$139 million or more. 

D. Detailed Economic Analysis 

This final rule sets forth updates to 

the HH PPS rates contained in the CY 

2012 HH PPS final rule. The impact 

analysis of this final rule presents the 

estimated expenditure effects of policy 

changes finalized in this rule. We use 

the latest data and best analysis 

available, but we do not make 

adjustments for future changes in such 

variables as number of visits or casemix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare home 

health benefit, based on Medicare 

claims from 2010. We note that certain 

events may combine to limit the scope 

or accuracy of our impact analysis, 

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

resulting from other changes in the 

impact time period assessed. Some 

examples of such possible events are 

newly-legislated general Medicare 

program funding changes made by the 

Congress, or changes specifically related 

to HHAs. 

Table 28 represents how HHA 

revenues are likely to be affected by the 

policy changes finalized in this rule. For 

this analysis, we used linked home 

health claims and OASIS assessments; 

the claims represented a 100-percent 

sample of 60-day episodes occurring in 

CY 2010. The first column of Table 28 

classifies HHAs according to a number 

of characteristics including provider 

type, geographic region, and urban and 

rural locations. The second column 

shows the payment effects of the wage 

index only. The third column shows the 

payment effects of all the policies 

outlined earlier in this rule. For CY 

2013, the average impact for all HHAs 

due to the effects of the wage index is 

a 0.37 percent decrease in payments. 

The overall impact for all HHAs, in 

estimated total payments from CY 2012 

to CY 2013, is a decrease of 

approximately 0.01 percent. 

As shown in Table 28, the combined 

effects of all of the changes vary by 

specific types of providers and by 

location. In general, facility-based, 

proprietary agencies in rural areas will 

be impacted positively as a result of the 

provisions in this rule. In addition, freestanding, other volunteer/non-profit 

agencies and facility-based volunteer/ 

non-profit agencies in urban areas will 

be impacted positively. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

E. Alternatives Considered 

In implementing the case-mix 

adjustment for CY 2013, along with the 

home health payment update and the 

updated wage index, the aggregate 

impact will be a net decrease of $10 

million in payments to HHAs, resulting 

from a $70 million decrease due to the 

updated wage index, a $260 million 

increase due to the home health 

payment update, a $50 million increase 

due to the revised FDL ratio, and a $250 

million decrease from the 1.32 percent 

case-mix adjustment. In the proposed 

rule, we considered not implementing 

the 1.32 percent case-mix adjustment. 

However, if we were to not implement 

the 1.32 case-mix adjustment, Medicare 

would pay an estimated $250 million 

more to HHAs in CY 2013. In the 

proposed rule, we stated that we 

believed that not implementing a casemix adjustment, and paying out an 

additional $250 million to HHAs when 

those additional payments are not 

reflective of HHAs treating sicker 

patients, would not be in line with the 

HH PPS, which is to pay accurately and 


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appropriately for the delivery of home 

health services to Medicare 

beneficiaries. 

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

gives CMS the authority to implement 

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

are unrelated to actual changes in 

patient health status. We are committed 

to monitoring the accuracy of payments 

to HHAs, which includes the 

measurement of the increase in nominal 

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

discussed in section III.A. of this rule, 

we have determined that there is a 20.08 

percent nominal case-mix change from 

2000 to 2010. For CY 2013, we are 

finalizing a 1.32 percent payment 

reduction to the national standardized 

60-day episode rates as promulgated in 

the CY 2012 HH PPS final rule (76 FR 

68532). 

We believe that the alternative of not 

implementing a case-mix adjustment to 

the payment system in CY 2013 to 

account for the increase in case-mix that 

is not real would be detrimental to the 

integrity of the PPS. As discussed in 

section III.A. of this rule, because 

nominal case-mix continues to grow as 

we update our analysis with more 

current data and thus to date we have 

not accounted for all the increase in 

nominal case-mix growth, we believe it 

is appropriate to reduce HH PPS rates 

now, thereby paying more accurately for 

the delivery of home health services 

under the Medicare home health 

benefit. The other reduction to HH PPS 

payments, a 1.0 percentage point 

reduction to the CY 2013 home health 

market basket update, is discussed in 

this rule and is not discretionary as it is 

a requirement in section 

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

by the Affordable Care Act). 

F. Survey and Enforcement 

Requirements for Home Health Agencies 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $7.0 million to $34.5 million in any 

1 year. Individuals and states are not 

included in the definition of a small 

entity. We are not preparing an analysis 

for the RFA because we have 

determined, and the Secretary certifies, 

that this regulation will not have a 

significant economic impact on a 

substantial number of small entities. In 

2010, out of a total of 11,814 HHAs 

enrolled in the Medicare program, only 

260 HHA providers had the potential to 

be sanctioned based on noncompliance 

with one or more CoPs. This was 

approximately 2.2 percent of the HHAs 

(small entities affected) which is less 

than 5 percent of total HHAs surveyed. 

We believe the benefit will be in 

assuring public health and safety. We 

believe this final rule will have a minor 

impact on HHAs and SAs. This minor 

rule determination was made by 

examining the following survey data for 

calendar year (CY) 2010 in the CMS 

Providing Data Quickly (PDQ) System: 

Survey Activity Report, the Citation 

Frequency Report, the Condition-Level 

Deficiencies Report and the Active 

Provider Count Report(s). 

Our data below reflects the 

probability of low impact for monetary 

sanctions. In any given year 

approximately 11,814 surveyed agencies 

have the possibility of having a 

mandatory unannounced survey, but 

only 260 are likely to be cited for 

condition level noncompliance. 

Also, by comparison, in our review of 

the nursing home data reports, we have 

found less than 0.3 percent of nursing 

homes have been subject to the 

Temporary Management Sanction in 

2008, therefore we do not anticipate any 

major impact on home health provider 

costs with this sanction in the final 

regulation. 

Because implementation of the 

complex and far-reaching provisions of 

this final rule for CMS will require an 

infrastructure overhaul with changes to 

current tracking mechanisms and a 

nationwide training effort to train 

surveyors, their supervisors and related 

CMS personnel, we provide for 

staggered effective dates of July 1, 2013 

for the provisions of part 488, subparts 

I and J and parts 489 and 498 of the rule 

and July 1, 2014 for § 488.745, § 488.840 

and § 488.845. 

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 also 

conform to the provisions of section 604 

of the RFA. For purposes of section 

1102(b) of the Act, we define a ‘‘small 

rural hospital’’ as a hospital that is 

located outside of a Metropolitan 

Statistical Area for Medicare payment 

regulations and has fewer than 100 

beds. We are not preparing an analysis 

for section 1102(b) of the Act because 

we have determined, and the Secretary 

certifies, that this final regulation will 


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not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2012, that threshold level is 

approximately $139 million. This rule 

will have no consequential effect on 

state, local, or tribal governments or on 

the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on state and local 

governments, preempts state law, or 

otherwise has Federalism implications. 

We will incur certain administrative 

expenses in the course of designing and 

managing a CMP process. One-time 

costs are estimated at $2 million for 

redesigning certain parts of the survey 

information system (ASPEN) and 

ongoing expenses for maintenance and 

associated modifications of the system 

are estimated at $75,000 per year. In 

addition, we will incur expenses for 

training federal and state surveyors, 

developing and publishing the 

necessary training and instruction 

documents and procedures, and 

tracking and reporting of CMP data. We 

estimate one 6 hour webinar training 

and trouble-shooting session per year 

involving approximately 302 surveyor 

and ancillary state and federal 

personnel (1812 person-hours) and 190 

hours for training development and 

design. We also estimate 104 hours per 

year in trouble-shooting and responding 

to questions. The total combined person 

hours of 2106 will cost $299,052 

annually. We also estimate ongoing 

CMS costs for managing the collection 

and disbursement of CMPs to require 

about 260 person hours per year or 

approximately $36,920. The grand total 

amounts to $2 million in onetime 

expenses and approximately $410,972 

in annual operating costs. The 

provisions in this final rule related to 

survey protocols have already been 

incorporated into long standing CMS 

survey policy, implemented in the years 

after 1987 and most recently revised in 

2011. 

G. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http://www.whitehouse.

gov/omb/circulars_a004_a-4), in Table 

30, we have prepared an accounting 

statement showing the classification of 

the transfers associated with the 

provisions of this final rule. This table 

provides our best estimate of the 

decrease in Medicare payments under 

the HH PPS as a result of the changes 

presented in this final rule. 

H. Conclusion 

In conclusion, we estimate that the 

net impact of the proposals finalized in 

this rule is approximately $10 million in 

CY 2013 savings. The $10 million 

impact to the CY 2013 HH PPS reflects 

the distributional effects of an updated 

wage index ($70 million decrease), the 

1.3 percent home health payment 

update ($260 million increase), a new 

FDL ratio of 0.45 ($50 million increase), 

and a 1.32 percent case-mix adjustment 

applicable to the national standardized 

60-day episode rates ($250 million 

decrease). This analysis, together with 

the remainder of this preamble, 

provides a Regulatory Impact Analysis. 

VIII. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a final rule that 

imposes substantial direct requirement 

costs on state and local governments, 

preempts state law, or otherwise has 

Federalism implications. We have 

reviewed this final rule under the 

threshold criteria of Executive Order 

13132, Federalism, and have 

determined that it will not have 

substantial direct effects on the rights, 

roles, and responsibilities of states, local 

or tribal governments. 

List of Subjects 

42 CFR Part 409 

Health facilities, Medicare. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 484 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements 

42 CFR Part 488 

Administrative practice and 

procedure, Health facilities, Medicare, 

Record and reporting requirements. 

42 CFR Part 489 

Health facilities, Medicare, Reporting 

and recordkeeping requirements 

42 CFR Part 498 

Administrative practice and 

procedure, Health facilities, Health 

professions, Medicare reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 409—HOSPITAL INSURANCE 

BENEFITS 

■ 1. The authority citation for part 409 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395(hh)). 

■ 2. Section 409.44 is amended by 

revising paragraphs (c)(2)(i)(C)(2), 

(c)(2)(i)(D)(2), (c)(2)(i)(E) introductory 

text, and (c)(2)(i)(E)(1) to read as 

follows: 

§ 409.44 Skilled services requirements. 

* * * * * 

(c) * * * 

(2) * * * 

(i) * * * 

(C) * * * 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide all of the therapy services and 

functionally reassess the patient in 


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

of this section during the visit 

associated with that discipline which is 

scheduled to occur after the 10th 

therapy visit but no later than the 13th 

therapy visit per the plan of care. In 

instances where the frequency of a 

particular discipline, as ordered by a 

physician, does not make it feasible for 

the reassessment to occur during the 

specified timeframes without providing 

an extra unnecessary visit or delaying a 

visit, then it is acceptable for the 

qualified therapist from that discipline 

to provide all of the therapy and 

functionally reassess the patient during 

the visit associated with that discipline 

that is scheduled to occur closest to the 

14th Medicare-covered therapy visit, but 

no later than the 13th Medicare-covered 

therapy visit. 

(D) * * * 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide all of the therapy services and 

functionally reassess the patient in 

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

of this section during the visit 

associated with that discipline which is 

schedule to occur after the 16th therapy 

visit but no later than the 19th therapy 

visit per the plan of care. In instances 

where the frequency of a particular 

discipline, as ordered by a physician, 

does not make it feasible for the 

reassessment to occur during the 

specified timeframes without providing 

an extra, unnecessary visit or delaying 

a visit, then it is acceptable for the 

qualified therapist from that discipline 

to provide all of the therapy and 

functionally reassess the patient during 

the visit associated with that discipline 

that is scheduled to occur closest to the 

20th Medicare-covered therapy visit, but 

no later than the 19th Medicare-covered 

therapy visit. 

(E) As specified in paragraphs 

(c)(2)(i)(A), (B), (C), and (D) of this 

section, therapy visits for the therapy 

discipline(s) not in compliance with 

these policies will not be covered until 

the following conditions are met: 

(1) The qualified therapist has 

completed the reassessment and 

objective measurement of the 

effectiveness of the therapy as it relates 

to the therapy goals. As long as 

paragraphs (c)(2)(i) (E)(2) and (c)(2)(i) 

(E)(3) of this section are met, therapy 

coverage resumes with the completed 

reassessment therapy visit. 

* * * * * 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

■ 3. The authority citation for part 424 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395(hh)). 

■ 4. Section 424.22 is amended by— 

■ A. Revising paragraph (a)(1)(v) 

introductory text. 

■ B. Redesignating paragraphs 

(a)(1)(v)(A), (B), (C), and (D) as 

paragraphs (a)(1)(v)(C), (D), (E), and (F), 

respectively. 

■ C. Adding new paragraphs (a)(1)(v)(A) 

and (B). 

■ D. Revising newly redesignated 

paragraphs (a)(1)(v)(C) and (F). 

The revisions and additions read as 

follows: 

§ 424.22 Requirements for home health 

services. 

* * * * * 

(a) * * * 

(1) * * * 

(v) The physician responsible for 

performing the initial certification must 

document that the face-to-face patient 

encounter, which is related to the 

primary reason the patient requires 

home health services, has occurred no 

more than 90 days prior to the home 

health start of care date or within 30 

days of the start of the home health care 

by including the date of the encounter, 

and including an explanation of why 

the clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

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

of this chapter, respectively. 

(A) The face-to-face encounter must 

be performed by one of the following: 

(1) The certifying physician himself or 

herself. 

(2) A physician, with privileges, who 

cared for the patient in an acute or postacute care facility from which the 

patient was directly admitted to home 

health. 

(3) A nurse practitioner or a clinical 

nurse specialist (as those terms are 

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

Act) who is working in accordance with 

State law and in collaboration with the 

certifying physician or in collaboration 

with an acute or post-acute care 

physician with privileges who cared for 

the patient in the acute or post-acute 

care facility from which the patient was 

directly admitted to home health. 

(4) A certified nurse midwife (as 

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

authorized by State law, under the 

supervision of the certifying physician 

or under the supervision of an acute or 

post-acute care physician with 

privileges who cared for the patient in 

the acute or post-acute care facility from 

which the patient was directly admitted 

to home health. 

(5) A physician assistant (as defined 

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

the supervision of the certifying 

physician or under the supervision of an 

acute or post-acute care physician with 

privileges who cared for the patient in 

the acute or post-acute care facility from 

which the patient was directly admitted 

to home health. 

(B) The documentation of the face-toface patient encounter must be a 

separate and distinct section of, or an 

addendum to, the certification, and 

must be clearly titled and dated and the 

certification must be signed by the 

certifying physician. 

(C) In cases where the face-to-face 

encounter is performed by a physician 

who cared for the patient in an acute or 

post-acute care facility or by a 

nonphysician practitioner in 

collaboration with or under the 

supervision of such an acute or postacute care physician and that 

nonphysician practitioner is not directly 

communicating to the certifying 

physician the clinical findings (that is, 

the patient’s homebound status and 

need for intermittent skilled nursing 

services or therapy services as defined 

in § 409.42(a) and (c) of this chapter), 

the acute or post-acute care physician 

must communicate the clinical findings 

of that face-to-face encounter to the 

certifying physician. In all other cases 

where a nonphysician practitioner 

performs the face-to-face encounter, the 

nonphysician practitioner must 

communicate the clinical findings of 

that face-to-face patient encounter to the 

certifying physician. 

* * * * * 

(F) The physician responsible for 

certifying the patient for home care 

must document the face-to-face 

encounter on the certification itself, or 

as an addendum to the certification (as 

described in paragraph (a)(1)(v) of this 

section), that the condition for which 

the patient was being treated in the faceto-face patient encounter is related to 

the primary reason the patient requires 

home health services, and why the 

clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

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

respectively. The documentation must 

be clearly titled and dated and the 


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documentation must be signed by the 

certifying physician. 

* * * * * 

PART 484—HOME HEALTH SERVICES 

■ 5. The authority citation for part 484 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395(hh)). 

■ 6. Section 484.250 is amended by 

adding paragraph (c)(3) to read as 

follows: 

§ 484.250 Patient assessment data. 

* * * * * 

(c) * * * 

(3) Approved HHCAHPS survey 

vendors must fully comply with all 

HHCAHPS oversight activities, 

including allowing CMS and its 

HHCAHPS program team to perform site 

visits at the vendors’ company 

locations. 

PART 488—SURVEY, CERTIFICATION, 

AND ENFORCEMENT PROCEDURES 

■ 7. The authority citation for part 488 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the Act 

(42 U.S.C. 1302 and 1395(hh)). 

■ 8. Section 488.2 is amended by adding 

the following statutory basis in 

numerical order as follows: 

§ 488.2 Statutory basis. 

* * * * * 

1861(m)—Requirements for Home 

Health Services 

1861(o)—Requirements for Home Health 

Agencies 

* * * * * 

1891—Conditions of participation for 

home health agencies; home health 

quality. 

* * * * * 

■ 9. Section 488.3 is amended by 

revising paragraph (a)(1) to read as 

follows: 

§ 488.3 Conditions of participation; 

conditions for coverage; and long-term care 

requirements. 

(a) * * * 

(1) Meet the applicable statutory 

definition in sections 1138(b), 1819, 

1832(a)(2)(F), 1861, 1881, 1891, or 1919 

of the Act. 

* * * * * 

■ 10. Section 488.26 is amended by 

revising paragraphs (c)(2) and (e) to read 

as follows: 

§ 488.26 Determining compliance. 

* * * * * 

(c) * * * 

(2) The survey process uses resident 

and patient outcomes as the primary 

means to establish the compliance 

process of facilities and agencies. 

Specifically, surveyors will directly 

observe the actual provision of care and 

services to residents and/or patients, 

and the effects of that care, to assess 

whether the care provided meets the 

needs of individual residents and/or 

patients. 

* * * * * 

(e) The State survey agency must 

ensure that a facility’s or agency’s actual 

provision of care and services to 

residents and patients and the effects of 

that care on such residents and patients 

are assessed in a systematic manner. 

■ 11. The section heading for § 488.28 is 

revised to read as follows: 

§ 488.28 Providers or suppliers, other than 

SNFs, NFs, and HHAs with deficiencies. 

* * * * * 

■ 12. Subpart I is added to read as 

follows: 

Subpart I—Survey and Certification of 

Home Health Agencies 

Sec. 

488.700 Basis and scope. 

488.705 Definitions. 

488.710 Standard surveys. 

488.715 Partial extended surveys. 

488.720 Extended surveys. 

488.725 Unannounced surveys. 

488.730 Survey frequency and content. 

488.735 Surveyor qualifications. 

488.740 Certification of compliance or 

noncompliance. 

488.745 Informal Dispute Resolution (IDR). 

Subpart I—Survey and Certification of 

Home Health Agencies 

§ 488.700 Basis and scope. 

Section 1891 of the Act establishes 

requirements for surveying HHAs to 

determine whether they meet the 

Medicare conditions of participation. 

§ 488.705 Definitions. 

As used in this subpart— 

Abbreviated standard survey means a 

focused survey other than a standard 

survey that gathers information on an 

HHA’s compliance with fewer specific 

standards or conditions of participation. 

An abbreviated standard survey may be 

based on complaints received, a change 

of ownership or management, or other 

indicators of specific concern such as 

reapplication for Medicare billing 

privileges following a deactivation. 

Complaint survey means a survey that 

is conducted to investigate specific 

allegations of noncompliance. 

Condition-level deficiency means 

noncompliance as described in § 488.24 

of this part. 

Deficiency is a violation of the Act 

and regulations contained in part 484, 

subparts A through C of this chapter, is 

determined as part of a survey, and can 

be either standard or condition-level. 

Extended survey means a survey that 

reviews additional conditions of 

participation not examined during a 

standard survey. It may be conducted at 

any time but must be conducted when 

substandard care is identified. 

Noncompliance means any deficiency 

found at the condition-level or standardlevel. 

Partial extended survey means a 

survey conducted to determine if 

deficiencies and/or deficient practice(s) 

exist that were not fully examined 

during the standard survey. The 

surveyors may review any additional 

requirements which would assist in 

making a compliance finding. 

Standard-level deficiency means 

noncompliance with one or more of the 

standards that make up each condition 

of participation for HHAs. 

Standard survey means a survey 

conducted in which the surveyor 

reviews the HHA’s compliance with a 

select number of standards and/or 

conditions of participation in order to 

determine the quality of care and 

services furnished by an HHA as 

measured by indicators related to 

medical, nursing, and rehabilitative 

care. 

Substandard care means 

noncompliance with one or more 

conditions of participation identified on 

a standard survey, including 

deficiencies which could result in 

actual or potential harm to patients of 

an HHA. 

Substantial compliance means 

compliance with all condition-level 

requirements, as determined by CMS or 

the State. 

§ 488.710 Standard surveys. 

(a) For each HHA, the survey agency 

must conduct a standard survey not 

later than 36 months after the date of the 

previous standard survey that includes, 

but is not limited to, all of the following 

(to the extent practicable): 

(1) A case-mix stratified sample of 

individuals furnished items or services 

by the HHA. 

(2) Visits to the homes of patients, 

(the purpose of the home visit is to 

evaluate the extent to which the quality 

and scope of services furnished by the 

HHA attained and maintained the 

highest practicable functional capacity 

of each patient as reflected in the 

patient’s written plan of care and 

clinical records), but only with their 

consent, and, if determined necessary 

by CMS or the survey team, other forms 


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of communication with patients 

including telephone calls. 

(3) Review of indicators that include 

the outcomes of quality care and 

services furnished by the agency as 

indicated by medical, nursing, and 

rehabilitative care. 

(4) Review of compliance with a 

select number of regulations most 

related to high-quality patient care. 

(b) The survey agency’s failure to 

follow the procedures set forth in this 

section will not invalidate otherwise 

legitimate determinations that 

deficiencies exist at an HHA. 

§ 488.715 Partial extended surveys. 

A partial extended survey is 

conducted to determine if standard or 

condition-level deficiencies are present 

in the conditions of participation not 

fully examined during the standard 

survey and there are indications that a 

more comprehensive review of 

conditions of participation would 

determine if a deficient practice exists. 

§ 488.720 Extended surveys. 

(a) Purpose of survey. The purpose of 

an extended survey is: 

(1) To review and identify the policies 

and procedures that caused an HHA to 

furnish substandard care. 

(2) To determine whether the HHA is 

in compliance with one or more or all 

additional conditions of participation 

not examined during the standard 

survey. 

(b) Timing and basis for survey. An 

extended survey must be conducted not 

later than 14 calendar days after 

completion of a standard survey which 

found that a HHA was out of 

compliance with a condition of 

participation. 

§ 488.725 Unannounced surveys. 

(a) Basic rule. All HHA surveys must 

be unannounced and conducted with 

procedures and scheduling that renders 

the onsite surveys as unpredictable in 

their timing as possible. 

(b) State survey agency’s scheduling 

and surveying procedures. CMS reviews 

each survey agency’s scheduling and 

surveying procedures and practices to 

assure that the survey agency has taken 

all reasonable steps to avoid giving 

notice of a survey through the 

scheduling procedures and conduct of 

the surveys. 

(c) Civil money penalties. Any 

individual who notifies an HHA, or 

causes an HHA to be notified, of the 

time or date on which a standard survey 

is scheduled to be conducted is subject 

to a Federal civil money penalty not to 

exceed $2,000. 

§ 488.730 Survey frequency and content. 

(a) Basic period. Each HHA must be 

surveyed not later than 36 months after 

the last day of the previous standard 

survey. Additionally, a survey may be 

conducted as frequently as necessary 

to— 

(1) Assure the delivery of quality 

home health services by determining 

whether an HHA complies with the Act 

and conditions of participation; and 

(2) Confirm that the HHA has 

corrected deficiencies that were 

previously cited. 

(b) Change in HHA information. A 

standard survey or an abbreviated 

standard survey may be conducted 

within 2 months of a change, or 

knowledge of a change, in any of the 

following: 

(1) Ownership; 

(2) Administration; or, 

(3) Management of the HHA. 

(c) Complaints. A standard survey, or 

abbreviated standard survey— 

(1) Must be conducted of an HHA 

within 2 months of when a significant 

number of complaints against the HHA 

are reported to CMS, the State, the State 

or local agency responsible for 

maintaining a toll-free hotline and 

investigative unit, or any other 

appropriate Federal, State, or local 

agency; or 

(2) As otherwise required to 

determine compliance with the 

conditions of participation such as the 

investigation of a complaint. 

§ 488.735 Surveyor qualifications. 

(a) Minimum qualifications. Surveys 

must be conducted by individuals who 

meet minimum qualifications 

prescribed by CMS. In addition, before 

any State or Federal surveyor may serve 

on an HHA survey team (except as a 

trainee), he/she must have successfully 

completed the relevant CMS-sponsored 

Basic HHA Surveyor Training Course 

and any associated course prerequisites. 

All surveyors must follow the principles 

set forth in § 488.24 through § 488.28 

according to CMS policies and 

procedures for determining compliance 

with the conditions of participation. 

(b) Disqualifications. Any of the 

following circumstances disqualifies a 

surveyor from surveying a particular 

agency: 

(1) The surveyor currently works for, 

or, within the past two years, has 

worked with the HHA to be surveyed as: 

(i) A direct employee; 

(ii) An employment agency staff at the 

agency; or 

(iii) An officer, consultant, or agent 

for the agency to be surveyed 

concerning compliance with conditions 

of participation specified in or pursuant 

to sections 1861(o) or 1891(a) of the Act. 

(2) The surveyor has a financial 

interest or an ownership interest in the 

HHA to be surveyed. 

(3) The surveyor has a family member 

who has a relationship with the HHA to 

be surveyed. 

(4) The surveyor has an immediate 

family member who is a patient of the 

HHA to be surveyed. 

§ 488.740 Certification of compliance or 

noncompliance. 

Rules to be followed for certification, 

documentation of findings, periodic 

review of compliance and approval, 

certification of noncompliance, and 

determining compliance of HHAs are set 

forth, respectively, in §§ 488.12, 488.18, 

488.20, 488.24, and 488.26 of this part. 

§ 488.745 Informal Dispute Resolution 

(IDR). 

(a) Opportunity to refute survey 

findings. Upon the provider’s receipt of 

an official statement of deficiencies, 

HHAs are afforded the option to request 

an informal opportunity to dispute 

condition-level survey findings. 

(b) Failure to conduct IDR timely. 

Failure of CMS or the State, as 

appropriate, to complete IDR shall not 

delay the effective date of any 

enforcement action. 

(c) Revised statement of deficiencies 

as a result of IDR. If any findings are 

revised or removed by CMS or the State 

based on IDR, the official statement of 

deficiencies is revised accordingly and 

any enforcement actions imposed solely 

as a result of those cited deficiencies are 

adjusted accordingly. 

(d) Notification. When the survey 

findings indicate a condition-level 

deficiency, CMS or the State, as 

appropriate, must provide the agency 

with written notification of the 

opportunity for participating in an IDR 

process at the time the official statement 

of deficiencies is issued. The request for 

IDR must be submitted in writing to the 

State or CMS, must include the specific 

deficiencies that are disputed, and must 

be made within the same 10 calendar 

day period that the HHA has for 

submitting an acceptable plan of 

correction. 

■ 13. Subpart J is added to read as 

follows: 

Subpart J—Alternative Sanctions for Home 

Health Agencies With Deficiencies 

Sec. 

488.800 Statutory basis. 

488.805 Definitions. 

488.810 General provisions. 

488.815 Factors to be considered in 

selecting sanctions. 

488.820 Available sanctions. 

488.825 Action when deficiencies pose 

immediate jeopardy. 


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488.830 Action when deficiencies are at 

the condition-level but do not pose 

immediate jeopardy. 

488.835 Temporary management. 

488.840 Suspension of payment for all new 

patient admissions. 

488.845 Civil money penalties. 

488.850 Directed plan of correction. 

488.855 Directed in-service training. 

488.860 Continuation of payments to an 

HHA with deficiencies. 

488.865 Termination of provider 

agreement. 

Subpart J—Alternative Sanctions for 

Home Health Agencies With 

Deficiencies 

§ 488.800 Statutory basis. 

Section 1891(e) through (f) of the Act 

authorizes the Secretary to take actions 

to remove and correct deficiencies in an 

HHA through an alternative sanction or 

termination or both. Furthermore, this 

section specifies that these sanctions are 

in addition to any others available 

under State or Federal law, and, except 

for the final determination of civil 

money penalties, are imposed prior to 

the conduct of a hearing. 

§ 488.805 Definitions. 

As used in this subpart— 

Directed plan of correction means 

CMS or the temporary manager (with 

CMS/SA approval) may direct the HHA 

to take specific corrective action to 

achieve specific outcomes within 

specific timeframes. 

Immediate jeopardy means a situation 

in which the provider’s noncompliance 

with one or more requirements of 

participation has caused, or is likely to 

cause serious injury, harm, impairment, 

or death to a patient(s). 

New admission means an individual 

who becomes a patient or is readmitted 

to the HHA on or after the effective date 

of a suspension of payment sanction. 

Per instance means a single event of 

noncompliance identified and corrected 

through a survey, for which the statute 

authorizes CMS to impose a sanction. 

Plan of correction means a plan 

developed by the HHA and approved by 

CMS that is the HHA’s written response 

to survey findings detailing corrective 

actions to cited deficiencies and 

specifies the date by which those 

deficiencies will be corrected. 

Repeat deficiency means a conditionlevel citation that is cited on the current 

survey and is substantially the same as 

or similar to, a finding of a standardlevel or condition-level deficiency 

citation cited on the most recent 

previous standard survey or on any 

intervening survey since the most recent 

standard survey. 

Temporary management means the 

temporary appointment by CMS or by a 

CMS authorized agent, of a substitute 

manager or administrator based upon 

qualifications described in §§ 484.4 and 

484.14(c) of this chapter. The HHA’s 

governing body must ensure that the 

temporary manager has authority to 

hire, terminate or reassign staff, obligate 

funds, alter procedures, and manage the 

HHA to correct deficiencies identified 

in the HHA’s operation. 

§ 488.810 General provisions. 

(a) Purpose of sanctions. The purpose 

of sanctions is to ensure prompt 

compliance with program requirements 

in order to protect the health and safety 

of individuals under the care of an 

HHA. 

(b) Basis for imposition of sanctions. 

When CMS chooses to apply one or 

more sanctions specified in § 488.820, 

the sanctions are applied on the basis of 

noncompliance with one or more 

conditions of participation found 

through a survey and may be based on 

failure to correct previous deficiency 

findings as evidenced by repeat 

deficiencies. 

(c) Number of sanctions. CMS may 

apply one or more sanctions for each 

deficiency constituting noncompliance 

or for all deficiencies constituting 

noncompliance. 

(d) Extent of sanctions imposed. 

When CMS imposes a sanction, the 

sanction applies to the parent HHA and 

its respective branch offices. 

(e) Plan of correction requirement. 

Regardless of which sanction is applied, 

a non-compliant HHA must submit a 

plan of correction for approval by CMS. 

(f) Notification requirements. (1) 

Notice. CMS provides written 

notification to the HHA of the intent to 

impose the sanction. 

(2) Date of enforcement action. The 

notice periods specified in § 488.825(b) 

and § 488.830(b) begin the day after the 

HHA receives the notice. 

(g) Appeals. (1) The provisions of part 

498 of this chapter apply when the HHA 

requests a hearing on a determination of 

noncompliance leading to the 

imposition of a sanction, including 

termination of the provider agreement. 

(2) A pending hearing does not delay 

the effective date of a sanction, 

including termination, against an HHA. 

Sanctions continue to be in effect 

regardless of the timing of any appeals 

proceedings. 

§ 488.815 Factors to be considered in 

selecting sanctions. 

CMS bases its choice of sanction or 

sanctions on consideration of one or 

more factors that include, but are not 

limited to, the following: 

(a) The extent to which the 

deficiencies pose immediate jeopardy to 

patient health and safety. 

(b) The nature, incidence, manner, 

degree, and duration of the deficiencies 

or noncompliance. 

(c) The presence of repeat 

deficiencies, the HHA’s overall 

compliance history and any history of 

repeat deficiencies at either the parent 

or branch location. 

(d) The extent to which the 

deficiencies are directly related to a 

failure to provide quality patient care. 

(e) The extent to which the HHA is 

part of a larger organization with 

performance problems. 

(f) An indication of any system-wide 

failure to provide quality care. 

§ 488.820 Available sanctions. 

In addition to termination of the 

provider agreement, the following 

alternative sanctions are available: 

(a) Civil money penalties. 

(b) Suspension of payment for all new 

admissions. 

(c) Temporary management of the 

HHA. 

(d) Directed plan of correction, as set 

out at § 488.850. 

(e) Directed in-service training, as set 

out at § 488.855. 

§ 488.825 Action when deficiencies pose 

immediate jeopardy. 

(a) Immediate jeopardy. If there is 

immediate jeopardy to the HHA’s 

patient health or safety— 

(1) CMS immediately terminates the 

HHA provider agreement in accordance 

with § 489.53 of this chapter. 

(2) CMS terminates the HHA provider 

agreement no later than 23 days from 

the last day of the survey, if the 

immediate jeopardy has not been 

removed by the HHA. 

(3) In addition to a termination, CMS 

may impose one or more alternative 

sanctions, as appropriate. 

(b) 2-day notice. Except for civil 

money penalties, for all sanctions 

specified in § 488.820 that are imposed 

when there is immediate jeopardy, 

notice must be given at least 2 calendar 

days before the effective date of the 

enforcement action. 

(c) Transfer of care. An HHA, if its 

provider agreement terminated, is 

responsible for providing information, 

assistance, and arrangements necessary 

for the proper and safe transfer of 

patients to another local HHA within 30 

days of termination. The State must 

assist the HHA in the safe and orderly 

transfer of care and services for the 

patients to another local HHA. 


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§ 488.830 Action when deficiencies are at 

the condition-level but do not pose 

immediate jeopardy. 

(a) Noncompliance. If the HHA is no 

longer in compliance with the 

conditions of participation, either 

because the deficiency or deficiencies 

substantially limit the provider’s 

capacity to furnish adequate care but do 

not pose immediate jeopardy, have a 

condition-level deficiency or 

deficiencies that do not pose immediate 

jeopardy, or because the HHA has repeat 

noncompliance that results in a 

condition-level deficiency based on the 

HHA’s failure to correct and sustain 

compliance, CMS will: 

(1) Terminate the HHA’s provider 

agreement; or 

(2) Impose one or more alternative 

sanctions set forth in § 488.820(a) 

through (f) of this part as an alternative 

to termination, for a period not to 

exceed 6 months. 

(b) 15-day notice. Except for civil 

money penalties, for all sanctions 

specified in § 488.820 imposed when 

there is no immediate jeopardy, notice 

must be given at least 15 calendar days 

before the effective date of the 

enforcement action. The requirements of 

the notice are set forth in § 488.810(f) of 

this part. 

(c) Not meeting criteria for 

continuation of payment. If an HHA 

does not meet the criteria for 

continuation of payment under 

§ 488.860(a) of this part, CMS will 

terminate the HHA’s provider agreement 

in accordance with § 488.865 of this 

part. 

(d) Termination time frame when 

there is no immediate jeopardy. CMS 

terminates an HHA within 6 months of 

the last day of the survey, if the HHA 

is not in compliance with the conditions 

of participation, and the terms of the 

plan of correction have not been met. 

(e) Transfer of care. An HHA, if its 

provider agreement terminated, is 

responsible for providing information, 

assistance, and arrangements necessary 

for the proper and safe transfer of 

patients to another local HHA within 30 

days of termination. The State must 

assist the HHA in the safe and orderly 

transfer of care and services for the 

patients to another local HHA. 

§ 488.835 Temporary management. 

(a) Application. (1) CMS may impose 

temporary management of an HHA if it 

determines that an HHA has a 

condition-level noncompliance and 

CMS determines that management 

limitations or the deficiencies are likely 

to impair the HHA’s ability to correct 

deficiencies and return the HHA to full 

compliance with the conditions of 

participation within the timeframe 

required. 

(2) [Reserved] 

(b) Procedures. (1) CMS notifies the 

HHA that a temporary manager is being 

appointed. 

(2) If the HHA fails to relinquish 

authority and control to the temporary 

manager, CMS terminates the HHA’s 

provider agreement in accordance with 

§ 488.865. 

(c) Duration and effect of sanction. 

Temporary management continues 

until— 

(1) CMS determines that the HHA has 

achieved substantial compliance and 

has the management capability to 

ensure continued compliance with all 

the conditions of participation; 

(2) CMS terminates the provider 

agreement; or 

(3) The HHA reassumes management 

control without CMS approval. In such 

case, CMS initiates termination of the 

provider agreement and may impose 

additional sanctions. 

(4) Temporary management will not 

exceed a period of 6 months from the 

date of the survey identifying 

noncompliance. 

(d) Payment of salary. (1) The 

temporary manager’s salary— 

(i) Is paid directly by the HHA while 

the temporary manager is assigned to 

that HHA; and 

(ii) Must be at least equivalent to the 

sum of the following: 

(A) The prevailing salary paid by 

providers for positions of this type in 

what the State considers to be the 

HHA’s geographic area (prevailing 

salary based on the Geographic Guide 

by the Department of Labor (BLS Wage 

Data by Area and Occupation); 

(B) Any additional costs that would 

have reasonably been incurred by the 

HHA if such person had been in an 

employment relationship; and 

(C) Any other costs incurred by such 

a person in furnishing services under 

such an arrangement or as otherwise set 

by the State. 

(2) An HHA’s failure to pay the salary 

and other costs of the temporary 

manager described in paragraph (d)(1) of 

this section is considered a failure to 

relinquish authority and control to 

temporary management. 

§ 488.840 Suspension of payment for all 

new patient admissions. 

(a) Application. (1) CMS may suspend 

payment for all new admissions if an 

HHA is found to have condition-level 

deficiencies, regardless of whether those 

deficiencies pose immediate jeopardy. 

(2) CMS will consider this sanction 

for any deficiency related to poor 

patient care outcomes, regardless of 

whether the deficiency poses immediate 

jeopardy. 

(b) Procedures. (1) Notices. (i) Before 

suspending payments for new 

admissions, CMS provides the HHA 

notice of the suspension of payment for 

all new admissions as set forth in 

§ 488.810(f). The CMS notice of 

suspension will include the nature of 

the noncompliance; the effective date of 

the sanction; and the right to appeal the 

determination leading to the sanction. 

(ii) The HHA may not charge a newly 

admitted HHA patient who is a 

Medicare beneficiary for services for 

which Medicare payment is suspended 

unless the HHA can show that, before 

initiating care, it gave the patient or his 

or her representative oral and written 

notice of the suspension of Medicare 

payment in a language and manner that 

the beneficiary or representative can 

understand. 

(2) Restriction. (i) Suspension of 

payment for all new admissions 

sanction may be imposed anytime an 

HHA is found to be out of substantial 

compliance. 

(ii) Suspension of payment for 

patients with new admissions will 

remain in place until CMS determines 

that the HHA has achieved substantial 

compliance or is involuntarily 

terminated with the conditions of 

participation, as determined by CMS. 

(3) Resumption of payments. 

Payments to the HHA resume 

prospectively on the date that CMS 

determines that the HHA has achieved 

substantial compliance with the 

conditions of participation. 

(c) Duration and effect of sanction. 

This sanction ends when— 

(1) CMS determines that the HHA is 

in substantial compliance with all of the 

conditions of participation; or 

(2) When the HHA is terminated or 

CMS determines that the HHA is not in 

compliance with the conditions of 

participation at a maximum of 6 months 

from the date noncompliance was 

determined. 

§ 488.845 Civil money penalties. 

(a) Application. (1) CMS may impose 

a civil money penalty against an HHA 

for either the number of days the HHA 

is not in compliance with one or more 

conditions of participation or for each 

instance that an HHA is not in 

compliance, regardless of whether the 

HHA’s deficiencies pose immediate 

jeopardy. 

(2) CMS may impose a civil money 

penalty for the number of days of 

immediate jeopardy. 

(3) A per-day and a per-instance CMP 

may not be imposed simultaneously for 

the same deficiency. 


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(b) Amount of penalty. (1) Factors 

considered. CMS takes into account the 

following factors in determining the 

amount of the penalty: 

(i) The factors set out at § 488.815. 

(ii) The size of an agency and its 

resources. 

(iii) Accurate and credible resources, 

such as PECOS, Medicare cost reports 

and Medicare/Medicaid claims 

information that provide information on 

the operation and resources of the HHA. 

(iv) Evidence that the HHA has a 

built-in, self-regulating quality 

assessment and performance 

improvement system to provide proper 

care, prevent poor outcomes, control 

patient injury, enhance quality, promote 

safety, and avoid risks to patients on a 

sustainable basis that indicates the 

ability to meet the conditions of 

participation and to ensure patient 

health and safety. 

(2) Adjustments to penalties. Based on 

revisit survey findings, adjustments to 

penalties may be made after a review of 

the provider’s attempted correction of 

deficiencies. 

(i) CMS may increase a CMP in 

increments based on a HHA’s inability 

or failure to correct deficiencies, the 

presence of a system-wide failure in the 

provision of quality care, or a 

determination of immediate jeopardy 

with actual harm versus immediate 

jeopardy with potential for harm. 

(ii) CMS may also decrease a CMP in 

increments to the extent that it finds, 

pursuant to a revisit, that substantial 

and sustainable improvements have 

been implemented even though the 

HHA is not yet in full compliance with 

the conditions of participation. 

(iii) No penalty assessment shall 

exceed $10,000 for each day of 

noncompliance. 

(3) Upper range of penalty. Penalties 

in the upper range of $8,500 to $10,000 

per day of noncompliance are imposed 

for a condition-level deficiency that is 

immediate jeopardy. The penalty in this 

range will continue until compliance 

can be determined based on a revisit 

survey. 

(i) $10,000 per day for a deficiency or 

deficiencies that are immediate jeopardy 

and that result in actual harm. 

(ii) $9,000 per day for a deficiency or 

deficiencies that are immediate jeopardy 

and that result in a potential for harm. 

(iii) $8,500 per day for an isolated 

incident of noncompliance in violation 

of established HHA policy. 

(4) Middle range of penalty. Penalties 

in the range of $1,500–$8,500 per day of 

noncompliance are imposed for a repeat 

and/or condition-level deficiency that 

does not constitute immediate jeopardy, 

but is directly related to poor quality 

patient care outcomes. 

(5) Lower range of penalty. Penalties 

in this range of $500–$4,000 are 

imposed for a repeat and/or conditionlevel deficiency that does not constitute 

immediate jeopardy and that are related 

predominately to structure or processoriented conditions (such as OASIS 

submission requirements) rather than 

directly related to patient care 

outcomes. 

(6) Per instance penalty. Penalty 

imposed per instance of noncompliance 

may be assessed for one or more 

singular events of condition-level 

noncompliance that are identified and 

where the noncompliance was corrected 

during the onsite survey. When 

penalties are imposed for per instance of 

noncompliance, or more than one per 

instance of noncompliance, the 

penalties will be in the range of $1,000 

to $10,000 per instance, not to exceed 

$10,000 each day of noncompliance. 

(7) Decreased penalty amounts. If the 

immediate jeopardy situation is 

removed, but condition-level 

noncompliance continues, CMS will 

shift the penalty amount imposed per 

day from the upper range to the middle 

or lower range. An earnest effort to 

correct any systemic causes of 

deficiencies and sustain improvement 

must be evident. 

(8) Increased penalty amounts. (i) In 

accordance with paragraph (b)(2) of this 

section, CMS will increase the per day 

penalty amount for any condition-level 

deficiency or deficiencies which, after 

imposition of a lower-level penalty 

amount, become sufficiently serious to 

pose potential harm or immediate 

jeopardy. 

(ii) CMS increases the per day penalty 

amount for deficiencies that are not 

corrected and found again at the time of 

revisit survey(s) for which a lower-level 

penalty amount was previously 

imposed. 

(iii) CMS may impose a more severe 

amount of penalties for repeated 

noncompliance with the same 

condition-level deficiency or 

uncorrected deficiencies from a prior 

survey. 

(c) Procedures. (1) Notice of intent. 

CMS provides the HHA with written 

notice of the intent to impose a civil 

money penalty. The notice includes the 

amount of the CMP being imposed, the 

basis for such imposition and the 

proposed effective date of the sanction. 

(2) Appeals. (i) Appeals procedures. 

An HHA may request a hearing on the 

determination of the noncompliance 

that is the basis for imposition of the 

civil money penalty. The request must 

meet the requirements in § 498.40 of 

this chapter. 

(ii) Waiver of a hearing. An HHA may 

waive the right to a hearing, in writing, 

within 60 days from the date of the 

notice imposing the civil money 

penalty. If an HHA timely waives its 

right to a hearing, CMS reduces the 

penalty amount by 35 percent, and the 

amount is due within 15 days of the 

HHAs agreeing in writing to waive the 

hearing. If the HHA does not waive its 

right to a hearing in accordance to the 

procedures specified in this subsection, 

the civil money penalty is not reduced 

by 35 percent. 

(d) Accrual and duration of penalty. 

(1)(i) The per day civil money penalty 

may start accruing as early as the 

beginning of the last day of the survey 

that determines that the HHA was out 

of compliance, as determined by CMS. 

(ii) A civil money penalty for each per 

instance of noncompliance is imposed 

in a specific amount for that particular 

deficiency, with a maximum of $10,000 

per day per HHA. 

(2) A penalty that is imposed per day 

and per instance of noncompliance may 

not be imposed simultaneously. 

(3) Duration of per day penalty when 

there is immediate jeopardy. (i) In the 

case of noncompliance that poses 

immediate jeopardy, CMS must 

terminate the provider agreement within 

23 calendar days after the last day of the 

survey if the immediate jeopardy is not 

removed. 

(ii) A penalty imposed per day of 

noncompliance will stop accruing on 

the day the provider agreement is 

terminated or the HHA achieves 

substantial compliance, whichever 

occurs first. 

(4) Duration of penalty when there is 

no immediate jeopardy. (i) In the case of 

noncompliance that does not pose 

immediate jeopardy, the daily accrual of 

per day civil money penalties is 

imposed for the days of noncompliance 

prior to the notice specified in 

paragraph (c)(1) of this section and an 

additional period of no longer than 6 

months following the last day of the 

survey. 

(ii) If the HHA has not achieved 

compliance with the conditions of 

participation, CMS terminates the 

provider agreement. The accrual of civil 

money penalty stops on the day the 

HHA agreement is terminated or the 

HHA achieves substantial compliance, 

whichever is earlier. 

(e) Computation and notice of total 

penalty amount. (1) When a civil money 

penalty is imposed on a per day basis 

and the HHA achieves compliance with 

the conditions of participation as 

determined by a revisit survey, CMS 


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sends a final notice to the HHA 

containing all of the following 

information: 

(i) The amount of penalty assessed per 

day. 

(ii) The total number of days of 

noncompliance. 

(iii) The total amount due. 

(iv) The due date of the penalty. 

(v) The rate of interest to be assessed 

on any unpaid balance beginning on the 

due date, as provided in paragraph (f)(4) 

of this section. 

(2) When a civil money penalty is 

imposed for per instance of 

noncompliance, CMS sends a notice to 

the HHA containing all of the following 

information: 

(i) The amount of the penalty that was 

assessed. 

(ii) The total amount due. 

(iii) The due date of the penalty. 

(iv) The rate of interest to be assessed 

on any unpaid balance beginning on the 

due date, as provided in paragraph (f)(6) 

of this section. 

(3) In the case of an HHA for which 

the provider agreement has been 

involuntarily terminated and for which 

a civil money penalty was imposed on 

a per day basis, CMS sends this penalty 

information after one of the following 

actions has occurred: 

(i) Final administrative decision is 

made. 

(ii) The HHA has waived its right to 

a hearing in accordance with paragraph 

(c)(2)(ii) of this section. 

(iii) Time for requesting a hearing has 

expired and CMS has not received a 

hearing request from the HHA. 

(f) Due date for payment of penalty. 

A penalty is due and payable 15 days 

from notice of the final administrative 

decision. 

(1) Payments are due for all civil 

money penalties within 15 days: 

(i) After a final administrative 

decision when the HHA achieves 

substantial compliance before the final 

decision or the effective date of 

termination before final decision, 

(ii) After the time to appeal has 

expired and the HHA does not appeal or 

fails to timely appeal the initial 

determination, 

(iii) After CMS receives a written 

request from the HHA requesting to 

waive its right to appeal the 

determinations that led to the 

imposition of a sanction, 

(iv) After substantial compliance is 

achieved, or 

(v) After the effective date of 

termination. 

(2) A request for hearing does not 

delay the imposition of any penalty; it 

only potentially delays the collection of 

the final penalty amount. 

(3) If an HHA waives its right to a 

hearing according to paragraph (c)(2)(ii) 

of this section, CMS will apply a 35 

percent reduction to the CMP amount 

when: 

(i) The HHA achieved compliance 

with the conditions of participation 

before CMS received the written waiver 

of hearing; or 

(ii) The effective date of termination 

occurs before CMS received the written 

waiver of hearing. 

(4) The period of noncompliance may 

not extend beyond 6 months from the 

last day of the survey. 

(5) The amount of the penalty, when 

determined, may be deducted (offset) 

from any sum then or later owing by 

CMS or State Medicaid to the HHA. 

(6) Interest is assessed and accrues on 

the unpaid balance of a penalty, 

beginning on the due date. Interest is 

computed at the rate specified in 

§ 405.378(d) of this chapter. 

(g) Penalties collected by CMS. (1) 

Disbursement of CMPs. Civil money 

penalties and any corresponding 

interest collected by CMS from 

Medicare and Medicaid participating 

HHAs are disbursed in proportion to 

average dollars spent by Medicare and 

Medicaid at the national level based on 

MSIS and HHA PPS data for a three year 

fiscal period. 

(i) Based on expenditures for the FY 

2007–2009 period, the initial 

proportions to be disbursed are 63 

percent returned to the U.S. Treasury 

and 37 percent returned to the State 

Medicaid agency. 

(ii) Beginning one year after the 

effective date of this section, CMS shall 

annually update these proportions 

based on the most recent 3-year fiscal 

period, prior to the year in which the 

CMP is imposed, for which CMS 

determines that the relevant data are 

essentially complete. 

(iii) The portion corresponding to the 

Medicare payments is returned to the 

U.S. Department of Treasury as 

miscellaneous receipts. 

(iv) The portion corresponding to the 

Medicaid payments is returned to the 

State Medicaid agency. 

(2) Penalties may not be used for 

Survey and Certification operations nor 

as the State’s Medicaid non-Federal 

medical assistance or administrative 

match. 

§ 488.850 Directed plan of correction. 

(a) Application. CMS may impose a 

directed plan of correction when an 

HHA: 

(1) Has one or more deficiencies that 

warrant directing the HHA to take 

specific actions; or 

(2) Fails to submit an acceptable plan 

of correction. 

(b) Procedures. (1) Before imposing 

this sanction, CMS provides the HHA 

notice of the impending sanction. 

(2) CMS or the temporary manager 

(with CMS approval) may direct the 

HHA to take corrective action to achieve 

specific outcomes within specific 

timeframes. 

(c) Duration and effect of sanction. If 

the HHA fails to achieve compliance 

with the conditions of participation 

within the timeframes specified in the 

directed plan of correction, CMS: 

(1) May impose one or more other 

sanctions set forth in § 488.820; or 

(2) Terminates the provider 

agreement. 

§ 488.855 Directed in-service training. 

(a) Application. CMS may require the 

staff of an HHA to attend in-service 

training program(s) if CMS determines 

that— 

(1) The HHA has deficiencies that 

indicate noncompliance; 

(2) Education is likely to correct the 

deficiencies; and 

(3) The programs are conducted by 

established centers of health education 

and training or consultants with 

background in education and training 

with Medicare Home Health Providers, 

or as deemed acceptable by CMS and/ 

or the State (by review of a copy of 

curriculum vitas and/or resumes/ 

references to determine the educator’s 

qualifications). 

(b) Procedures. (1) Action following 

training. After the HHA staff has 

received in-service training, if the HHA 

has not achieved compliance, CMS may 

impose one or more other sanctions 

specified in § 488.820. 

(2) Payment. The HHA pays for the 

directed in-service training for its staff. 

§ 488.860 Continuation of payments to an 

HHA with deficiencies. 

(a) Continued payments. CMS may 

continue payments to an HHA with 

condition-level deficiencies that do not 

constitute immediate jeopardy for up to 

6 months from the last day of the survey 

if the criteria in paragraph (a)(1) of this 

section are met. 

(1) Criteria. CMS may continue 

payments to an HHA not in compliance 

with the conditions of participation for 

the period specified in paragraph (a) of 

this section if all of the following 

criteria are met: 

(i) The HHA has been imposed an 

alternative sanction or sanctions and 

termination has not been imposed. 

(ii) The HHA has submitted a plan of 

correction approved by CMS. 

(iii) The HHA agrees to repay the 

Federal government payments received 

under this provision if corrective action 


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is not taken in accordance with the 

approved plan and timetable for 

corrective action. 

(2) CMS may terminate the HHA’s 

provider agreement any time if the 

criteria in paragraph (a)(1) of this 

section are not met. 

(b) Cessation of payments for new 

admissions. If termination is imposed, 

either on its own or in addition to an 

alternative sanction or sanctions, or if 

any of the criteria set forth in paragraph 

(a)(1) of this section are not met, the 

HHA will receive no Medicare 

payments, as applicable, for new 

admissions following the last day of the 

survey. 

(c) Failure to achieve compliance with 

the conditions of participation. If the 

HHA does not achieve compliance with 

the conditions of participation by the 

end of the period specified in paragraph 

(a) of this section, CMS will terminate 

the provider agreement of the HHA in 

accordance with § 488.865. 

§ 488.865 Termination of provider 

agreement. 

(a) Effect of termination by CMS. 

Termination of the provider agreement 

ends— 

(1) Payment to the HHA; and 

(2) Any alternative sanction(s). 

(b) Basis for termination. CMS 

terminates an HHA’s provider 

agreement under any one of the 

following conditions— 

(1) The HHA is not in compliance 

with the conditions of participation. 

(2) The HHA fails to submit an 

acceptable plan of correction within the 

timeframe specified by CMS. 

(3) The HHA fails to relinquish 

control to the temporary manager, if that 

sanction is imposed by CMS. 

(4) The HHA fails to meet the 

eligibility criteria for continuation of 

payment as set forth in § 488.860(a)(1). 

(c) Notice. CMS notifies the HHA and 

the public of the termination, in 

accordance with procedures set forth in 

§ 489.53 of this chapter. 

(d) Procedures for termination. CMS 

terminates the provider agreement in 

accordance with procedures set forth in 

§ 489.53 of this chapter. 

(e) Appeal. An HHA may appeal the 

termination of its provider agreement by 

CMS in accordance with part 498 of this 

chapter. 

PART 489—PROVIDER AGREEMENTS 

AND SUPPLIER APPROVAL 

■ 14. The authority citation continues to 

read as follows: 

Authority: Secs. 1102 and 1871 of the Act 

(42 U.S.C. 1302 and 1395hh). 

■ 15. Section 489.53 is amended by 

adding paragraphs (a)(17) and (d)(2)(iii) 

to read as follows: 

§ 489.53 Termination by CMS. 

(a) * * * 

(17) In the case of an HHA, it failed 

to correct any deficiencies within the 

required time frame. 

* * * * * 

(d) * * * 

(2) * * * 

(iii) Home health agencies (HHAs). 

For an HHA with deficiencies that pose 

immediate jeopardy to the health and 

safety of patients, CMS gives notice to 

the HHA at least 2 days before the 

effective date of termination of the 

provider agreement. 

* * * * * 

PART 498–APPEALS PROCEDURES 

FOR DETERMINATIONS THAT AFFECT 

PARTICIPATION IN THE MEDICARE 

PROGRAM AND FOR 

DETERMINATIONS THAT AFFECT THE 

PARTICIPATION OF ICFS/MR AND 

CERTAIN NFs IN THE MEDICAID 

PROGRAM 

■ 16. The authority citation for part 498 

continues to read as follows: 

Authority: Secs. 1102 and 1871 the Act (42 

U.S.C. 1302 and 1395hh). 

■ 17. Section 498.3 is amended by 

revising paragraphs (b)(13), (b)(14) 

introductory text, (b)(14)(i), and (d)(10) 

to read as follows: 

§ 498.3 Scope and applicability. 

* * * * * 

(b) * * * 

(13) Except as provided at paragraph 

(d)(12) of this section for SNFs, NFs, 

and HHAs the finding of noncompliance 

leading to the imposition of 

enforcement actions specified in 

§ 488.406 or § 488.740 of this chapter, 

but not the determination as to which 

sanction was imposed. The scope of 

review on the imposition of a civil 

money penalty is specified in 

§ 488.438(e) of this chapter. 

(14) The level of noncompliance 

found by CMS in a SNF, NF, or HHA 

but only if a successful challenge on this 

issue would affect— 

(i) The range of civil money penalty 

amounts that CMS could collect (for 

SNFs or NFs, the scope of review during 

a hearing on imposition of a civil money 

penalty is set forth in § 488.438(e) of 

this chapter); or 

* * * * * 

(d) * * * 

(10) For a SNF, NF, or HHA— 

(i) The finding that the provider’s 

deficiencies pose immediate jeopardy to 

the health or safety of the residents or 

patients; 

(ii) Except as provided in paragraph 

(b)(13) of this section, a determination 

by CMS as to the provider’s level of 

noncompliance; and 

(iii) For SNFs and NFs, the imposition 

of State monitoring. 

* * * * * 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: October 24, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: October 25, 2012. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2012–26904 Filed 11–7–12; 8:45 am] 

BILLING CODE 4120–01–P 


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