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[Federal Register Volume 76, Number 150 (Thursday, August 4, 2011)]
[Rules and Regulations]
[Pages 47302-47352]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19488]

[[Page 47301]]

Vol. 76

Thursday,

No. 150

August 4, 2011

Part II

Department of Health and Human Services

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 Centers for Medicare & Medicaid Services

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42 CFR Part 418

 Medicare Program; Hospice Wage Index for Fiscal Year 2012; Final Rule

Federal Register / Vol. 76 , No. 150 / Thursday, August 4, 2011 / 
Rules and Regulations

[[Page 47302]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 418

[CMS-1355-F]
RIN 0938-AQ31

Medicare Program; Hospice Wage Index for Fiscal Year 2012

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

ACTION: Final rule.

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SUMMARY: This final rule will set forth the hospice wage index for 
fiscal year (FY) 2012 and continue the phase-out of the wage index 
budget neutrality adjustment factor (BNAF), with an additional 15 
percent BNAF reduction, for a total BNAF reduction in FY 2012 of 40 
percent. The BNAF phase-out will continue with successive 15 percent 
reductions from FY 2013 through FY 2016. This final rule will change 
the hospice aggregate cap calculation methodology. This final rule will 
also revise the hospice requirement for a face-to-face encounter for 
recertification of a patient's terminal illness. Finally, this final 
rule will begin implementation of a hospice quality reporting program.

DATES: Effective Date: These regulations are effective on October 1, 
2011.

FOR FURTHER INFORMATION CONTACT:

Robin Dowell, (410) 786-0060 for questions regarding quality reporting 
for hospices and collection of information requirements. Anjana Patel, 
(410) 786-2120 for questions regarding hospice wage index and hospice 
face-to-face requirement.
Katie Lucas, (410) 786-7723 for questions regarding all other sections.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. General
    1. Hospice Care
    2. Medicare Payment for Hospice Care
    B. Hospice Wage Index
    1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified, Hospital 
Wage Index)
    2. Changes to Core-Based Statistical Area (CBSA) Designations
    3. Definition of Rural and Urban Areas
    4. Areas Without Hospital Wage Data
    5. CBSA Nomenclature Changes
    6. Wage Data for Multi-Campus Hospitals
    7. Hospice Payment Rates
II. Provisions of the Proposed Rule and Analysis of and Response to 
Public Comments
    A. FY 2012 Hospice Wage Index
    1. Background
    2. Areas without Hospital Wage Data
    3. FY 2012 Wage Index with an Additional 15 Percent Reduced 
Budget Neutrality Adjustment Factor (BNAF)
    4. Effects of Phasing Out the BNAF
    B. Aggregate Cap Calculation Methodology
    1. Cap Determinations for Cap Years Ending on or Before October 
31, 2011
    2. Cap Determinations for Cap Years Ending on or After October 
31, 2012
    3. Patient-by-Patient Proportional Methodology
    4. Streamlined Methodology
    5. Changing Methodologies
    6. Other Issues
    C. Hospice Face-to-Face Requirement
    D. Technical Proposals and Clarification
    1. Hospice Local Coverage Determinations
    2. Definition of Hospice Employee
    3. Timeframe for Face-to-Face Encounters
    4. Hospice Aide and Homemaker Services
    E. Quality Reporting for Hospices
    1. Background and Statutory Authority
    2. Quality Measures for Hospice Quality Reporting Program for 
Payment Year FY 2014
    a. Considerations in the Selection of the Proposed Quality 
Measures
    b. Proposed Quality Measures for the Quality Reporting Program 
for Hospices
    c. Proposed Timeline for Data Collection Under the Quality 
Reporting Program for Hospices
    d. Data Submission Requirements
    3. Public Availability of Data Submitted
    4. Additional Measures Under Consideration
III. Provisions of the Final Regulations
IV. Updates on Issues Not Proposed for FY 2012 Rulemaking
    A. Update on Hospice Payment Reform and Value Based Purchasing
    B. Update on the Redesigned Provider Statistical & Reimbursement 
Report
    (PS&R)
V. Collection of Information Requirements
    A. Structural Measure: Participation in Quality Assessment 
Performance Improvement Program That Includes at Least Three 
Indicators Related to Patient Care
    B. Outcome Measure: NQF Measure 0209, Percentage of 
Patients Who Were Uncomfortable Because of Pain on Admission to 
Hospice Whose Pain Was Brought Under Control Within 48 Hours
VI. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    4. Detailed Economic Analysis
    a. Effects on Hospices
    b. Hospice Size
    c. Geographic Location
    d. Type of Ownership
    e. Hospice Base
    f. Effects on Other Providers
    g. Effects on the Medicare and Medicaid Programs
    h. Accounting Statement
    i. Conclusion
    B. Regulatory Flexibility Act Analysis
    C. Unfunded Mandates Reform Act Analysis
VII. Federalism Analysis
Addendum A: FY 2012 Wage Index for Urban Areas
Addendum B: FY 2012 Wage Index for Rural Areas

I. Background

A. General

1. Hospice Care
    Hospice care is an approach to treatment that recognizes that the 
impending death of an individual warrants a change in the focus from 
curative to palliative care, for relief of pain and for symptom 
management. The goal of hospice care is to help terminally ill 
individuals continue life with minimal disruption to normal activities 
while remaining primarily in the home environment. A hospice uses an 
interdisciplinary approach to deliver medical, nursing, social, 
psychological, emotional, and spiritual services through use of a broad 
spectrum of professional and other caregivers, with the goal of making 
the individual as physically and emotionally comfortable as possible. 
Counseling services and inpatient respite services are available to the 
family of the hospice patient. Hospice programs consider both the 
patient and the family as a unit of care.
    Section 1861(dd) of the Social Security Act (the Act) provides for 
coverage of hospice care for terminally ill Medicare beneficiaries who 
elect to receive care from a participating hospice. Section 1814(i) of 
the Act provides payment for Medicare participating hospices.
2. Medicare Payment for Hospice Care
    Sections 1812(d), 1813(a)(4), 1814(a)(7), 1814(i) and 1861(dd) of 
the Act, and our regulations at 42 CFR part 418, establish eligibility 
requirements, payment standards and procedures, define covered 
services, and delineate the conditions a hospice must meet to be 
approved for participation in the Medicare program. Part 418 subpart G 
provides for payment in one of four prospectively-determined rate 
categories (routine home care, continuous home care, inpatient respite 
care, and general inpatient care) to hospices, based on each day a 
qualified Medicare beneficiary is under a hospice election.

B. Hospice Wage Index

    The hospice wage index is used to adjust payment rates for hospice 
agencies under the Medicare program to reflect local differences in 
area wage levels. Our regulations at Sec.  418.306(c) require each 
hospice's labor market to be established using the most current 
hospital wage data available, including

[[Page 47303]]

any changes by the Office of Management and Budget (OMB) to the 
Metropolitan Statistical Areas (MSAs) definitions. OMB revised the MSA 
definitions beginning in 2003 with new designations called the Core 
Based Statistical Areas (CBSAs). For the purposes of the hospice 
benefit, the term ``MSA-based'' refers to wage index values and 
designations based on the previous MSA designations before 2003. 
Conversely, the term ``CBSA-based'' refers to wage index values and 
designations based on the OMB revised MSA designations in 2003, which 
now include CBSAs. In the August 11, 2004 Inpatient Prospective Payment 
System (IPPS) final rule (69 FR 48916, 49026), revised labor market 
area definitions were adopted at Sec.  412.64(b), which were effective 
October 1, 2004 for acute care hospitals. We also revised the labor 
market areas for hospices using the new OMB standards that included 
CBSAs. In the FY 2006 hospice wage index final rule (70 FR 45130), we 
implemented a 1-year transition policy using a 50/50 blend of the CBSA-
based wage index values and the Metropolitan Statistical Area (MSA)-
based wage index values for FY 2006. The one-year transition policy 
ended on September 30, 2006. For fiscal years 2007 and beyond, we have 
used CBSAs exclusively to calculate wage index values.
    The original hospice wage index was based on the 1981 Bureau of 
Labor Statistics hospital data and had not been updated since 1983. In 
1994, because of disparity in wages from one geographical location to 
another, a committee was formulated to negotiate a wage index 
methodology that could be accepted by the industry and the government. 
This committee, functioning under a process established by the 
Negotiated Rulemaking Act of 1990, comprised representatives from 
national hospice associations; rural, urban, large and small hospices, 
and multi-site hospices; consumer groups; and a government 
representative. On April 13, 1995, the Hospice Wage Index Negotiated 
Rulemaking Committee (the Committee) signed an agreement for the 
methodology to be used for updating the hospice wage index.
    In the August 8, 1997 Federal Register (62 FR 42860), we published 
a final rule implementing a new methodology for calculating the hospice 
wage index based on the recommendations of the negotiated rulemaking 
committee. The Committee's statement was included in the appendix of 
that final rule (62 FR 42883).
    The reduction in overall Medicare payments if a new wage index were 
adopted was noted in the November 29, 1995 notice transmitting the 
recommendations of the Committee (60 FR 61264). The Committee also 
decided that for each year in updating the hospice wage index, 
aggregate Medicare payments to hospices would remain budget neutral to 
payments as if the 1983 wage index had been used.
    As suggested by the Committee, ``budget neutrality'' would mean 
that, in a given year, estimated aggregate payments for Medicare 
hospice services using the updated hospice values would equal estimated 
payments that would have been made for these services if the 1983 
hospice wage index values had remained in effect. Although payments to 
individual hospice programs would change each year, the total payments 
each year to hospices would not be affected by using the updated 
hospice wage index because total payments would be budget neutral as if 
the 1983 wage index had been used. To implement this policy, a Budget 
Neutrality Adjustment Factor (BNAF) would be computed and applied 
annually to the pre-floor, pre-reclassified hospital wage index when 
deriving the hospice wage index.
    The BNAF is calculated by computing estimated payments using the 
most recent, completed year of hospice claims data. The units (days or 
hours) from those claims are multiplied by the updated hospice payment 
rates to calculate estimated payments. For the FY 2011 Hospice Wage 
Index Notice with Comment Period, that meant estimating payments for FY 
2011 using FY 2009 hospice claims data, and applying the FY 2011 
hospice payment rates (updating the FY 2010 rates by the FY 2011 
inpatient hospital market basket update). The FY 2011 hospice wage 
index values are then applied to the labor portion of the payment rates 
only. The procedure is repeated using the same claims data and payment 
rates, but using the 1983 Bureau of Labor Statistics (BLS)-based wage 
index instead of the updated raw pre-floor, pre-reclassified hospital 
wage index (note that both wage indices include their respective floor 
adjustments). The total payments are then compared, and the adjustment 
required to make total payments equal is computed; that adjustment 
factor is the BNAF.
    The FY 2010 Hospice Wage Index Final Rule (74 FR 39384) finalized a 
provision for a 7-year phase-out of the BNAF, which is applied to the 
wage index values. The BNAF was reduced by 10 percent in FY 2010, an 
additional 15 percent in FY 2011, and will be reduced by an additional 
15 percent in each of the next 5 years, for complete phase out in 2016.
    The hospice wage index is updated annually. Our most recent annual 
hospice wage index Notice with Comment Period, published in the Federal 
Register (75 FR 42944) on July 22, 2010, set forth updates to the 
hospice wage index for FY 2011. As noted previously, that update 
included the second year of a 7-year phase-out of the BNAF, which was 
applied to the wage index values. The BNAF was reduced by 10 percent in 
FY 2010 and by additional 15 percent in 2011, for a total FY 2011 
reduction of 25 percent.
1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified Hospital Wage 
Index)
    As described in the August 8, 1997 hospice wage index final rule 
(62 FR 42860), the pre-floor and pre-reclassified hospital wage index 
is used as the raw wage index for the hospice benefit. These raw wage 
index values are then subject to either a budget neutrality adjustment 
or application of the hospice floor to compute the hospice wage index 
used to determine payments to hospices.
    Pre-floor, pre-reclassified hospital wage index values of 0.8 or 
greater are currently adjusted by a reduced BNAF. As noted above, for 
FY 2011, the BNAF was reduced by a cumulative total of 25 percent. Pre-
floor, pre-reclassified hospital wage index values below 0.8 are 
adjusted by the greater of: (1) The hospice BNAF, reduced by a total of 
25 percent for FY 2011; or (2) the hospice floor (which is a 15 percent 
increase) subject to a maximum wage index value of 0.8. For example, if 
in FY 2011, County A had a pre-floor, pre-reclassified hospital wage 
index (raw wage index) value of 0.3994, we would perform the following 
calculations using the budget-neutrality factor (which for this example 
is an unreduced BNAF of 0.060562, less 25 percent, or 0.045422) and the 
hospice floor to determine County A's hospice wage index:
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the 25 percent reduced BNAF: (0.3994 x 1.045422 = 
0.4175).
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the hospice floor: (0.3994 x 1.15 = 0.4593).
    Based on these calculations, County A's hospice wage index would be 
0.4593.
    The BNAF has been computed and applied annually, in full or in 
reduced form, to the labor portion of the hospice payment. Currently, 
the labor portion of the payment rates is as follows: for Routine Home 
Care, 68.71 percent; for Continuous Home Care, 68.71 percent; for 
General Inpatient Care, 64.01

[[Page 47304]]

percent; and for Respite Care, 54.13 percent. The non-labor portion is 
equal to 100 percent minus the labor portion for each level of care. 
Therefore the non-labor portion of the payment rates is as follows: for 
Routine Home Care, 31.29 percent; for Continuous Home Care, 31.29 
percent; for General Inpatient Care, 35.99 percent; and for Respite 
Care, 45.87 percent.
2. Changes to Core Based Statistical Area (CBSA) Designations
    The annual update to the hospice wage index is published in the 
Federal Register and is based on the most current available hospital 
wage data, as well as any changes by the OMB to the definitions of 
MSAs, which now include CBSA designations. The August 4, 2005 final 
rule (70 FR 45130) set forth the adoption of the changes discussed in 
the OMB Bulletin No. 03-04 (June 6, 2003), which announced revised 
definitions for Micropolitan Statistical Areas and the creation of MSAs 
and Combined Statistical Areas. In adopting the OMB CBSA geographic 
designations, we provided for a 1-year transition with a blended 
hospice wage index for all hospices for FY 2006. For FY 2006, the 
hospice wage index consisted of a blend of 50 percent of the FY 2006 
MSA-based hospice wage index and 50 percent of the FY 2006 CBSA based 
hospice wage index. Subsequent fiscal years have used the full CBSA-
based hospice wage index.
3. Definition of Rural and Urban Areas
    Each hospice's labor market is determined based on definitions of 
MSAs issued by OMB. In general, an urban area is defined as an MSA or 
New England County Metropolitan Area (NECMA), as defined by OMB. Under 
Sec.  412.64(b)(1)(ii)(C), a rural area is defined as any area outside 
of the urban area. The urban and rural area geographic classifications 
are defined in Sec.  412.64(b)(1)(ii)(A) through (C), and have been 
used for the Medicare hospice benefit since implementation.
    When the raw pre-floor, pre-reclassified hospital wage index was 
adopted for use in deriving the hospice wage index, it was decided not 
to take into account Inpatient Prospective Payment System (IPPS) 
geographic reclassifications. This policy of following OMB designations 
of rural or urban, rather than considering some Counties to be 
``deemed'' urban, is consistent with our policy of not taking into 
account IPPS geographic reclassifications in determining payments under 
the hospice wage index.
4. Areas Without Hospital Wage Data
    When adopting OMB's new labor market designations in FY 2006, we 
identified some geographic areas where there were no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the hospice wage index. Beginning in FY 2006, we adopted a policy to 
use the FY 2005 pre-floor, pre-reclassified hospital wage index value 
for rural areas when no hospital wage data were available. We also 
adopted the policy that for urban labor markets without a hospital from 
which a hospital wage index data could be derived, all of the CBSAs 
within the State would be used to calculate a statewide urban average 
pre-floor, pre-reclassified hospital wage index value to use as a 
reasonable proxy for these areas. Consequently, in subsequent fiscal 
years, we applied the average pre-floor, pre-reclassified hospital wage 
index data from all urban areas in that state, to urban areas without a 
hospital. In FY 2011, the only such CBSA was 25980, Hinesville-Fort 
Stewart, Georgia.
    Under the CBSA labor market areas, there are no hospitals in rural 
locations in Massachusetts and Puerto Rico. Since there was no rural 
proxy for more recent rural data within those areas, in the FY 2006 
hospice wage index proposed rule (70 FR 22394, 22398), we proposed 
applying the FY 2005 pre-floor, pre-reclassified hospital wage index 
value to rural areas where no hospital wage data were available. In the 
FY 2006 final rule and in the FY 2007 update notice, we applied the FY 
2005 pre-floor, pre-reclassified hospital wage index data for areas 
lacking hospital wage data in both FY 2006 and FY 2007 for rural 
Massachusetts and rural Puerto Rico.
    In the FY 2008 final rule (72 FR 50214, 50217) we considered 
alternatives to our methodology to update the pre-floor, pre-
reclassified hospital wage index for rural areas without hospital wage 
data. We indicated that we believed that the best imputed proxy for 
rural areas, would: (1) Use pre-floor, pre-reclassified hospital data; 
(2) use the most local data available to impute a rural pre-floor, pre-
reclassified hospital wage index; (3) be easy to evaluate; and, (4) be 
easy to update from year to year.
    Therefore, in FY 2008 through FY 2011, in cases where there was a 
rural area without rural hospital wage data, we used the average pre-
floor, pre-reclassified hospital wage index data from all contiguous 
CBSAs to represent a reasonable proxy for the rural area. This approach 
does not use rural data; however, the approach, which uses pre-floor, 
pre-reclassified hospital wage data, is easy to evaluate, is easy to 
update from year to year, and uses the most local data available. In 
the FY 2008 rule (72 FR at 50217), we noted that in determining an 
imputed rural pre-floor, pre-reclassified hospital wage index, we 
interpret the term ``contiguous'' to mean sharing a border. For 
example, in the case of Massachusetts, the entire rural area consists 
of Dukes and Nantucket counties. We determined that the borders of 
Dukes and Nantucket counties are contiguous with Barnstable and Bristol 
counties. Under the adopted methodology, the pre-floor, pre-
reclassified hospital wage index values for the counties of Barnstable 
(CBSA 12700, Barnstable Town, MA) and Bristol (CBSA 39300, Providence-
New Bedford-Fall River, RI-MA) would be averaged resulting in an 
imputed pre-floor, pre-reclassified rural hospital wage index for FY 
2008. We noted in the FY 2008 final hospice wage index rule that while 
we believe that this policy could be readily applied to other rural 
areas that lack hospital wage data (possibly due to hospitals 
converting to a different provider type, such as a Critical Access 
Hospital, that does not submit the appropriate wage data), if a similar 
situation arose in the future, we would re-examine this policy.
    We also noted that we do not believe that this policy would be 
appropriate for Puerto Rico, as there are sufficient economic 
differences between hospitals in the United States and those in Puerto 
Rico, including the payment of hospitals in Puerto Rico using blended 
Federal/Commonwealth-specific rates. Therefore, we believe that a 
separate and distinct policy is necessary for Puerto Rico. Any 
alternative methodology for imputing a pre-floor, pre-reclassified 
hospital wage index for rural Puerto Rico would need to take into 
account the economic differences between hospitals in the United States 
and those in Puerto Rico. Our policy of imputing a rural pre-floor, 
pre-reclassified hospital wage index based on the pre-floor, pre-
reclassified hospital wage index (or indices) of CBSAs contiguous to 
the rural area in question does not recognize the unique circumstances 
of Puerto Rico. While we have not yet identified an alternative 
methodology for imputing a pre-floor, pre-reclassified hospital wage 
index for rural Puerto Rico, we will continue to evaluate the 
feasibility of using existing hospital wage data and, possibly, wage 
data from other sources. For FY 2008 through FY 2011, we have used the 
most recent pre-floor, pre-reclassified hospital wage index available 
for Puerto Rico, which is 0.4047.

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5. CBSA Nomenclature Changes
    The OMB regularly publishes a bulletin that updates the titles of 
certain CBSAs. In the FY 2008 Final Rule (72 FR 50218), we noted that 
the FY 2008 rule and all subsequent hospice wage index rules and 
notices would incorporate CBSA changes from the most recent OMB 
bulletins. The OMB bulletins may be accessed at http://www.whitehouse.gov/omb/bulletins/index.html.
6. Wage Data From Multi-Campus Hospitals
    Historically, under the Medicare hospice benefit, we have 
established hospice wage index values calculated from the raw pre-
floor, pre-reclassified hospital wage data (also called the IPPS wage 
index) without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. The wage adjustment 
established under the Medicare hospice benefit is based on the location 
where services are furnished without any reclassification.
    For FY 2011, the data collected from cost reports submitted by 
hospitals for cost reporting periods beginning during FY 2006 were used 
to compute the 2010 raw pre-floor, pre-reclassified hospital wage index 
data, without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. This 2010 raw pre-floor, 
pre-reclassified hospital wage index was used to derive the applicable 
wage index values for the hospice wage index because these data (FY 
2006) were the most recent complete cost data.
    Beginning in FY 2008, the IPPS apportioned the wage data for multi-
campus hospitals located in different labor market areas (CBSAs) to 
each CBSA where the campuses were located (see the FY 2008 IPPS final 
rule with comment period (72 FR 47317 through 47320)). We are 
continuing to use the raw pre-floor, pre-reclassified hospital wage 
data as a basis to determine the hospice wage index values because 
hospitals and hospices both compete in the same labor markets, and 
therefore, experience similar wage-related costs. We note that the use 
of raw pre-floor, pre-reclassified hospital (IPPS) wage data used to 
derive the FY 2012 hospice wage index values reflects the application 
of our policy to use those data to establish the hospice wage index. 
The FY 2012 hospice wage index values presented in this final rule were 
computed consistent with our raw pre-floor, pre-reclassified hospital 
(IPPS) wage index policy (that is, our historical policy of not taking 
into account IPPS geographic reclassifications in determining payments 
for hospice). As implemented in the August 8, 2008 FY 2009 Hospice Wage 
Index final rule, for the FY 2009 Medicare hospice benefit, the hospice 
wage index was computed from IPPS wage data (submitted by hospitals for 
cost reporting periods beginning in FY 2004 (as was the FY 2008 IPPS 
wage index)), which allocated salaries and hours to the campuses of two 
multi-campus hospitals with campuses that are located in different 
labor areas, one in Massachusetts and another in Illinois. Thus, in FY 
2009 and subsequent fiscal years, hospice wage index values for the 
following CBSAs have been affected by this policy: Boston-Quincy, MA 
(CBSA 14484), Providence-New Bedford-Falls River, RI-MA (CBSA 39300), 
Chicago-Naperville-Joliet, IL (CBSA 16974), and Lake County-Kenosha 
County, IL-WI (CBSA 29404).
7. Hospice Payment Rates
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended 
section 1814(i)(1)(C)(ii) of the Act to establish updates to hospice 
rates for FYs 1998 through 2002. Hospice rates were to be updated by a 
factor equal to the market basket index, minus 1 percentage point. 
Payment rates for FYs since 2002 have been updated according to section 
1814(i)(1)(C)(ii)(VII) of the Act, which states that the update to the 
payment rates for subsequent fiscal years will be the market basket 
percentage for the fiscal year. It has been longstanding practice to 
use the inpatient hospital market basket as a proxy for a hospice 
market basket.
    Historically, the rate update has been published through a separate 
administrative instruction issued annually in the summer to provide 
adequate time to implement system change requirements. Hospices 
determine their payments by applying the hospice wage index in this 
final rule to the labor portion of the published hospice rates. Section 
3401(g) of the Affordable Care Act of 2010 requires that, in FY 2013 
(and in subsequent fiscal years), the market basket percentage update 
under the hospice payment system as described in section 
1814(i)(1)(C)(ii)(VII) or section 1814(i)(1)(C)(iii) be annually 
reduced by changes in economy-wide productivity as set out at section 
1886(b)(3)(B)(xi)(II) of the Act. Additionally, section 3401(g) of the 
Affordable Care Act requires that in FY 2013 through FY 2019, the 
market basket percentage update under the hospice payment system be 
reduced by an additional 0.3 percentage point (although the potential 
reduction is subject to suspension under conditions set out under new 
section 1814(i)(1)(C)(v) of the Act). Congress also required, in 
section 3004(c) of the Affordable Care Act, that hospices begin 
submitting quality data, based on measures to be specified by the 
Secretary, for FY 2014 and subsequent fiscal years. Beginning in FY 
2014, hospices which fail to report quality data will have their market 
basket update reduced by 2 percentage points.

II. Provisions of the Proposed Rule and Analysis of and Response to 
Public Comments

A. FY 2012 Hospice Wage Index

1. Background
    As previously noted, the hospice final rule published in the 
Federal Register on December 16, 1983 (48 FR 56008) provided for 
adjustment to hospice payment rates to reflect differences in area wage 
levels. We apply the appropriate hospice wage index value to the labor 
portion of the hospice payment rates based on the geographic area where 
hospice care was furnished. As noted earlier, each hospice's labor 
market area is based on definitions of MSAs issued by the OMB. In the 
proposed rule, and in this final rule, we are using the pre-floor, pre-
reclassified hospital wage index, based solely on the CBSA 
designations, as the basis for determining wage index values for the FY 
2012 hospice wage index.
    As noted above, our hospice payment rules utilize the wage 
adjustment factors used by the Secretary for purposes of section 
1886(d)(3)(E) of the Act for hospital wage adjustments. In the proposed 
rule, and in this final rule, we are again using the pre-floor and pre-
reclassified hospital wage index data as the basis to determine the 
hospice wage index, which is then used to adjust the labor portion of 
the hospice payment rates based on the geographic area where the 
beneficiary receives hospice care. We believe the use of the pre-floor, 
pre-reclassified hospital wage index data, as a basis for the hospice 
wage index, results in the appropriate adjustment to the labor portion 
of the costs. For the FY 2012 update to the hospice wage index, we are 
continuing to use the most recent pre-floor, pre-reclassified hospital 
wage index available at the time of publication.
    We received three comments regarding the wage index.
    Comment: A commenter was concerned that the wage index continues to 
provide a significantly lower wage index to rural counties and 
indicated that cuts affect rural areas more than urban areas. The 
commenter asked that we move to a more accurate

[[Page 47306]]

and fair index as recommended by the Medicare Payment Advisory 
Commission (MedPAC). In addition, the commenter felt that the pre-
floor, pre-reclassified hospital wage index with only the hospice floor 
is not a good policy. The same commenter suggested that we maintain the 
BNAF until a more equitable wage index can be developed.
    Two commenters wanted Montgomery County, Maryland to be moved from 
its current CBSA and placed into CBSA 47894 for number of reasons. One 
of the reasons a commenter described was that in FY 2012, hospices in 
CBSA 47894 will be paid at a rate 4.0 percent greater than the payment 
given to hospices in Montgomery County's current CBSA. The commenter 
indicated that this rate differential creates significant hardship and 
results in loss of revenue. The commenter also indicated that by not 
changing, CMS is discriminating against the Medicare beneficiaries 
living in Montgomery County because it is financially jeopardizing the 
hospices that serve them.
    Response: We thank the commenters. The pre-floor, pre-reclassified 
hospital wage index was adopted in 1998 as the wage index from which 
the hospice wage index is derived by a committee of CMS (then Health 
Care Financing Administration) and industry representatives as part of 
a negotiated rulemaking effort. The Negotiated Rulemaking Committee 
considered several wage index options: (1) Continuing with Bureau of 
Labor Statistics data; (2) using updated hospital wage data; (3) using 
hospice-specific data; and (4) using data from the physician payment 
system. The Committee determined that the pre-floor, pre-reclassified 
hospital wage index was the best option for hospice. The pre-floor, 
pre-reclassified hospital wage index is updated annually, and reflects 
the wages of highly skilled hospital workers.
    We also note that section 3137(b) of the Affordable Care Act 
requires us to submit to Congress a report that includes a plan to 
reform the hospital wage index system. This provision was enacted in 
response to MedPAC's suggestions, which included a suggestion that the 
hospital wage index minimize wage index adjustments between and within 
metropolitan statistical areas and statewide rural areas. The latest 
information on hospital wage index reform is discussed in the 
``Proposed Changes to the Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long-Term Care Hospital 
Prospective Payment System and Fiscal Year 2012 Rates'' proposed rule, 
published May 5, 2011 in the Federal Register (76 FR 25788).
    In the future, when reforming the hospice payment system, we will 
consider wage index alternatives if alternatives are available.
    Each hospice's labor market area is based on definitions of MSAs 
issued by the Office of Management and Budget (OMB), not CMS. For this 
final rule, we are using the pre-floor, pre-reclassified hospital wage 
index, based solely on the CBSA designations, as the basis for 
determining wage index values for the FY 2012 hospice wage index. In 
summary, we continue to believe that the pre-floor, pre-reclassified 
hospital wage index, which is updated yearly and is used by many other 
CMS payment systems, is the most appropriate method available to 
account for geographic variances in labor costs for hospices for FY 
2012.
2. Areas Without Hospital Wage Data
    In adopting the CBSA designations, we identified some geographic 
areas where there are no hospitals, and no hospital wage data on which 
to base the calculation of the hospice wage index. These areas are 
described in section I.B.4 of this final rule. Beginning in FY 2006, we 
adopted a policy that, for urban labor markets without an urban 
hospital from which a pre-floor, pre-reclassified hospital wage index 
can be derived, all of the urban CBSA pre-floor, pre-reclassified 
hospital wage index values within the State would be used to calculate 
a statewide urban average pre-floor, pre-reclassified hospital wage 
index to use as a reasonable proxy for these areas. Currently, the only 
CBSA that would be affected by this policy is CBSA 25980, Hinesville-
Fort Stewart, Georgia. We proposed to continue this policy for FY 2012 
and have applied this policy in this final rule.
    Currently, the only rural areas where there are no hospitals from 
which to calculate a pre-floor, pre-reclassified hospital wage index 
are Massachusetts and Puerto Rico. In August 2007 (72 FR 50217), we 
adopted a methodology for imputing rural pre-floor, pre-reclassified 
hospital wage index values for areas where no hospital wage data are 
available as an acceptable proxy; that methodology is also described in 
section I.B.4 of this final rule. In FY 2012, Dukes and Nantucket 
Counties are the only areas for rural Massachusetts which are affected. 
We again proposed to apply this methodology for imputing a rural pre-
floor, pre-reclassified hospital wage index for those rural areas 
without rural hospital wage data in FY 2012, and we are implementing 
this policy in this final rule.
    However, as we noted section I.B.4 of this final rule, we do not 
believe that this policy is appropriate for Puerto Rico. For FY 2012, 
we again proposed to continue to use the most recent pre-floor, pre-
reclassified hospital wage index value available for Puerto Rico, which 
is 0.4047. This pre-floor, pre-reclassified hospital wage index value 
was then adjusted upward by the hospice 15 percent floor adjustment in 
the computing of the proposed FY 2012 hospice wage index. We are 
continuing to follow this policy in this final rule. We received no 
comments regarding continuing this policy for areas without hospital 
wage data.
3. FY 2012 Wage Index With an Additional 15 Percent Reduced Budget 
Neutrality Adjustment Factor (BNAF)
    The hospice wage index set forth in this final rule would be 
effective October 1, 2011 through September 30, 2012. We did not 
propose and are not finalizing any modifications to the hospice wage 
index methodology. For this final rule, the FY 2011 hospital wage index 
was the most current hospital wage data available for calculating the 
FY 2012 hospice wage index values. We used the FY 2011 pre-floor, pre-
reclassified hospital wage index data for this calculation.
    As noted above, for this FY 2012 wage index final rule, the hospice 
wage index values are based solely on the adoption of the CBSA-based 
labor market definitions and the hospital wage index. We continue to 
use the most recent pre-floor and pre-reclassified hospital wage index 
data available (based on FY 2007 hospital cost report wage data). A 
detailed description of the methodology used to compute the hospice 
wage index is contained in the September 4, 1996 hospice wage index 
proposed rule (61 FR 46579), the August 8, 1997 hospice wage index 
final rule (62 FR 42860), and the August 6, 2009 FY 2010 Hospice Wage 
Index final rule (74 FR 39384).
    The August 6, 2009 FY 2010 Hospice Wage Index final rule finalized 
a provision to phase out the BNAF over seven years, with a 10 percent 
reduction in the BNAF in FY 2010, and an additional 15 percent 
reduction in FY 2011, and additional 15 percent reductions in each of 
the next five years, with complete phase out in FY 2016. Therefore, in 
accordance with the August 6, 2009, FY 2010 Hospice Wage Index final 
rule, the BNAF for FY 2012 was reduced by an additional 15 percent for 
a total BNAF reduction of 40 percent (10 percent from FY 2010, 
additional 15

[[Page 47307]]

percent from FY 2011, and additional 15 percent for FY 2012).
    For this final rule, an unreduced BNAF for FY 2012 is computed to 
be 0.058593 (or 5.8593 percent). A 40 percent reduced BNAF, which is 
subsequently applied to the pre-floor, pre-reclassified hospital wage 
index values greater than or equal to 0.8, is computed to be 0.035156 
(or 3.5156 percent). Pre-floor, pre-reclassified hospital wage index 
values which are less than 0.8 are subject to the hospice floor 
calculation; that calculation is described in section I.B.1. The BNAF 
is updated compared to the proposed rule based on availability of more 
complete data.
    The final hospice wage index for FY 2012 is shown in Addenda A and 
B; the wage index values shown already have the BNAF reduction applied. 
Specifically, Addendum A reflects the final FY 2012 wage index values 
for urban areas under the CBSA designations. Addendum B reflects the 
final FY 2012 wage index values for rural areas under the CBSA 
designations.
    We received five comments regarding the BNAF.
    Comment: A few commenters were pleased with overall increase in the 
hospice payments for fiscal year 2012. Some commenters continued to 
voice opposition to the BNAF reduction; several were concerned about 
the impact of the BNAF phase-out, coupled with the productivity 
adjustment which begins in FY 2013. One commenter provided analysis 
which suggested that estimated mean hospice profit margins would 
decrease, and noted that many hospices can't absorb these reductions. 
Commenters were concerned that hospices would be forced to close, which 
could create access issues for patients, put at risk the quality of 
care, and ultimately increase Medicare costs. Several commenters noted 
that rate reductions disproportionately affect rural providers. One 
wrote that rural providers have higher costs of care than urban 
hospices, and yet also have a payment reduction due to lower rural wage 
index values. This commenter asked for a rural add-on, or at least 
parity. Another commenter asked that we create ``critical access'' 
hospices in rural areas to protect rural providers.
    Response: We thank the commenters. The BNAF phase-out was finalized 
in the August 6, 2009 final rule. Comments opposing the BNAF reductions 
are outside the scope of this rule because we finalized this policy in 
FY 2010. Comments surrounding the productivity adjustment, which the 
Affordable Care Act mandates be applied beginning in fiscal year 2013, 
are also outside the scope of this rule. We acknowledge that there was 
a single erroneous reference to the BNAF reduction as a proposal; 
however, as noted on page 26808 of the proposed rule, and in multiple 
other locations throughout the proposed rule, the BNAF phase-out was 
already settled for the remaining years of the phase-out, as described 
in the FY 2010 Hospice Wage Index final rule (74 FR 39384).
    However, we are sensitive to the issues raised by commenters, and 
to the possible effects of the BNAF reduction on access to care. We 
continue to monitor for unintended consequences associated with the 
BNAF phase-out. Our analysis reveals an overall growth in number of 
hospices since the start of the phase-out. Additionally, we see no data 
which would indicate that hospices in rural areas are closing.
    We also note that the hospice wage index includes a floor 
calculation which benefits many rural providers. We are sensitive to 
concerns from rural hospices that the additional time and distance 
required to visit a rural patient adds significantly to their costs. We 
do not have the authority to change the hospice rates beyond the limits 
set out in the statute. We will consider the situation of rural 
providers in the context of broader hospice payment system reform. We 
appreciate the analyses shared by the commenter.
4. Effects of Phasing Out the BNAF
    The full (unreduced) BNAF calculated for the FY 2012 final rule is 
5.8593 percent. As implemented in the August 6, 2009 FY 2010 Hospice 
Wage Index final rule (74 FR 39384), for FY 2012 we are reducing the 
BNAF by an additional 15 percent, for a total BNAF reduction of 40 
percent (a 10 percent reduction in FY 2010 plus a 15 percent reduction 
in FY 2011 plus a 15 percent reduction in FY 2012), with additional 
reductions of 15 percent per year in each of the next 4 years until the 
BNAF is phased out in FY 2016.
    For FY 2012, this is mathematically equivalent to taking 60 percent 
of the full BNAF value, or multiplying 0.58593 by 0.60, which equals 
0.035156 (3.5156 percent). The BNAF of 3.5156 percent reflects a 40 
percent reduction in the BNAF. The 40 percent reduced BNAF (3.5156 
percent) was applied to the pre-floor, pre-reclassified hospital wage 
index values of 0.8 or greater in the final FY 2012 hospice wage index.
    The hospice floor calculation still applies to any pre-floor, pre-
reclassified hospital wage index values less than 0.8. The hospice 
floor calculation is described in section I.B.1 of this final rule. We 
examined the effects of an additional 15 percent reduction in the BNAF, 
for a total BNAF reduction of 40 percent, on the final FY 2012 hospice 
wage index compared to remaining with the total 25 percent reduced BNAF 
which was used for the FY 2011 hospice wage index. The additional 15 
percent BNAF reduction applied to the final FY 2012 wage index resulted 
in a (rounded) 0.9 percent reduction in wage index values in 39.7 
percent of CBSAs, a 0.8 percent reduction in wage index values in 53.0 
percent of CBSAs, a 0.6 or 0.7 percent reduction in wage index values 
in 0.7 percent of CBSAs, and no reduction in wage index values in 6.5 
percent of CBSAs. Note that these are reductions in wage index values, 
not in payments. Please see Table 1 in section VI of this rule for the 
effects on payments. The wage index values in Addenda A and B already 
reflect the additional 15 percent BNAF reduction.
    Those CBSAs whose pre-floor, pre-reclassified hospital wage index 
values had the hospice 15 percent floor adjustment applied before the 
BNAF reduction would not be affected by this ongoing phase out of the 
BNAF. These CBSAs, which typically include rural areas, are protected 
by the hospice 15 percent floor adjustment. We estimate that 29 CBSAs 
are already protected by the hospice 15 percent floor adjustment, and 
are therefore completely unaffected by the BNAF reduction. There are 
325 hospices in these 29 CBSAs.
    Additionally, some CBSAs with pre-floor, pre-reclassified wage 
index values less than 0.8 will become newly eligible for the hospice 
15 percent floor adjustment as a result of the additional 15 percent 
reduction in the BNAF applied in FY 2012. Areas where the hospice floor 
calculation would have yielded a wage index value greater than 0.8 if 
the 25 percent reduction in BNAF were maintained, but which will have a 
final wage index value less than 0.8 after the additional 15 percent 
reduction in the BNAF (for a total BNAF reduction of 40 percent) is 
applied, will now be eligible for the hospice 15 percent floor 
adjustment. These CBSAs will see a smaller reduction in their hospice 
wage index values since the hospice 15 percent floor adjustment will 
apply. We estimate that 3 CBSAs will have their pre-floor, pre-
reclassified hospital wage index value become newly protected by the 
hospice 15 percent floor adjustment due to the additional 15 percent 
reduction in the BNAF applied in the final FY 2012 hospice wage index. 
Because of the protection given by the hospice 15 percent floor 
adjustment, these CBSAs will see smaller percentage decreases in their 
hospice wage index values than those CBSAs that are not

[[Page 47308]]

eligible for the hospice 15 percent floor adjustment. This will affect 
those hospices with lower hospice wage index values, which are 
typically in rural areas. There are 44 hospices located in these 3 
CBSAs.
    Finally, the hospice wage index values only apply to the labor 
portion of the payment rates; the labor portion is described in section 
I.B.1 of this final rule. Therefore, the projected reduction in 
payments due solely to the additional 15 percent reduction of the BNAF 
applied in FY 2012 is estimated to be 0.6 percent, as calculated from 
the difference in column 3 and column 4 of Table 1 in section VI of 
this final rule. In addition, the estimated effects of the phase-out of 
the BNAF will be mitigated by any inpatient hospital market basket 
updates in payments. The final inpatient hospital market basket update 
for FY 2012 is 3.0 percent; this 3.0 percent does not reflect the 
provision in the Affordable Care Act which reduces the inpatient 
hospital market basket update for FY 2012 by 0.1 percentage point, 
since that reduction does not apply to hospices. The final update is 
communicated through an administrative instruction.
    The combined estimated effects of the updated wage data, an 
additional 15 percent reduction of the BNAF, and the final inpatient 
hospital market basket update are shown in Table 1 in section VI of 
this final rule. The updated wage data are estimated to increase 
payments by 0.1 percent (column 3 of Table 1). The additional 15 
percent reduction in the BNAF, which has already been applied to the 
wage index values shown in this final rule, is estimated to reduce 
payments by 0.6 percent. Therefore, the changes in the wage data and 
the additional 15 percent BNAF reduction reduce estimated hospice 
payments by 0.5 percent, when compared to FY 2011 payments (column 4 of 
Table 1). However, so that hospices can fully understand the total 
estimated effects on their revenue, we have also accounted for the 3.0 
percent final market basket update for FY 2012. The net effect of that 
3.0 percent increase and the 0.5 percent reduction due the updated wage 
data and the additional 15 percent BNAF reduction, is an estimated 
increase in payments to hospices in FY 2012 of 2.5 percent (column 5 of 
Table 1).
    We received two comments regarding the combined effect of the 
expected market basket update, BNAF reduction and wage data updates.
    Comment: Some commenters were confused about the language in the 
proposed rule concerning the market basket increase and the BNAF 
adjustment. They suggested revising the description of the BNAF 
reduction and the market basket increase to further describe the effect 
of each of the components which affect hospice rates in section II.A.4 
of the final rule.
    Response: We have clarified the language about the BNAF reduction 
and the market basket increase in this section.

B. Aggregate Cap Calculation Methodology

    The existing methodology for counting Medicare beneficiaries in 42 
CFR 418.309 has been the subject of substantial litigation. 
Specifically, the lawsuits challenge the way CMS apportions hospice 
patients with care spanning more than one year when calculating the 
cap.
    A number of district courts and two appellate courts have concluded 
that CMS' current methodology used to determine the number of Medicare 
beneficiaries used in the aggregate cap calculation is not consistent 
with the statute. We continue to believe that the methodology set forth 
in Sec.  418.309(b)(1) is consistent with the Medicare statute. 
Nonetheless, we have determined that it is in the best interest of CMS 
and the Medicare program to take action to prevent future litigation, 
and alleviate the litigation burden on providers, CMS, and the courts. 
On April 14, 2011, we issued a Ruling entitled ``Medicare Program; 
Hospice Appeals for Review of an Overpayment Determination'' (CMS-1355-
R), and also published in the Federal Register as CMS-1355-NR (76 FR 
26731, May 9, 2011), related to the aggregate cap calculation for 
hospices which provided for application of a patient-by-patient 
proportional methodology, as defined in the Ruling, to hospices that 
have challenged the current methodology. Specifically, the Ruling 
provides that, for any hospice which has a timely-filed administrative 
appeal of the methodology set forth at Sec.  418.309(b)(1) used to 
determine the number of Medicare beneficiaries used in the aggregate 
cap calculation for a cap year ending on or before October 31, 2011, 
the Medicare contractors will recalculate that year's cap determination 
using the patient-by-patient proportional methodology as set forth in 
the Ruling.
    In the proposed rule, we also made several proposals regarding cap 
determinations from two time periods:
     Cap determinations for cap years ending on or before 
October 31, 2011; and
     Cap determinations for cap years ending on or after 
October 31, 2012.
1. Cap Determinations for Cap Years Ending on or Before October 31, 
2011
    By its terms, the relief provided in Ruling CMS-1355-R applies only 
to those cap years for which a hospice has received an overpayment 
determination and filed a timely qualifying appeal. For any hospice 
that receives relief pursuant to Ruling CMS-1355-R in the form of a 
recalculation of one or more of its cap determinations, or for any 
hospice that receives relief from a court after challenging the 
validity of the cap regulation, we proposed that the hospice's cap 
determination for any subsequent cap year also be calculated using a 
patient-by-patient proportional methodology as opposed to the 
methodology set forth in 42 CFR 418.309(b)(1). The patient-by-patient 
proportional methodology is defined below in section II.B.3.
    Additionally, there are hospices that have not filed an appeal of 
an overpayment determination challenging the validity of 42 CFR 
418.309(b)(1) and which are awaiting for CMS to make a cap 
determination for cap years ending on or before October 31, 2011. We 
proposed to allow any such hospice provider, as of October 1, 2011, to 
elect to have its final cap determination for such cap year(s), and all 
subsequent cap years, calculated using the patient-by-patient 
proportional methodology.
    Finally, we recognize that most hospices have not challenged the 
methodology used for determining the number of beneficiaries used in 
the cap calculation. Therefore, we proposed that those hospices which 
would like to continue to have the existing methodology (hereafter 
called the streamlined methodology) used to determine the number of 
beneficiaries in a given cap year would not need to take any action, 
and would have their cap calculated using the streamlined methodology 
for cap years ending on or before October 31, 2011. The streamlined 
methodology is defined in section II.B.4 below.
2. Cap Determinations for Cap Years Ending on or After October 31, 2012
    We continue to believe that the methodology set forth in Sec.  
418.309(b)(1) is consistent with the Medicare statute. We emphasized 
that nothing in our proposals in this section constitutes an admission 
as to any issue of law or fact. In light of the court decisions, 
however, we proposed to change the hospice aggregate cap calculation 
methodology policy for cap determinations ending on or after October 
31, 2012 (the 2012 cap year). Specifically, for the cap year ending 
October 31, 2012 (the 2012 cap

[[Page 47309]]

year) and subsequent cap years, we proposed to revise the methodology 
set forth at Sec.  418.309(b)(1) to adopt a patient-by-patient 
proportional methodology when computing hospices' aggregate caps. We 
also proposed to ``grandfather'' in the current streamlined methodology 
set forth in Sec.  418.309(b)(1) for those hospices that elect to 
continue to have the current streamlined methodology used to determine 
the number of Medicare beneficiaries in a given cap year, for the 
following reasons.
    As described in section II of the proposed rule, we solicited 
comments on modernizing the cap calculation in our FY 2011 Hospice Wage 
Index Notice with Comment Period. We summarized those comments in 
section II of that proposed rule, and noted that many commenters, 
including the major hospice associations, were concerned about the 
burden to hospices of changing the cap calculation methodology, and 
urged us to defer across-the-board changes to the cap methodology until 
we analyzed the cap in the context of broader payment reform. 
Specifically, commenters urged us to retain the current methodology, as 
it resulted in a more streamlined and timely cap determination for 
providers, as compared to other options. In addition, commenters noted 
that once made, cap determinations usually remain final. Commenters 
were concerned that a proportional methodology could result in prior 
year cap determination revisions to account for situations in which the 
percentage of time a beneficiary received services in a prior cap year 
declined as his or her overall hospice stay continued into subsequent 
cap years, and these revisions could result in new overpayments for 
some providers. Commenters noted that the vast majority of providers 
don't exceed the cap, so burdening these providers with an across-the-
board change would not be justified. We also noted that on January 18, 
2011, President Obama issued an Executive Order (EO) entitled 
``Improving Regulation and Regulatory Review'' (EO 13563), which 
instructed federal agencies to consider regulatory approaches that 
reduced burdens and maintained flexibility and freedom of choice for 
the public. We believe that offering hospices the option to elect to 
continue to have the streamlined methodology used in calculating their 
caps is in keeping with this EO.
    For these reasons, for the cap year ending October 31, 2012 (the 
2012 cap year) and subsequent cap years, we proposed that the hospice 
aggregate cap be calculated using the patient-by-patient proportional 
methodology, but also proposed to allow hospices the option of having 
their cap calculated via the current streamlined methodology, as 
discussed below. We stated in the proposed rule that we believe this 
two-pronged approach is responsive to the commenters who do not want to 
be burdened with a change in the cap calculation methodology at this 
time, while also conforming with decisional law and meeting the needs 
of hospices that would prefer the patient-by-patient proportional 
methodology of counting beneficiaries. This grandfathering proposal to 
allow hospices the option of having their caps calculated based on 
application of the current streamlined methodology would apply only to 
currently existing hospices that have, or will have, had a cap 
determination calculated under the streamlined methodology. New 
hospices that have not had their cap determination calculated using the 
streamlined methodology did not fall under the proposed ``grandfather'' 
policy. Therefore, all new hospices that are Medicare-certified after 
the effective date of this final rule would have their cap 
determinations calculated using the patient-by-patient proportional 
methodology.
3. Patient-by-Patient Proportional Methodology
    For the cap year ending October 31, 2012 (the 2012 cap year), and 
for all subsequent cap years (unless changed by future rulemaking), we 
proposed that the Medicare contractors would apply the patient-by-
patient proportional methodology (defined below) to a hospice's 
aggregate cap calculations unless the hospice elected to have its cap 
determination for cap years 2012 and beyond calculated using the 
current, streamlined methodology set forth in Sec.  418.309(b)(1).
    Under the proposed patient-by-patient proportional methodology, for 
each hospice, CMS would include in its number of Medicare beneficiaries 
only that fraction which represents the portion of a patient's total 
days of care in all hospices and all years that was spent in that 
hospice in that cap year, using the best data available at the time of 
the calculation. We proposed that the whole and fractional shares of 
Medicare beneficiaries' time in a given cap year would then be summed 
to compute the total number of Medicare beneficiaries served by that 
hospice in that cap year.
    When a hospice's cap is calculated using the patient-by-patient 
proportional methodology, and a beneficiary included in that 
calculation survives into another cap year, the contractor may need to 
make adjustments to prior cap determinations, subject to existing 
reopening regulations.
4. Streamlined Methodology
    As we described above and in the proposed rule, comments received 
from hospices and the major hospice associations in previous years 
urged us to defer across-the-board changes to the cap calculation 
methodology until we reform hospice payments. Several of these 
commenters feared that an across-the-board change in methodology now 
could disadvantage them by potentially placing them at risk for 
incurring new cap overpayments. Additionally, approximately 90 percent 
of hospices do not exceed the cap and have not objected to the current 
methodology, and commenters expressed concern that adapting to a 
process change would be costly and burdensome. In response to these 
concerns, we proposed that a hospice could exercise a one-time election 
to have its cap determination for cap years 2012 and beyond calculated 
using the current, streamlined methodology set forth in Sec.  
418.309(b). We proposed that the option to elect the continued use of 
the streamlined methodology for cap years 2012 and beyond would be 
available only to hospices that have had their cap determinations 
calculated using the streamlined methodology for all cap years prior to 
cap year 2012. In section II.B.5 (``Changing Methodologies'') below, we 
described our detailed rationale for limiting the election. Allowing 
hospices which, prior to cap year 2012, have their cap determination(s) 
calculated pursuant to a patient-by-patient proportional methodology to 
elect the streamlined methodology for cap years 2012 and beyond could 
result in over-counting patients and introduce a program vulnerability.
    Our current policy set forth in the existing Sec.  418.309(b)(2) 
states that when a beneficiary receives care from more than one hospice 
during a cap year or years, each hospice includes in its number of 
Medicare beneficiaries only that fraction which represents the portion 
of a patient's total stay in all hospices that was spent in that 
hospice. We proposed to revise the regulatory text at Sec.  
418.309(b)(2) to clarify that for each hospice, CMS includes in its 
number of Medicare beneficiaries only that fraction which represents 
the portion of a patient's total days of care in all hospices and all 
years that was spent in that hospice in that cap year, using the best 
data available at the time of the calculation. We also proposed to

[[Page 47310]]

add language to make clear that cap determinations are subject to 
reopening/adjustment to account for updated data.
5. Changing Methodologies
    We believe our proposed policies, described above, provide hospices 
with a reasonable amount of flexibility with regard to their cap 
calculation. However, we believe that if we allowed hospices to switch 
back and forth between methodologies, it would greatly complicate the 
cap determination calculation, would be difficult to administer, and 
might lead to inappropriate switching by hospices seeking merely to 
maximize Medicare payments. Additionally, in the year of a change in 
the calculation methodology, there is a potential for over-counting 
some beneficiaries. Allowing hospices to switch back and forth between 
methodologies would perpetuate the risk of over-counting beneficiaries. 
Therefore, we proposed that:
    (1) Those hospices that have their cap determination calculated 
using the patient-by-patient proportional methodology for any cap year 
prior to the 2012 cap year would continue to have their cap calculated 
using the patient-by-patient proportional methodology for the 2012 cap 
year and all subsequent cap years; and,
    (2) All other hospices would have their cap determinations for the 
2012 cap year and all subsequent cap years calculated using the 
patient-by-patient proportional methodology unless they make a one-time 
election to have their cap determinations for cap year 2012 and beyond 
calculated using the streamlined methodology.
    (3) A hospice would be able to elect the streamlined methodology no 
later than 60 days following the receipt of its 2012 cap determination.
    (4) Hospices which elected to have their cap determination 
calculated using the streamlined methodology could later elect to have 
their cap determinations calculated pursuant to the patient-by-patient 
proportional methodology by either:
    a. Electing to change to the patient-by-patient proportional 
methodology; or
    b. Appealing a cap determination calculated using the streamlined 
methodology to determine the number of Medicare beneficiaries.
    (5) If a hospice elected the streamlined methodology, and changed 
to the patient-by-patient proportional methodology for a subsequent cap 
year, the hospice's aggregate cap determination for that cap year 
(i.e., the cap year of the change) and all subsequent cap years would 
be calculated using the patient-by-patient proportional methodology. As 
such, past cap year determinations could be adjusted to prevent the 
over-counting of beneficiaries, notwithstanding the ordinary 
limitations on reopening.
6. Other Issues
    Contractors will provide hospices with instructions regarding the 
cap determination methodology election process. Regardless of which 
methodology is used, the contractor will continue to demand any 
additional overpayment amounts due to CMS at the time of the hospice 
cap determination. The contractor will continue to include the hospice 
cap determination in a letter which serves as a notice of program 
reimbursement under 42 CFR 405.1803(a)(3). Cap determinations are 
subject to the existing CMS reopening regulations.
    In that FY 2011 Hospice Wage Index Notice with Comment Period, we 
also discussed the timeframe used for counting beneficiaries under the 
streamlined methodology, which is September 28th to September 27th. 
This timeframe for counting beneficiaries was implemented because it 
allows those beneficiaries who elected hospice near the end of the cap 
year to be counted in the year when most of the services were provided. 
However, for those hospices whose cap determinations are calculated 
using a patient-by-patient proportional methodology for counting the 
number of beneficiaries, we proposed to count beneficiaries and their 
associated days of care from November 1st through October 31st, to 
match that of the cap year. This would ensure that the proportional 
share of each beneficiary's days in that hospice during the cap year is 
accurately computed.
    Finally, we noted that the existing regulatory text at Sec.  
418.308(b)(1) refers to the timeframe for counting beneficiaries as 
``(1) * * * the period beginning on September 28 (35 days before the 
beginning of the cap period) and ending on September 27 (35 days before 
the end of the cap period).'' The period beginning September 28 is 
actually 34 days before November 1 (the beginning of the cap year), 
rather than 35 days. We proposed to correct this in the regulatory 
text, and to change references to the ``cap period'' to that of the 
``cap year'' to correctly reference the time frame for cap 
determinations. We also proposed technical corrections to the 
regulatory text.
    The above summarizes the proposals made in our proposed rule. We 
are finalizing all the policies above as proposed, except as described 
in the following responses to comments. We received six comments 
related to these proposed changes.
    Comment: Most commenters were supportive of our providing hospices 
with options regarding their cap calculation methodology; however, one 
suggested that we abandon the patient-by-patient proportional 
methodology due to the burden created by the need for adjustments to 
prior year cap determinations. This commenter was also concerned about 
the potential for increased confusion and complexity. Several 
commenters asked for details on how to elect a particular calculation 
methodology, with one commenter asking that we incorporate consistent, 
specific timeframes for making such an election. Another commenter 
suggested we send providers a form to use in making the choice. A 
number of commenters asked that CMS and its contractors educate 
providers about the election process and the cap calculation 
methodology options. Several also asked that all contractors use the 
same methodology when calculating the cap.
    A commenter asked that we align the cap year and the beneficiary 
counting year with the federal fiscal year, to simplify the cap 
calculation process. A few commenters asked that contractors mail cap 
determination letters in a more timely and consistent fashion, with one 
asking that we specify timelines for contractors to follow. One 
commenter suggested that timely notification of cap determination 
letters be a performance measure for the contractors. Several 
commenters asked for longer, more flexible repayment timeframes, 
suggesting three to five years for repayment of overpayments, or 
longer. One commenter wrote that the cap was an outdated cost 
containment provision, and was concerned that it would limit access. 
This commenter asked that we increase the cap amount to reflect a full 
six months of care and wage adjust it. The commenter added that this 
would require study to determine the relevant methodology that would 
support providers in caring for all hospice patients.
    Response: We appreciate commenters' support of our proposal and of 
the options provided to hospices regarding their aggregate cap 
calculations. Having two cap calculation methodologies addresses the 
concerns of commenters who did not want to be burdened with a change 
given future payment reform; those comments were described in section 
II of our proposed rule. Earlier in this section we also noted that 
there had been substantial litigation challenging the way we apportion 
hospice patients with care spanning more than one year when calculating

[[Page 47311]]

the aggregate cap. We believe it is in the best interest of CMS and the 
Medicare program to take action to prevent future cap litigation, and 
to alleviate the litigation burden on providers, CMS, and the courts. 
Therefore, we do not believe that we should abandon the patient-by-
patient proportional methodology.
    Regarding the timeframes for elections, our proposed rule addressed 
the issue based on two time periods:
    1. For cap years ending on or before October 31, 2011:
    We proposed that hospices that have not filed an appeal of an 
overpayment determination challenging the validity of 42 CFR 
418.309(b)(1) and which are waiting for us to make a cap determination 
in a cap year ending on or before October 31, 2011 may, as of October 
1, 2011, elect to have their final cap determinations for such cap 
year(s), and all subsequent cap years, calculated using the patient-by-
patient proportional methodology. In other words, in this circumstance, 
the election must occur in the period beginning October 1, 2011 (the 
effective date of this final rule) but before receipt of the 2011 (or 
prior) cap year determination. We are finalizing this policy as 
proposed.
    2. For cap years ending on or after October 31, 2012:
    (a) Electing to continue using the streamlined methodology: We 
proposed that for cap years ending on or after October 31, 2012, 
hospices would have their aggregate caps calculated using the patient-
by-patient proportional methodology, unless a hospice exercises a one-
time election to have its aggregate cap for cap years 2012 and beyond 
calculated using the streamlined methodology. Those hospices that make 
such an election will have their cap determinations for the 2012 cap 
year and subsequent cap years calculated using the streamlined 
methodology unless they subsequently elect to have the patient-by-
patient proportional methodology used, appeal the streamlined 
methodology (please see section II.B.5, entitled ``Changing 
Methodologies,'' for more details), or we implement changes through 
future rulemaking. This option to elect to continue with the 
streamlined methodology only applies to existing hospices that have 
had, or will have had, a cap determination calculated under the 
streamlined methodology. Additionally, this option to elect to continue 
with the streamlined methodology is not available to a hospice when its 
2011 or prior cap determination(s) was calculated using the patient-by-
patient proportional methodology.
    The timeframe for electing to continue to have the aggregate cap 
calculated using the streamlined methodology is specified in the 
regulatory text at 42 CFR 418.309(d)(2)(ii), and requires that the 
election be made no later than 60 days after receipt of the 2012 cap 
determination. Therefore, the hospice could elect for CMS to continue 
using the streamlined methodology at any time between October 1, 2011 
(the effective date of this final rule) and up to 60 days after receipt 
of its 2012 cap determination. This election to use the streamlined 
methodology would remain in effect unless the hospice subsequently 
submitted an election to change to the patient-by-patient proportional 
methodology or appealed the streamlined methodology used to determine 
the number of Medicare beneficiaries used in the aggregate cap 
calculation. We allow this 60 days after receipt of the 2012 cap 
determination because we are concerned that a hospice that intended to 
continue using the streamlined methodology might fail to elect it due 
to an oversight, and we do not want any provider to be forced to change 
methodologies due to such an error. We are finalizing this policy as 
proposed.
    (b) Electing to change from the streamlined methodology to the 
patient-by-patient proportional methodology: We proposed that if a 
hospice elected to have its 2012 cap determination calculated using the 
streamlined methodology, it could later submit a written election to 
change to the patient-by-patient proportional methodology. This 
election to change methodologies from streamlined to patient-by-patient 
proportional for a given cap year and all subsequent cap years must be 
submitted before receipt of the cap determination for that cap year. If 
the hospice has already received the cap determination for that cap 
year, and then decides it would like to change from the streamlined 
methodology to the patient-by-patient proportional methodology, it must 
file an appeal of the methodology used to determine the number of 
Medicare beneficiaries used in the aggregate cap calculation. We are 
finalizing this policy as proposed.
    Contractors will provide hospices with instructions on how to elect 
a methodology in the coming months. In addition, we will revise the cap 
section of the hospice claims processing manual (Internet-only manual 
(IOM) 100-04, chapter 11, section 80) to reflect the policies 
implemented in this final rule. We will include examples to make sure 
the details of the calculation are clear to providers and to the 
contractors. There will also be a MedLearn Matters article, discussion 
on Open Door forums, and information on the hospice center webpage 
(http://www.cms.gov/center/hospice.asp) to further educate the 
industry. Additional education will come from industry associations and 
from contractor Web sites, reminding hospices of the procedures for 
electing a methodology.
    In case a provider misses these educational efforts, we will also 
ask contractors to include language on the 2012 cap determinations 
which explains that the provider has up to 60 days from the date of 
receipt of the determination to elect to continue using the streamlined 
methodology. Given these efforts, we do not believe it is necessary for 
us to create a form and send it to all providers for choosing to 
continue using the streamlined methodology. To address comments related 
to contractor consistency in applying the cap methodologies, we also 
believe that clearly written manual instructions which include examples 
will ensure consistent application of the cap calculation procedures by 
all contractors.
    As we noted in the proposed rule, we agree with commenters on our 
2010 Hospice Wage Index Notice with Comment who asked us not to change 
the cap year timeframe now, but to consider that change when we 
undertake broader payment reform. In the proposed rule, we also stated 
that for purposes of applying the patient-by-patient proportional 
methodology, we proposed to count beneficiaries and their associated 
days of care from November 1 to October 31, to match the cap year 
timeframe. We are finalizing this policy as proposed.
    Finally, several comments were outside the scope of this rule, 
including those related to requiring more timely and consistent mailing 
of cap determination letters, to extending repayment timeframes, to 
increasing the cap amount, and wage adjusting the cap amount. We will 
consider these issues, such as the wage adjustment of the cap and 
changing the cap amount, as we continue with hospice payment reform, to 
the extent that we have such authority. In its March 2010 Report to 
Congress (http://www.medpac.gov/chapters/Mar10_Ch02E.pdf), MedPAC 
investigated claims that the cap was creating an access problem for 
non-cancer patients or for racial or ethnic minorities. MedPAC found no 
evidence to support these claims.
    Comment: A majority of commenters asked that we define the 
reopening time period for making adjustments to prior

[[Page 47312]]

year cap determinations, citing a need for hospices to manage their 
finances with some certainty and administrative burden. Suggested 
reopening timeframes ranged from 3 to 5 years. One commenter asked that 
we provide a manual reference for ``existing reopening regulations.'' 
Another commenter wrote that hospices should be afforded parallel 
rights, at least on a one-time basis, to request reopening of demands 
issued not more than 3 years ago for recalculation under the 
proportional methodology.
    Response: Our regulations at 42 CFR 405.1803 equate the hospice cap 
determination letter with a Notice of Program Reimbursement (NPR). The 
regulations governing NPRs, which are found at 42 CFR 405.1885, have a 
3-year timeframe for reopening, except in instances of fraud, where 
reopening is unlimited. The regulations related to reopening are 
described in our Paper-Based Manual 15-1, chapter 29, entitled 
``Provider Payment Determination and Appeals'', available on our Web 
site at http://www.cms.gov/Manuals/PBM/list.asp. In response to 
concerns from multiple commenters, we are revising our proposal to make 
it clear that there is a 3-year timeframe for reopening, as described 
in 42 CFR 405.1885. We are also revising the regulatory text we 
proposed at 42 CFR 418.309(d)(3) to remove the language that reads 
``notwithstanding the ordinary limitations on reopening'' and replacing 
it with ``subject to existing reopening requirements.'' These changes 
should satisfy commenters' concerns, and provide hospices with more 
certainty in managing their finances.
    We do not believe that allowing us to reopen prior year cap 
determinations in light of a provider's decision to switch 
methodologies and allowing providers to request reopening of prior year 
cap determinations that were not timely appealed are parallel 
situations. If a hospice elects one methodology for determining the cap 
and then subsequently elects a different methodology, we believe that 
it might be appropriate to recalculate earlier payment/cap 
determinations (after the change in methodologies) in order to prevent 
providers from switching methodologies to gain an inappropriate 
benefit. This consideration does not apply in the situation where a 
provider did not timely appeal an earlier determination. Providers may 
appeal payment determinations, and we believe that, if a provider did 
not exercise its appeal rights in a timely manner, then subsequent 
developments do not warrant effectively extending the time period for 
appeal (unlike providers, the agency cannot ``appeal'' a payment 
determination for a provider reflecting that provider's election of a 
cap methodology within 180 days after the date of the relevant 
determination).
    Comment: One commenter, who is counsel for a number of hospices 
that have brought litigation challenging the streamlined methodology, 
suggested that we advise hospices that ``multiple spreadsheets offered 
in litigation by hospices (and HHS) tend to show'' that there are 
``material reductions in hospice cap liability under the proportional 
method.'' The commenter stated that, based on their experience, they 
strongly recommend that hospices opt for the proportional methodology 
and suggested that HHS should make the same recommendation to hospices.
    Response: We note the statements and recommendations of the 
commenter for providers to consider, but we do not believe it is 
appropriate for us to make a general recommendation to hospices as to 
which method hospices should choose. The commenter states that 
``multiple spreadsheets offered in litigation by hospices (and HHS) 
tend to show'' that there are ``material reductions in hospice cap 
liability under the proportional method.'' To the extent the commenter 
suggests that, as a general matter, hospices are generally likely to 
receive material reductions in hospice cap liability under the 
proportional method (relative to the streamlined method), we do not 
draw the same conclusions as the commenter from the spreadsheets 
offered in litigation by some plaintiff hospices. We acknowledge that a 
number of spreadsheets offered in litigation indicate that certain 
plaintiff hospices would likely experience a reduction (perhaps 
significant) in cap liability for a given year. At the same time, we 
believe that it is important to consider that numerous plaintiff 
hospices did not offer any spreadsheets in litigation indicating 
whether those plaintiff hospices would receive a significant reduction 
or any reduction in cap liability in a given year. Plaintiff hospices 
that did offer spreadsheets in litigation might be more likely to 
benefit from application of a patient-by-patient proportional 
methodology in a given year than other plaintiff hospices that did not 
offer such spreadsheets. Moreover, hospices that have brought 
litigation challenging the streamlined method might be more likely than 
other hospices to benefit from application of a patient-by-patient 
proportional methodology. We also note that spreadsheets offered by 
plaintiff hospices in litigation might have reflected incomplete data 
or reflected calculations that had not been verified by HHS.
    It is true that a given hospice for a given year might benefit 
(perhaps significantly) from application of a patient-by-patient 
proportional methodology (resulting in a higher cap and a lower cap 
liability), but that same hospice might have a higher cap liability 
(perhaps significantly) from application of the patient-by-patient 
proportional methodology in a different year. In fact, some evidence 
offered in litigation indicated that even some plaintiff hospices were 
likely to have a greater cap liability using the patient-by-patient 
proportional methodology in a given year. The effect on a particular 
hospice (in a given year or in the aggregate over all years) depends on 
a number of factors (for example, the flow of patients in and out of 
the hospice, the mix of patients' lengths of stay). Therefore, while a 
reduction in cap liability for a hospice is certainly possible, it is 
not a given. Hospices that have brought litigation challenging the 
streamlined method and offered spreadsheets are not necessarily 
representative of the majority of hospices and their experience would 
not be generalizable to all hospices.
    In any event, we do not believe it is appropriate for us to make a 
general recommendation to hospices regarding which method hospices 
should choose. Nevertheless, we note the commenter's statements and 
recommendations for providers to consider.
    Comment: A commenter was concerned that the proposed regulatory 
text at 42 CFR 418.309(b) needed to be clarified. The commenter asked 
that we clarify the differences in the streamlined methodology 
calculation when a beneficiary has been in only 1 hospice versus when a 
beneficiary has received care from more than one hospice. The commenter 
also asked that we clarify 42 CFR 418.309(b)(2), which deals with 
applying the streamlined methodology when a beneficiary receives care 
from more than one hospice. The commenter wasn't clear whether the 
calculation of the fraction of the total days of care applies to all 
years of hospice care, or just to the year of initial election.
    Response: The streamlined methodology requires that beneficiaries 
who have only been in one hospice be counted as 1 in their initial year 
of election, with the timeframe for counting beneficiaries running from 
September 28 to September 27. The beneficiary is not included in the 
count of beneficiaries ever again, even if he/she survives past 
September 27th into another beneficiary counting year. This

[[Page 47313]]

calculation has not changed since the hospice benefit's inception.
    Under the streamlined methodology, when a beneficiary has been 
served by more than 1 hospice, the current regulation at 42 CFR 
418.309(b)(2) says that ``In the case in which a beneficiary has 
elected to receive care from more than one hospice, each hospice 
includes in its number of Medicare beneficiaries only that fraction 
which represents the portion of a patient's total stay in all hospices 
that was spent in that hospice.'' The streamlined methodology used when 
a beneficiary has been served by more than one hospice is actually a 
patient-by-patient proportional allocation of the beneficiary's time.
    In our proposed rule, we proposed changes to the regulatory text 
describing how the streamlined methodology accounts for beneficiaries 
who are served by more than one hospice. We are finalizing those 
proposed changes to the regulatory text, as it makes it clear that the 
calculation is to occur across all years of hospice care, and not just 
the initial year of election. It also matches the language describing 
the patient-by-patient proportional methodology, and ``requires each 
hospice include in its count of Medicare beneficiaries only that 
fraction which represents the portion of a patient's total days of care 
in all hospices and all years that was spent in that hospice in that 
cap year, using the best data available at the time of the 
calculation.'' When a beneficiary is served by more than one hospice, 
the calculation is a proportional one, even under the streamlined 
methodology.
    Because the regulation refers to counting days spent in a given 
hospice ``in that cap year'', it also follows the same beneficiary 
counting timeframe that the patient-by-patient proportional methodology 
uses, which is the cap year timeframe (November 1 to October 31). In 
our proposed rule we explained that the September timeframe for 
counting beneficiaries was implemented in 1983 because it allows those 
beneficiaries who elected hospice near the end of the cap year to be 
counted in the year when most of the services were expected to be 
provided. However, for a patient-by-patient proportional calculation, 
there is no need to make such an adjustment, and therefore we are using 
the cap year timeframe when counting beneficiaries.
    In other words, the streamlined methodology is identical to the 
patient-by-patient proportional methodology when counting beneficiaries 
who have been served by more than one hospice. As such, the difference 
between the streamlined methodology and the patient-by-patient 
proportional methodology is only evident when a beneficiary receives 
hospice care from a single hospice. We are finalizing the regulatory 
text at 42 CFR 418.309(b) as proposed.
    Comment: Several commenters suggested that we allow calculation of 
a total cap across all provider numbers belonging to a common owner. 
One commenter suggested that in the situation where one hospice 
acquires another hospice, hospices operating under the proportional 
methodology should have the option of switching to the streamlined 
methodology for consistency.
    Response: There are several issues we must address to fully respond 
to this comment: (1) Whether the aggregate cap calculation can be 
consolidated for all providers of a common owner, such as for hospices 
that are part of a chain; (2) which calculation methodology to allow 
when there is a change of ownership with assignment of provider 
agreements; and (3) which calculation methodology to allow when there 
is an acquisition with rejection of assignment of provider agreements. 
All three issues hinge on the Medicare provider agreement for each 
participating hospice and its unique provider number. The unique 
provider number is the administrative method used by Medicare to track 
each Medicare provider agreement. A unique provider number is assigned 
to a hospice program which is certified as meeting the conditions to 
participate in the Medicare program defined in section 1861(dd) of the 
Act.
    To address the first issue, longstanding policy has not permitted 
consolidation of separate Medicare certified hospice providers with a 
common owner when computing the aggregate cap; instead, a separate cap 
calculation occurs for each Medicare certified hospice program defined 
by its unique provider number. Our regulations at 42 CFR 418.308 and 42 
CFR 418.309 describe the aggregate cap calculation in terms of an 
individual hospice, rather than in terms of a hospice chain or a common 
owner.
    To address the second issue, when one hospice acquires another, one 
needs to consider the unique provider number of the hospice(s) which 
provided care to each patient. For example, hospice A, which has opted 
for CMS to use the streamlined methodology in its cap calculation, 
acquires hospice B, which has its cap calculated using the patient-by-
patient proportional methodology. When a change of ownership occurs 
with assignment of provider agreements, and the acquiring hospice 
chooses to consolidate the operations, the unique provider number of 
hospice B is retired, and hospice B comes under hospice A's Medicare 
provider agreement and unique provider number. Hospice B is 
consolidated into hospice A. In this case the beneficiaries who were in 
hospice B are now in hospice A. From the standpoint of the cap, those 
beneficiaries are considered to have been served by more than one 
hospice. As noted previously in this section, the streamlined and 
patient-by-patient proportional methodologies are identical when a 
beneficiary is served by more than one hospice, following the patient-
by-patient proportional methodology. Therefore hospice A's use of the 
streamlined methodology does not create any inconsistency when 
accounting for hospice B's beneficiaries in its aggregate cap.
    In another example, if hospice A acquires hospice B with rejection 
of assignment of provider agreements, but wants to operate hospice B as 
a separate entity, hospice B's existing Medicare provider agreement and 
unique provider number would be terminated. Hospice B would have to 
meet all requirements to be certified to participate in the Medicare 
program, and would be given a new provider agreement and unique 
provider number upon approval. Therefore, hospice A and B continue to 
have separate unique provider numbers. As such, separate cap 
calculations are performed for hospice A and hospice B, since our 
longstanding policy is to calculate the cap by provider (defined as 
having a unique provider number), rather than by owner or by chain.
    Because hospice B has a new Medicare provider agreement (with a new 
unique provider number), it is considered a new provider for purposes 
of applying the aggregate cap. As such, all its cap calculations would 
be made using the patient-by-patient proportional methodology; new 
providers are not eligible for the grandfathering described in the 
proposed rule, which allows hospices to elect to continue using the 
streamlined methodology.
    We continue to believe that there would be a program vulnerability 
if we allowed providers to switch back and forth between cap 
calculation methodologies. As such, we proposed that a provider whose 
cap is calculated using the proportional methodology may not later 
decide to have its cap calculated using the streamlined methodology. We 
proposed an exception to this policy for the 2012 cap year, when all 
aggregate caps will be computed using the proportional methodology, 
unless an eligible provider makes a one-time election to continue using 
the streamlined

[[Page 47314]]

methodology. The exception allows eligible providers that intended to 
continue using the streamlined methodology but which failed to elect 
the streamlined methodology to make that one-time election during the 
60-day period following receipt of the 2012 cap determination notice.
    The above examples regarding changes in ownership are consistent 
with our policy of defining hospices by their unique provider numbers 
and consistent with our proposal to preclude switching calculation 
methodologies.
    In summary, we are finalizing the proposals related to the 
aggregate cap as proposed, except to clarify that the timeframe for 
reopening cap determinations is 3 years (except in the case of fraud).

C. Hospice Face-to-Face Requirement

    Section 3132(b) of the Affordable Care Act of 2010 (Pub. L. 111-
148, enacted March 23, 2010) amended section 1814(a)(7) of the Act by 
adding an additional certification requirement that beginning January 
1, 2011, a hospice physician or nurse practitioner (NP) must have a 
face-to-face encounter with every hospice patient prior to the 180-day 
recertification of the patient's terminal illness to determine 
continued eligibility. The statute also requires that the hospice 
physician or NP who performs the encounter attest that such a visit 
took place in accordance with procedures established by the Secretary. 
Although the provision allows an NP to perform the face-to-face 
encounter and attest to it, section 1814(a)(7)(A) of the Act continues 
to require that a hospice physician must certify and recertify the 
terminal illness.
    We implemented section 1814(a)(7), as amended by section 3132(b) of 
the Affordable Care Act in the November 17, 2010 final rule (75 FR 
70372), published in the Federal Register, entitled ``Home Health 
Prospective Payment System Rate Update for CY 2011; Changes in 
Certification Requirements for Home Health Agencies and Hospices'', 
hereinafter referred to as the CY 2011 HH PPS Final Rule. The statute 
requires that for hospice recertifications occurring on or after 
January 1, 2011, a face-to-face encounter take place before the 180th-
day recertification. We decided that the 180th-day recertification and 
subsequent benefit periods corresponded to the recertification for a 
patient's third or subsequent benefit period.
    These provisions at Sec.  418.22(a) and (b), as set out in the CY 
2011 HH PPS final rule (75 FR 70463) include the following 
requirements:
     The encounter must occur no more than 30 calendar days 
prior to the start of the third benefit period and no more than 30 
calendar days prior to every subsequent benefit period thereafter.
     The hospice physician or NP who performs the encounter 
attests in writing that he or she had a face-to-face encounter with the 
patient and includes the date of the encounter. The attestation, which 
includes the physician's signature and the date of the signature, must 
be a separate and distinct section of, or an addendum to, the 
recertification form, and must be clearly titled.
     The physician narrative associated with recertifications 
for the third and subsequent benefit period recertifications includes 
an explanation of why the clinical findings of the face-to-face 
encounter support a prognosis that the patient has a life expectancy of 
6 months or less.
     When an NP performs the encounter, the NP's attestation 
must state that the clinical findings of that visit were provided to 
the certifying physician, for use in determining whether the patient 
continues to have a life expectancy of 6 months or less, should the 
illness run its normal course.
     The hospice physician or the hospice NP can perform the 
encounter. We define a hospice physician as a physician who is employed 
by the hospice or working under contract with the hospice, and a 
hospice NP as an NP who is employed by the hospice.
     The hospice physician who performs the face-to-face 
encounter and attests to it must be the same physician who certifies 
the patient's terminal illness and composes the recertification 
narrative (75 FR 70445).
    As a result of stakeholders' concerns regarding access risks 
resulting from the final rule policy, we proposed that any hospice 
physician can perform the face-to-face encounter regardless of whether 
that physician recertifies the patient's terminal illness and composes 
the recertification narrative. Additionally, we also proposed to change 
the regulatory text at 42 CFR 418.22(b)(4) to state that the 
attestation of the nurse practitioner or a non-certifying hospice 
physician shall state that the clinical findings of that encounter were 
provided to the certifying physician, for use in determining continued 
eligibility for hospice. This proposal reflects the our commitment to 
the general principles of the President's EO released January 18, 2011 
entitled ``Improving Regulation and Regulatory Review'', as it would 
reduce burden to hospices and hospice physicians and increase 
flexibility in areas of physician shortages.
    We received 15 comments related to these proposed changes.
    Comment: Commenters expressed appreciation of CMS' efforts to 
address concerns regarding implementation of the face-to-face encounter 
for hospice eligibility certification and recertification, including 
the three-month enforcement delay provided for in early 2011.
    All 15 commenters supported the proposal to allow any hospice 
physician to perform the face-to-face encounter regardless of whether 
the physician recertifies the patient's terminal illness and composes 
the recertification narrative. While commenters supported the less 
restrictive policy, they made suggestions to add additional 
practitioners such as Physician Assistants (PA) and Clinical Nurse 
Specialists (CNS) to the list of healthcare professionals that would be 
allowed to conduct the face-to-face encounter. These commenters 
described the shortage of nurse practitioners and physicians in some 
areas of the country, especially small and rural areas. Another 
commenter, also citing physician and NP shortages in rural areas, 
suggested that community physicians and nurse practitioners should be 
able to conduct the face-to-face encounter and report their findings to 
a physician employed by the hospice. Another commenter strongly 
encouraged CMS to allow any physician to certify and recertify a 
patient for hospice. The commenter described the situation when caring 
for the imminently dying patient at an emergency department; a non-
hospice physician cannot certify the patient for hospice services 
without a hospice physician certification. The commenter indicated that 
the patient should not have to wait for the hospice physician to 
certify the patient in a situation when the patient is imminently 
dying. The commenter supported efforts in Congress to change the 
statute about this change.
    Commenters were concerned that hospices are facing a large increase 
in administrative costs to provide care to hospice patients without 
getting additional reimbursement as a result of the new face-to-face 
requirement. Commenters indicated that unreimbursed face-to-face visits 
are costly in terms of time, travel and salaries, and the visits cause 
patients and families to be anxious that the patient may be discharged.
    Response: We thank the commenters for their support of our 
clarification in allowing any hospice physician to

[[Page 47315]]

perform face-to-face encounters regardless of whether that same 
physician recertifies the patient's terminal illness and composes the 
recertification narrative and of the three-month delay provided early 
in 2011. We are finalizing the policy to allow any hospice physician to 
perform the face-to-face encounter regardless of whether that same 
physician recertifies the patient's terminal illness and composes the 
recertification narrative.
    The statutory language in section 1814(a)(7) of the Act limits the 
disciplines of those who can provide a hospice face-to-face encounter. 
PAs and CNSs are not authorized by the Affordable Care Act to perform 
the face-to-face visit. Therefore, without a change in the law, we 
cannot adopt a policy to allow PAs and CNSs to perform the face-to-face 
encounter. In addition, a statutory change to section 1814(a)(7) of the 
Act would also be required to change the requirements regarding the 
physicians who must certify and recertify a patient's terminal illness.
    Similarly, allowing community physicians and NPs to conduct the 
face-to-face encounter and report their findings to a physician 
employed by the hospice would also require a statutory change. The Act 
requires that the physician or NP conducting the face-to-face encounter 
must be a hospice physician or NP. A ``hospice physician'' is a 
physician either employed by or working under arrangement with a 
hospice (i.e., contracted). The complete definition of a hospice 
employee at 42 CFR 418.3 is as follows: ``Employee means a person who: 
(1) Works for the hospice and for whom the hospice is required to issue 
a W-2 form on his or her behalf; (2) if the hospice is a subdivision of 
an agency or organization, an employee of the agency or organization 
who is assigned to the hospice; or (3) is a volunteer under the 
jurisdiction of the hospice.''
    We appreciate the commenters concerns about the financial effects 
of the face-to-face requirements. We expect most face-to-face 
encounters would be satisfied in conjunction with a medically 
reasonable and necessary physician service. Hospices can bill for that 
portion of the visit where medically reasonable and necessary physician 
services were provided to the patient by the hospice physician or 
hospice attending NP in conjunction with a face-to-face encounter. We 
will continue to monitor for any unintended consequences associated 
with this provision.
    Comment: A commenter asked us to consider the concept of ``advanced 
disease management.'' A commenter noted that many patients are 
legitimately certified at admission but their condition actually 
improves with hospice care. The commenter also suggested that Medicare 
benefit be modified in ways that will encourage more comprehensive, 
continuing care management for those in the advanced stages of 
incurable illnesses.
    Response: We appreciate the comment; however, it is outside the 
scope of this rule. We may consider such suggestions in the future in 
the context of broader analysis surrounding palliative care.
    Comment: A commenter supported the change in regulatory text that 
states an NP or a non-certifying hospice physician may convey their 
clinical findings from the face-to-face visit to the certifying 
physician.
    Response: We thank the commenter for his or her support.
    Comment: A commenter requested that we make every effort to ensure 
that the clarification provided in the proposed rule about the face-to-
face requirement is applied as if incorporated in the final rule issued 
November 17, 2010.
    Response: Thank you for your comment. We note that the effective 
date of the provisions in this final rule is October 1, 2011. We direct 
providers to the Hospice Benefit Policy Manual (IOM 100-02, chapter 9), 
section 20.1 for up-to-date and comprehensive guidance on our face-to-
face encounter policy. In summary, we are finalizing the proposed 
policy to allow any hospice physician to perform the face-to-face 
encounter regardless of whether that same physician recertifies the 
patient's terminal illness and composes the recertification narrative.

D. Technical Proposals and Clarification

1. Hospice Local Coverage Determinations
    In section II.H of the November 17, 2010 CY 2011 HH PPS Final Rule, 
we implemented new requirements for a hospice face-to-face encounter 
which were mandated by the Affordable Care Act of 2010. A commenter 
asked how the face-to-face encounter related to Local Coverage 
Determinations (LCDs), and if the expectation was that the physician 
would verify the patient's condition based on the LCDs. Other 
commenters asked for guidance regarding what the encounter should 
include (that is, elements that make up an encounter) for purposes of 
satisfying the requirement. When describing how to assess patients for 
recertification, our response cited the LCDs of several contractors 
(see 75 FR 70447-70448). The response also included common text from 
those LCDs related to clinical findings to use in making the assessment 
and determining whether a patient was terminally ill. We stated that 
the clinical findings should include evidence from the three following 
categories: (1) Decline in clinical status guidelines (for example, 
decline in systolic blood pressure to below 90 or progressive postural 
hypotension); (2) Non disease-specific base guidelines (that is, 
decline in functional status) as demonstrated by Karnofsky Performance 
Status or Palliative Performance Score and dependence in two or more 
activities of daily living; and (3) Co-morbidities. We noted that 
because the language was not mandatory, there was never any intention 
that this response have a legally binding effect on hospices. These are 
suggestions as to elements considered during certification or 
recertification which could be deemed to be indicative of a terminal 
condition. However, this was not meant to be an exhaustive or exclusive 
list. Because there has been some confusion about the extent to which 
these items exclude other possible scenarios, we proposed to clarify 
that the clinical findings included in the comment response were 
provided as an example of findings that can be used in determining 
continued medical eligibility for hospice care. The illustrative 
clinical findings mentioned above are not mandatory national policy. In 
this final rule we are clarifying that the clinical findings included 
in the comment response discussed above were provided as an example, 
and are not national policy. We reiterate that certification or 
recertification is based upon a physician's clinical judgment, and is 
not an exact science. Congress made this clear in section 322 of the 
Benefits Improvement and Protection Act of 2000, which says that the 
hospice certification of terminal illness ``shall be based on the 
physician's or medical director's clinical judgment regarding the 
normal course of the individual's illness.'' We received four comments 
about this clarification.
    Comment: Commenters appreciated the clarification and our 
reiterating existing policy that the certification and recertification 
are based upon the clinical judgment of the physician. One commenter 
wrote that their hospice physician occasionally discharges a patient 
who is not longer eligible for the benefit, and asked how the hospice 
should handle a situation in which the

[[Page 47316]]

Quality Improvement Organization (QIO) later overrules the physician.
    Response: We appreciate the commenters' support for our 
clarification and for the existing policy that certification and 
recertification are based upon the clinical judgment of the physician. 
We again note the response we gave to the same question in the CY 2011 
HH PPS final rule. We wrote ``If a patient appeals a pending discharge 
to the QIO, the QIO decision is binding; a hospice could not discharge 
a patient as ineligible if the QIO deems that patient to be eligible. 
The provider is required to continue to provide services for the 
patient. In the QIO response, the QIO should advise the provider as to 
why it disagrees with the hospice, which should help the provider to 
re-evaluate the discharge decision. If at another point in time the 
hospice feels that the patient is no longer hospice eligible, the 
provider should give timely notice to the patient of its decision to 
discharge. The patient could again appeal to the QIO, and the hospice 
and patient would await a new determination from the QIO based on the 
situation at that time'' (75 FR 70448).
2. Definition of Hospice Employee
    As noted above, in section II.H of the November 17, 2010 CY 2011 HH 
PPS Final Rule, we implemented new requirements for a hospice face-to-
face encounter, which were mandated by the Affordable Care Act. As part 
of that implementation, we required that a hospice physician or nurse 
practitioner must perform the face-to-face encounters. Several 
commenters asked us to clarify who is considered a ``hospice physician 
or nurse practitioner'' (see 75 FR 70443-70445). We stated that a 
hospice physician or nurse practitioner must be employed by the 
hospice, and that hospice physicians could also be working under 
arrangement with the hospice (i.e., contracted). We added that section 
42 CFR 418.3 defines a hospice employee as someone who is receiving a 
W-2 form from the hospice or who is a volunteer. The complete 
definition of a hospice employee at 42 CFR Sec.  418.3 is as follows: 
``Employee means a person who: (1) Works for the hospice and for whom 
the hospice is required to issue a W-2 form on his or her behalf; (2) 
if the hospice is a subdivision of an agency or organization, an 
employee of the agency or organization who is assigned to the hospice; 
or (3) is a volunteer under the jurisdiction of the hospice.'' We 
received a number of questions from the industry about the definition 
of an employee and whether it included personnel who were employed by 
an agency or organization that has a hospice subdivision and who were 
assigned to that hospice. In the proposed rule, we clarified that 
entire definition of employee given at 42 CFR 418.3 (shown above) 
applies. In this final rule, we continue to clarify that the entire 
definition of employee given at 42 CFR 418.3 applies. Therefore, if the 
hospice is a subdivision of an agency or organization, an employee of 
the agency or organization who is assigned to the hospice is a hospice 
employee. We received seven comments on this section.
    Comment: Several commenters wrote that they appreciated our 
clarifying that the entire definition of employee given in the existing 
regulation at 42 CFR 418.3 applies when considering who is a hospice 
employee. Two commenters sought further clarification. One asked if a 
hospice that issues W-2s for its direct employees is also part of a 
commonly controlled health system, could it use NPs employed by that 
health system and assigned to the hospice to perform face-to-face 
encounters. Another asked that we clarify further what it means to be 
``assigned to a hospice.'' A third commenter felt that the 
clarification gives a competitive advantage to hospices that are part 
of a larger system, and noted the shortage of NPs. This commenter added 
that in rural areas, NPs are often working under contracts with 
exclusivity rights, which do not permit them to work for others.
    Response: We thank commenters for their support of our 
clarification. An NP employed by a health care system and assigned to 
the hospice would be considered a direct employee and could perform 
face-to-face encounters. ``Assigned to the hospice'' means that the 
health care system has allotted a position for a specific employee to 
work at that specific hospice. This would be the employee's regular 
place of employment. An NP can be assigned to more than one hospice, in 
which case the NP would have more than one regular place of employment.
    Our clarification did not change or add to existing policy 
regarding the definition of an employee, but simply noted the complete 
definition of employee given at 42 CFR 418.3. Hospices face different 
operational challenges depending on the specific business model their 
operators have chosen. We appreciate the difficulties created by a 
shortage of NPs in some areas; however, we do not have the authority to 
regulate the contractual provisions of an employer and an employee, and 
such contractual relationships are, therefore, not within the scope of 
this rule.
3. Timeframe for Face-to-Face Encounters
    In section II.H of the November 17, 2010 CY 2011 HH PPS Final Rule, 
we also implemented policies related to the timeframe for performing a 
hospice face-to-face encounter. We cited the statutory language from 
section 3132 of the Affordable Care Act, which says that on and after 
January 1, 2011, a hospice physician or nurse practitioner must have a 
face-to-face encounter with the beneficiary to determine continued 
eligibility of the beneficiary for hospice care prior to the 180th-day 
recertification and each subsequent recertification (see 75 FR 70435). 
We also defined the 180th-day recertification to be the recertification 
which occurs at the 3rd benefit period (see 75 FR 70436-70437). We 
implemented a requirement that the face-to-face encounter occur no more 
than 30 calendar days prior to the 3rd or later benefit periods, to 
allow hospices flexibility in scheduling the encounter (see 75 FR 
70437-70439). We emphasized throughout the final rule that the 
encounter must occur ``prior to'' the 3rd benefit period 
recertification, and each subsequent recertification. The regulatory 
text associated with these changes is found at 42 CFR 418.22(a)(4), and 
reads, ``As of January 1, 2011, a hospice physician or hospice nurse 
practitioner must have a face-to-face encounter with each hospice 
patient, whose total stay across all hospices is anticipated to reach 
the 3rd benefit period, no more than 30 calendar days prior to the 3rd 
benefit period recertification, and must have a face-to-face encounter 
with that patient no more than 30 calendar days prior to every 
recertification thereafter, to gather clinical findings to determine 
continued eligibility for hospice care.'' We believe our final policy 
states clearly that the face-to-face encounter must occur prior to, but 
no more than 30 calendar days prior to, the 3rd benefit period 
recertification and each subsequent recertification. However, we are 
concerned that our regulation text could lead a hospice to believe that 
the face-to-face encounter could occur in an open-ended fashion after 
the start of a benefit period in which it is required, and that the 
limitation on the time-frame was only on how far in advance of the 
start of the benefit period that the encounter could occur. Our policy, 
as stated in the final rule, is that a face-to-face encounter is 
required prior to the 3rd benefit period recertification and each 
recertification thereafter (75 FR 70454). Therefore, we proposed to 
revise the regulation text to more clearly

[[Page 47317]]

state that the encounter is required ``prior to'' the 3rd benefit 
period recertification, and each subsequent recertification. As such, 
we proposed to change the regulatory text to read ``(4) Face-to-face 
encounter. As of January 1, 2011, a hospice physician or hospice nurse 
practitioner must have a face-to-face encounter with each hospice 
patient whose total stay across all hospices is anticipated to reach 
the 3rd benefit period. The face-to-face encounter must occur prior to 
but no more than 30 calendar days prior to the 3rd benefit period 
recertification, and every benefit period recertification thereafter, 
to gather clinical findings to determine continued eligibility for 
hospice care.'' Based on the comments received, we are implementing 
this change as proposed. We received 10 comments related to these 
proposed changes.
    Comment: Commenters supported clarification regarding the timing of 
the face-to-face encounter; however, they asked for more flexibility in 
the timeframe that CMS mandated. A few commenters urged CMS to consider 
alternatives to discharging and readmitting patients when a face-to-
face encounter is not timely.
    Commenters appreciated our effort to incorporate ``exceptional 
circumstances'' as part of the manual instructions governing the 
hospice face-to-face requirement. While commenters found these 
instructions helpful, they urged that we expand the current two-day 
grace period to seven days for all new 3rd benefit period and later 
readmissions and include transfer patients. Commenters believed that 
allowance of only two days is not sufficient and may still result in 
delayed delivery of needed services. A commenter also said that 
allowing seven days will avoid delays in admissions without creating 
staffing burdens where there is a shortage in MD/NPs. Commenters 
indicated that hospice physicians may have unavoidable circumstances 
such as becoming ill, taking vacations, and resigning suddenly, which 
the commenter indicated could potentially leave the hospice in the 
unforeseeable position of having to discharge a patient because the 
face-to-face encounter was not completed prior to the start of the 
benefit period. A commenter believed a seven-day window would allow for 
emergency patient admissions and address potential staffing issues.
    Another commenter recommended that we allow the encounter to occur 
up to five days after the start of the 3rd or later benefit period in 
exceptional circumstances, such as in a situation in which a transfer 
occurs immediately prior to a three-day weekend. Moreover, commenters 
requested that we include additional circumstances under which the 
grace period may be allowed, such as for providers in rural and large 
service areas and those in medically underserved areas. In addition, a 
commenter indicated that contractors should be instructed to use 
reasonable discretion when implementing application of ``exceptional 
circumstances.''
    A commenter suggested a statutory change to require that the face-
to-face encounter occur every six months instead of every new benefit 
period. A commenter stated that we should not require a hospice to 
discharge and readmit the patient if a face-to-face encounter does not 
occur prior to the 3rd benefit period recertification as it imposes a 
needless complication on the process, and it is an unnecessary burden 
on the patient and family for a mistake made by the hospice. The same 
commenter suggested other alternatives to penalize the hospice for its 
mistake without causing any problems to the patient. The commenter 
indicated that prior to the face-to-face requirement, hospices could 
use occurrence code 77 to represent the non-billable days if 
certification criteria were not documented in a timely fashion. The 
commenter asked to allow the use of the billing code subsequent to 
implementation of the face-to-face requirement. The commenter also 
suggested that hospices should not be able to submit claims until the 
certification is complete.
    The same commenter stated that the main goal of the face-to-face 
encounter requirement was to increase hospice accountability; this 
commenter felt that a financial consequence to the hospice for an 
untimely face-to-face encounter is a logical and justified way to meet 
this goal. The commenter stated that in stark contrast, there is no 
justifiable purpose for an overly strict implementation requirement 
when actively dying patients need to go through a formal discharge 
process and re-complete admission paperwork and assessments because of 
a technical error made by hospice. A commenter suggested that we act to 
prevent a negative impact on hospice patients and families by 
recognizing that human error can occur. In addition, the commenter 
suggested that we limit consequences such that they impact the hospice 
alone, rather than patients and their families.
    A commenter indicated that the existing regulations allow two days 
after the beginning of the certification period to get a Certification 
of Terminal Illness signed; therefore, this commenter urged us to 
permit this two-day extended period for the face-to-face encounter for 
all 3rd and later benefit periods, not just new admissions.
    A commenter suggested that we ``hold harmless'' those who 
miscalculate the correct date for the recertification when they 
demonstrate compliance in terms of submitting information.
    Response: We thank the commenters for their support of the 
clarification of the regulation text regarding the timing of the face-
to-face encounter. Based on the comments we received, we are finalizing 
the policy as clarified in the proposed rule.
    The remaining comments described in the comment summary are beyond 
the scope of the clarification which we proposed, including the comment 
that suggested that we ``hold harmless'' those who miscalculate the 
correct date for the recertification when they demonstrate compliance 
in terms of submitting information. However, we will briefly address 
some of them to ensure that the policy is clear. We appreciate 
commenters support regarding the manual instructions. We note that the 
flexibility adopted in the manual instructions applies only to new 
admissions which occur at the 3rd or later benefit period. We allow 
this flexibility because we are convinced that in cases where a hospice 
newly admits a patient who is in the third or later benefit period, a 
face-to-face encounter prior to the start of the benefit period may not 
be possible. The manual provides some examples, but these examples are 
not intended to be all-inclusive. We believe that any additional 
flexibility would require a statutory change.
    We also note that if the face-to-face encounter requirements are 
not met, the beneficiary is no longer certified as terminally ill, and 
consequently is not eligible for the Medicare hospice benefit. 
Therefore, the hospice must discharge the patient from the Medicare 
hospice benefit because he or she is not considered terminally ill for 
Medicare purposes. The hospice can re-admit the patient to the Medicare 
hospice benefit once the required encounter occurs, provided the 
patient signs a new election form and all other new election criteria 
are met. If they choose to do so, hospices can provide care to these 
patients in the interim at the hospice's own expense until eligibility 
is re-established, but that care must occur outside of the Medicare 
hospice benefit.

[[Page 47318]]

4. Hospice Aide and Homemaker Services
    The hospice Conditions of Participation (CoPs) were updated in 
2008, after being finalized on June 5, 2008 in the Hospice Conditions 
of Participation Final Rule (73 FR 32088). Those revised CoPs included 
changing the term ``home health aide'' to ``hospice aide''. In our FY 
2010 Hospice Wage Index Final Rule (74 FR 39384), we updated language 
in several areas of our regulatory text to use this new terminology, 
including at 42 CFR 418.202(g). The regulatory text at 42 CFR 
418.202(g) describes hospice aide and homemaker services. The last 
sentence of the regulatory text that was finalized is about homemaker 
services; however the word ``homemaker'' was inadvertently replaced 
with ``aide.'' The revised regulatory text also inadvertently deleted 
the sentence which read ``Aide services must be provided under the 
supervision of a registered nurse.'' Finally, the title of this section 
of the regulatory text continues to refer to 42 CFR 418.94 of the CoPs. 
However, 42 CFR 418.94 no longer exists, and it was updated in the 2008 
Hospice CoP Final Rule to 42 CFR 418.76. We propose to correct the 
regulatory text at 42 CFR 418.202(g) to update the CoP reference to 
show 42 CFR Sec.  418.76, to add back the sentence about supervision 
which was deleted, and to correct the last sentence to refer to 
``homemakers'' rather than ``aides.'' We received one comment on this 
section, and are implementing this change as proposed.
    Comment: A commenter wrote in support of this change.
    Response: We appreciate the commenter's support.
    Comment: A commenter had concerns that hospice patients could not 
fully access occupational therapy services. The commenter asked us to 
provide education to providers, especially physicians, about the 
benefits and improved quality of life that occupational therapy 
services can provide to hospice patients.
    Response: We appreciate this comment, but it is outside the scope 
of this rule.

E. Quality Reporting for Hospices

1. Background and Statutory Authority
    The CMS seeks to promote higher quality and more efficient health 
care for Medicare beneficiaries. Our efforts are furthered by the 
quality reporting programs coupled with public reporting of that 
information. Such quality reporting programs exist for various settings 
such as the Hospital Inpatient Quality Reporting (Hospital IQR) 
Program. In addition, CMS has implemented quality reporting programs 
for hospital outpatient services, the Hospital Outpatient Quality 
Reporting Program (OQR), and for physicians and other eligible 
professionals, the Physician Quality Reporting System (PQRS). CMS has 
also implemented quality reporting programs for home health agencies 
and skilled nursing facilities that are based on conditions of 
participation, and an end stage renal disease quality improvement 
program that links payment to performance based on requirements in 
section 153(c) of the Medicare Improvement for Patients and Providers 
Act of 2008.
    Section 3004 of the Affordable Care Act amends the Act to authorize 
additional quality reporting programs, including one for hospices. 
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. Depending on the amount of annual update for a 
particular year, a reduction of two percentage points may 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 with respect to the particular fiscal year 
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 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 not later than October 1, 2012 publish selected measures that will 
be applicable with respect to FY 2014.
    Section 1814(i)(5)(E) of the Act requires the Secretary to 
establish procedures for making data submitted under the hospice 
quality reporting program available to the public. The Secretary must 
ensure that a hospice has the opportunity to review the data that are 
to be made public with respect to the hospice program prior to such 
data being made public. The Secretary must report quality measures that 
relate to hospice care provided by hospices on the CMS Internet Web 
site.
2. Quality Measures for Hospice Quality Reporting Program for Payment 
Year FY 2014
a. Considerations in the Selection of the Proposed Quality Measures
    In implementing these quality reporting programs, we envision the 
comprehensive availability and widespread use of health care quality 
information for informed decision making and quality improvement. We 
seek to collect data in a manner that balances the need for information 
related to the full spectrum of quality performance and the need to 
minimize the burden of data collection and reporting. Our purpose is to 
help achieve better health care and improve health through the 
widespread dissemination and use of performance information. We seek to 
efficiently collect data using valid, reliable and relevant measures of 
quality and to share the information with organizations that use such 
performance information as well as with the public.
    We also seek to align new Affordable Care Act reporting 
requirements with current HHS high priority conditions, topics and 
National Quality Strategy (NQS) goals and to ultimately provide a 
comprehensive assessment of the quality of health care delivered. The 
hospice quality reporting program will align with the HHS National 
Quality Strategy, particularly with the goals of ensuring person and 
family centered care and promoting effective communication and 
coordination of care. One fundamental element of hospice care is 
adherence to patient choice regarding issues such as the desired level 
of treatment and the location of care. This closely aligns with the HHS 
NQS goal of ensuring person and family centered care. Another

[[Page 47319]]

fundamental element of hospice care is the use of a closely coordinated 
interdisciplinary team to provide the desired care. This characteristic 
is closely aligned with the goal of promoting effective communication 
and coordination of care. Patient/family preferences and coordination 
of care will be foci of future hospice quality measure selection. 
Arriving at such a comprehensive set of quality measures that reflect 
high priority conditions and goals of the HHS NQS will be a multi-year 
effort.
    Other considerations in selecting measures include: alignment with 
other Medicare and Medicaid quality reporting programs as well as other 
private sector initiatives; suggestions and input received on measures 
including, for example, those received during the Listening Session on 
the Hospice Quality Reporting Program held on November 15, 2010; 
seeking measures that have a low probability of causing unintended 
adverse consequences; and considering measures that are feasible (that 
is, measures that can be technically implemented within the capacity of 
our infrastructure for data collection, analyses, and calculation of 
reporting and performance rates as applicable). We also considered the 
burden to hospices when selecting measures to propose. We considered 
the January 18, 2011 EO entitled ``Improving Regulation and Regulatory 
Review'' (E.O. 13563), which instructs federal agencies to consider 
regulatory approaches that reduce burdens and maintain flexibility and 
freedom of choice for the public.
    In our search for measures appropriate for the first year of the 
Hospice Quality Reporting Program, we considered the results of our 
environmental scan, literature search, technical expert panel and 
stakeholder listening sessions that detailed measures developed by 
multiple stewards. Of particular interest were measures from the 
National Hospice and Palliative Care Organization (NHPCO), the PEACE 
(Prepare. Embrace. Attend. Communicate. Empower.) Project conducted by 
The Carolinas Center for Medical Excellence 2006-2008 and the 
Assessment Intervention and Measurement (AIM) Project conducted by the 
New York QIO, IPRO 2009-2010. Measures from these three sources can be 
viewed at the following Web sites: http://www.nhpco.org/files/public/Statistics_Research/NHPCO_research_flier.pdf, http://www.thecarolinascenter.org/default.aspx?pageid=46 and http://www.ipro.org/index/cms-filesystem-action/hospice/1_6.pdf.
    We are investigating expanding our proposed measures to adopt some 
of these measures in the future. However, evaluation of these measures 
revealed unique measurement concerns for hospice services generally. 
Two major issues were identified. First, all of the measures currently 
available for use in measuring hospice quality of care are 
retrospective and have to be collected using a chart abstraction 
approach. This creates a burden for hospice providers. Secondly, there 
is no standardized vehicle for data collection or centralized structure 
for hospice quality reporting. We believe these issues limit our 
options for measure reporting in the first year of the Hospice Quality 
Reporting Program. Our plans to require additional measure reporting 
are described below under section 4. ``Additional Measures Under 
Consideration.''
    We considered measures currently endorsed by the NQF that are 
applicable to hospice care. Of the nine measures listed by the NQF as 
applicable to care provided at this stage of life, seven address 
patients who specifically died of cancer and various situations 
experienced by those patients in their last days of life regardless of 
whether they were cared for by a hospice. These seven measures do not 
address the provision of hospice care or the breadth of the hospice 
patient population. The remaining two NQF endorsed hospice-related 
measures address the quality of care actually provided by hospices. One 
of the two hospice appropriate measures relates to pain control and is 
discussed below under section b. The other hospice appropriate measure, 
0208: ``Percentage of family members of all patients enrolled 
in a hospice program who give satisfactory answers to the survey 
instrument,'' requires the hospice to administer the Family Evaluation 
of Hospice Care (FEHC) survey to families of deceased hospice patients. 
The FEHC survey itself is available to all hospices and contains 54 
questions to be returned to the hospice and analyzed/scored in order to 
produce ratings for the measure. A composite score derived from 17 
items on the survey and a global score based on the overall rating 
question on the survey are included in the measure. Although in the 
proposed rule we stated that we were uncertain of the number of 
hospices that currently use this survey or the number that analyze the 
responses to determine scoring for this NQF endorsed measure, we 
estimate that one-third of hospices participate in the NHPCO data 
collection effort (the NHPCO is the developer of the FEHC survey 
measure). Although we did not propose to include the FEHC survey 
measure in the 2014 hospice quality reporting program, we are now 
considering whether to propose to adopt this measure in next year's 
rule. We are not aware of any other measures applicable to hospice care 
that have been endorsed or adopted by a consensus organization other 
than the NQF.
    The current Hospice CoPs at 42 CFR 418.58 require that hospices 
develop, implement, and maintain an effective, ongoing, hospice-wide 
data-driven quality assessment and performance improvement (QAPI) 
program and that the hospice maintain documentary evidence of its 
quality assessment and performance improvement program and be able to 
demonstrate its operation to us. In addition, hospices must measure, 
analyze, and track quality indicators, including adverse patient 
events, and other aspects of performance that enable the hospice to 
assess processes of care, hospice services, and operations as part of 
their QAPI Program.
    Hospices have been required to have QAPI programs in place since 
December 2008 in order to comply with the CoPs. As a part of the QAPI 
regulations, since February 2, 2009, hospices have been required to 
develop, implement, and evaluate performance improvement projects. The 
regulations require that:
    (1) The number and scope of distinct performance improvement 
projects conducted annually, based on the needs of the hospice's 
population and internal organizational needs, reflect the scope, 
complexity, and past performance of the hospice's services and 
operations; and
    (2) The hospice document what performance improvement projects are 
being conducted, the reasons for conducting these projects, and the 
measurable progress achieved on these projects.
    Comment: CMS appreciates comments received about the potential use 
of measures calculated using data from the Family Evaluation of Hospice 
Care (FEHC) Survey. The FEHC was recognized by commenters as a well-
known and widely used instrument and received support from some 
commenters. However, other commenters raised concerns about the use of 
the FEHC survey including the burden on providers and the potential for 
bias during data entry and analysis if the survey is not administered 
by a third party (rather than hospices themselves).
    Response: Measurement of patient/family experience of hospice care 
is a high priority for CMS. The NQF Web site now contains updated 
information regarding the endorsed FEHC measure

[[Page 47320]]

0208, which includes a composite score and a global score. 
Details on the measure can be found at: http://www.qualityforum.org/MeasureDetails.aspx?actid=0&SubmissionId=456#k=0208&e=1&st=&sd=&s=n&so=a&p=1&mt=&cs=. We recognize that many (approximately one-third) of all 
hospices do participate in the NHPCO sponsored data collection and 
analysis of the FEHC survey. We are also aware of limitations of the 
FEHC survey, some of which may be addressed in the near future through 
updates to the survey. Ensuring patient and family centered care 
continues to be a priority for CMS. Therefore, we are considering this 
measure for inclusion in next year's rule for data collection beginning 
October 2012 for the FY 2014 program, or for data collection beginning 
in January 2013 for the FY 2015 program. We will also consider the 
comments received in making decisions about future measure development.
b. Quality Measures for the Quality Reporting Program for Hospices
    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 proposed that hospices report the NQF-endorsed measure that is 
related to pain management, NQF 0209: The percentage of 
patients who were uncomfortable because of pain on admission to hospice 
whose pain was brought to a comfortable level within 48 hours. A 
primary goal of hospice care is to enable patients to be comfortable 
and free of pain, so that they may live each day as fully as possible. 
The provision of pain control to hospice patients is an essential 
function, a fundamental element of hospice care; therefore, we believe 
the pain control measure, NQF 0209, is an important and 
appropriate measure for the hospice quality reporting program.
    Additionally, 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 proposed that hospices also report one 
structural measure that is not endorsed by NQF. Structural measures 
assess the characteristics and capacity of the provider to deliver 
quality health care. The proposed structural measure is: Participation 
in a Quality Assessment and Performance Improvement (QAPI) Program that 
Includes at Least Three Quality Indicators Related to Patient Care. We 
believe that participation in QAPI programs that address at least three 
indicators related to patient care reflects a commitment not only to 
assessing the quality of care provided to patients but also to 
identifying opportunities for improvement that pertain to the care of 
patients. Examples of domains of indicators related to patient care 
include providing care in accordance with documented patient and family 
goals, effective and timely symptom management, care coordination, and 
patient safety.
    Section 1814(i)(5)(D)(ii) of the Act provides that ``[i]n the case 
of a specified area or medical topic determined appropriate by the 
Secretary for which a feasible measure has not been endorsed by an 
entity with a contract under section 1890(a), the Secretary may specify 
a measure that is not so endorsed as long as due consideration is given 
to measures that have been endorsed or adopted by a consensus 
organization identified by the Secretary.'' We proposed to adopt this 
structural measure because we believe it is appropriate for use in 
evaluating the quality of care provided by hospices. As discussed 
above, a majority of the NQF-endorsed measures in this category are not 
hospice-specific or, in the case of the FEHC survey instrument, that 
measure may be too burdensome for hospices to implement for the FY 2014 
payment determination. We are also not aware of any other measures 
applicable to the hospice setting that have been adopted by another 
consensus organization. Accordingly, we proposed to adopt the 
structural measure under the authority in section 1814(i)(5)(D)(ii) of 
the Act.
    We proposed that each hospice submit data on the proposed 
structural measure, including the description of each of its patient-
care focused quality indicators (if applicable) to us by January 31, 
2013 on a spreadsheet template to be prepared by us. Specifically, 
hospice programs would be required to report whether or not they have a 
QAPI program that addresses at least three indicators related to 
patient care. In addition, hospices would be required to list all of 
their patient care indicators. Hospice programs would be evaluated for 
purposes of the quality reporting program based on whether or not they 
respond, not on how they respond.
    In addition, we proposed a voluntary submission of the proposed 
structural measure (not for purposes of a payment determination or 
public reporting), including the description of each of their patient-
care focused quality indicators to us by January 31, 2012 on a 
spreadsheet template to be prepared by us. Voluntary reporting of the 
structural measure data with specific quality indicators related to 
patient care to us would allow us to learn what the important patient 
care quality issues are for hospices and would serve to provide useful 
information in the design and structure of the quality reporting 
program. Our intent is to require additional standardized and specific 
quality measures to be reported by hospices in subsequent years.
    The proposed collection and submission of data on the proposed NQF-
endorsed measure will be a new requirement for hospices. However, since 
the development, implementation and maintenance of an effective, 
ongoing, hospice-wide data driven quality assessment and performance 
improvement program have been requirements in the Medicare CoPs since 
2008, we do not believe that the collection of the proposed structural 
measure on QAPI indicators would be considered new work. There are 
numerous data collection tools and quality indicators that are 
available to hospices through hospice industry associations and private 
companies. In addition to these options, hospices may choose to use the 
CMS-sponsored Hospice Assessment Intervention and Measurement (AIM) 
Project data elements, data dictionary, data collection tool, and 
quality indicator formulas that are freely available to all hospices, 
found at http://www.ipro.org/index/hospice-aim.
    We proposed that hospices report the structural measure by January 
2013 and the NQF measure 0209 by April 2013 in order to be 
used in the FY 2014 payment determination. We are requiring two 
different reporting dates in order for details on the QAPI data to be 
useful in rulemaking that would impact FY 2014 and to allow hospices 
sufficient time to extract, calculate and report the pain measure data 
collected through December 31, 2012. In addition, we proposed that 
hospices voluntarily report the structural measure by January 2012 for 
purposes of program development and design. It is important to note 
that the Affordable Care Act allows the Secretary until October 1, 2012 
to publish the measures required to meet the FY 2014 reporting 
requirement. As such, we have the opportunity to also consider 
commenters' suggestions associated with this final rule in FY 2013 
hospice rulemaking.
    Comment: Most commenters supported use of the NQF0209 
measure overall, and pointed out that many hospices already track this 
measure, and that it is practical. However, some expressed concerns 
about complexities with respect to pain management in hospice, about 
the exclusion of non-verbal patients, and

[[Page 47321]]

about whether this measure would require risk adjustment. The 
commenters stated the need for a quality measure that would take these 
challenges into consideration, and provides very specific definitions 
and specifications in how to collect the data needed to calculate the 
measure. One commenter expressed concern that it is premature to 
collect an outcome pain management measure and suggested a process 
measure instead.
    Response: We appreciate the positive feedback. We are finalizing 
our proposal to require that hospices report the NQF-endorsed measure 
that is related to pain management, NQF 0209: the percentage 
of patients who were uncomfortable because of pain on admission to 
hospice whose pain was brought to a comfortable level within 48 hours. 
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. The patient's definition of ``comfort'' is used in 
this measure; there is no set numeric value on a standardized 
assessment that's used to quantify ``comfort.'' The measure is designed 
to capture information on each patient's overall experience of pain. 
The measure is not limited to asking the patient about one specific 
pain site; rather it is a reflection of the patient's overall 
experience of pain. There is no assumption that every patient's pain 
will be managed to a ``comfortable'' level within 48 hours. The measure 
reflects the opinions of experienced hospice professionals that, in the 
aggregate, most patients admitted in pain can and should be more 
comfortable within 48 hours of admission. The measure allows for the 
fact that some patients will not achieve a comfortable level because of 
complications like those suggested by commenters. This measure was 
tested in two studies during its initial development, and it has been 
collected on a voluntary basis by hospices for many years. We will 
consider the use of process measures related to pain management and 
will consider all comments we receive as we continue to evaluate 
additional measures for use in the hospice quality reporting program.
    Comment: We received several comments in support of the requirement 
that hospices report the structural measure: Participation in a Quality 
Assessment and Performance Improvement (QAPI) Program that Includes at 
Least Three Quality Indicators Related to Patient Care. We also 
received a few comments indicating a need for clarification about this 
measure for both the voluntary and mandatory reporting periods.
    Response: We appreciate the supportive comments. In response to 
requests for clarification, we note that the description of the 
proposed measure was accurately described in section II.E.2.b. 
``Proposed Quality Measures'' and that the proposed measure was 
subsequently inaccurately summarized in section II.E.2.d ``Data 
Submission Requirements.'' We are clarifying that the structural 
measure is designed to obtain two pieces of information from hospices 
during both the voluntary reporting period and the mandatory period. 
Hospices will indicate whether their QAPI program includes at least 
three patient care related indicators, and will also list all their 
patient related indicators along with specific information about those 
indicators. Information requested includes: name and description of 
indicator, domain of care the indicator addresses, description (not the 
numeric values) of the numerator and denominator if available, and data 
source (for example, electronic medical record, paper medical record, 
adverse events log). Hospices will not be asked to report their level 
of performance on these patient care related indicators at this time. 
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. Based on the 
comments we received, we are therefore finalizing our adoption of the 
structural measure: Participation in a Quality Assessment and 
Performance Improvement (QAPI) Program that Includes at Least Three 
Quality Indicators Related to Patient Care. Hospices will be required 
to submit data on the structural measure, including the description of 
each of their patient-care focused quality indicators.
    Comment: Commenters expressed support of and pledged participation 
in the voluntary data reporting period. Some commenters questioned how 
the voluntary data collected about hospices' QAPI programs would be 
used by CMS, and cautioned that the data would likely not be 
comprehensive or generalizable. In addition, commenters expressed 
concerns regarding the need for standardization of patient outcome 
definitions when soliciting data. Finally, a few commenters urged CMS 
to make available as soon as possible the standardized voluntary data 
collection form along with training and education to ensure a smooth 
process for the voluntary data submission period.
    Response: We are finalizing our proposed voluntary submission of 
the structural measure (not for purposes of a payment determination or 
public reporting), including the description of each hospice's patient-
care focused quality indicators to CMS by January 31, 2012. We 
acknowledge and appreciate commenters' support of, and their pledging 
participation in, the voluntary data reporting period. The voluntary 
data reporting we proposed is designed to obtain specific information 
about hospice organizations' existing QAPI programs, including 
specifics about patient care related indicators the hospices monitor as 
part of their QAPI program. Hospices will be invited to provide us a 
list of their QAPI indicators along with specific information about 
each indicator. The information being gathered will be used by us to 
ascertain the breadth and content of existing hospice QAPI programs. 
This will help inform future measure development. We recognize that not 
all hospices will choose to participate in the voluntary data 
submission, and that information obtained will not necessarily be 
generalizable. We also recognize that information obtained during the 
voluntary period will not necessarily be representative of all 
hospices' QAPI programs.
    The data collection form will be made available, along with 
education in the form of webinars, data dictionary, and other 
supporting documents, before the voluntary data submission date.
    Comment: Commenters supported the use of an electronic spreadsheet 
as a temporary approach to data submission for the voluntary and 
mandatory data reporting period, but urged the creation of a more user 
friendly and less labor intensive approach in the future, including 
approaches that use data from Electronic Health Records. Commenters 
also expressed an eagerness to see the data collection template as soon 
as possible.
    Response: We are finalizing our proposal to provide a spreadsheet 
template to hospices as a temporary means of data submission. To 
maximize the security of transmission of data from hospices to us, and 
to reduce data errors and streamline analysis, we are investigating the 
feasibility of a Web interface for the data collection. The spreadsheet 
template will be part of this web interface for the data entry. 
Hospices will be asked to provide identifying information, and then 
complete a Web based data entry that contains four questions. Hospices 
would report whether they have a QAPI program that includes at least 
three patient care related indicators and

[[Page 47322]]

hospices would be asked to enter information about all of their patient 
care related indicators including name of indicator, domain of care, 
description (not the numeric values) of the numerator and denominator 
if available, and data source (for example, electronic medical record, 
paper medical record, adverse events log) using a spreadsheet format. 
Training for use of this Web based data submission tool will be 
provided to hospices through webinars and other downloadable materials. 
A call-in help line will also be established and staffed, should 
hospices have specific questions requiring immediate assistance. For 
hospices that cannot complete the Web based data entry, a downloadable 
data entry form will be available.
c. Proposed Timeline for Data Collection Under the Quality Reporting 
Program for Hospices
    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 proposed that the first hospice quality reporting cycle for the 
proposed NQF-endorsed measure and the proposed structural measure would 
consist of data collected from October 1, 2012 through December 31, 
2012. This timeframe would permit us to determine whether each hospice 
was eligible to receive the full market basket update for FY 2014 based 
on a full quarter of data. This also provides sufficient time after the 
end of the data collection period to accurately determine each 
hospice's market basket update for FY 2014. We proposed that all 
subsequent hospice quality reporting cycles be based on the calendar-
year basis (for example, January 1, 2013 through December 31, 2013 for 
determination of the hospice market basket update for each hospice in 
FY 2015, etc.).
    To voluntarily submit the structural measure, we proposed that the 
hospice voluntary quality reporting cycle would consist of data 
collected from October 1, 2011 through December 31, 2011. This 
timeframe would permit us to analyze the data to learn what the 
important patient care quality issues were for hospices as we enhance 
the quality reporting program design to require more standardized and 
specific quality measures to be reported by hospices in subsequent 
years.
    Comment: We received minimal yet supportive comments on the 
proposed data collection timeframes. One commenter questioned why data 
would be required so early for the FY 2014 payment determination and 
requested further clarification.
    Response: We are finalizing our proposal that the first hospice 
quality mandatory reporting cycle for the proposed NQF-endorsed measure 
and the proposed structural measure consist of data collected from 
October 1, 2012 through December 31, 2012. We are also finalizing our 
proposal that all subsequent hospice quality reporting cycles be based 
on a calendar-year (for example, January 1, 2013 through December 31, 
2013 for determination of the hospice market basket update for each 
hospice in FY 2015, etc.). Hospices will report their data for the 
structural measure by January 2013 and data for NQF 0209 by 
April 2013 to allow ample time for analysis of data and subsequent 
impact on hospices' annual payment updates in advance of the start of 
FY 2014 (10/1/2013-9/30/2014). This timeframe will also be necessary in 
future years where analysis will be required in advance of any public 
reporting of data.
    We are also finalizing our proposal that the hospice voluntary 
quality reporting cycle consist of data collected from October 1, 2011 
through December 31, 2011.
d. Data Submission Requirements
    We generally proposed that hospices submit data in the fiscal year 
prior to the payment determination. For the fiscal year 2014 payment 
determination, we proposed that hospices submit data for the proposed 
NQF-endorsed measure based on the measure specifications for that 
measure, which can be found at http://www.qualityforum.org, no later 
than April 1, 2013. Data submission for the structural measure would 
include the hospices' report of (1) Whether they have a QAPI program 
that addresses at least three indicators related to patient care, and 
(2) the subject matter of all of their patient care indicators for the 
period October 1, 2012 through December 31, 2012. Submission of these 
reports would be required by January 31, 2013.
    We proposed that both measures' data be submitted to us on a 
spreadsheet template to be prepared by us. We would announce 
operational details with respect to the data submission methods and 
format for the hospice quality data reporting program using this CMS 
Web site http://www.cms.gov/LTCH-IRF-Hospice-Quality-Reporting by no 
later than December 31, 2011.
    For the voluntary submission, we proposed that hospices submit data 
for the proposed structural measure based on the spreadsheet template 
to be prepared by us, no later than January 31, 2012. Voluntary data 
submission for the structural measure would include the hospices' 
report of (1) Whether they have a QAPI program that addresses at least 
three indicators related to patient care, and (2) the subject matter of 
all of their patient care indicators for the period October 1, 2011 
through December 31, 2011. Submission of these reports would be 
required by January 31, 2012.
    Comment: Commenters supported the use of an electronic spreadsheet 
as a temporary approach to data submission for the voluntary and 
mandatory data reporting period, but urged the creation of a more user 
friendly and less labor intensive approach in the future, including 
approaches that use data from EHRs. Commenters also expressed an 
eagerness to see the data collection template as soon as possible.
    Response: We are finalizing our proposal that hospices submit data 
in the FY prior to the payment determination. For the FY 2014 payment 
determination, hospices will be required to submit data for the NQF-
endorsed measure no later than April 1, 2013. Data submission for the 
structural measure will include the hospices' report of (1) Whether 
they have a QAPI program that addresses at least three indicators 
related to patient care, and (2) the subject matter of all of their 
patient care indicators for the period October 1, 2012 through December 
31, 2012. Submission of these reports will be required by January 31, 
2013.
    The proposed rule stated that we would provide a spreadsheet 
template to hospices as a temporary means of data submission. To 
maximize the security of transmission of data from hospices to us, and 
to reduce data errors and streamline analysis, we are investigating the 
feasibility of a Web interface for the data collection. The spreadsheet 
template will be part of this Web interface for the data entry. 
Hospices will be asked to provide identifying information, and then 
complete a Web based data entry that contains four questions. Hospices 
would report they have a QAPI program that includes at least three 
patient care-related indicators and all hospices would be asked to 
enter information about all of their patient care indicators including 
name of indicator, domain of care, description (not the numeric values) 
of the numerator and denominator if available, and data source (for 
example, electronic medical record, paper medical record, adverse 
events log) using a spreadsheet format. Training for use of this Web 
based data submission tool would be provided to hospices through 
webinars and other downloadable materials. A call-in help line would 
also be established and

[[Page 47323]]

staffed, should hospices have specific questions requiring immediate 
assistance. For hospices that cannot complete the Web based data entry, 
a downloadable data entry form would be available. We are finalizing 
all of these proposals. We would announce further operational details 
with respect to the data submission methods and format for the 
mandatory hospice quality data reporting program using the CMS Web site 
http://www.cms.gov/LTCH-IRF-Hospice-Quality-Reporting no later than 
December 31, 2011 and for the voluntary reporting cycle by November 
2011.
3. 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 its 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 internet Web site. 
At the time of the publication of this final rule, no date has been set 
for public reporting of data. 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.
    Comment: Commenters supported our development of systems for future 
public reporting and provided input on that process. Commenters 
suggested we gain a clear understanding of what is important to 
consumers when discriminating between providers. A few commenters also 
urged us to involve broad representation from stakeholders in 
development of future public reporting. Commenters also indicated that 
some states already have public reporting, and that where possible, 
CMS-required reporting should not result in duplication of efforts.
    Response: We appreciate comments received indicating support for 
the development of systems for future public reporting, and willingness 
to provide input. We are taking into consideration the body of 
literature related to consumer perceptions of what is important to them 
during the measure development process. In addition, we are aware of 
state-based quality reporting initiatives, and plan to take these into 
consideration as well. Finally, the measure development process used 
includes a variety of ways in which we obtain stakeholder input, 
including Listening Sessions, Technical Expert Panels, and public 
comment periods. Stakeholder input is critical to the process, and we 
value it highly.
4. Additional Measures Under Consideration
    As described above, we are considering expanding the proposed 
measures to include measures from the National Hospice and Palliative 
Care Organization (NHPCO), the PEACE Project and the AIM Project. While 
in this first year, we will build a foundation for quality reporting by 
requiring hospices to report one NQF-endorsed measure and one 
structural measure, we seek to achieve a comprehensive set of quality 
measures to be available for widespread use for informed decision 
making and quality improvement. We expect to explore and expand the 
measures in various ways. Future topics under consideration for quality 
data reporting include patient safety, effective symptom management, 
patient and family experience of care, and alignment of care with 
patient preferences. For quality data reporting in FY2014 or FY2015, we 
are also particularly interested in the development of new measures 
related to these topics and in the further development of existing 
measures that can be found on the following Web sites: http://www.nhpco.org/files/public/Statistics_Research/NHPCO_research_flier.pdf, http://www.thecarolinascenter.org/default.aspx?pageid=46 and 
http://www.ipro.org/index/cms-filesystem-action/hospice/1_6.pdf.
    We welcomed comments on whether all, some, any, or none of these 
measures should be considered for future rulemaking. We also solicited 
comments on ways by which we can adopt these measures in a standardized 
way that is not overly burdensome to hospice providers and reflects 
hospice patient input.
    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 have developed an assessment instrument for the ``Post-Acute 
Care Payment Reform Demonstration Program,'' as required by section 
5008 of the 2005 Deficit Reduction Act. This is a standardized 
assessment instrument that could be used across all post-acute care 
sites to measure functional status and other factors during treatment 
and at discharge from each provider and to test the usefulness of this 
standardized assessment instrument (now referred to as the Continuity 
Assessment Record & Evaluation, CARE). We believe such an assessment 
instrument would be beneficial in supporting the submission of data on 
quality measures by requiring standardized data with regard to hospice 
patients, similar to the current MDS 3.0 and OASIS-C that support a 
variety of quality measures for nursing homes and home health agencies, 
respectively. The CARE data set used by hospices would require editing 
to address the unique and specific assessment needs of the hospice 
patient population. We invited comments on the implementation of a 
standardized assessment instrument for hospices that would similarly 
support the calculation of quality measures.
    We invited public comment on considering modifications to the CARE 
data set to capture information specifically relevant to measuring the 
quality of care and services delivered by hospices such as patient/
family preferences and the degree to which those preferences were met 
for care delivery, symptom management, spiritual needs and other 
aspects of care pertinent to the hospice patient population. The 
current version of the CARE data set can be found at http://www.pacdemo.rti.org.
    Finally, we also solicited comments on ways which we could expand 
the structural reporting measure to also include hospice performance on 
each QAPI indicator reported in the performance period.
    Comment: We received many comments about the need for future 
measures to reflect the full range of hospice practice and approach to 
care. Commenters pointed out that measures need to include domains of 
care including psychosocial and spiritual to fully reflect hospice 
quality of care. In addition, commenters indicated that measures needed 
to reflect patient preference and refusal of treatment. Finally, 
commenters pointed out that measures needed to be very specific with 
regard to definitions, and easy to extract from medical records (paper 
or electronic). We received numerous and detailed comments related to 
the PEACE, AIM and NHPCO measures, including measures calculated from 
the collection of data using the Family Evaluation of Hospice Care 
(FEHC). While commenters were supportive of future measure development, 
a few commenters cautioned against implementing future measures for 
which evidence of validity is not fully established.

[[Page 47324]]

    Response: We appreciate the specific and insightful analyses 
provided and will carefully consider this input as we continue to 
develop the hospice quality reporting program. Future measures will be 
proposed after being selected through our measure development process. 
This process is designed to prevent implementation of measures without 
sufficient evidence for use in care settings. We will consider the 
comments received in making decisions about future measure development.
    Comment: Comments were also received about the development of a 
standardized tool, such as the CARE tool, as an instrument to gather 
standardized data items. Commenters voiced general support of the idea 
of developing a data tool specifically for hospice and offered specific 
ideas on domains of hospice patient care that are missing from the 
current tool. Some commenters advised against adopting existing tools 
that were developed for other settings and other commenters offered 
suggestions for additions to the tool that would make it appropriate 
for hospice patients.
    Response: We appreciate the comments submitted about a future 
standardized data set for use in hospice. We recognize the tension 
between the desire for a tool to standardize data elements collected 
that would enable comparison of hospices ``apples to apples'' and the 
need for development of evidence for quality measures in certain 
domains of care. We also recognize that the CARE in its current form 
would not meet the needs of hospice patients or providers, and that 
revisions including the addition of care domains and items would be 
required to make CARE hospice-appropriate.
    Comment: We received one comment in response to our request for 
input about future expansion of the structural measure to include 
hospice performance on each QAPI indicator. The commenter did not 
support the expansion of the structural measure in the future, stating 
that the data would not be usable unless we know the definitions, 
specifications, and data dictionaries used by each hospice, or would 
have to standardize the measure. The commenter also was unsure what use 
the measure would be.
    Response: We appreciate the comment received, and understand the 
limitations of the QAPI program structural measure. We will consider 
this comment, along with data from the voluntary data collection period 
to inform future decisions.

III. Provisions of the Final Regulations

    For the most part, this final rule incorporates the provisions of 
the proposed rule without changes. Those provisions of this final rule 
that differ from the proposed rule are as follows:
     In section II.B, Aggregate Cap Calculation Methodology, we 
are clarifying that the reopening period is three years (except in 
cases of fraud, where it is unlimited), in accordance with existing 
regulations. We are changing proposed regulatory text at 418.309(d)(3) 
to indicate that adjustment of prior year cap determinations is subject 
to existing reopening regulations.
     In section II.E, Quality Reporting for Hospices, the 
proposed rule stated that CMS would provide a spreadsheet template to 
hospices as a temporary means of data submission. To maximize the 
security of transmission of data from hospices to CMS, and to reduce 
data errors and streamline analysis, CMS is investigating the 
feasibility of a Web interface for the data collection. The spreadsheet 
template will be part of this Web interface for the data entry. In 
response to comments, we have also clarified the description of the 
structural measure which is designed to obtain two pieces of 
information from hospices during both the voluntary reporting period 
and the mandatory period. Hospices will indicate whether their QAPI 
program includes at least three patient care related measures, and will 
also list all their patient related indicators along with specific 
information about those indicators. We are finalizing our adoption of 
this measure.
    We are implementing all other provisions in the proposed rule as 
proposed.

IV. Updates on Issues Not Proposed for FY 2012 Rulemaking

A. Update on Hospice Payment Reform and Value Based Purchasing

    Section 3132 of the Affordable Care Act of 2010 (Pub. L. 111-148) 
authorized the Secretary to collect additional data and information 
determined appropriate to revise payments for hospice care and for 
other purposes. The types of data and information described in the 
Affordable Care Act attempt to capture resource utilization, which can 
be collected on claims, cost reports, and possibly other mechanisms as 
we determine to be appropriate. The data collected would be used to 
revise hospice payment methodology for routine home care rates (in a 
budget-neutral manner in the first year), no earlier than October 1, 
2013. In order to determine the revised hospice payment methodology, we 
will consult with hospice programs and MedPAC.
    According to MedPAC's March 2011 ``Report to Congress: Medicare 
Payment Policy'' (available at http://www.medpac.gov/chapters/Mar11_Ch11.pdf), Medicare expenditures for hospice services exceeded $12 
billion in 2009 and the aggregate Medicare margin in 2008 was 5.1 
percent. In addition, MedPAC found a 50-percent growth in the number of 
hospices from 2000 to 2009, of which a majority were for-profit 
hospices. Finally, MedPAC noted a change in patient case-mix from 
predominantly cancer diagnoses to non-cancer diagnoses. The growth in 
Medicare expenditures, margins, and number of new hospices, and the 
change in patient case-mix, raise concern that the current hospice 
payment methodology may have created unintended incentives and may not 
reflect the resource usage associated with the current mix of hospice 
patients. Over the past several years, MedPAC, the Government 
Accounting Office, and the Office of Inspector General all recommended 
that we collect more comprehensive data in order to better assess the 
utilization of the Medicare hospice benefit. MedPAC has also suggested 
an alternative payment model that they believe will address the 
vulnerabilities in the current payment system.
    We are in the early stages of reform analysis. We have conducted a 
literature review, are in the process of conducting initial data 
analysis, and our contractor convened a technical advisory panel in 
June of 2011. We are also working in collaboration with the Assistant 
Secretary of Planning and Evaluation to develop analysis that may be 
used to inform our reform efforts. We will continue to update 
stakeholders on our progress.
    Section 10326 of the Affordable Care Act directs the Secretary to 
conduct a pilot program to test a value-based purchasing program for 
hospices no later than January 1, 2016. As described in section II.E. 
``Quality Reporting for Hospices'' above, we finalized two measures for 
hospices to report to us, with one measure (the QAPI measure) to be 
reported no later than January 2013 and the other measure (the pain 
measure) to be reported by April 2013. We believe that these measures 
are a quality reporting foundation upon which we will expand. Over the 
course of the next few years, no later than beginning in FY 2015, we 
expect to require hospices to report an expanded and comprehensive set 
of quality measures from which we can select for pilot testing a value-
based purchasing program. During the FY 2013, FY 2014 and FY 2015 
hospice rulemaking, we

[[Page 47325]]

plan to iteratively implement the expanded measures, and solicit 
industry comments regarding analysis and design options for a hospice 
value-based purchasing pilot which would improve the quality of care 
while reducing spending. We will also consult with stakeholders in 
developing the implementation plan, as well as considering the outcomes 
of any recent demonstration projects related to value based purchasing 
which we believe might be relevant to the hospice setting. We will 
provide further information on the progress of our efforts in future 
rulemaking.
    We did not solicit comments on this section, but we received three 
comments.
    Comment: Some commenters noted that the hospice payment system is 
based upon the benefit as it was in the early 1980's, and that the 
benefit has changed considerably. While they agree that the payment 
system needs to be updated, they suggested that we not make piecemeal 
changes, and that we accumulate the necessary data to overhaul the 
system. A few commenters wrote that payment reform should not be 
undertaken without compelling reasons, and that the changes made must 
reflect the cost of services provided. One commenter urged us to work 
with a national industry association in reforming the payment system. 
Commenters suggested that we pilot any payment system changes through a 
demonstration project, which would help overcome a lack of reliable 
data to evaluate payment methodologies, would allow for testing to 
assess the impact of the reformed model on beneficiary access, and 
would help ensure a smoother transition.
    Response: We appreciate the commenters' input, and will consider 
these suggestions as we move forward with payment reform. We reiterate 
that the Affordable Care Act calls for us to work with MedPAC and the 
industry in reforming the payment system.

B. Update on the Redesigned Provider Statistical & Reimbursement Report 
(PS&R)

    In our FY 2011 Hospice Wage Index Notice with Comment Period, we 
solicited comments on a redesigned PS&R system, which would allow 
hospices easy access to national hospice utilization data on their 
Medicare hospice beneficiaries. As described in section II of the 
proposed rule, some commenters were supportive of the idea, and said 
they needed access to each beneficiary's full utilization history to 
better manage their caps and to meet the new face-to-face requirements.
    We are moving forward with this project, and expect the redesigned 
PS&R system to be able to provide complete utilization data needed for 
calculating hospice caps. We believe that the redesigned PS&R system 
will provide hospices with a greater ability to monitor their caps by 
providing readily accessible information on beneficiary utilization. We 
expect it to be available to hospices before year's end. We encourage 
all hospices to become familiar with the redesigned PS&R and to use the 
information it will make available in managing their respective caps. 
In the future, we may consider requiring hospices to self-report their 
caps, using PS&R data.
    While we did not solicit comments on this section, we received 1 
comment.
    Comment: A commenter looks forward to the redesigned PS&R, and 
asked to give input before the newly designed PS&R report is finalized.
    Response: We appreciate the commenter's support for the PS&R 
redesign; the PS&R redesign was undertaken in consultation with 
contractors, and with input previously solicited from the industry in 
prior rulemaking (see our FY 2011 Hospice Wage Index Notice with 
Comment, 75 FR 42950, dated July 22, 2010). We expect more information 
on the PS&R redesign to be forthcoming, and will keep the industry up-
to-date through Open Door Forums, list-serves, and the hospice center 
webpage (http://www.cms.gov/center/hospice.asp).

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995(PRA), we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We solicited public comment on each of these issues in the proposed 
rule.

Quality Measures for the Quality Reporting Program for Hospices

    Section 1814(i)(5)(C) of the Act requires that each hospice must 
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. Under section 1814(i)(5)(D)(iii) of 
the Act, the Secretary must not later than October 1, 2012 publish 
selected measures that will be applicable with respect to FY 2014.
    In implementing the Hospice quality reporting program, we seek to 
collect measure information with as little burden to the providers as 
possible and which reflects the full spectrum of quality performance. 
Our purpose in collecting these data is to help achieve better health 
care and improve health through the widespread dissemination and use of 
performance information.
A. Structural Measure: Participation in a Quality Assessment 
Performance Improvement Program That Includes at Least Three Indicators 
Related to Patient Care
    Consistent with this final rule, hospices will voluntarily report 
to us by January 31, 2012 their participation in a QAPI program that 
includes the hospices' report of whether they have a QAPI program that 
addresses at least three indicators related to patient care, and if so, 
the subject matter of all of their patient care indicators during the 
time frame October 1 through December 31, 2011. Data submitted for the 
last quarter of calendar year 2011 shall be voluntary on the part of 
hospice providers and shall not impact their fiscal year 2014 payment 
determination.
    The information that hospices will be required to report, in both 
the voluntary and mandatory phases of reporting, consists of stating 
(1) Whether or not they participate in a QAPI program that includes at 
least three indicators related to patient care and (2) the subject 
matter of all of their patient care indicators. Expectations of the 
QAPI programs are set forth in the Hospice Conditions of Participation 
(CoPs) at 42 CFR 418.58(a) through 418.58(e). These conditions of 
participation require that hospices must develop, implement, and 
maintain an effective, ongoing, hospice-wide, data-driven QAPI program 
and that the hospice must maintain documentary evidence of its QAPI 
programs. Hospices have been required to meet all of the standards set 
forth in 42 CFR 418.58(a) through 418.58(e) as a condition of 
participation in the Medicare and Medicaid programs since

[[Page 47326]]

2008. Therefore, the identification of quality indicators related to 
patient care will not be considered new or additional work.
    Under the quality reporting program, hospices will voluntarily 
report to us by no later than January 31, 2012, data that would include 
(1) Whether they have a QAPI program that addresses at least three 
indicators related to patient care, and (2) the subject matter of all 
of their patient care indicators during the time frame via a CMS-
prepared spreadsheet template. We anticipate that this reporting will 
take no more than 15 minutes of time to prepare the structural measure 
report.
    Thereafter, each of the 3,531 hospices in the United States will be 
required to submit this structural measure information to us one time 
per year. We estimate that it will take approximately 15 minutes to 
prepare and complete the submission of this structural measure report. 
Therefore, the estimated number of hours spent by all hospices in the 
U.S. preparing and submitting such data totals 883 hours. We believe 
that the compilation and transmission of the data can be completed by 
data entry personnel. We have estimated a total cost impact of $18,163 
to all hospices for the implementation of the hospice structural 
measure quality reporting program, based on 883 total hours for a 
billing clerk at $20.57/hour (which includes 30 percent overhead and 
fringe benefits, using most recent BLS wage data). We have developed an 
information collection request for OMB review and approval.
B. Outcome Measure: NQF Measure 0209, Percentage of Patients 
Who Were Uncomfortable Because of Pain on Admission to Hospice Whose 
Pain Was Brought Under Control Within 48 Hours
    At this time, we have not completed development of the information 
collection instrument that hospices would have to submit in order to 
comply with the NQF measure 0209 reporting requirements as 
discussed earlier in this final rule. Because the instrument for the 
reporting of this measure is still under development, we cannot assign 
a complete burden estimate at this time. Once the instrument is 
available, we will publish the required 60-day and 30-day Federal 
Register notices to solicit public comments on the data submission form 
and to announce the submission of the information collection request to 
OMB for its review and approval. The data collection of the NQF measure 
0209 for the FY 2014 payment determination is for the time 
period from October 1, 2012 to December 31, 2012.
    We did not receive any public comments on this collection of 
information section.

VI. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule as required by 
EO 12866 (September 30, 1993, Regulatory Planning and Review), EO 13563 
on Improving Regulation and Regulatory Review (January 18, 2011), the 
Regulatory Flexibility Act (September 19, 1980; Pub. L. 96-354) (RFA), 
section 1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), EO 13132 
on Federalism (August 4, 1999), and the Congressional Review Act (5 
U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has not been designated an ``economically'' 
significant rule, under section 3(f)(1) of EO 12866. However, we have 
voluntarily prepared a Regulatory Impact Analysis that to the best of 
our ability presents the costs and benefits of this proposed rule.
2. Statement of Need
    This final rule follows 42 CFR 418.306(c) which requires annual 
publication, in the Federal Register, of the hospice wage index based 
on the most current available CMS hospital wage data, including any 
changes to the definitions of MSAs. In addition, it implements section 
3004 of the Affordable Care Act of 2010, which directs the Secretary to 
specify quality measures for the hospice program. Lastly, this final 
rule implements changes to the aggregate cap calculation, to 
requirements related to physicians who perform face-to-face encounters, 
and offers several clarifying technical corrections.
3. Overall Impacts
    The overall impact of this final rule is an estimated net decrease 
in Federal payments to hospices of $80 million for FY 2012. We 
estimated the impact on hospices, as a result of the changes to the FY 
2012 hospice wage index and of reducing the BNAF by an additional 15 
percent, for a total BNAF reduction of 40 percent (10 percent in FY 
2010, 15 percent in FY 2011, and 15 percent in FY 2012). The BNAF 
reduction is part of a 7-year BNAF phase-out that was finalized in 
previous rulemaking (74 FR 39384 (August 6, 2009)), and is not a policy 
change.
    As discussed previously, the methodology for computing the hospice 
wage index was determined through a negotiated rulemaking committee and 
promulgated in the August 8, 1997 hospice wage index final rule (62 FR 
42860). The BNAF, which was promulgated in the August 8, 1997 rule, is 
being phased out. This rule updates the hospice wage index in 
accordance with the 2010 Hospice Wage Index final rule, which finalized 
a 10 percent reduced BNAF for FY 2010 as the first year of a 7-year 
phase-out of the BNAF, to be followed by an additional 15 percent per 
year reduction in the BNAF in each of the next six years. Total phase-
out will be complete by FY 2016.
4. Detailed Economic Analysis
    Column 4 of Table 1 shows the combined effects of the updated wage 
data (the 2011 pre-floor, pre-reclassified hospital wage index) and of 
the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 40 percent), comparing estimated payments for FY 2012 to 
estimated payments for FY 2011. The FY 2011 payments used for 
comparison have a 25 percent reduced BNAF applied. We estimate that the 
total hospice payments for FY 2012 will decrease by $80 million as a 
result of the application of the updated wage data ($+10 million) and 
the additional 15 percent reduction in the BNAF ($-90 million). This 
estimate does not take into account any inpatient hospital market 
basket update, which is 3.0 percent for FY 2012. This 3.0 percent does 
not reflect the provision in the Affordable Care Act which reduces the 
inpatient hospital market basket update for FY 2012 by 0.1 percentage 
point, since that reduction does not apply to hospices. The final 
inpatient hospital market basket update and associated payment rates 
are communicated through an administrative instruction in the summer. 
The estimated effect of 3.0 percent inpatient hospital market basket 
update on payments to hospices is approximately $420 million. Taking 
into account 3.0 percent inpatient hospital market basket update (+$420 
million), in addition to the updated wage data ($+10 million) and the 
additional 15 percent reduction in the BNAF ($-90

[[Page 47327]]

million), it is estimated that hospice payments would increase by $340 
million in FY 2012 ($420 million + $10 million -$90 million = $340 
million). The percent change in estimated payments to hospices due to 
the combined effects of the updated wage data, the additional 15 
percent reduction in the BNAF (for a total BNAF reduction of 40 
percent), and the inpatient hospital market basket update of 3.0 
percent is reflected in column 5 of the impact table (Table 1).
a. Effects on Hospices
    This section discusses the impact of the projected effects of the 
hospice wage index, including the effects of a 3.0 percent inpatient 
hospital market basket update for FY 2012 that is communicated 
separately through an administrative instruction. This final rule 
continues to use the CBSA-based pre-floor, pre-reclassified hospital 
wage index as a basis for the hospice wage index and continues to use 
the same policies for treatment of areas (rural and urban) without 
hospital wage data. The final FY 2012 hospice wage index is based upon 
the 2011 pre-floor, pre-reclassified hospital wage index and the most 
complete claims data available (FY 2010) with an additional 15 percent 
reduction in the BNAF (combined with the 10 percent reduction in the 
BNAF taken in FY 2010, and the additional 15 percent taken in 2011, for 
a total BNAF reduction of 40 percent in FY 2012). The BNAF reduction is 
part of a 7-year BNAF phase-out that was finalized in previous 
rulemaking, and is not a policy change.
    For the purposes of our impacts, our baseline is estimated FY 2011 
payments with a 25 percent BNAF reduction, using the 2010 pre-floor, 
pre-reclassified hospital wage index. Our first comparison (column 3, 
Table 1) compares our baseline to estimated FY 2012 payments (holding 
payment rates constant) using the updated wage data (2011 pre-floor, 
pre-reclassified hospital wage index). Consequently, the estimated 
effects illustrated in column 3 of Table 1 show the distributional 
effects of the updated wage data only. The effects of using the updated 
wage data combined with the additional 15 percent reduction in the BNAF 
are illustrated in column 4 of Table 1.
    We have included a comparison of the combined effects of the 
additional 15 percent BNAF reduction, the updated wage data, and a 3.0 
percent inpatient hospital market basket update for FY 2012 (Table 1, 
column 5). Presenting these data gives the hospice industry a more 
complete picture of the effects on their total revenue of the hospice 
wage index discussed in this proposed rule, the BNAF phase-out, and the 
final FY 2012 inpatient hospital market basket update. Certain events 
may limit the scope or accuracy of our impact analysis, because such an 
analysis is susceptible to forecasting errors due to other changes in 
the forecasted impact time period. The nature of the Medicare program 
is such that the changes may interact, and the complexity of the 
interaction of these changes could make it difficult to predict 
accurately the full scope of the impact upon hospices.

  Table 1--Anticipated Impact on Medicare Hospice Payments of Updating the Pre-Floor, Pre-Reclassified Hospital
   Wage Index Data, Reducing the Budget Neutrality Adjustment Factor (BNAF) by an Additional 15 Percent (for a
 Total BNAF Reduction of 40 Percent) and Applying a 3.0 Percent[dagger] Inpatient Hospital Market Basket Update
 to the FY 2012 Hospice Wage Index, Compared to the FY 2011 Hospice Wage Index With a 25 Percent BNAF Reduction
----------------------------------------------------------------------------------------------------------------
                                                                                                      Percent
                                                                                      Percent        change in
                                                                      Percent        change in        hospice
                                                                     change in        hospice      payments due
                                                     Number of        hospice      payments due    to wage index
                                     Number of     routine home    payments due    to wage index      change,
                                    hospices *     care days in     to FY 2012        change,     additional 15%
                                                     thousands      wage index      additional     reduction  in
                                                                      change       15% reduction     BNAF, and
                                                                                      in BNAF      market basket
                                                                                                  update[dagger]
                                             (1)             (2)             (3)             (4)             (5)
----------------------------------------------------------------------------------------------------------------
ALL HOSPICES....................           3,552          79,509            0.1%          (0.5%)            2.5%
URBAN HOSPICES..................           2,494          69,238            0.1%          (0.5%)            2.5%
RURAL HOSPICES..................           1,058          10,272          (0.2%)          (0.6%)            2.3%
BY REGION--URBAN:
    NEW ENGLAND.................             134           2,527          (0.7%)          (1.3%)            1.7%
    MIDDLE ATLANTIC.............             244           7,488          (0.4%)          (0.9%)            2.0%
    SOUTH ATLANTIC..............             359          15,713            0.3%          (0.3%)            2.7%
    EAST NORTH CENTRAL..........             336          10,058            0.2%          (0.4%)            2.6%
    EAST SOUTH CENTRAL..........             177           4,456          (0.1%)          (0.6%)            2.4%
    WEST NORTH CENTRAL..........             189           4,482          (0.3%)          (0.9%)            2.1%
    WEST SOUTH CENTRAL..........             485           9,249            0.1%          (0.4%)            2.6%
    MOUNTAIN....................             234           5,818          (0.0%)          (0.6%)            2.4%
    PACIFIC.....................             299           8,070            0.6%          (0.0%)            3.0%
    OUTLYING....................              37           1,377          (0.4%)          (0.4%)            2.6%
BY REGION--RURAL:
    NEW ENGLAND.................              26             200          (0.1%)          (0.7%)            2.3%
    MIDDLE ATLANTIC.............              45             517            0.4%          (0.2%)            2.8%
    SOUTH ATLANTIC..............             139           2,176          (0.8%)          (1.2%)            1.8%
    EAST NORTH CENTRAL..........             147           1,779          (0.6%)          (1.1%)            1.8%
    EAST SOUTH CENTRAL..........             154           1,794            0.1%          (0.1%)            2.9%
    WEST NORTH CENTRAL..........             196           1,122          (0.5%)          (0.9%)            2.0%
    WEST SOUTH CENTRAL..........             189           1,574            0.8%            0.3%            3.3%
    MOUNTAIN....................             109             648            0.3%          (0.1%)            2.9%
    PACIFIC.....................              52             450          (0.7%)          (1.3%)            1.6%
    OUTLYING....................               1              13            0.0%            0.0%            3.0%

[[Page 47328]]

 
BY SIZE/DAYS:
    0-3,499 DAYS (small)........             649           1,083          (0.0%)          (0.5%)            2.4%
    3,500-19,999 DAYS (medium)..           1,767          17,897          (0.1%)          (0.6%)            2.4%
    20,000+ DAYS (large)........           1,136          60,530            0.1%          (0.5%)            2.5%
TYPE OF OWNERSHIP:
    VOLUNTARY...................           1,170          31,470            0.0%          (0.5%)            2.5%
    PROPRIETARY.................           1,895          40,587            0.1%          (0.4%)            2.6%
    GOVERNMENT **...............             487           7,452          (0.1%)          (0.7%)            2.3%
HOSPICE BASE:
    FREESTANDING HOME HEALTH....           2,448          62,588            0.1%          (0.5%)            2.5%
    AGENCY......................             571          10,441            0.1%          (0.5%)            2.5%
    HOSPITAL....................             513           6,274          (0.1%)          (0.6%)            2.3%
    SKILLED NURSING FACILITY....              20             206            0.3%          (0.3%)            2.7%
----------------------------------------------------------------------------------------------------------------
BNAF = Budget Neutrality Adjustment Factor. Comparison is to FY 2011 data with a 25 percent BNAF reduction.
* OSCAR data as of January 6, 2011 for hospices with claims filed in FY 2010.
** In previous years, there was also a category labeled ``Other''; these were Other Government hospices, and
  have been combined with the ``Government'' category.
[dagger] The 3.0 percent inpatient hospital market basket update for FY 2012 does not reflect the provision in
  the Affordable Care Act which reduces the inpatient hospital market basket update by 0.1 percentage point
  since that reduction does not apply to hospices.
Region Key:
New England = Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic =
  Pennsylvania, New Jersey, New York; South Atlantic = Delaware, District of Columbia, Florida, Georgia,
  Maryland, North Carolina, South Carolina, Virginia, West Virginia; East North Central = Illinois, Indiana,
  Michigan, Ohio, Wisconsin; East South Central = Alabama, Kentucky, Mississippi, Tennessee; West North Central
  = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central = Arkansas,
  Louisiana, Oklahoma, Texas; Mountain = Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming;
  Pacific = Alaska, California, Hawaii, Oregon, Washington; Outlying = Guam, Puerto Rico, Virgin Islands.

    Table 1 shows the results of our analysis. In column 1, we indicate 
the number of hospices included in our analysis as of January 6, 2011 
which had also filed claims in FY 2010. In column 2, we indicate the 
number of routine home care days that were included in our analysis, 
although the analysis was performed on all types of hospice care. 
Columns 3, 4, and 5 compare FY 2012 estimated payments with those 
estimated for FY 2011. The estimated FY 2011 payments incorporate a 
BNAF which has been reduced by 25 percent. Column 3 shows the 
percentage change in estimated Medicare payments for FY 2012 due to the 
effects of the updated wage data only, compared with estimated FY 2011 
payments. The effect of the updated wage data can vary from region to 
region depending on the fluctuations in the wage index values of the 
pre-floor, pre-reclassified hospital wage index. Column 4 shows the 
percentage change in estimated hospice payments from FY 2011 to FY 2012 
due to the combined effects of using the updated wage data and reducing 
the BNAF by an additional 15 percent. Column 5 shows the percentage 
change in estimated hospice payments from FY 2011 to FY 2012 due to the 
combined effects of using updated wage data, an additional 15 percent 
BNAF reduction, and a 3.0 percent inpatient hospital market basket 
update.
    Table 1 also categorizes hospices by various geographic and hospice 
characteristics. The first row of data displays the aggregate result of 
the impact for all Medicare-certified hospices. The second and third 
rows of the table categorize hospices according to their geographic 
location (urban and rural). Our analysis indicated that there are 2,494 
hospices located in urban areas and 1,058 hospices located in rural 
areas. The next two row groupings in the table indicate the number of 
hospices by census region, also broken down by urban and rural 
hospices. The next grouping shows the impact on hospices based on the 
size of the hospice's program. We determined that the majority of 
hospice payments are made at the routine home care rate. Therefore, we 
based the size of each individual hospice's program on the number of 
routine home care days provided in FY 2009. The next grouping shows the 
impact on hospices by type of ownership. The final grouping shows the 
impact on hospices defined by whether they are provider-based or 
freestanding.
    As indicated in Table 1, there are 3,552 hospices. Approximately 47 
percent of Medicare-certified hospices are identified as voluntary 
(non-profit) or government agencies. Because the National Hospice and 
Palliative Care Organization estimates that approximately 83 percent of 
hospice patients in 2009 were Medicare beneficiaries, we have not 
considered

[[Page 47329]]

other sources of revenue in this analysis.
    As stated previously, the following discussions are limited to 
demonstrating trends rather than projected dollars. We used the pre-
floor, pre-reclassified hospital wage indexes as well as the most 
complete claims data available (FY 2010) in developing the impact 
analysis. The FY 2012 payment rates will be adjusted to reflect the 
full inpatient hospital market basket update, as required by section 
1814(i)(1)(C)(ii)(VII) of the Act. As previously noted, we publish 
these rates through administrative instructions rather than in a 
proposed rule. The FY 2012 final inpatient hospital market basket 
update is 3.0 percent. This 3.0 percent does not reflect the provision 
in the Affordable Care Act which reduces the inpatient hospital market 
basket update by 0.1 percentage point since that reduction does not 
apply to hospices. Since the inclusion of the effect of an inpatient 
hospital market basket increase provides a more complete picture of 
projected total hospice payments for FY 2012, the last column of Table 
1 shows the combined impacts of the updated wage data, the additional 
15 percent BNAF reduction, and the 3.0 percent inpatient hospital 
market basket update. As discussed in the FY 2006 hospice wage index 
final rule (70 FR 45129), hospice agencies may use multiple hospice 
wage index values to compute their payments based on potentially 
different geographic locations. Before January 1, 2008, the location of 
the beneficiary was used to determine the CBSA for routine and 
continuous home care, and the location of the hospice agency was used 
to determine the CBSA for respite and general inpatient care. Beginning 
January 1, 2008, the hospice wage index CBSA utilized is based on the 
location of the site of service. As the location of the beneficiary's 
home and the location of the hospice may vary, there will still be 
variability in geographic location for an individual hospice. We 
anticipate that the CBSA of the various sites of service will usually 
correspond with the CBSA of the geographic location of the hospice, and 
thus we will continue to use the location of the hospice for our 
analyses of the impact of the changes to the hospice wage index in this 
rule. For this analysis, we use payments to the hospice in the 
aggregate based on the location of the hospice.
    The impact of hospice wage index changes has been analyzed 
according to the type of hospice, geographic location, type of 
ownership, hospice base, and size. Our analysis shows that most 
hospices are in urban areas and provide the vast majority of routine 
home care days. Most hospices are medium-sized followed by large 
hospices. Hospices are almost equal in numbers by ownership with 1,657 
designated as non-profit or government hospices and 1,895 as 
proprietary. The vast majority of hospices are freestanding.
b. Hospice Size
    Under the Medicare hospice benefit, hospices can provide four 
different levels of care days. The majority of the days provided by a 
hospice are routine home care (RHC) days, representing about 97 percent 
of the services provided by a hospice. Therefore, the number of RHC 
days can be used as a proxy for the size of the hospice, that is, the 
more days of care provided, the larger the hospice. As discussed in the 
August 4, 2005 final rule, we currently use three size designations to 
present the impact analyses. The three categories are: (1) Small 
agencies having 0 to 3,499 RHC days; (2) medium agencies having 3,500 
to 19,999 RHC days; and (3) large agencies having 20,000 or more RHC 
days. The FY 2012 updated wage data without any BNAF reduction are 
anticipated to decrease payments to medium hospices by 0.1 percent and 
increase payments to large hospices by 0.1 percent; small hospices are 
anticipated to be unchanged (column 3); the updated wage data and the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 40 
percent) are anticipated to decrease estimated payments to small and 
large hospices by 0.5 percent, and to medium hospices by 0.6 percent 
(column 4); and finally, the updated wage data, the additional 15 
percent BNAF reduction (for a total BNAF reduction of 40 percent), and 
the final 3.0 percent inpatient hospital market basket update are 
projected to increase estimated payments by 2.4 percent for small and 
medium hospices, and by 2.5 percent for large hospices (column 5).
c. Geographic Location
    Column 3 of Table 1 shows updated wage data without the BNAF 
reduction. Urban hospices are anticipated to experience an increase of 
0.1 percent, while rural hospices are anticipated to experience a 
decrease of 0.2 percent. Urban hospices can anticipate a decrease in 
payments in five regions; ranging from 0.7 percent in the New England 
region to 0.1 percent in the East South Central region. Payments in the 
Mountain region are estimated to stay stable. Urban hospices are 
anticipated to see an increase in payments in four regions, ranging 
from 0.1 percent in the West South Central region to 0.6 percent in the 
Pacific region.
    Column 3 shows estimated percentages for rural hospices. Rural 
hospices are estimated to see a decrease in payments in five regions, 
ranging from 0.8 percent in the South Atlantic to 0.1 percent in the 
New England region. Rural hospices can anticipate an increase in 
payments in four regions, ranging from 0.1 percent in the East South 
Central region to 0.8 percent in the West South Central region. There 
is no anticipated change in payments for Outlying regions due to FY 
2012 Wage Index change.
    Column 4 shows the combined effect of the updated wage data and the 
additional 15 percent BNAF reduction on estimated payments, as compared 
to the FY 2011 estimated payments using a BNAF with a 25 percent 
reduction. Overall, urban hospices are anticipated to experience a 0.5 
percent decrease in payments while rural hospices are anticipated to 
experience a 0.6 percent decrease in payments. Nine regions in urban 
areas are estimated to see decreases in payments, ranging from 1.3 
percent in the New England region to 0.3 percent in the South Atlantic 
region. Payments for the Pacific region are estimated to be relatively 
stable.
    Rural hospices are estimated to experience a decrease in payments 
in eight regions, ranging from 1.3 percent in the Pacific region to 0.1 
percent in the East South Central and Mountain regions. While the 
estimated effect of the additional 15 percent BNAF reduction decreased 
payments to rural hospices in the West South Central region, hospices 
in this region are still anticipated to experience an estimated 
increase in payments of 0.3 percent due to the net effect of the 
reduced BNAF and the updated wage index data. Payments to rural 
outlying regions are anticipated to remain relatively stable.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction, and the final 3.0 percent 
inpatient hospital market basket update on estimated FY 2012 payments 
as compared to the estimated FY 2011 payments. Note that the FY 2011 
payments had a 25 percent BNAF reduction applied to them. Overall, 
urban hospices are anticipated to experience a 2.5 percent increase in 
payments and rural hospices are anticipated to experience a 2.3 percent 
increase in payments. Urban hospices are anticipated to experience an 
increase in estimated payments in every region, ranging from 1.7 
percent in the New England region to 3.0 percent in the Pacific region. 
Rural hospices in every region are estimated to see an increase in 
payments, ranging from 1.6 percent in the Pacific region to 3.3

[[Page 47330]]

percent in the West South Central region.
d. Type of Ownership
    Column 3 demonstrates the effect of the updated wage data on FY 
2012 estimated payments, versus FY 2011 estimated payments. We 
anticipate that using the updated wage data would decrease estimated 
payments to government hospices by 0.1 percent and payments to 
voluntary (non-profit) hospices would remain relatively unchanged. We 
estimate an increase in payments for proprietary (for-profit) hospices 
of 0.1 percent.
    Column 4 demonstrates the combined effects of the updated wage data 
and of the additional 15 percent BNAF reduction. Estimated payments to 
voluntary (non-profit) hospices are anticipated to decrease by 0.5 
percent, while government hospices are anticipated to experience a 
decrease of 0.7 percent. Estimated payments to proprietary (for-profit) 
hospices are anticipated to decrease by 0.4 percent.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 40 
percent), and a final 3.0 percent inpatient hospital market basket 
update on estimated payments, comparing FY 2012 to FY 2011 (using a 
BNAF with a 25 percent reduction). Estimated FY 2012 payments are 
anticipated to increase 2.5 percent for voluntary (non-profit), 2.3 
percent for government hospices, and 2.6 percent for proprietary (for-
profit) hospices.
e. Hospice Base
    Column 3 demonstrates the effect of using the updated wage data, 
comparing estimated payments for FY 2012 to FY 2011. Estimated payments 
are anticipated to increase by 0.1 percent for freestanding hospices 
and home health agency based hospices, and 0.3 percent for hospices 
based out of a skilled nursing facility. Payments to hospital based 
hospices are estimated to decrease by 0.1 percent.
    Column 4 shows the combined effects of the updated wage data and 
reducing the BNAF by an additional 15 percent, comparing estimated 
payments for FY 2012 to FY 2011. All hospice facilities are anticipated 
to experience decrease in payments ranging from 0.3 percent for skilled 
nursing facility based hospices, to 0.6 percent for hospital based 
hospices.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction, and a final 3.0 percent inpatient 
hospital market basket update on estimated payments, comparing FY 2012 
to FY 2011. Estimated payments are anticipated to increase for all 
hospices, ranging from 2.3 percent for hospital based hospices to 2.7 
percent for skilled nursing facility based hospices.
f. Effects on Other Providers
    This proposed rule only affects Medicare hospices, and therefore 
has no effect on other provider types.
g. Effects on the Medicare and Medicaid Programs
    This proposed rule only affects Medicare hospices, and therefore 
has no effect on Medicaid programs. As described previously, estimated 
Medicare payments to hospices in FY 2012 are anticipated to increase by 
$10 million due to the update in the wage index data, and to decrease 
by $90 million due to the additional 15 percent reduction in the BNAF 
(for a of total 40 percent reduction in the BNAF). However, the final 
market basket update of 3.0 percent is anticipated to increase Medicare 
payments by $420 million. Therefore, the total effect on Medicare 
hospice payments is estimated to be a $340 million increase. Note that 
the final market basket update and associated FY 2012 payment rates is 
officially communicated this summer through an administrative 
instruction.
h. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 2 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with this final rule. This table provides our 
best estimate of the decrease in Medicare payments under the hospice 
benefit as a result of the changes presented in this proposed rule 
using data for 3,552 hospices in our database.

Table 2--Accounting Statement: Classification of Estimated Expenditures,
                         From FY 2011 to FY 2012
                             [In $millions]
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $-80.*
From Whom to Whom.........................  Federal Government to
                                             Hospices.
------------------------------------------------------------------------
* The $80 million estimated reduction in transfers includes the
  additional 15 percent reduction in the BNAF and the updated wage data.
  It does not include the final hospital market basket update, which is
  3.0 percent for FY 2012. This final 3.0 percent does not reflect the
  provision in the Affordable Care Act which reduced the hospital market
  basket update by 0.1 percentage point since that reduction does not
  apply to hospices.

i. Conclusion
    In conclusion, the overall effect of this final rule is estimated 
to be the $80 million reduction in Federal payments due to the wage 
index changes (including the additional 15 percent reduction in the 
BNAF). Furthermore, the Secretary has determined that this will not 
have a significant impact on a substantial number of small entities, or 
have a significant effect relative to section 1102(b) of the Act.
B. Regulatory Flexibility Act Analysis
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
almost all hospices are small entities as that term is used in the RFA. 
The great majority of hospitals and most other health care providers 
and suppliers are small entities by meeting the Small Business 
Administration (SBA) definition of a small business (having revenues of 
less than $7.0 million to $34.5 million in any 1 year). While the SBA 
does not define a size threshold in terms of annual revenues for 
hospices, it does define one for home health agencies ($13.5 million; 
see http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=2465b064ba6965cc1fbd2eae60854b11&rgn=div8&view=text&node=13:1.0.1.1.16.1.266.9&idno=13). For the purposes of this final rule, 
because the hospice benefit is a home-based benefit, we are applying 
the SBA definition of ``small'' for home health agencies to hospices; 
we will use this definition of ``small'' in determining if this final 
rule has a significant impact on a substantial number of small entities 
(for example, hospices). Using CY 2009 Medicare hospice data from the 
Health Care Information System (HCIS), we estimate that 96 percent of 
hospices

[[Page 47331]]

have Medicare revenues below $13.5 million and therefore are considered 
small entities.
    The effects of this rule on hospices are shown in Table 1. Overall, 
Medicare payments to all hospices would decrease by an estimated 0.5 
percent over last year's payments in response to the policies that we 
are finalizing in this final rule, reflecting the combined effects of 
the updated wage data and the additional 15 percent reduction in the 
BNAF. The combined effects of the updated wage data and additional 15 
percent reduction in the BNAF on small and large sized hospices (as 
defined by routine home care days rather than by the SBA definition), 
is an estimated reduction of 0.5 percent. Medium sized hospices are 
anticipated to experience an estimated reduction in payments of 0.6 
percent as a result of the updated wage data and the additional 15 
percent reduction in the BNAF. Furthermore, when examining the 
distributional effects of the updated wage data combined with the 
additional 15 percent BNAF reduction, the highest estimated reductions 
in payments are experienced by the urban New England and rural Pacific 
areas with each reflecting a 1.3 percent reduction.
    HHS's practice in interpreting the RFA is to consider effects 
economically ``significant'' only if they reach a threshold of 3 to 5 
percent or more of total revenue or total costs. As noted above, the 
combined effect of only the updated wage data and the additional 15 
percent reduced BNAF (for a total BNAF reduction of 40 percent) for all 
hospices is an estimated reduction of 0.5 percent. Furthermore, since 
HHS's practice in determining ``significant economic impact'' considers 
either total revenue or total costs, it is necessary for total hospice 
revenues to include the effect of the market basket update of 3.0 
percent. As a result, we consider the combined effect of the updated 
wage data, the additional 15 percent BNAF reduction, and the final 3.0 
percent FY 2012 inpatient hospital market basket update inclusive of 
the overall impact, thereby reflecting an aggregate increase in 
estimated hospice payments of 2.5 percent for FY 2012. For small and 
medium hospices (as defined by routine home care days), the estimated 
effects on revenue when accounting for the updated wage data, the 
additional 15 percent BNAF reduction, and the final inpatient hospital 
market basket update reflect increases in payments of 2.4 percent. 
Overall average hospice revenue effects will be slightly less than 
these estimates since according the National Hospice and Palliative 
Care Organization, about 17 percent of hospice patients are non-
Medicare. Therefore, the Secretary has determined that this final rule 
would not create a significant economic impact on a substantial number 
of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This final rule only 
affects hospices. Therefore, the Secretary has determined that this 
final rule would not have a significant impact on the operations of a 
substantial number of small rural hospitals.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2011, that 
threshold is approximately $136 million. This final rule is not 
anticipated to have an effect on State, local, or tribal governments, 
in the aggregate, or on the private sector of $136 million or more.

VII. Federalism Analysis

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

List of Subjects in 42 CFR Part 418

    Health facilities, Hospice care, Medicare, Reporting and 
recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 418--HOSPICE CARE

0
1. The authority citation for part 418 continues to read as follows:

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

Subpart B--Eligibility, Election and Duration of Benefits

0
2. In Sec.  418.22, paragraphs (a)(4) and (b)(4) are revised to read as 
follows:

Sec.  418.22  Certification of terminal illness.

    (a) * * *
    (4) Face-to-face encounter. As of January 1, 2011, a hospice 
physician or hospice nurse practitioner must have a face-to-face 
encounter with each hospice patient whose total stay across all 
hospices is anticipated to reach the 3rd benefit period. The face-to-
face encounter must occur prior to, but no more than 30 calendar days 
prior to, the 3rd benefit period recertification, and every benefit 
period recertification thereafter, to gather clinical findings to 
determine continued eligibility for hospice care.
    (b) * * *
    (4) The physician or nurse practitioner who performs the face-to-
face encounter with the patient described in paragraph (a)(4) of this 
section must attest in writing that he or she had a face-to-face 
encounter with the patient, including the date of that visit. The 
attestation of the nurse practitioner or a non-certifying hospice 
physician shall state that the clinical findings of that visit were 
provided to the certifying physician for use in determining continued 
eligibility for hospice care.
* * * * *

Subpart F--Covered Services

0
3. Section 418.202 (g) is revised to read:

Sec.  418.202  Covered services.

* * * * *
    (g) Home health or hospice aide services furnished by qualified 
aides as designated in Sec.  418.76 and homemaker services. Home health 
aides (also known as hospice aides) may provide personal care services 
as defined in Sec.  409.45(b) of this chapter. Aides may perform 
household services to maintain a safe and sanitary environment in areas 
of the home used by the patient, such as changing bed linens or light 
cleaning and laundering essential to the comfort and cleanliness of the 
patient. Aide services must be provided under the general supervision 
of a registered nurse. Homemaker services may include assistance in 
maintenance of a safe and healthy environment and services to

[[Page 47332]]

enable the individual to carry out the treatment plan.
* * * * *

Subpart G--Payment for Hospice Care

0
4. In Sec.  418.309, the section heading, introductory text and 
paragraph (b) are revised, and new paragraphs (c) and (d) are added, to 
read:

Sec.  418.309  Hospice aggregate cap.

    A hospice's aggregate cap is calculated by multiplying the adjusted 
cap amount (determined in paragraph (a) of this section) by the number 
of Medicare beneficiaries, as determined by one of two methodologies 
for determining the number of Medicare beneficiaries for a given cap 
year described in paragraphs (b) and (c) of this section:
* * * * *
    (b) Streamlined methodology defined. A hospice's aggregate cap is 
calculated by multiplying the adjusted cap amount determined in 
paragraph (a) of this section by the number of Medicare beneficiaries 
as determined in paragraphs (b)(1) and (2) of this section. For 
purposes of the streamlined methodology calculation--
    (1) In the case in which a beneficiary received care from only one 
hospice, the hospice includes in its number of Medicare beneficiaries 
those Medicare beneficiaries who have not previously been included in 
the calculation of any hospice cap, and who have filed an election to 
receive hospice care in accordance with Sec.  418.24 during the period 
beginning on September 28 (34 days before the beginning of the cap 
year) and ending on September 27 (35 days before the end of the cap 
year), using the best data available at the time of the calculation.
    (2) In the case in which a beneficiary received care from more than 
one hospice, each hospice includes in its number of Medicare 
beneficiaries only that fraction which represents the portion of a 
patient's total days of care in all hospices and all years that was 
spent in that hospice in that cap year, using the best data available 
at the time of the calculation. The aggregate cap calculation for a 
given cap year may be adjusted after the calculation for that year 
based on updated data.
    (c) Patient-by-patient proportional methodology defined. A 
hospice's aggregate cap is calculated by multiplying the adjusted cap 
amount determined in paragraph (a) of this section by the number of 
Medicare beneficiaries as described in paragraphs (c)(1) and (2) of 
this section. For the purposes of the patient-by-patient proportional 
methodology--
    (1) A hospice includes in its number of Medicare beneficiaries only 
that fraction which represents the portion of a patient's total days of 
care in all hospices and all years that was spent in that hospice in 
that cap year, using the best data available at the time of the 
calculation. The total number of Medicare beneficiaries for a given 
hospice's cap year is determined by summing the whole or fractional 
share of each Medicare beneficiary that received hospice care during 
the cap year, from that hospice.
    (2) The aggregate cap calculation for a given cap year may be 
adjusted after the calculation for that year based on updated data.
    (d) Application of methodologies. (1) For cap years ending October 
31, 2011 and for prior cap years, a hospice's aggregate cap is 
calculated using the streamlined methodology described in paragraph (b) 
of this section, subject to the following:
    (i) A hospice that has not received a cap determination for a cap 
year ending on or before October 31, 2011 as of October 1, 2011, may 
elect to have its final cap determination for such cap years calculated 
using the patient-by-patient proportional methodology described in 
paragraph (c) of this section; or
    (ii) A hospice that has filed a timely appeal regarding the 
methodology used for determining the number of Medicare beneficiaries 
in its cap calculation for any cap year is deemed to have elected that 
its cap determination for the challenged year, and all subsequent cap 
years, be calculated using the patient-by-patient proportional 
methodology described in paragraph (c) of this section.
    (2) For cap years ending October 31, 2012, and all subsequent cap 
years, a hospice's aggregate cap is calculated using the patient-by-
patient proportional methodology described in paragraph (c) of this 
section, subject to the following:
    (i) A hospice that has had its cap calculated using the patient-by-
patient proportional methodology for any cap year(s) prior to the 2012 
cap year is not eligible to elect the streamlined methodology, and must 
continue to have the patient-by-patient proportional methodology used 
to determine the number of Medicare beneficiaries in a given cap year.
    (ii) A hospice that is eligible to make a one-time election to have 
its cap calculated using the streamlined methodology must make that 
election no later than 60 days after receipt of its 2012 cap 
determination. A hospice's election to have its cap calculated using 
the streamlined methodology would remain in effect unless:
    (A) The hospice subsequently submits a written election to change 
the methodology used in its cap determination to the patient-by-patient 
proportional methodology; or
    (B) The hospice appeals the streamlined methodology used to 
determine the number of Medicare beneficiaries used in the aggregate 
cap calculation.
    (3) If a hospice that elected to have its aggregate cap calculated 
using the streamlined methodology under paragraph (d)(2)(ii) of this 
section subsequently elects the patient-by-patient proportional 
methodology or appeals the streamlined methodology, under paragraph 
(d)(2)(ii)(A) or (B) of this section, the hospice's aggregate cap 
determination for that cap year and all subsequent cap years is to be 
calculated using the patient-by-patient proportional methodology. As 
such, past cap year determinations may be adjusted to prevent the over-
counting of beneficiaries, subject to existing reopening regulations.

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

    Dated: July 21, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: July 27, 2011.

Kathleen Sebelius,
Secretary, Department of Health and Human Services.

    Note:  The following Addendums will not be published in the Code 
of Federal Regulations.

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[FR Doc. 2011-19488 Filed 7-29-11; 4:15 pm]
BILLING CODE 4920-01-P
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