```

[Federal Register Volume 77, Number 217 (Thursday, November 8, 2012)]
[Rules and Regulations]
[Pages 67067-67170]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26904]

[[Page 67067]]

Vol. 77

Thursday,

No. 217

November 8, 2012

Part II

 Department of Health and Human Services

-----------------------------------------------------------------------

Centers for Medicare & Medicaid Services

-----------------------------------------------------------------------

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

Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2013, Hospice Quality Reporting Requirements, and 
Survey and Enforcement Requirements for Home Health Agencies; Final 
Rule

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

[[Page 67068]]

-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, 484, 488, 489, and 498

[CMS-1358-F]
RIN 0938-AR18

Medicare Program; Home Health Prospective Payment System Rate 
Update for Calendar Year 2013, Hospice Quality Reporting Requirements, 
and Survey and Enforcement Requirements for Home Health Agencies

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule updates the Home Health Prospective Payment 
System (HH PPS) rates, including the national standardized 60-day 
episode rates, the national per-visit rates, the low-utilization 
payment amount (LUPA), the non-routine medical supplies (NRS) 
conversion factor, and outlier payments under the Medicare prospective 
payment system for home health agencies effective January 1, 2013. This 
rule also establishes requirements for the Home Health and Hospice 
quality reporting programs. This final rule will also establish 
requirements for unannounced, standard and extended surveys of home 
health agencies (HHAs) and sets forth alternative sanctions that could 
be imposed instead of, or in addition to, termination of the HHA's 
participation in the Medicare program, which could remain in effect up 
to a maximum of 6 months, until an HHA achieves compliance with the HHA 
Conditions of Participation (CoPs) or until the HHA's provider 
agreement is terminated.

DATES: This rule is effective on January 1, 2013, except for:
    a. The amendments to 42 CFR 488.2, 488.3, 488.26, and 488.28, and 
the additions of 42 CFR part 488, subparts I and J, which are effective 
July 1, 2013 (except that Sec.  488.745, Sec.  488.840 and Sec.  
488.845 are effective July 1, 2014).
    b. The amendments to 42 CFR 489.53 and 498.3, which are effective 
July 1, 2013.

FOR FURTHER INFORMATION CONTACT:
Hillary Loeffler, (410) 786-0456, for information about the HH PPS.
Kristine Chu, (410) 786-8953, for information about the HH payment 
reform study and report.
Robin Dowell, (410) 786-0060, for information about HH and Hospice 
quality improvement and reporting.
Mollie Knight, (410) 786-7948, for information about the HH market 
basket.
Joan Proctor, (410) 786-0949, for information about the HH PPS Grouper 
and ICD-10 Conversion.
Lori Teichman, (410) 786-6684, for information about HHCAHPS.
Patricia Sevast, (410) 786-8135 and Peggye Wilkerson, (410) 786-4857, 
for survey and enforcement requirements for HHAs.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Costs and Benefits
II. Background
    A. Statutory Background
    B. System for Payment of Home Health Services
    C. Updates to the HH PPS
III. Summary of Proposed Provisions and Analysis of and Responses to 
Public Comments
    A. Case-Mix Measurement
    B. Outlier Policy
    C. CY 2013 Rate Update
    D. Home Health Face-to-Face Encounter
    E. Therapy Coverage and Reassessments
    F. Payment Reform: Home Health Study and Report
    G. International Classification of Diseases, 10th Edition (ICD-
10) Transition Plan and Grouper Enhancements
IV. Quality Reporting for Hospices
    A. Background and Statutory Authority
    B. Public Availability of Data Submitted
    C. Quality Measures for Hospice Quality Reporting Program and 
Data Submission Requirements for Payment Year FY 2014.
    D. Quality Measures for Hospice Quality Reporting Program for 
Payment Year FY 2015 and Beyond
    E. Additional Measures Under Consideration and Standardization 
of Data Collection
V. Survey and Enforcement Requirements for Home Health Agencies
    A. Background and Statutory Authority
    B. Summary of Proposed Provisions and Analysis of and Responses 
to Public Comments
    C. Provider Agreements and Supplier Approval
    D. Solicitation of Comments
VI. Collection of Information Requirements
VII. Regulatory Impact Analysis
VIII. Federalism Analysis Regulations Text

Acronyms

    In addition, because of the many terms to which we refer by 
abbreviation in this final rule, we are listing these abbreviations and 
their corresponding terms in alphabetical order below:

ACH LOS Acute Care Hospital Length of Stay
ADL Activities of Daily Living
APU Annual Payment Update
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Pub. L. 106-113
CAD Coronary Artery Disease
CAH Critical Access Hospital
CBSA Core-Based Statistical Area
CASPER Certification And Survey Provider Enhanced Reports
CHF Congestive Heart Failure
CMI Case-Mix Index
CMS Centers for Medicare and Medicaid Services
CoPs Conditions of Participation
COPD Chronic Obstructive Pulmonary Disease
CVD Cardiovascular Disease
CY Calendar Year
DM Diabetes Mellitus
DRA Deficit Reduction Act of 2005, Pub. L. 109-171, enacted February 
8, 2006
FDL Fixed Dollar Loss
FI Fiscal Intermediaries
FR Federal Register
FY Fiscal Year
HAVEN Home Assessment Validation and Entry System
HCC Hierarchical Condition Categories
HCIS Health Care Information System
HH Home Health
HHABN Home Health Advance Beneficiary Notice
HHCAHPS Home Health Care Consumer Assessment of Healthcare Providers 
and Systems Survey
HH PPS Home Health Prospective Payment System
HHAs Home Health Agencies
HHRG Home Health Resource Group
HIPPS Health Insurance Prospective Payment System
IH Inpatient Hospitalization
IRF Inpatient Rehabilitation Facility
LTCH Long-Term Care Hospital
LUPA Low Utilization Payment Amount
MEPS Medical Expenditures Panel Survey
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173, enacted December 8, 2003
MSA Metropolitan Statistical Areas
MSS Medical Social Services
NRS Non-Routine Supplies
OBRA Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-2-3, 
enacted December 22, 1987
OCESAA Omnibus Consolidated and Emergency Supplemental 
Appropriations Act, Pub. L. 105-277, enacted October 21, 1998
OES Occupational Employment Statistics
OIG Office of Inspector General
OT Occupational Therapy
OMB Office of Management and Budget
PAC-PRD Post-Acute Care Payment Reform Demonstration
PEP Partial Episode Payment Adjustment
PT Physical Therapy
QAP Quality Assurance Plan
PRRB Provider Reimbursement Review Board
RAP Request for Anticipated Payment
RF Renal Failure

[[Page 67069]]

RFA Regulatory Flexibility Act, Pub. L. 96-354
RHHIs Regional Home Health Intermediaries
RIA Regulatory Impact Analysis
SLP Speech Language Pathology Therapy
SNF Skilled Nursing Facility
UMRA Unfunded Mandates Reform Act of 1995

I. Executive Summary

A. Purpose

    This rule updates the payment rates for home health agencies (HHAs) 
for Calendar Year (CY) 2013 as required under section 1895(b) of the 
Social Security Act (the Act). The update to the prospective payment 
system addresses the market basket update, case-mix adjustments due to 
variation in costs among different units of services, adjustments for 
geographic differences in wage levels, outlier payments, the submission 
of quality data, and additional payments for services provided in rural 
areas.

B. Summary of the Major Provisions

    In this final rule, we use the methods described in the CY 2012 HH 
PPS final rule (76 FR 68526) to update the prospective payment rates 
for CY 2013 using a rebased and revised market basket described in 
section III.C.1 of this rule. This rule discusses the nominal case-mix 
growth adjustment, policy changes regarding therapy reassessments and 
face-to-face encounter requirements, grouper enhancements, and 
requirements concerning the home health and hospice quality reporting 
programs. We also provide an update on the transition plan for ICD-10 
and the home health study concerning home health care access. Lastly, 
this rule establishes alternative sanctions, in lieu of termination, 
for HHAs found not to be in compliance with Medicare Conditions of 
Participation.

C. Summary of Costs and Benefits

                                           TABLE 1--Cost and Benefits
----------------------------------------------------------------------------------------------------------------
        Provision description                Total costs             Total benefits             Transfers
----------------------------------------------------------------------------------------------------------------
CY 2013 HH PPS payment rate update...  N/A....................  The benefits of this     The overall economic
                                                                 final rule include       impact of this final
                                                                 paying more accurately   rule is an estimated
                                                                 for the delivery of      $10 million in
                                                                 Medicare home health     decreased payments to
                                                                 services, providing      HHAs.
                                                                 additional regulatory
                                                                 flexibility for HHAs
                                                                 to comply with therapy
                                                                 requirements and face-
                                                                 to-face encounter
                                                                 documentation
                                                                 requirements.
HHA Survey Requirements and            The components of the    The benefits of this     N/A.
 Alternative (or Intermediate)          rule, which address      rule include
 Sanctions That May be Imposed when     survey requirements,     establishing
 HHAs are Out of Compliance with        codify current Survey    alternative (or
 federal Requirements.                  and Certification        intermediate)
                                        policies and do not      sanctions that may be
                                        represent new costs.     imposed when HHAs are
                                        We estimate that the     out of compliance with
                                        costs associated with    federal requirements,
                                        Informal Dispute         increasing provider
                                        Resolution (IDR) will    participation related
                                        not be significantly     to survey findings via
                                        greater than current     the IDR, and
                                        actions related to       incentives for HHAs to
                                        termination actions.     maintain or regain
                                        We estimate a onetime    compliance with the
                                        $2 million expense for   HHA Conditions of
                                        system modifications     Participation through
                                        to monitor Civil Money   measures other than
                                        Penalties and annual     termination.
                                        operating expenses of
                                        $410,972 to maintain
                                        the system and provide
                                        surveyor training.
----------------------------------------------------------------------------------------------------------------

II. Background

A. Statutory Background

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted 
August 5, 1997), significantly changed the way Medicare pays for 
Medicare HH services. Section 4603 of the BBA mandated the development 
of the HH PPS. Until the implementation of a HH PPS on October 1, 2000, 
HHAs received payment under a retrospective reimbursement system.
    Section 4603(a) of the BBA mandated the development of a HH PPS for 
all Medicare-covered HH services provided under a plan of care (POC) 
that were paid on a reasonable cost basis by adding section 1895 of the 
Social Security Act (the Act), entitled ``Prospective Payment For Home 
Health Services.'' Section 1895(b)(1) of the Act requires the Secretary 
to establish a HH PPS for all costs of HH services paid under Medicare.
    Section 1895(b)(3)(A) of the Act requires the following: (1) The 
computation of a standard prospective payment amount include all costs 
for HH services covered and paid for on a reasonable cost basis and 
that such amounts be initially based on the most recent audited cost 
report data available to the Secretary; and (2) the standardized 
prospective payment amount be adjusted to account for the effects of 
case-mix and wage levels among HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the HH applicable percentage 
increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
case-mix and geographic differences in wage levels. Section 
1895(b)(4)(B) of the Act requires the establishment of an appropriate 
case-mix change adjustment factor for significant variation in costs 
among different units of services.
    Similarly, section 1895(b)(4)(C) of the Act requires the 
establishment of wage adjustment factors that reflect the relative 
level of wages, and wage-related costs applicable to HH services 
furnished in a geographic area

[[Page 67070]]

compared to the applicable national average level. Under section 
1895(b)(4)(C) of the Act, the wage-adjustment factors used by the 
Secretary may be the factors used under section 1886(d)(3)(E) of the 
Act.
    Section 1895(b)(5) of the Act gives the Secretary the option to 
make additions or adjustments to the payment amount otherwise paid in 
the case of outliers due to unusual variations in the type or amount of 
medically necessary care. Section 3131(b)(2) of the Patient Protection 
and Affordable Care Act of 2010 (the Affordable Care Act) (Pub. L. 111-
148, enacted March 23, 2010) revised section 1895(b)(5) of the Act so 
that total outlier payments in a given year would not exceed 2.5 
percent of total payments projected or estimated. The provision also 
made permanent a 10 percent agency-level outlier payment cap.
    In accordance with the statute, as amended by the BBA, we published 
a final rule in the July 3, 2000 Federal Register (65 FR 41128) to 
implement the HH PPS legislation. The July 2000 final rule established 
requirements for the new HH PPS for HH services as required by section 
4603 of the BBA, as subsequently amended by section 5101 of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act (OCESAA) for 
Fiscal Year 1999, (Pub. L. 105-277, enacted October 21, 1998); and by 
sections 302, 305, and 306 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act (BBRA) of 1999, (Pub. L. 106-113, 
enacted November 29, 1999). The requirements include the implementation 
of a HH PPS for HH services, consolidated billing requirements, and a 
number of other related changes. The HH PPS described in that rule 
replaced the retrospective reasonable cost-based system that was used 
by Medicare for the payment of HH services under Part A and Part B. For 
a complete and full description of the HH PPS as required by the BBA, 
see the July 2000 HH PPS final rule (65 FR 41128 through 41214).
    Section 5201(c) of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171, enacted February 8, 2006) added new section 1895(b)(3)(B)(v) 
to the Act, requiring HHAs to submit data for purposes of measuring 
health care quality, and links the quality data submission to the 
annual applicable percentage increase. This data submission requirement 
is applicable for CY 2007 and each subsequent year. If an HHA does not 
submit quality data, the HH market basket percentage increase is 
reduced 2 percentage points. In the November 9, 2006 Federal Register 
(71 FR 65884, 65935), we published a final rule to implement the pay-
for-reporting requirement of the DRA, which was codified at Sec.  
484.225(h) and (i) in accordance with the statute. The pay-for-
reporting requirement was implemented on January 1, 2007.
    The Affordable Care Act made additional changes to the HH PPS. One 
of the changes in section 3131 of the Affordable Care Act is the 
amendment to section 421(a) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173, 
enacted on December 8, 2003) as amended by section 5201(b) of the DRA. 
The amended section 421(a) of the MMA now requires, for HH services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act) with respect to episodes and visits ending on or after April 1, 
2010, and before January 1, 2016, that the Secretary increase, by 3 
percent, the payment amount otherwise made under section 1895 of the 
Act.

B. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS on the basis of 
a national standardized 60-day episode payment rate that is adjusted 
for the applicable case-mix and wage index. The national standardized 
60-day episode rate includes the six HH disciplines (skilled nursing, 
HH aide, physical therapy, speech-language pathology, occupational 
therapy, and medical social services). Payment for NRS is no longer 
part of the national standardized 60-day episode rate and is computed 
by multiplying the relative weight for a particular NRS severity level 
by the NRS conversion factor (See section II.D.4.e). Payment for 
durable medical equipment covered under the HH benefit is made outside 
the HH PPS payment system. To adjust for case-mix, the HH PPS uses a 
153-category case-mix classification system to assign patients to a 
home health resource group (HHRG). The clinical severity level, 
functional severity level, and service utilization are computed from 
responses to selected data elements in the OASIS assessment instrument 
and are used to place the patient in a particular HHRG. Each HHRG has 
an associated case-mix weight which is used in calculating the payment 
for an episode.
    For episodes with four or fewer visits, Medicare pays national per-
visit rates based on the discipline(s) providing the services. An 
episode consisting of four or fewer visits within a 60-day period 
receives what is referred to as a low utilization payment adjustment 
(LUPA). Medicare also adjusts the national standardized 60-day episode 
payment rate for certain intervening events that are subject to a 
partial episode payment adjustment (PEP adjustment). For certain cases 
that exceed a specific cost threshold, an outlier adjustment may also 
be available.

C. Updates to the HH PPS

    As required by section 1895(b)(3)(B) of the Act, we have 
historically updated the HH PPS rates annually in the Federal Register. 
The August 29, 2007 final rule with comment period set forth an update 
to the 60-day national episode rates and the national per-visit rates 
under the Medicare prospective payment system for HHAs for CY 2008. The 
CY 2008 rule included an analysis performed on CY 2005 HH claims data, 
which indicated a 12.78 percent increase in the observed case-mix since 
2000. Case-mix represents the variations in conditions of the patient 
population served by the HHAs. Subsequently, a more detailed analysis 
was performed on the 2005 case-mix data to evaluate if any portion of 
the 12.78 percent increase was associated with a change in the actual 
clinical condition of HH patients. We examined data on demographics, 
family severity, and non-HH Part A Medicare expenditures to predict the 
average case-mix weight for 2005. We identified 8.03 percent of the 
total case-mix change as real, and therefore, decreased the 12.78 
percent of total case-mix change by 8.03 percent to get a final nominal 
case-mix increase measure of 11.75 percent (0.1278 * (1-0.0803) = 
0.1175).
    To account for the changes in case-mix that were not related to an 
underlying change in patient health status, we implemented a reduction 
over 4 years in the national standardized 60-day episode payment rates. 
That reduction was to be 2.75 percent per year for 3 years beginning in 
CY 2008 and 2.71 percent for the fourth year in CY 2011. In the CY 2011 
HH PPS final rule (76 FR 68532) we updated our analyses of case-mix 
change and finalized a reduction of 3.79 percent, instead of 2.71 
percent, for CY 2011 and deferred finalizing a payment reduction for CY 
2012 until further study of the case-mix change data and methodology 
was completed.
    For CY 2012, we published the November 4, 2011 final rule (76 FR 
68526) (hereinafter referred to as the CY 2012 HH PPS final rule) that 
set forth the update to the 60-day national episode rates and the 
national per-visit rates under the Medicare prospective payment system 
for HH services. In

[[Page 67071]]

addition, as discussed in the CY 2012 final rule (76 FR 68528), our 
analysis indicated that there was a 22.59 percent increase in overall 
case-mix from 2000 to 2009 and that only 15.76 percent of that overall 
observed case-mix percentage increase was due to real case-mix change. 
As a result of our analysis, we identified a 19.03 percent nominal 
increase in case-mix. To fully account for the 19.03 percent nominal 
case-mix growth which was identified from 2000 to 2009, we finalized a 
3.79 percent payment reduction in CY 2012 and 1.32 percent payment 
reduction for CY 2013.
    Following up on our commitment to further study case-mix change 
over time and the methodology used to determine real versus nominal 
case-mix change, we procured an independent review of our methodology 
by a team at Harvard University, lead by Dr. David Grabowski. That 
review led to a slight enhancement of the case-mix model, but otherwise 
confirmed the model's accuracy (please see the report located at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Downloads/HHPPS_HHAcasemixgrowthFinalReport.pdf).

III. Summary of Proposed Provisions and Analysis of and Responses to 
Public Comments

A. Case-Mix Measurement

    As described in the CY 2013 HH PPS proposed rule issued in the July 
13, 2012 Federal Register (77 FR 41548) and in section II.B of this 
rule, we have implemented payment reductions to the national 
standardized 60-day episode payment rates over the past 5 years to 
account for nominal case-mix growth, that is, case-mix growth unrelated 
to changes in patient acuity.
    When including the latest data available, data from 2000 to 2010, 
we determined that there was a 20.08 percent nominal case-mix change 
during that time period. To fully account for the remainder of the 
20.08 percent increase in nominal case-mix beyond that which has been 
accounted for in previous payment reductions, we estimated that the 
percentage reduction to the national standardized 60-day episode rates 
for nominal case-mix change would be 2.18 percent. We considered 
proposing a 2.18 percent reduction to account for the remaining 
increase in measured nominal case-mix, and solicited comments on that 
proposal. However for CY 2013, we proposed to move forward with the 
1.32 percent payment reduction to the national standardized 60-day 
episode rates as promulgated in the CY 2012 HH PPS final rule. We note 
that analysis, to date, would seem to indicate a high likelihood of 
continued growth in nominal case-mix going forward. As such, we will 
continue to monitor real and nominal case-mix change and make updates 
as appropriate. We will consider any and all analyses as it continues 
to address the issue of the increase in nominal case-mix in future 
rulemaking.
    The following is a summary of the comments we received regarding 
the case-mix measurement proposal.
    Comment: One commenter stated that the payment reductions for 
nominal case-mix growth are based on the unsubstantiated assertion that 
HHAs have intentionally ``gamed the system'' by coding their patients 
at a higher clinical severity level in order to receive higher 
payments.
    Response: As we have stated in previous regulations, we believe 
nominal coding change results mostly from changed coding practices, 
including improved understanding of the ICD-9 coding system, more 
comprehensive coding, changes in the interpretation of various items on 
the OASIS and in formal OASIS definitions, and other evolving 
measurement issues. Our view of the causes of nominal coding change 
does not emphasize the idea that HHAs or clinicians in general ``gamed 
the system.'' However, since our goal is to pay increased costs 
associated with real changes in patient severity, and nominal coding 
change does not demonstrate that underlying changes in patient severity 
occurred, we believe it is necessary to exclude nominal case-mix 
effects that are unrelated to changes in patient severity.
    Comment: Several commenters stated that CMS should not implement 
across-the-board reductions in payments, but rather apply the 
reductions only to HHAs that are abusing the system, or upcoding. 
Commenters stated that the payment reductions penalize agencies where 
case-mix increases have been less than average. A commenter stated that 
those agencies with a low average case-mix should be protected from 
further cuts since the cuts are based on a high case-mix weight. Other 
commenters stated that across the board cuts do not directly address 
problems with upcoding. One commenter stated that instead of 
implementing an across the board cut, CMS should redirect its focus to 
approaches that target specific practices that have caused the case-mix 
increase and that these methods should be implemented in conjunction 
with rebasing.
    Response: For a variety of reasons, as we have noted in previous 
regulations, we have not proposed targeted reductions for nominal case-
mix change. Many agencies have small patient populations, which would 
make it practically impossible to reliably measure nominal case-mix 
change at the agency level. Further, we believe changes and 
improvements in coding practices have been widespread, making it 
difficult to clearly categorize agencies into high and low coding-
change groups. As discussed in the CY 2012 final rule, when performing 
an independent review of our case-mix measurement methodology, Dr. 
David Grabowski and his team at Harvard University agreed with our 
reasons for not proposing targeted reductions, stating their concerns 
about the small sample size of many agencies and their findings of 
significant nominal case-mix increases across different classes of 
agencies (please see the report located at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Downloads/HHPPS_HHAcasemixgrowthFinalReport.pdf).
    We note that although we have stated in past regulations that a 
targeted system would be administratively burdensome, the reasons we 
have just presented go beyond administrative complexity. Certain 
comments seem to assume that we can use case-mix levels to precisely 
identify those agencies with inappropriate coding practices. We do not 
agree that agency-specific case-mix levels can precisely differentiate 
agencies with inappropriate coding practices from other agencies that 
are coding appropriately. System wide, case-mix levels have risen over 
time while data on patient characteristics indicate little change in 
patient severity over time. That is, the main problem is not the level 
of case-mix reached over a period of time, but the amount of change in 
the billed case-mix weights not attributable to underlying changes in 
actual patient severity. We continue to explore potential changes to 
the HH PPS which could deter future nominal case-mix growth, such as 
the recalibration implemented in the CY 2012 final rule, and possible 
changes in conjunction with rebasing. However, we believe we still need 
to implement payment reductions to account for nominal case-mix change 
from the inception of the HH PPS through 2009.
    Comment: A commenter stated that across the board cuts appear to be 
based on high profit margins of agencies that are not committed to 
serving all patients.
    Response: We note that the payment reductions are based on our 
assessment of real and nominal case-mix growth. High profit margins do 
not play a role

[[Page 67072]]

in our calculations of the payment reductions.
    Comment: Commenters recommended that CMS target specific HHAs by 
reducing case-mix adjustments for HHAs with Medicare margins that are 
significantly above average for similarly situated HHAs. A commenter 
cited MedPAC's report of the variation in margins for home health 
providers and stated that the vast disparity in Medicare margins among 
HHAs makes across the board payment cuts not only unwarranted and 
unfair, but also potentially devastating for those whose costs exceed 
Medicare reimbursement.
    Response: Case-mix adjustments are based on changes in real and 
nominal case-mix over time. Our analyses of coding change among many 
classifications of agencies, as described in the CY 2012 proposed and 
final rules, found relatively little difference across provider types 
in the amount of coding change. An examination of coding change by 
profitability may have similar results, as profitability may reflect 
efficiency rather than upcoding. We further note that a classification 
by profitability would be complicated by the fact that profitability 
can vary from year to year.
    Comment: A commenter stated that applying the 1.32 percent payment 
reduction would be premature and that CMS should wait to apply the 
reduction until there are more data to review for 2011 and in 
particular 2012, where there has been a significant shift in the case-
mix away from therapy episodes. The commenter stated that the 2012 
recalibration will likely change agency behavior and, in turn, have an 
effect on the average case-mix weight. The commenter urged CMS to wait 
to make further payment reductions until it can analyze complete data 
sets from 2011 and 2012.
    Response: As we have stated in previous rulemaking since the start 
of the HH PPS, we continue to use data samples that represent a 2-year 
lag in service dates relative to the year in which we conduct the 
analysis. We note that while we analyzed 2010 data, which showed that 
we would need to implement a 2.18 percent reduction to account for 
nominal case-mix growth through 2010, we only proposed to implement a 
1.32 percent reduction which would account for nominal case-mix growth 
from 2000 to 2009. We agree with the commenter that the recalibration 
in CY 2012 may have an effect on the average case-mix weight and we 
note that this has been taken into account when considering the 1.32 
percent reduction versus than the 2.18 percent reduction. We would like 
to point out that the 1.32 percent payment reduction was finalized in 
the CY 2012 rule and we believe that with the steady increases in 
nominal case-mix growth over the years, there is a need to implement a 
payment reduction to account for this growth. We plan to continue to 
analyze data as it becomes available and propose payment adjustments 
accordingly.
    Comment: A commenter stated that CMS should use the most current 
metrics in analyzing case-mix growth and that they were willing to help 
with this effort.
    Response: Currently, we use claims data matched to OASIS 
assessments and Part A information, as well as HCC data, in the 
analysis of real and nominal case-mix growth. The commenter did not 
specify what they consider to be the most current metrics. However, we 
will continue to solicit concrete suggestions for other metrics that 
can be incorporated in our analysis.
    Comment: A commenter stated that CMS proposed a 1.32 percent 
decrease in payments to account for nominal case-mix growth from 2000 
to 2010.
    Response: We would like to clarify that the 1.32 percent decrease 
in payments was finalized in the CY 2012 final rule in order to account 
for nominal case-mix growth from 2000 to 2009. Our updated analysis 
shows that in order to account for nominal case-mix growth from 2000 to 
2010, we would need to implement a 2.18 percent reduction to payments 
for CY 2013. Therefore, for this rule, we are finalizing the 1.32 
percent case-mix adjustment.
    Comment: A commenter stated that the proposed national standardized 
60-day episode payment rate has only increased by a total of 1 percent 
in 12 years.
    Response: While the national standardized 60-day episode payment 
rate has not increased substantially in recent years, overall Medicare 
HH expenditures increased from $10.1 billion in 2003 to $18.6 billion 
in 2011, an increase of 84 percent, and the number of HH users 
increased 30 percent during the same time period. However, payment for 
an episode does not solely rely on the national standardized 60-day 
episode base payment rate. One must take into account the average case-
mix weight when looking at HH PPS payments. The average case-mix weight 
has continually increased over the years while our analysis shows 
relatively lower real case-mix growth. The average case-mix weight in 
2000 was 1.0959 while the average case-mix weight in 2009 was 1.3435, a 
total case-mix change from 2000 to 2009 of 22.59 percent ((1.3435-
1.0959)/1.0959). When taking into account the 15.76 percent of total 
case-mix change estimated as real from 2000 to 2009, the nominal case-
mix change measure is 19.03 percent (0.2259 * (1-0.1576) = 0.1903) from 
2000 to 2009. Therefore, we believe a payment reduction is necessary to 
align payments with the real case-mix growth we have observed.
    Comment: A commenter stated that a further payment reduction is 
unwarranted especially with rebasing next year.
    Response: We are finalizing a 1.32 percent payment reduction to the 
CY 2013 national standardized 60-day episode base payment rate intended 
to account for increases in billed case-mix weights, resulting in 
overpayments, that have occurred between 2000 and 2009, above and 
beyond the real change in case-mix. Since our analysis indicates that 
margins will remain adequate, and our analysis for purposes of rebasing 
is still in process, we see no reason to defer the nominal case-mix 
adjustment in this rule.
    Comment: A commenter recommended that CMS find alternative ways to 
account for nominal case-mix growth that do not impose payment 
reductions to the HH PPS.
    Response: Section 1895(b)(3)(B)(iv) of the Act gives CMS the 
authority to implement payment reductions for nominal case-mix growth 
by applying reductions to the base payment. We continue to explore ways 
to prevent future nominal case-mix growth and we welcome any 
suggestions.
    Comment: Some commenters stated that CMS should increase its 
program integrity efforts to combat fraud, waste, and abuse. Other 
commenters stated that CMS should eliminate the proposed payment 
reduction and instead ``conduct targeted claims review and deny payment 
for claims where the case-mix weight is not supported by the plan of 
care.'' In addition, some commenters recommended that CMS use existing 
medical review to identify and target specific agencies with abusive 
coding practices rather than imposing an across the board payment 
reduction, and one commenter stated that review by Medicare 
Administrative Contractors and edits can be used to determine if 
agencies are upcoding; the commenter believes that such a method would 
encourage accurate coding.
    Response: We have taken various measures to reduce payment 
vulnerabilities and the federal government has launched actions to 
directly identify fraudulent and abusive activities. Commenters should 
be aware of tip lines available that can help

[[Page 67073]]

support investigative efforts of the federal government. The Office of 
the Inspector General, HHS Web site at http://oig.hhs.gov/fraud/report-fraud/index.asp, provides information about how to report fraud. 
Another Web site, http://www.stopmedicarefraud.gov/index.html, is 
oriented to Medicare patients and their families and provides 
information about recognizing fraud.
    In addition, while we appreciate the commenters' suggestion about 
the claims review, we note that because our resources are not 
sufficient to conduct claims review on a scale that would be required 
to counteract the broad-based uptrend in case-mix weights, we cannot 
perform the review as suggested.
    Furthermore, we note that our statistical methods using available 
administrative data are feasible and sufficiently reliable to utilize 
for the purpose of case-mix reductions.
    Comment: A commenter requested that CMS adopt the approach outlined 
in the Home Health Care Access Protection Act of 2012 (H.R. 6059, 112th 
Cong.), which is sponsored by Rep. James McGovern and Rep. Walter 
Jones, and involves working with the home health industry to develop 
criteria and evaluating a medical records sample to determine 
reductions, rather than relying on hypothetical extrapolations.
    Response: We already have commissioned a review of the case-mix 
change methodology, as we described in the CY 2012 proposed and final 
rule. A research team of highly qualified personnel evaluated our case-
mix change methodology and found that, overall, our models to assess 
real and nominal case-mix growth are robust. We have not commissioned 
work analyzing case-mix change based on information from a medical 
records sample. We note that a medical records sample could be used to 
determine payment reductions; however, there are many difficulties and 
limitations to this analysis. First, to produce reliable results, we 
would need to collect a large sample, which would require significant 
financial resources that may not be available. We would need a sizable 
sample of records from both the IPS period and from a follow-up year 
(for example, 2009). In addition, based on our past experience in 
retrieving old records, it is difficult to find enough records to 
constitute a valid broad-based sample. Further, it is possible that 
using information from a medical records sample might not return the 
findings that the proponents suggest, because nominal case-mix 
increases partly result from reporting practices that have changed 
throughout time from a state of underreporting to a state of more 
complete reporting. Therefore, one would expect that the source records 
would likely reflect underreporting in the early years, just as the 
OASIS reflected underreporting in the early years.
    Comment: A commenter stated that the CMS case-mix change 
methodology does not recognize the industry's increasing ability to 
care for more serious medical conditions in the home (caused by 
technology improvements, etc.) and ignores changes in patient severity. 
We received a number of comments stating that home health patients are 
now more complex with more co-morbidities and chronic conditions than 
in previous years and that patients that would have previously been 
referred to health care facilities, such as skilled nursing facilities, 
are now being cared for at home. Moreover, the commenters stated that 
other healthcare settings have developed stricter admission 
requirements, thereby increasing the number of home health patients 
with high severity levels. A commenter stated that Transitional Care 
Units (TCUs) and Skilled Nursing Facilities (SNFs) are refusing to 
accept complex patients from the hospital and implied that those 
patients were being diverted to home health care.
    Response: To assess whether patients are more complex with more co-
morbidities and chronic conditions than previous years, we examined the 
change in HCC variables over time, examining the average values for 
2005 and 2010, the most recent complete data available. We note that 
our analysis did not find evidence that home health patients have 
gotten sicker over time as measured by the number of HCC indicators 
present. The mean number of HCC conditions present was the same in 2005 
as in 2010. In addition, our analyses showed that while the prevalence 
of some HCCs has increased since 2005, the prevalence of others has 
decreased. Based on the relationship of individual HCC variables to 
case-mix level, the changes in the HCC indicators that have occurred 
since 2005 actually lead to a prediction of slightly lower expected 
case-mix. Furthermore, data we presented in the CY 2011 HH PPS final 
rule (75 FR 70379) indicate that hospital lengths of stay have been 
declining slightly and lengths of stay in residential post-acute 
settings before home health admission have increased between 2001 and 
2008. We note that the proportion of initial non-LUPA home health 
episodes preceded by acute care within the previous 60 days has 
declined between 2001 and 2008, from 70.0 percent to 62.7 percent. This 
indicates more patients are being admitted to HHAs from non-
institutional settings, such as from the community. Also, we note that 
acute care stays, which normally precede stays in institutional post-
acute care settings, are decreasing in the stay histories of home 
health patients. Therefore, we question whether there is any evidence 
showing an increase in home health patient severity as a result of more 
patients coming to home health as a result of diversion from other 
post-acute care settings.
    Comment: Commenters stated that CMS should suspend or eliminate 
case-mix payment reductions because the data used to determine the 
reductions do not recognize real increases in severity due to earlier 
and sicker hospital discharges.
    Response: Although we recognize that average lengths of stay in 
acute care settings are in decline, our analysis shows that agencies 
are, in fact, caring for proportionately fewer, not more, post-acute 
patients. Since 2001, the average length of stay (LOS) in acute care 
preceding home health has declined by about one day, from 7 days to 6 
days. Between 2008 and 2009, the average length of stay in acute care 
leading directly to home health admission declined from 6.07 days to 
5.85 days. However, agencies are caring for fewer highly acute patients 
in their caseloads. The proportion of non-LUPA episodes in which the 
patient went from acute care directly to home health within 14 days of 
acute hospital discharge declined substantially between 2001 and 2008, 
from 32 percent to 23 percent. Also, the median acute hospital LOS for 
these non-LUPA episodes with a 14-day look back period remained 
unchanged at 5 days between 2002 and 2008 (see 75 FR 70379). In 2009, 
the median LOS declined to an estimated four days (see Table 2). The 
distribution of lengths of stay has been fairly stable, with declines 
since 2006 limited to the upper half of lengths of stay.
    We believe the declining proportion of home health cases with a 
recent acute discharge is due in part to more patients incurring re-
certifications after admission to home health care, and also due to 
more patients entering care from the community. The shortening lengths 
of stay at the right tail (high percentiles) of the distribution may 
reflect changing utilization of long-term-care hospitals during recent 
years. The conclusion we draw from these data is that while patients on 
average have shorter hospital stays, agencies are also facing a smaller 
proportion of home health episodes in which the patient has been 
acutely ill in the very recent past. Also, the detailed data on the 
distribution of stay lengths suggest that for the most

[[Page 67074]]

part lengths of stay for such patients remained fairly stable through 
2009.
[GRAPHIC] [TIFF OMITTED] TR08NO12.000

    Furthermore, we think that acuity of patients has been increasingly 
mitigated by lengthening post-acute stays for the substantial number of 
home health patients who use residential post-acute care prior to an 
episode. Our data show that patients who enter residential post-acute 
care before home health admission have experienced increasing lengths 
of stay in post-acute care since 2001. Using a 10 percent random 
beneficiary sample, we computed the total days of stay (including both 
acute and post-acute care days) for home health episodes with common 
patterns of pre-admission utilization during the 60 days preceding the 
beginning of the episode. We included patients whose last stay was an 
acute care stay, or whose next-to-last stay was an acute care stay with 
a follow-on residential post-acute care stay, or whose third from last 
stay was an acute care stay followed by two post-acute care stays. 
These common patterns accounted for 55 percent of the initial episodes 
in 2001 and 42 percent in 2008. We found that total days of stay during 
the 60 days leading up to the episode averaged 12.6 days in 2001, and 
rose to 12.8 days in 2008. This small change in total days of stay 
during a period when acute care LOS was declining was due to increasing 
lengths of stay in residential post-acute care for these patients. For 
example, within the 30 days before admission, an average LOS in the 
post-acute care setting for episodes preceded by an acute care stay 
that was the next-to-last stay, and where the post-acute care stay was 
the very last stay before the claim from-date, increased from 12.7 to 
14.3 days. Our interpretation of these statistics is that patient 
acuity has been increasingly mitigated by longer post-acute stays for 
the substantial number of home health patients that use residential 
post-acute care prior to the start of a home health episode. Patient 
acuity was also mitigated by growing numbers of home health re-
certifications.
    Comment: A commenter stated that the model used to assess real 
case-mix growth ignores the fact that more individuals are becoming 
eligible for Medicare services and there is an increasing number of 
Medicare beneficiaries who are over 85 years of age and need additional 
services.
    Response: We note that increasing eligibility does not in itself 
imply more severity. Rather, our statistical analysis shows that there 
are more patients with about the same severity of illness level. With 
regards to the comment about the proportion of older patients, we note 
that we take into account the proportion of home health patients over 
the age of 85 in our model to estimate real case-mix growth. The 
results of the model show that while the proportion of patients over 
age 85 has increased somewhat, this change is only associated with 
small changes in real case-mix.
    Comment: A commenter stated that relevant data shows that home 
health care patients have increased functional limitations and more 
complex clinical conditions than in past years.
    Response: As stated in the CY 2012 proposed rule, a detailed 
analysis of Medicare Expenditure Panel Survey (MEPS) data (which is 
independent of our real case-mix model) was performed to examine the 
severity of the Medicare home health population. The trends in health 
status from 2000 to 2008 were analyzed.
    The analysis showed a slight increase in the overall health status 
of the Medicare home health population, and in particular, the percent 
of home health Medicare beneficiaries experiencing ``extreme'' or 
``quite a bit'' of work-limiting pain decreased substantially, from 
56.6 percent in 2000 to 45.4 percent in 2008 (p=0.039). While we 
recognize that there are some limitations to this analysis, we 
concluded that the results of this analysis provide no evidence of an 
increase in patient severity from 2000 to 2008.
    In addition, we would like to note that during the CY 2012 
rulemaking cycle, we incorporated HCC data, which is used by CMS to 
risk-adjust payments to managed care organizations in the Medicare 
program, in our model to assess real case-mix growth. Our findings of 
real and nominal case-mix growth, even when incorporating HCC data, 
were consistent with past results. Most of the case-mix change was 
identified as nominal case-mix change.
    We will continue to solicit suggestions for other data that can be

[[Page 67075]]

incorporated into our analysis of real and nominal case-mix growth.
    Comment: A commenter stated the models used to determine real case-
mix change do not consider increased therapy needs in the home health 
population.
    Response: The models were intended to analyze real changes in case-
mix over time and do not distinguish whether these changes are due to 
increases in therapy use or other factors. We do not believe that it 
would be appropriate to include utilization-related variables, such as 
the number of therapy visits, as predictors in the model, as such 
variables are provider-determined. In addition, the goal of these 
analyses was not to develop refinements to the payment system but 
rather to examine changes in measures of patient acuity that are not 
affected by any changes in provider coding practices. For example, the 
models do incorporate information about change in the types of patients 
more likely to use therapy, such as post-acute joint replacement 
patients. CMS has access to the claims histories and other 
administrative data for patients in our samples, and we welcome 
suggestions about how to better use these resources in finding 
alternative variables more indicative of the need for therapy, 
particularly if the suggestions involve the use of data and variables 
that are not HHA-determined.
    Comment: Some commenters suggested that CMS recognize changes in 
patient severity, improved patient assessment, and coding and 
reimbursement changes in its case-mix methodology and work with NAHC to 
uncover the reasons for case-mix weight changes and to develop a valid 
methodology for payment reform. A commenter urged CMS to continue to 
evaluate and refine the case-mix methodology so that it targets drivers 
of case-mix change and more effectively captures real case-mix change. 
Another commenter stated that CMS should consult with stakeholders to 
agree upon factors that should be considered when calculating real and 
nominal case-mix growth.
    Response: Through the public comment process, we have obtained 
industry views as to the reasons for coding changes. As we have pointed 
out in the past, reasons offered, such as improved coding, are not a 
sufficient basis for raising payment rates, particularly if data does 
not indicate a significant increase in the severity of home health 
patients. To the extent case-mix change is due to better methods of 
assessing patients in the home health setting, this does not justify 
making reimbursements as though the patients really were different in 
their case-mix levels of severity. Over the last several years, we have 
continued to evaluate our data and methods, and in the CY 2012 proposed 
and final rule, we described that we procured an independent review of 
our methodology to assess real and nominal case-mix growth performed by 
a team at Harvard University led by Dr. David Grabowski. The Harvard 
team was asked to review the appropriateness and strength of evidence 
from the case-mix change methodology we used. After their examination, 
they concluded that the methodology was robust and valid. We plan to 
continue to evaluate the case-mix methodology and potentially refine 
the methodology as needed. We will continue to solicit suggestions on 
possible ways to improve our models.
    Comment: Commenters stated that providers have had to absorb 
several rounds of payment reductions due to upcoding, which have 
contributed to lower growth in home care spending. They stated that the 
growth rate in Medicare home care spending has dramatically declined to 
just 1.0 percent from 2010 to 2011.
    Response: We note that the purpose of the payment reduction is to 
adjust payments to better reflect real changes in patient severity. In 
addition, slower Medicare home care spending growth may be due to a 
number of factors. We note that we have conducted analyses looking at 
the number of paid claims, both nationally and by state, for 2009 
through 2011. Our analyses show that the volume of paid claims is 
consistent with previous years. Although paid claims generally go up 
very slightly every year and they did not in 2010, this could be 
attributed to many factors, including CMS's fraud and abuse efforts, or 
simply a more general trend in Medicare claims volume.
    Comment: One commenter estimated that over 40 percent of existing 
HHAs currently operate with negative financial margins on Medicare 
revenues and that when all patient costs and revenues are considered, 
overall margins for all freestanding HHAs are estimated to be 3 percent 
in 2012. Another commenter stated that in the states where they 
operate, more than half or nearly half of all home health providers are 
reimbursed less than cost by Medicare. Specifically, the commenter 
stated that 59 percent of HHAs in Missouri, 45.9 percent of HHAs in 
Illinois, 59.0 percent of HHAs in Oklahoma, and 67.1 percent of HHAs in 
Wisconsin are operating with margins less than zero. The commenter 
urged CMS to eliminate the proposed 1.32 percent reduction so that 
payments more closely reflect the ``economic realities'' of HHAs.
    Response: Regarding the commenters' concerns about the effects of 
the proposed reductions on providers' viability and the resultant 
access risks, we note that in their March 2012 Report to the Congress, 
MedPAC projected Medicare margins for home health agencies in 2012 to 
average 13.7 percent. While it is unclear whether the projection of 
average Medicare margins of 13.7 percent in 2012 factors in potential 
changes in the therapy level distribution due to the CY 2012 
recalibration, and therefore actual margins could be slightly 
different, we note that our analysis of payments and costs also 
projects average margins to be adequate. Furthermore, when examining 
the impact of the 1.32 percent payment reduction, providers need to 
take into account all of the other policies in the CY 2013 rule, such 
as changes to the fixed dollar loss (FDL) ratio as well as the wage 
index and payment update. When examining all of the CY 2013 policies 
finalized in this final rule, our data indicates that the impact is 
minimal, with an average effect on payments of -0.01 percent. In 
addition, when taking into account all of the CY 2013 policies, 
Illinois, Wisconsin, and Missouri are expected to have a net increase 
in payments in CY 2013 (see section IV. Regulatory Impact Analysis). 
Furthermore, based on the results of our analysis on estimated margins 
by state, there is no indication that the four states mentioned by the 
commenter will be more adversely affected by the CY 2013 policies 
compared to other states.
    Comment: A commenter stated that while the number of HHAs may 
continue to grow, the growth is limited to certain geographic areas and 
that the across the board payment reductions are ``taking their toll'' 
on HHAs with below average margins. Another commenter stated ``Any 
efficiency available to control the cost of an episode of care has been 
implemented, and rate cuts are now having a direct, linear impact of 
providers.''
    Response: We note that our analysis of margins and MedPAC's 
reported margins for 2010 indicate that payments should be adequate. In 
addition, we reiterate that the purpose of the payment reduction is to 
align payment with real, observed changes in patient severity. 
Moreover, while we considered a 2.18 percent reduction to the national 
standardized 60-day episode rates based on our analysis using 2010 
data, we are finalizing a 1.32 percent payment reduction for this year.
    Comment: A commenter stated that the case-mix model used to 
determine

[[Page 67076]]

real case-mix growth does not account for real case-mix changes in 
patient severity experienced by hospital-based home health agencies and 
that the proposed payment reduction would adversely impact hospital-
based home health agencies. Commenters stated that the data used to 
calculate the case-mix reduction is skewed to free-standing facilities 
and that free-standing HHAs are selective while hospital-based HHAs 
take on all types of patients discharged from the hospital. The 
commenters did not think the reduction was appropriate for hospital-
based home health care. Another commenter stated that hospital-based 
HHAs average Medicare margin was -6.29 percent in 2010 and that it can 
be assumed that overall margins of this HHA sector is well below zero 
percent given lower-than-cost Medicaid and Medicare Advantage payment 
rates.
    Response: In the CY 2012 proposed and final rule, we described the 
results of the independent review of our models to assess case-mix 
growth performed by a team at Harvard University led by Dr. David 
Grabowski. We described that the review included an examination of the 
predictive regression models and data used in CY 2011 rulemaking, and 
further analysis consisting of extensions of the model to allow a 
closer look at nominal case-mix growth by categorizing the growth 
according to provider types and subgroups of patients. Two of the 
extensions that we examined focused on free standing and facility-based 
HHAs. The extensions showed a large and not dissimilar rate of nominal 
case-mix growth from 2000 to 2008 for the two groups, 17.86 percent 
nominal case-mix increase for free-standing HHAs and 14.17 percent 
nominal case-mix increase for facility-based increase. Given the 
results of our analysis, which showed significant nominal case-mix 
growth for freestanding versus hospital based HHAs, we believe that the 
model is not skewed to a particular provider type and that an across 
the board reduction is appropriate given the widespread nominal case-
mix growth. We note that our analysis on Medicare Cost Report data for 
hospital-based HHAs does indicate that Medicare margins are lower than 
those of freestanding HHAs.
    Comment: Commenters criticized the model's reliance on hospital 
data, stating that over half of all Medicare home health patients are 
admitted to care from a setting other than a hospital and many of the 
patients receive home health care far extended past an initial episode. 
Commenters implied that the All Patient Refined Diagnosis Related 
Groups (APR-DRG) variables are less relevant for multiple episode 
patients.
    Response: We disagree that the use of the hospital information in 
the case-mix change analysis is so limited. Also, with the addition of 
HCC data, we have enhanced the robustness of the variable set used for 
the analysis to include physician diagnoses and diagnoses of other 
clinicians, as well as Medicaid eligibility. Regardless of whether the 
patient came directly from a non-hospital-setting (for example, home or 
an institutional post-acute stay), information from a hospital stay 
preceding home health is typically relevant to the type of patient 
being seen by the HHA.
    Comment: A commenter stated that case-mix reductions do not take 
into account the cost of new regulatory burdens, such as documentation 
for face-to-face encounters and HHCAHPS.
    Response: We note that the 1.32 percent payment reduction is to 
account for nominal case-mix increases (increases in case-mix that are 
not related to real changes in patient acuity). Case-mix reductions are 
not intended take into account the costs of regulatory burdens. The 
models used to assess real case-mix growth take into account factors 
that would affect patient severity.
    Comment: A commenter stated that nominal case-mix growth cannot be 
assumed using CMS's methodology because of the change from ICD-9 to 
ICD-10.
    Response: Our analysis of case-mix used data from 2000 to 2010 to 
determine the amount of real and nominal case-mix growth and did not 
take into account a change from ICD-9 to ICD-10. The change is 
currently not relevant to our analysis of case-mix growth. After we 
transition from ICD-9 to ICD-10, we may examine the effects of the 
change on case-mix growth as data become available and propose payment 
adjustments accordingly.
    Comment: One commenter said that the payment reductions to account 
for nominal case-mix growth are arbitrary and appear to reduce payments 
without data to show that they are necessary.
    Response: We disagree. The prediction model for real case-mix is an 
empirical model, the findings of which are based entirely on empirical 
evidence. The real case-mix prediction model and its application 
account for changes in the HH patient population by quantifying the 
relationships between patient demographics, clinical characteristics, 
and case-mix. The relationships in conjunction with updated measures of 
patient characteristics are used to quantify real case-mix change. The 
characteristics in the model include proxy measures for severity, 
including a variety of measures, namely, demographic variables, 
hospital expenditures, expenditures on other Part A services, Part A 
utilization measures, living situation, type of hospital stay, severity 
of illness during the stay, and risk of mortality during the stay. Last 
year, additional diagnosis data, based on physician and hospital 
diagnoses in the patient's claims history, were added in the form of 
HCC indicators. Measurable changes in patient severity and patient 
need, factors mentioned by commenters, are an appropriate basis for 
changes in payment. Our model of real case-mix change has attempted to 
capture such increases.
    We recognize that models are potentially limited in their ability 
to pick up more subtle changes in a patient population such as those 
alluded to by various commenters. Yet in previous regulations we 
presented additional types of data suggestive of only minor changes in 
the population admitted to home health, and very large changes in case-
mix over a short period. We included among these pieces of evidence 
information about the declining proportion of home health episodes 
associated with a recent acute stay for hip fracture, congestive heart 
failure, stroke, and hip replacement, which are four situations often 
associated with high severity and high resource intensity (72 FR 49762, 
49833 (August 2007)). We presented information showing that resource 
use did not increase along with case-mix increases (72 FR 49833). We 
also analyzed changes in OASIS item guidance that clarified definitions 
and could have led to progress in coding practice (72 FR 25356, 25359 
(May 2007)). We found some small and scattered changes indicative of 
worsening severity but these changes did not commensurate with the 
increase in case-mix weights (72 FR 25359). In our discussion, we cited 
specific instances where agencies' changing understanding of coding 
could have contributed to the adverse changes. However, as previously 
stated, Medicare payments should be based on patient level of severity, 
and not on coding practices.
    In the CY 2011 HH PPS proposed rule, we identified a very large, 
sudden 1-year change (+0.0533) in the average case-mix weight between 
2007 and 2008. This increase is partly attributable to the reporting of 
secondary diagnosis codes (see 75 FR 43242 (July 23, 2010)). The use of 
secondary diagnosis codes in the case-mix algorithm was introduced

[[Page 67077]]

in 2008 as part of the new case-mix system.
    In summary, we believe the payment reductions to account for 
nominal case-mix growth are not arbitrary and data used in our model as 
well as other data indicate only small changes in patient severity 
while we have observed large changes in the average case-mix weight 
over time. Therefore, in order to better align payment with real 
changes in patient severity, we are finalizing a 1.32 percent payment 
reduction for CY 2013.
    Comment: One commenter stated that the actual program spending on 
home health is generally less than the Congressional Budget Office 
estimates between 1996 to 2009. Therefore they questioned CMS's 
authority to implement payment reductions for nominal case-mix growth. 
They stated that in home health, Medicare expenditures have been equal 
to or lower than projections and estimates by CBO since the beginning 
of the HH PPS and therefore, there is no increase in aggregate 
expenditures that warrants application of the statutory authority under 
section 1895(b)(3)(B)(iv) of the Act.
    Response: Section 1895(b)(3)(B)(iv) of the Act gives CMS the 
authority to implement payment reductions if there are changes in 
aggregate payments that are a result of nominal case-mix growth. Our 
data show changes in actual aggregate payments due to nominal case-mix 
growth, and therefore in the CY 2013 HH PPS proposed rule, we proposed 
to move forward with a 1.32 percent reduction to the HH PPS rates.
    Comment: A commenter stated that across the board reduction can 
cause or exacerbate access issues for high-cost patients. Another 
commenter stated that they are seeing access problems for higher-cost 
patients. The commenter suggested that CMS evaluate the payment model 
to determine whether changes are needed to address the unintended 
impact of the across the board rates on providers and evaluate the 
payment model based on its ability to maintain access to care for all 
eligible Medicare beneficiaries. Commenters urged CMS to make 
modifications to the payment system so that there are not financial 
disincentives to accepting a disproportionate number of high cost 
patients.
    Response: We appreciate the commenter's concerns. To address 
concerns that some beneficiaries are at risk of not having access to 
Medicare home health services and that the current HH PPS may encourage 
providers to adopt selective admission patterns, section 3131(d) of the 
Affordable Care Act requires the Secretary to conduct a study on home 
health agency costs involved with providing access to care to low-
income Medicare beneficiaries or beneficiaries in medically underserved 
areas, and in treating beneficiaries with varying levels of severity of 
illness (specifically, beneficiaries with ``high levels of severity of 
illness''). Pending results of the study, CMS may make recommendations 
for revisions to the HH PPS and recommendations for legislation and/or 
administrative action which may address any access issues identified in 
the study. In addition, we will continue to monitor for unintended 
consequences of the payment reductions and we will seek information 
from other government agencies on access. Finally, we will use Open 
Door Forums and other venues to solicit information from agencies on 
any actual access issues they witness.
    Comment: A commenter stated that CMS should use information from 
the home health study under section 3131(d) of the Affordable Care Act 
to determine a fair payment rate rather than imposing across the board 
payment reductions.
    Response: The home health study under section 3131(d) of the 
Affordable Care Act allows CMS to not only look at access for 
vulnerable populations, but also look at other issues with the payment 
system and payment vulnerabilities. In this study, we plan to examine 
ways to better align payment with patient needs. The Report to Congress 
describing the findings of our study is projected to be available in 
2014. In the meantime, while examining ways to better improve the case-
mix system, we believe that it is appropriate to adjust payment rates 
to reflect real, observed changes in patient severity.
    Comment: One commenter stated that they were concerned with the 
1.32 percent payment reduction since it is combined with the Affordable 
Care Act mandated 1 percent reduction to the market basket update. The 
commenter urged CMS to recognize home health as a critical part of the 
health care continuum and that it requires adequate reimbursement to 
succeed in a reformed health care delivery system. The commenter stated 
that home health agencies should be reimbursed adequately for their 
services and that home health services are less expensive than acute 
care alternatives. Another commenter stated that overall Medicare 
spending has increased much more than Medicare payments to home health 
agencies and that the payment reductions to home health care spending 
``represents negative health policy at a time when we should be 
encouraging the provision of health care outside of facilities.'' The 
commenter continued to say that hospital inpatient and long-term acute 
care hospitals will see increases in their payments for CY 2013. The 
commenter stated that CMS should not be cutting the most cost effective 
portions of the health care system to provide greater reimbursement to 
the most expensive ones. The commenters asked CMS to reconsider the 
1.32 percent coding adjustment and other payment reduction changes in 
the 2013 HH PPS rule.
    Response: We thank the commenters for their comments. However, we 
note that the 1 percent reduction to the market basket update is a 
mandated payment reduction, not intended to be offset by other 
policies, such as the 1.32 percent payment reduction. In addition, the 
Regulatory Impact section of our rule (see section VII.) shows that 
when combined with the market basket update and the wage index update, 
this rule will have a minimal impact on payment in comparison with 
previous years. In addition, while we updated our analysis to include 
2010 data, which would have resulted in a 2.18 percent payment 
reduction, we are finalizing a 1.32 percent reduction for this final 
rule. We would also like to remind commenters that the goal of the 
payment reduction is to better align payment with real changes in 
patient severity. That is, the payment reduction is to ensure 
appropriate payment given the real changes in the Medicare home health 
population we observe. We would also like to point out that the 1.32 
percent payment reduction is not related to the increase in payments 
for hospital inpatient and long term acute care hospitals; that is, the 
payment reduction does not free up money to pay for other settings. The 
goal of the payment reduction is to pay appropriately for the home 
health services provided to Medicare home health beneficiaries.
    Comment: Several commenters stated that they support and appreciate 
CMS's proposal to withhold any further increase in the payment 
reduction to account for nominal case-mix growth. Commenters stated 
that the 1.32 percent payment reduction, rather than the full 2.18 
percent reduction is a welcome action from CMS as providers have 
experienced significantly increased costs with the face-to-face 
encounter and therapy assessment requirements. Another commenter stated 
that the restraint in the payment reduction to account for nominal 
case-mix growth is warranted because the 2010 data does not yet fully 
reflect changes in CMS

[[Page 67078]]

policy that were intended to reduce some of the nominal increases in 
case-mix weights. Commenters stated that they would like CMS to limit 
the 2013 adjustment for nominal case-mix growth to 1.32 percent as 
proposed in the CY 2013 proposed rule.
    Response: We appreciate the commenters' support of our proposal. We 
would like to clarify that the reason the 1.32 percent payment 
reduction, rather than the full 2.18 percent reduction, was proposed 
was not because of any potential additional costs associated with the 
face-to-face encounter and therapy assessment rules. We believe the 
2.18 percent payment reduction would allow CMS to fully account for the 
nominal case-mix growth from 2000 to 2010 and we may consider 
accounting for more nominal case-mix growth in future rulemaking. 
However, given certain factors, such as the recent recalibration in CY 
2012 and potential effect on the average case-mix, for this final rule, 
we are finalizing a 1.32 percent reduction to account for nominal case-
mix growth, as described in the CY 2012 final rule.
    Comment: One commenter stated that unwarranted overpayments 
attributable to changes in coding practices should be recovered and 
that payment increases unrelated to patient severity also occur in 
other payment systems. The commenter stated that the proposed 
adjustment would not account for all of the coding increase CMS has 
identified and that the proposed adjustment would result in 
overpayments to home health agencies, increasing home health 
expenditures for the federal government and beneficiaries. The 
commenter stated that aggregate Medicare margins in 2012 are projected 
to exceed 13 percent and that with the full reduction of 2.18 percent, 
most HHAs would be paid well in excess of costs. The commenter stated 
that implementing a small reduction in 2013 will require that a larger 
reduction occur in future years and therefore, CMS should reduce 
payments by 2.18 percent in 2013.
    Response: We thank the commenter for the comments. We agree that 
the 2.18 percent reduction would allow CMS to fully account for the 
nominal case-mix growth through 2010. However, due to certain factors 
such as the recalibration in CY 2012, the average case-mix weights may 
have lowered and therefore, for this final rule, we are finalizing a 
more conservative payment reduction of 1.32 percent. It is unclear 
whether the projection of average Medicare margins of 13 percent in 
2012 factors in potential changes in the therapy level distribution due 
to the CY 2012 recalibration. We will continue to assess nominal case-
mix growth and propose reductions in future rulemaking as necessary.
    Comment: One commenter stated that the yearly recalculation of 
revision of the payment reduction to account for nominal case-mix 
undermines the stability of the payment system and CMS's proposals have 
made it hard for HHAs to predict the payment amounts.
    Response: We disagree there has been instability. Since 2008, 
agencies have been informed that payments would be reduced over time to 
offset unwarranted reimbursement growth due to nominal case-mix growth 
and every year since 2008, we have applied a payment reduction to 
account for nominal case-mix growth. Also, every year since CY 2011 
rulemaking, we have updated our analysis of real and nominal case-mix 
growth as data have become available and in CY 2011 and CY 2012 
rulemaking, our updated analysis resulted in further payment reductions 
to the national standardized 60-day episode rates. We note that for CY 
2013, we are finalizing a 1.32 percent reduction, as described in the 
CY 2012 final rule. In addition, we reiterate that the purpose of the 
payment reduction is to adjust payments to better reflect real changes 
in patient severity and our goal is to pay appropriately for the home 
health services provided to Medicare home health beneficiaries.
    Comment: Commenters were concerned with the impact of the 1.32 
percent payment reduction on quality of care.
    Response: Commenters did not provide specific information about why 
they believe payment reductions might impact quality of care. Our 
simulation of margins under the payment policies in this rule suggests 
that margins will remain adequate, and thereby not have an adverse 
effect on quality of care. We also believe that policymaking in the 
quality improvement area should help to ensure quality advances. OASIS-
C outcome reports and HHCAHPS data are two important recent 
developments that we anticipate will support high-quality services. 
Over time, value-based purchasing policies will be developed, further 
enhancing quality-related incentives. We encourage agencies to work to 
their full professional potential to deliver a high standard of care to 
their patients.
    Comment: A commenter stated that payment reductions will decrease 
the agencies' ability to educate, focus on quality care, implement 
electronic systems of documentation, and focus on savings to the 
Medicare program such as decreasing hospitalizations. They stated that 
payment reductions would mean fewer resources to develop quality and 
compliance programs.
    Response: A reduction in margins as a result of our payment changes 
may have an effect on the availability of resources for various types 
of investments. However, our analysis indicates that payments to HHAs 
will still be more than adequate under our payment changes and would 
still allow for investments. We do not have sufficient data to evaluate 
the effect on technology-specific investments from the unusually large 
margins that have been in existence under the HH PPS, but we welcome 
information about whether the numerous agencies that operated with high 
margins under the HH PPS made investments during those years, and the 
nature of those investments. Other areas, such as education, quality 
improvement, and decreasing hospitalizations, are the focus of 
investment in human capital that agencies should be currently 
undertaking in view of program initiatives underway or being tested 
(HHCAHPS, HH P4P demo). We reiterate that our analysis of payments 
indicates that payments are adequate enough to allow for different 
types of quality-strengthening investments, whose costliness would 
depend on the agency's individual situation, including how efficiently 
the agency operates in general. We would also like to note that the pay 
for performance (P4P) demonstration did not find strong evidence that 
changes participating agencies made along the lines of better care 
coordination to improve quality and reduce hospitalizations were 
necessarily expensive (http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Downloads/HHP4P_Demo_Eval_2008_Vol3.pdf ).
    In the CY 2012 final rule, we finalized a 3.79 percent payment 
reduction to the CY 2012 national standard 60-day episode rates and a 
1.32 percent payment reduction to the CY 2013 national standardized 60-
day episode rates to account for nominal case-mix growth we identified 
from 2000 to 2009. In the CY 2013 proposed rule, we updated our 
analysis using data from 2000 to 2010, estimating that the percentage 
reduction to account for nominal case-mix change would be 2.18 percent. 
However, we proposed a 1.32 percent payment reduction as described in 
the CY 2012 rule. For this final rule, we are finalizing a 1.32 percent 
payment reduction for CY 2013 to the national standardized 60-day 
episode rates. This reduction enables us to account for nominal case-
mix growth which we have identified through CY 2009 and to

[[Page 67079]]

collect additional data on case-mix change, such as data on the effects 
of the CY 2012 recalibration of the HH PPS case-mix weights.

B. Outlier Policy

1. Background
    Section 1895(b)(5) of the Act allows for the provision of an 
addition or adjustment to the national standardized 60-day case-mix and 
wage-adjusted episode payment amounts in the case of episodes that 
incur unusually high costs due to patient home health (HH) care needs. 
Prior to the enactment of the Affordable Care Act, this section of the 
Act stipulated that projected total outlier payments could not exceed 5 
percent of total projected or estimated HH payments in a given year. In 
the July 2000 final rule (65 FR 41188 through 41190), we described the 
method for determining outlier payments. Under this system, outlier 
payments are made for episodes whose estimated costs exceed a threshold 
amount for each Home Health Resource Group (HHRG). The episode's 
estimated cost is the sum of the national wage-adjusted per-visit 
payment amounts for all visits delivered during the episode. The 
outlier threshold for each case-mix group or partial episode payment 
(PEP) adjustment is defined as the 60-day episode payment or PEP 
adjustment for that group plus a fixed dollar loss (FDL) amount. The 
outlier payment is defined to be a proportion of the wage-adjusted 
estimated cost beyond the wage-adjusted threshold. The threshold amount 
is the sum of the wage and case-mix adjusted PPS episode amount and 
wage-adjusted fixed dollar loss amount. The proportion of additional 
costs paid as outlier payments is referred to as the loss-sharing 
ratio.
2. Regulatory Update
    In the CY 2010 HH PPS final rule (74 FR 58080 through 58087), we 
discussed excessive growth in outlier payments, primarily the result of 
unusually high outlier payments in a few areas of the country. Despite 
program integrity efforts associated with excessive outlier payments in 
targeted areas of the country, we discovered that outlier expenditures 
still exceeded the 5 percent target and, in the absence of corrective 
measures, would have continued do to so. Consequently, we assessed the 
appropriateness of taking action to curb outlier abuse. To mitigate 
possible billing vulnerabilities associated with excessive outlier 
payments and adhere to our statutory limit on outlier payments, we 
adopted an outlier policy that included a 10 percent agency level cap 
on outlier payments. This cap was implemented in concert with a reduced 
FDL ratio of 0.67. These policies resulted in a projected target 
outlier pool of approximately 2.5 percent. (The previous outlier pool 
was 5 percent of total HH expenditures.)
    For CY 2010, we first returned 5 percent of these dollars back into 
the national standardized 60-day episode rates, the national per-visit 
rates, the low utilization payment adjustment (LUPA) add-on payment 
amount, and the non-routine supplies (NRS) conversion factor. Then, we 
reduced the CY 2010 rates by 2.5 percent to account for the new outlier 
pool of 2.5 percent. This outlier policy was adopted for CY 2010 only.
3. Statutory Update
    As we noted in the CY 2011 HH PPS final rule (75 FR 70397 through 
70399), section 3131(b)(1) of the Affordable Care Act amended section 
1895(b)(3)(C) of the Act. As revised, ``Adjustment for outliers,'' 
states that ``The Secretary shall reduce the standard prospective 
payment amount (or amounts) under this paragraph applicable to home 
health services furnished during a period by such proportion as will 
result in an aggregate reduction in payments for the period equal to 5 
percent of the total payments estimated to be made based on the 
prospective payment system under this subsection for the period.'' In 
addition, section 3131(b)(2) of the Affordable Care Act amended section 
1895(b)(5) of the Act by re-designating the existing language as 
section 1895(b)(5)(A) of the Act, and revising it to state that the 
Secretary, ``subject to [a 10 percent program-specific outlier cap], 
may provide for an addition or adjustment to the payment amount 
otherwise made in the case of outliers because of unusual variations in 
the type or amount of medically necessary care. The total amount of the 
additional payments or payment adjustments made under this paragraph 
with respect to a fiscal year or year may not exceed 2.5 percent of the 
total payments projected or estimated to be made based on the 
prospective payment system under this subsection in that year.''
    As such, beginning in CY 2011, our HH PPS outlier policy is that we 
reduce payment rates by 5 percent and target up to 2.5 percent of total 
estimated HH PPS payments to be paid as outliers. To do so, we first 
returned the 2.5 percent held for the target CY 2010 outlier pool to 
the national standardized 60-day episode rates, the national per visit 
rates, the LUPA add-on payment amount, and the NRS conversion factor 
for CY 2010. We then reduced the rates by 5 percent as required by 
section 1895(b)(3)(C) of the Act, as amended by section 3131(b)(1) of 
the Affordable Care Act. For CY 2011 and subsequent calendar years we 
target up to 2.5 percent of estimated total payments to be paid as 
outlier payments, and apply a 10 percent agency-level outlier cap.
4. Loss-Sharing Ratio and Fixed Dollar Loss (FDL) Ratio
    For a given level of outlier payments, there is a trade-off between 
the values selected for the FDL ratio and the loss-sharing ratio. A 
high FDL ratio reduces the number of episodes that can receive outlier 
payments, but makes it possible to select a higher loss-sharing ratio 
and, therefore, increase outlier payments for outlier episodes. 
Alternatively, a lower FDL ratio means that more episodes can qualify 
for outlier payments, but outlier payments per episode must then be 
lower.
    The FDL ratio and the loss-sharing ratio must be selected so that 
the estimated total outlier payments do not exceed the 2.5 percent 
aggregate level (as required by section 1895(b)(5)(A) of the Act). In 
the past, we have used a value of 0.80 for the loss-sharing ratio, 
which is relatively high, but preserves incentives for agencies to 
attempt to provide care efficiently for outlier cases. With a loss-
sharing ratio of 0.80, Medicare pays 80 percent of the additional 
estimated costs above the outlier threshold amount. In the CY 2011 HH 
PPS final rule (75 FR 70398), in targeting total outlier payments as 
2.5 percent of total HH PPS payments, we implemented an FDL ratio of 
0.67, and we maintained that ratio in CY 2012. The national 
standardized 60-day episode payment amount is multiplied by the FDL 
ratio. That amount is wage-adjusted to derive the wage-adjusted FDL, 
which is added to the case-mix and wage-adjusted 60-day episode payment 
amount to determine the outlier threshold amount that costs have to 
exceed before Medicare will pay 80 percent of the additional estimated 
costs. We did not propose a change to the loss-sharing ratio in the CY 
2013 HH PPS proposed rule issued in the July 13, 2012 Federal Register 
(77 FR 41548).
    For the proposed rule, based on simulations using CY 2010 claims 
data, we estimated that outlier payments in 2012 will comprise 
approximately 2.12 percent of total HH PPS payments. However, we did 
not propose a change to the FDL ratio in the CY 2013 HH PPS proposed 
rule. This was, in part, because we were not able to verify these 
projections in our paid claims files since

[[Page 67080]]

implementing the 10 percent agency-level cap on outlier payments on 
January 1, 2010. Two claims processing errors were identified in our 
implementation of the 10 percent agency-level cap on outlier payments. 
These errors resulted in inaccuracies in outlier payment amounts in our 
paid claims files for CY 2010 and 2011. One error allows for certain 
HHAs to be paid beyond the cap, resulting in overpayments. The other 
applies the cap to HHAs who have not reached it yet, resulting in 
underpayments. System changes were currently underway, and thus the CY 
2010 data file used in our analysis for the CY 2013 HH PPS proposed 
rule reflected outlier payments with these claims processing errors. In 
the CY 2013 HHS PPS proposed rule we stated that we would update our 
estimate of the FDL ratio for the final rule using the best analysis 
the most current and complete year of HH PPS data.
5. Outlier Relationship to the HH Payment Study
    As we discussed in the CY 2013 HH PPS proposed rule, section 
3131(d) of the Affordable Care Act requires us to conduct a study and 
report on developing HH payment revisions that will ensure access to 
care and payment for HH patients with high severity of illness. Our 
Report to Congress containing this study's recommendations is projected 
to be available in 2014. Section 3131(d)(1)(A)(iii) of the Affordable 
Care Act, in particular, states that this study may include analysis of 
potential revisions to outlier payments to better reflect costs of 
treating Medicare beneficiaries with high levels of severity of 
illness.
    The following is a summary of the comments we received regarding 
the outlier policy in the CY 2013 HH PPS proposed rule.
    Comment: A commenter stated that CMS's policy of reducing the 
outlier pool from 5 percent to 2.5 percent and capping, per provider, 
outlier revenues at 10 percent has negatively impacted HH providers. 
The commenter stated that in certain areas, HHAs provide services to 
predominantly high-cost beneficiaries with chronic conditions like HIV/
AIDS or with mental health needs and developmental disabilities. HHAs 
that provide services to a high-cost population have reported being 
negatively impacted by the 10 percent outlier cap. The commenter 
requested that CMS exempt special-needs HHAs that serve high-cost 
patients with multiple clinical issues from the 10 percent outlier cap. 
The commenter also believes that CMS should raise the outlier cap so 
that all HHAs that serve high-cost beneficiaries can continue to do so 
without losing outlier funding.
    Response: We do not have the statutory authority to change the 2.5 
percent outlier pool, the 5 percent reduction to the HH PPS payment 
rates to fund the outlier pool, or the 10 percent outlier cap. Section 
3131(b)(2) of the Affordable Care Act amended section 1895(b)(5)(A) of 
the Act to require that the total amount of the additional payments or 
payment adjustments made with respect to outliers in a fiscal year or 
year may not exceed 2.5 percent of the total payments projected or 
estimated to be made based on the prospective payment system in that 
year. Section 3131(b)(2)(C) of the Affordable Care Act added section 
1895(b)(5)(B) of the Act so that CMS is required to apply a 10 percent 
agency-level outlier cap in each year. The statute does not provide for 
exemptions to the 10 percent cap based on resource use or otherwise.
    Comment: A commenter requested that CMS develop a remedy to the 
limitations in the current outlier policy in actually addressing high 
cost cases.
    Response: We reiterate that we intend to analyze alternatives to 
our current outlier policy as part of the home health study mandated by 
section 3131 of the Affordable Care Act. The study calls for us to 
investigate improvements to the HH PPS to account for patients with 
varying severity of illness.
    Comment: Several commenters supported CMS's proposal to maintain 
the current FDL ratio in determining outlier payments, while several 
others were disappointed that the CY 2013 HH PPS proposed rule did not 
include any adjustments to the FDL ratio, especially given the analysis 
that projects that total outlier payments in 2011 and 2012 have been 
significantly below the 2.5 percent target. Commenters stated that CMS 
should recalculate outlier payment levels for 2011 and 2012 now that 
the claims processing errors for outliers have been corrected, and 
consider revising the CY 2013 FDL ratio in the event that total outlier 
spending is less than 2.5 percent. One commenter believed that recent 
outlier claims processing flaws, when resolved, are likely to affect 
the total outlier spending in 2011 such that outlier payments will 
comprise more than the estimated 2.12 percent of total HH PPS payments 
in outlier payments.
    Response: Since the publication of the CY 2013 HH PPS proposed 
rule, we were able to correct the two claims processing errors that 
resulted in inaccuracies in outlier payment amounts in our paid claims 
files for CY 2010 and 2011. Analysis of corrected claims data and 
updated simulations using CY 2010 claims data show that outlier 
payments in 2013 are estimated to comprise approximately 2.18 percent 
of total HH PPS payments. As a result, in order to pay up to, but no 
more than 2.5 percent of total HH PPS payments as outlier payments, the 
FDL ratio would need to be revised to 0.45 for CY 2013.
    Analysis of corrected claims data and updated simulations using CY 
2010 claims data show that outlier payments in 2013 are estimated to 
comprise approximately 2.18 percent of total HH PPS payments. As a 
result, we are finalizing an FDL ratio of 0.45 percent in order to pay 
up to, but no more than 2.5 percent of total HH PPS payments as outlier 
payments. We believe that our new outlier policy for CY 2013 of using 
an FDL ratio of 0.45 and a loss-sharing ratio of 0.80 strikes an 
effective balance of compensating for high cost episodes while allowing 
more episodes to qualify for outlier payments.

C. CY 2013 Rate Update

1. Rebasing and Revising of the Home Health Market Basket
a. Background
    Section 1895(b)(3)(B) of the Act requires that the standard 
prospective payment amounts for CY 2013 be increased by a factor equal 
to the applicable home health market basket update for those HHAs that 
submit quality data as required by the Secretary.
    Effective for cost reporting periods beginning on or after July 1, 
1980, we developed and adopted an HHA input price index (that is, the 
home health ``market basket''). Although ``market basket'' technically 
describes the mix of goods and services used to produce home health 
care, this term is also commonly used to denote the input price index 
derived from that market basket. Accordingly, the term ``home health 
market basket'' used in this document refers to the HHA input price 
index.
    The percentage change in the home health market basket reflects the 
average change in the price of goods and services purchased by HHAs in 
providing an efficient level of home health care services. We first 
used the home health market basket to adjust HHA cost limits by an 
amount that reflected the average increase in the prices of the goods 
and services used to furnish reasonable cost home health care. This 
approach linked the increase in the cost limits to the efficient 
utilization of resources. For a greater

[[Page 67081]]

discussion on the home health market basket, see the notice with 
comment period published in the February 15, 1980 Federal Register (45 
FR 10450, 10451), the notice with comment period published in the 
February 14, 1995 Federal Register (60 FR 8389, 8392), and the notice 
with comment period published in the July 1, 1996 Federal Register (61 
FR 34344, 34347). Beginning with the FY 2002 HH PPS payments, we used 
the home health market basket to update payments under the HH PPS. We 
last rebased the home health market basket effective with the CY 2008 
update. For more information on the HH PPS home health market basket, 
see our proposed rule published in the May 4, 2007 Federal Register (72 
FR 25435 through 25442).
    The home health market basket is a fixed-weight Laspeyres-type 
price index; its weights reflect the cost distribution for the base 
year while current period price changes are measured. The home health 
market basket is constructed in three major steps. First, a base period 
is selected and total base period expenditures are estimated for 
mutually exclusive and exhaustive spending categories based upon the 
type of expenditure. Then the proportion of total costs that each 
spending category represents is determined. These proportions are 
called cost or expenditure weights.
    The second step essential for developing an input price index is to 
match each expenditure category to an appropriate price/wage variable, 
called a price proxy. These proxy variables are mainly drawn from 
publicly available statistical series published on a consistent 
schedule, preferably at least quarterly.
    In the third and final step, the price level for each spending 
category is multiplied by the expenditure weight for that category. The 
sum of these products for all cost categories yields the composite 
index level in the market basket in a given year. Repeating the third 
step for other years will produce a time series of market basket index 
levels. Dividing one index level by an earlier index level will produce 
rates of growth in the input price index.
    We described the market basket as a fixed-weight index because it 
answers the question of how much more or less it would cost, at a later 
time, to purchase the same mix of goods and services that was purchased 
in the base period. As such, it measures ``pure'' price changes only. 
The effects on total expenditures resulting from changes in the 
quantity or mix of goods and services purchased subsequent to the base 
period are, by design, not considered.
b. Rebasing and Revising the Home Health Market Basket
    We believe that it is desirable to rebase the home health market 
basket periodically so that the cost category weights reflect changes 
in the mix of goods and services that HHAs purchase in furnishing home 
health care. We based the cost category weights in the current home 
health market basket on CY 2003 data. In the CY 2013 HH PPS proposed 
rule (77 FR 41548), we proposed to rebase and revise the home health 
market basket to reflect CY 2010 Medicare cost report (MCR) data, the 
latest available and most complete data on the actual structure of HHA 
costs.
    The terms ``rebasing'' and ``revising,'' while often used 
interchangeably, actually denote different activities. The term 
``rebasing'' means moving the base year for the structure of costs of 
an input price index (that is, in this exercise, we proposed to move 
the base year cost structure from CY 2003 to CY 2010) without making 
any other major changes to the methodology. The term ``revising'' means 
changing data sources, cost categories, and/or price proxies used in 
the input price index.
    For the rebasing and revising, we modified the wages and salaries 
and benefits cost categories to reflect revised occupational groupings 
of BLS Occupational Employment Statistics (OES) data of HHAs. As a 
result of the revised groupings, we also proposed changes to the wage 
and benefit price proxies used in the HH market basket. We also 
proposed to break out the Administration and General (A&G), Operations 
and Maintenance, and All Other (residual) cost category weight into 
more detailed cost categories, based on the 2002 Benchmark U.S. 
Department of Commerce, Bureau of Economic Analysis (BEA) Input-Output 
(I-O) Table for HHAs. We proposed to revise the price proxies for the 
Insurance and Transportation cost categories. Finally, we proposed the 
use of four new price proxies for the four additional cost categories.
    The major cost weights for the revised and rebased home health 
market basket are derived from the Medicare Cost Reports (MCR) data for 
freestanding HHAs, whose cost reporting period began on or after 
January 1, 2010 and before January 1, 2011. Using this methodology 
allowed our sample to include HHA facilities with varying cost report 
years including, but not limited to, the federal fiscal or calendar 
year. We referred to the market basket as a calendar year market basket 
because the base period for all price proxies and weights are set to CY 
2010.
    We proposed to maintain our policy of using data from freestanding 
HHAs because we have determined that they better reflect HHAs' actual 
cost structure. Expense data for hospital-based HHAs can be affected by 
the allocation of overhead costs over the entire institution. Due to 
the method of allocation, total expenses will be correct, but the 
individual components' expenses may be skewed; therefore, if data from 
hospital-based HHAs were included, the resulting cost structure could 
be unrepresentative of the average HHA costs.
    Data on HHA expenditures for nine major expense categories (Wages 
and Salaries, Employee Benefits, Transportation, Operation and 
Maintenance, A&G, Professional Liability Insurance (PLI), Fixed 
Capital, Movable Capital, and a residual ``All Other'') were tabulated 
from the CY 2010 Medicare HHA cost reports. As prescription drugs and 
DME are not payable under the HH PPS, we excluded those items from the 
home health market basket and from the expenditures. Expenditures for 
contract services were also tabulated from these CY 2010 Medicare HHA 
cost reports and allocated to Wages and Salaries, Employee Benefits, 
A&G, and Other Expenses. After totals for these cost categories were 
edited to remove reports where the data were deemed unreasonable (for 
example, when total reported costs were less than zero), we then 
determined the proportion of total costs that each category 
represented. The proportions represent the major rebased home health 
market basket weights.
    Next, we disaggregated the costs for the A&G, Operations and 
Maintenance and ``All Other'' cost weights using the latest available 
(2002 Benchmark) U.S. Department of Commerce, Bureau of Economic 
Analysis (BEA) Input-Output (I-O) Table, from which we extracted data 
for HHAs. The BEA I-O data, which are updated at 5-year intervals, were 
most recently described in the Survey of Current Business article, 
``Benchmark Input-Output Accounts of the U.S., 2002'' (December 2002). 
These data were aged from 2002 to 2010 using relevant price changes. 
The methodology we used to age the data applied the annual price 
changes from the price proxies to the appropriate cost categories. We 
repeated this practice for each year. This methodology reflects a 
slight revision from the methodology used to derive the 2003-based HHA 
market basket index. For the 2003-based index, we only disaggregated 
the A&G

[[Page 67082]]

and ``All Other'' cost categories using BEA I-O data. For the 2010-
based index, we proposed to also disaggregate the Operations and 
Maintenance cost categories using the BEA I-O data. Our proposal is 
based on our examination of the MCR data which indicated that some 
providers may be including some operations and maintenance costs in the 
A&G category and/or other cost categories. The Operations and 
Maintenance cost category (which we previously proxied with the CPI for 
Fuel and Other Utilities) from the MCR showed a decrease in the cost 
weight obtained directly from the MCR data from 2003 to 2010, despite 
rapid increases in utility costs over this time period. The revised 
method would rely on the 2002 I-O data, aged by the relevant price 
proxy, to determine the Utilities cost weight. The resulting 
methodology shows an increase in the Utilities cost weight over the 
same time period, which we believe to be a more reasonable result. We 
believe this change in the methodology for estimating utility costs for 
HHAs better reflects the 2010 cost structures of HHAs.
    This process resulted in the identification of 16 separate cost 
categories, which is four more cost categories than presented in the 
2003-based home health market basket. The additional cost categories 
(Administrative and Support Services, Financial Services, Medical 
Supplies, and Rubber and Plastics) stem from further disaggregating the 
Other Products and Other Services cost categories presented in the 
2003-based index into more detail. The Administrative and Support 
Services cost weight would include expenses for a range of day-to-day 
office administrative services including but not limited to billing, 
recordkeeping, mail routing, and reception services. The Financial 
Services cost weight would reflect expenses for services including but 
not limited to banking services and security and commodity brokering. 
The Medical Supplies cost weight would reflect expenses for medical and 
surgical instruments as, well as laboratory analysis equipment. The 
Rubber and Plastics cost weight would reflect expenses for products 
such as plastic trash cans, and carpeting. We proposed these additional 
cost categories in order to proxy price inflation in a more granular 
fashion. We provide our proposed price proxies in more detail below.
    The differences between the major categories for the 2010-based 
index and those used for the current 2003-based index are summarized in 
Table 3. We have allocated the Contract Services weight to the Wages 
and Salaries Employee Benefits, A&G, and Other Expenses cost categories 
in the 2010-based index as we did in the 2003-based index.
[GRAPHIC] [TIFF OMITTED] TR08NO12.001

    The complete 2010-based cost categories and weights are listed in 
Table 4.
BILLING CODE 4120-01-P

[[Page 67083]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.002

BILLING CODE 4120-01-C
    After we computed the CY 2010 cost category weights for the rebased 
home health market basket, we selected the most appropriate wage and 
price

[[Page 67084]]

indexes to proxy the rate of change for each expenditure category. With 
the exception of the price index for professional liability insurance 
costs, the price proxies are based on Bureau of Labor Statistics (BLS) 
data and are grouped into one of the following BLS categories:
     Employment Cost Indexes--Employment Cost Indexes (ECIs) 
measure the rate of change in employee wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. They are not affected by shifts in skill mix. ECIs 
are superior to average hourly earnings as price proxies for input 
price indexes for two reasons: (a) They measure pure price change; and 
(b) they are available by occupational groups, not just by industry.
     Consumer Price Indexes--Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by the 
typical consumer. Consumer price indexes are used when the expenditure 
is more similar to that of a purchase at the retail level rather than 
at the wholesale level, or if no appropriate Producer Price Indexes 
(PPIs) were available.
     Producer Price Indexes--PPIs measures average changes in 
prices received by domestic producers for their goods and services. 
PPIs are used to measure price changes for goods sold in other than 
retail markets. For example, a PPI for movable equipment is used rather 
than a CPI for equipment. PPIs in some cases are preferable price 
proxies for goods that HHAs purchase at wholesale levels. These fixed-
weight indexes are a measure of price change at the producer or at the 
intermediate stage of production.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance. Reliability indicates that the 
index is based on valid statistical methods and has low sampling 
variability. Widely accepted statistical methods ensure that the data 
were collected and aggregated in way that can be replicated. Low 
sampling variability is desirable because it indicates that sample 
reflects the typical members of the population. (Sampling variability 
is variation that occurs by chance because a sample was surveyed rather 
than the entire population.) Timeliness implies that the proxy is 
published regularly, preferably at least once a quarter. The market 
baskets are updated quarterly and therefore it is important the 
underlying price proxies be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
helps ensure that we are using the most recent data available to update 
the market basket. We strive to use publications that are disseminated 
frequently because we believe that this is an optimal way to stay 
abreast of the most current data available. Availability means that the 
proxy is publicly available. We prefer that our proxies are publicly 
available because this will help ensure that our market basket updates 
are as transparent to the public as possible. In addition, this enables 
the public to be able to obtain the price proxy data on a regular 
basis. Finally, relevance means that the proxy is applicable and 
representative of the cost category weight to which it is applied. The 
CPIs, PPIs, and ECIs selected by us in this regulation meet these 
criteria. Therefore, we believe that they continue to be the best 
measure of price changes for the cost categories to which they would be 
applied.
    As part of the revising and rebasing of the home health market 
basket, we proposed to revise and rebase the home health blended Wage 
and Salary index and the home health blended Benefits index. We 
proposed to use these blended indexes as price proxies for the Wages 
and Salaries and the Employee Benefits portions of the 2010-based home 
health market basket, as we did in the 2003-based home health market 
basket. A more detailed discussion is provided below.
c. Price Proxies Used To Measure Cost Category Growth
     Wages and Salaries For measuring price growth in the 2010-
based home health market basket, we proposed to apply six price proxies 
to six occupational subcategories within the Wages and Salaries 
component, that reflect the HHA occupational mix.
    The 2003-based blended wage index was comprised of four 
occupational subcategories proxied by five wage proxies. For the 2010 
blended wage index, we proposed to further disaggregate the service 
workers occupations into health and social assistance service and other 
service occupational groups. We also proposed to explicitly 
disaggregate professional and technical (P&T) workers into health-
related P&T and non health-related P&T workers. We proposed to continue 
to use the National Industry-Specific Occupational Employment and Wage 
estimates for North American Industrial Classification System (NAICS) 
621600, Home Health Care Services, published by the BLS Office of 
Occupational Employment Statistics (OES) as the data source for the 
cost shares of the home health specific blended wage and benefits 
proxy. Detailed information on the methodology for the national 
industry-specific occupational employment and wage estimates survey can 
be found at http://www.bls.gov/oes/current/oes_tec.htm.
    The needed data on HHA expenditures for the six occupational 
subcategories (managerial, health-related P&T, non health-related P&T, 
health and social assistance service, other service occupations, and 
administrative/clerical) for the wages and salaries component were 
tabulated from the May 2010 OES data for NAICS 621600, Home Health Care 
Services. Table 5 compares the 2010 occupational assignments of the six 
CMS designated subcategories to the 2003 occupational assignments of 
the four CMS designated subcategories.
BILLING CODE 4120-01-P

[[Page 67085]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.003

[[Page 67086]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.004

    Total expenditures by occupation were calculated by taking the OES 
number of employees multiplied by the OES annual average salary. The 
wage and salary expenditures were aggregated based on the groupings in 
Table 6. We determined the proportion of total wage costs that each 
subcategory represents. These proportions listed in Table 6 represent 
the major rebased and revised home health blended Wage and Salary index 
weights.

[[Page 67087]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.005

    A comparison of the yearly changes from CY 2010 to CY 2013 for the 
2003-based HH wage and salary blend and the 2010-based home health wage 
and salary blend is shown in Table 7. The average annual increase in 
the two price proxies is similar, and in no year is the difference 
greater than 0.2 percentage point.
[GRAPHIC] [TIFF OMITTED] TR08NO12.006

     Employee benefits: For measuring employee benefits price 
growth in the 2010-based home health market basket, we proposed to 
apply applicable price proxies to the six occupational subcategories 
that are used for the wage blend listed in Table 8. The percentage 
change in the blended price of home health employee benefits is applied 
to this component, which is described in Table 8.

[[Page 67088]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.007

    There is no available data source that exists for benefit 
expenditures by occupation for the home health industry. Thus, to 
construct weights for the home health occupational benefits index we 
calculated the ratio of benefits to wages and salaries for CY 2010 for 
the six BLS ECI series we proposed to use in the blended wage and 
benefit indexes. To derive the relevant benefit weight, we applied the 
benefit-to-wage ratios to each of the six occupational subcategories 
from the 2010 OES wage and salary weights, and normalized. For example, 
the ratio of benefits to wages from the 2010 home health occupational 
wage and benefit indexes for home health managers is 0.976. We apply 
this ratio to the 2010 OES weight for wages and salaries for home 
health managers, 8.260, and then normalize those weights relative to 
the other five benefit occupational categories to obtain a benefit 
weight for home health managers of 8.029.
    A comparison of the yearly changes from CY 2010 to CY 2013 for the 
2003-based HH benefit blend and the 2010-based home health benefit 
blend is shown in Table 9. The average annual increase in the two price 
proxies is similar, and in no year is the difference greater than 0.3 
percentage point.
[GRAPHIC] [TIFF OMITTED] TR08NO12.008

     Administrative and Support: We proposed to use the ECI for 
Compensation for Office and Administrative Support Services (private 
industry) (BLS series code CIU2010000220000I) to measure price 
growth of this cost category. The 2003-based index did not reflect this 
detailed cost category.
     Financial Services: We proposed to use the ECI for 
Compensation for Financial Activities (private industry) (BLS series 
code CIU201520A000000I) to measure price growth of this cost 
category. The 2003-based index did not reflect this detailed cost 
category.
     Medical Supplies: We proposed to use the PPI for Medical 
Surgical & Personal Aid Devices (BLS series code WPU156) to 
measure price growth of this cost category. The 2003-based index did 
not reflect this detailed cost category.
     Rubber and Plastics: We proposed to use the PPI for Rubber 
and Plastic Products (BLS series code WPU07) to measure price 
growth of this cost

[[Page 67089]]

category. The 2003-based index did not reflect this detailed cost 
category.
     Operations and Maintenance: We proposed to use CPI for 
Fuel and Utilities (BLS series code CUUR0000SAH2) to measure 
price growth of this cost category. The same proxy was used for the 
2003-based market basket.
     Professional Liability Insurance: We proposed to use the 
CMS Physician Professional Liability Insurance price index to measure 
price growth of this cost category. The 2003-based index used the CPI 
for Household Insurance as the price proxy for this component. We 
proposed to revise the price proxy for this category as we believe that 
it is more technically appropriate to proxy PLI price changes by an 
index specific to medical liability insurance. We currently do not have 
a PLI index specific to the HHA industry so we proposed to use the CMS 
Physician Liability Insurance Index as we believe this would reasonably 
reflect the price changes associated with medical liability insurance 
purchased by home health agencies.
    To accurately reflect the price changes associated with physician 
PLI, each year, we solicit PLI premium data for physicians from a 
sample of commercial carriers. This information is not collected 
through a survey form, but instead is requested directly from, and 
provided by (on a voluntary basis), several national commercial 
carriers. As we require for our other price proxies, the PLI price 
proxy is intended to reflect the pure price change associated with this 
particular cost category. Thus, it does not include changes in the mix 
or level of liability coverage. To accomplish this result, we obtain 
premium information from a sample of commercial carriers for a fixed 
level of coverage, currently $1 million per occurrence and a $3 million 
annual limit. This information is collected for every state by 
physician specialty and risk class. Finally, the state-level, 
physician-specialty data are aggregated by effective premium date to 
compute a national total, using counts of physicians by state and 
specialty as provided in the AMA publication, Physician Characteristics 
and Distribution in the U.S.
     Telephone: We proposed to use CPI for Telephone Services 
(BLS series code CUUR0000SEED) to measure price growth of this 
cost category. The same proxy was used for the 2003-based market 
basket.
     Postage: We proposed to use CPI for Postage (BLS series 
code CUUR0000SEEC01) to measure price growth of this cost 
category. The same proxy was used for the 2003-based market basket.
     Professional Fees: We proposed to use the ECI for 
Compensation for Professional and Related Workers (private industry) 
(BLS series code  CIS2010000120000I) to measure price growth 
of this category. The same proxy was used for the 2003-based market 
basket.
     Other Products: We proposed to use the PPI for Finished 
Goods Less Food and Energy (BLS series code ) to measure price 
growth of this category. For the 2003-based market basket we used the 
CPI for All Items Less Food and Energy to proxy this category. We 
believe that the PPI better reflects business input costs than the CPI 
index which better reflects cost faced by consumers.
     Other Services: We proposed to use the ECI for 
Compensation for Service Occupations (private) (BLS series code 
CIU2010000300000I) to measure price growth of this category. 
The same proxy was used for the 2003-based market basket.
     Transportation: We proposed to use the CPI for 
Transportation (BLS series code CUUR00000SAT) to measure price 
growth of this category. The 2003-based market basket used the CPI for 
Private Transportation (BLS series code CUUS0000SAT1). We 
proposed to revise the price proxy to reflect price inflation of both 
private and public transportation costs. We proposed this change as 
further investigation of the MCR instructions request providers to 
include both private and public transportation costs.
     Fixed capital: We proposed to use the CPI for Owner's 
Equivalent Rent (BLS series code CUUS0000SEHC) to measure 
price growth of this cost category. The same proxy was used for the 
2003-based market basket.
     Movable Capital: We proposed to use the PPI for Machinery 
and Equipment (BLS series code WPU11) to measure price growth 
of this cost category. The same proxy was used for the 2003-based 
market basket.
    As we did in the 2003-based home health market basket, we allocated 
the Contract Services' share of home health agency expenditures among 
Wages and Salaries, Employee Benefits, A&G and Other Expenses.
d. Rebasing Results
    A comparison of the yearly changes from CY 2010 to CY 2013 for the 
2003-based home health market basket and the 2010-based home health 
market basket is shown in Table 10.

[[Page 67090]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.009

    Table 10 shows that the forecasted rate of growth for CY 2013, 
beginning January 1, 2013, for the rebased and revised home health 
market basket is 2.3 percent, while the forecasted rate of growth for 
the current 2003-based home health market basket is 2.1 percent. The 
higher growth rate for the 2010-based HHA market basket for CY 2013 is 
primarily attributable to the wage blended price proxies. The revised 
wage blended index reflects a larger weight associated with health P&T 
occupations (which is proxied by the ECIs for Hospital Workers) 
compared to the 2003-based index. The wage ECI for hospital workers is 
currently projected to grow faster than the other ECIs in the blended 
indexes.
e. Labor-Related Share
    In the 2003-based home health market basket the labor-related share 
was 77.082 percent while the remaining non-labor-related share was 
22.918 percent. In the revised and rebased home health market basket, 
the labor-related share is 78.535 percent. The labor-related share 
includes wages and salaries and employee benefits, as well as allocated 
contract labor costs. The non-labor-related share is 21.465 percent. 
The increase in the labor-related share using the 2010-based HH market 
basket is primarily due to the increase in costs associated with 
contract labor. Table 11 details the components of the labor-related 
share for the 2003-based and 2010-based home health market baskets.
[GRAPHIC] [TIFF OMITTED] TR08NO12.010

f. CY 2013 Market Basket Update for HHAs
    For CY 2013, we proposed to use an estimate of the 2010-based HHA 
market basket to update payments to HHAs based on the best available 
data. Consistent with historical practice, we estimate the HHA market 
basket update for the HHA PPS based on IHS Global Insight, Inc.'s 
(IGI's) forecast using the most recent available data. IGI is a 
nationally recognized economic and financial forecasting firm that 
contracts with CMS to forecast the components of the market baskets.
    In the proposed rule, based on IGI's second quarter 2012 forecast 
with history through the first quarter of 2012, the HHA market basket 
update for CY 2013 was projected to be 2.5 percent. Consistent with 
historical practice, we also proposed that if more recent data are 
subsequently available (for example, a more recent estimate of the 
market basket), we would use such data, if appropriate, to determine 
the CY 2013 annual update in the final rule. Therefore, we are 
finalizing a CY 2013 market basket update of 2.3 percent for CY 2013, 
which is based on IGI's third quarter 2012 forecast with history 
through the 2nd quarter 2012.

[[Page 67091]]

2. CY 2013 Home Health Payment Update Percentage
    Section 3401(e) of the Affordable Care Act amended section 
1895(b)(3)(B) of the Act by adding a new clause (vi) which states, 
``After determining the home health market basket percentage increase * 
* * the Secretary shall reduce such percentage * * * for each of 2011, 
2012, and 2013, by 1 percentage point. The application of this clause 
may result in the home health market basket percentage increase under 
clause (iii) being less than 0.0 for a year, and may result in payment 
rates under the system under this subsection for a year being less than 
such payment rates for the preceding year.'' Therefore, the final CY 
2013 market basket update of 2.3 percent must be reduced by 1 
percentage point. Thus, the CY 2013 home health payment update is 1.3 
percent.
    The following is a summary of the comments we received regarding 
the CY 2013 Rate Update proposal.
    Comment: Several commenters supported the proposed effort to rebase 
and revise the market basket in order to update the cost shares from a 
2003 base year to a 2010 base year. One commenter believed that future 
rebasings and revisions may be needed every 5 years or less due to the 
rapidly changing landscape of health care and home health services.
    Response: We appreciate the commenters' support for the proposed 
rebasing and revising of the market basket to reflect 2010 cost data. 
We also acknowledge the public's concern regarding the changing 
landscape of costs. We will monitor the market basket's cost categories 
and their respective weights in order to ensure they remain 
contemporary and representative of the industry's cost structure.
    Comment: One commenter expressed concerns about the quality of the 
cost report data that are submitted to CMS. The commenter noted that 
they are hopeful that the recent audits of the cost reports that CMS 
has initiated will improve the quality of the data. The commenter noted 
that although they have concerns about the quality of the cost report 
data they still support the proposed rebasing and revising of the 
market basket to 2010.
    Response: In regards to the commenter's concern on the quality of 
the cost report data, when we calculate the market basket cost weights, 
we run various trimming scenarios to be sure the final market basket 
cost weights are not adversely impacted by outliers. We also run 
matched samples and compare trends and cost shares over time. 
Therefore, we believe our resulting market basket cost weights are 
representative of the national average of freestanding home health 
agencies.
    Comment: One commenter questioned the accuracy with which the 
market basket accounts for transportation costs, currently, as well as 
under the proposed methodology. They note that transportation costs 
have become more unpredictable with the increasing and fluctuating cost 
of gasoline.
    Response: We believe the Transportation cost weight within this 
market basket accurately captures the relative costs faced by home 
health providers as we obtain these costs directly from the Medicare 
cost reports. Additionally, this particular category's cost weight has 
been notably consistent, ranging from between 2.5 percent and 2.8 
percent over the last several years.
    For the price proxy used to estimate price changes for this 
category of costs, although we agree that there is volatility in the 
price of gasoline, we feel that the CPI-U for Transportation price 
index, developed and published by the Bureau of Labor Statistics 
appropriately reflects these costs. Within this particular CPI, motor 
fuel represents approximately 1/3rd of its cost weight (with new and 
used motor vehicles and motor vehicle insurance comprising most of the 
remaining share). This index also appropriately meets CMS's guidelines 
for price proxies (relevance, reliability, timeliness, and public 
availability).
    Comment: Several commenters expressed concern that CMS only uses 
data from freestanding home health agencies to determine the market 
basket cost shares. One commenter also specifically noted the possible 
difference in the labor portion of the market basket and the impact on 
the payments based on the geographic differences. They noted that while 
there is concern about the attribution of costs to hospital-based 
providers, those shifts would appear in the indirect cost centers. They 
also noted that wages and salaries and benefits should be comparable 
across freestanding and hospital-based providers since they are direct 
costs and therefore the hospital-based data should be incorporated into 
the calculation of the labor-related share.
    Response: Presently, all of CMS's market baskets, or input prices 
indexes, incorporate data from only freestanding providers. We monitor 
the costs and cost structures of both freestanding and hospital-based 
providers in the home health industry, as well as other industries. 
Despite controlling for the differing characteristics of both provider 
types, including their respective patient case mix, their geographic 
locations, and other relevant factors, we were not able to adequately 
explain the variation in costs between the two provider types. 
Consequently, we believe that it is appropriate to base the market 
basket's structure on free-standing providers only. We will continue to 
monitor and attempt to better understand these differences going 
forward.
    Comment: One commenter believed that the market basket should be 
based on 2011 cost report data and that 2010 cost reports do not 
reflect the increases in costs to providers of the face-to-face and 
therapy reassessment requirements.
    Response: The market baskets are always based on the most current 
and complete set of cost report data. At the time of this rebasing, the 
most current and complete set of data was for 2010. We will monitor the 
2011 cost reports as they become available and, if the cost structure 
of the industry is materially different than it was in 2010, we would 
consider proposing a subsequent rebasing.
    Comment: Several commenters support the resulting increase to the 
labor-related share which results from the rebasing of the market 
basket cost shares.
    Response: We believe the cost shares that are determined based on 
this rebasing represent the current national average cost shares of the 
industry. Thus, we are finalizing those cost shares in this final rule.
    Comment: Several commenters expressed concerns with the proposal to 
increase the labor-related share from 77.082 percent to 78.535 percent 
for CY 2013 and asked CMS to provide more clarity on the calculation 
methodology. One commenter notes that the resulting increase to the 
labor-related share will have a significant negative impact on 
providers, particularly those in rural areas.
    Response: The home health market basket's labor-related share is 
based on the sum of the weights for Wages & Salaries and Benefits. The 
labor-related share is estimated based on actual data submitted on the 
home health Medicare cost report for both rural and urban freestanding 
home health facilities and is intended to reflect the national average. 
The proposed change in the labor-related share is primarily 
attributable to the update of the base year to reflect 2010 data. The 
2010 data, the most recent and comprehensive data available at the time 
of the rebasing, show that labor-related costs have increased faster 
than aggregate non-labor-related costs since 2003. Although we will 
continue to analyze the home

[[Page 67092]]

health Medicare cost report data on a regular basis to ensure it 
accurately reflects the cost structures facing home health providers, 
we believe the proposed 78.535 percent labor-related share 
appropriately reflects the current national average.
    Comment: One commenter believed the market basket should reflect 
cost changes in an episode of care rather than annual total costs for 
the home health agency. The commenter requested that CMS provide an 
explanation of how the market basket index and the changes in episode 
costs relate to one another. They noted that the average episode of 
care in 2010 could include a different mix of disciplines than an 
average episode of care in 2003.
    Response: Section 1895(b)(3)(B) of the Act requires that the 
standard prospective payment amounts for CY 2013 be increased by a 
factor equal to the applicable home health market basket. Specifically 
the statute states: ``The standard prospective payment amount (or 
amounts) shall be adjusted for fiscal year 2002 and for fiscal year 
2003 and for each subsequent year (beginning with 2004) in a 
prospective manner specified by the Secretary by the home health 
applicable increase percentage (as defined in clause (ii)) applicable 
to the fiscal year or year involved.'' Given that the weighted changes 
in episode costs, including the changing mix of disciplines required to 
provide home health services, all flow into the Medicare cost report, 
they are thus reflected in the market basket's respective cost weights.
    As a result of the comments, we are finalizing all of the proposed 
changes to the home health market basket. The base year will reflect 
the 2010 cost shares as proposed and all of the price proxies that were 
proposed will be implemented. Therefore, consistent with our historical 
practice of estimating market basket increases based on the best 
available data, we are finalizing a CY 2013 market basket update of 2.3 
percent for CY 2013, which is based on IGI's third quarter 2012 
forecast with history through the 2nd quarter 2012. Additionally, we 
are finalizing the labor-related share that reflect the 2010 wage and 
benefit cost shares of the market basket, which is 78.535 percent.
    Comment: A commenter expressed concern about the impact of the 
reduction to the market basket update.
    Response: The reduction to the market basket update is legislated 
by section 1895(b)(3)(B) of the Act, as amended by section 3401(e) of 
the Affordable Care Act, which states that the Secretary shall reduce 
the market basket percentage by 1 percentage point for 2011, 2012, and 
2013.
    Comment: We received several comments regarding CMS's efforts in 
rebasing the HH payment rates as mandated by the Affordable Care Act. 
We also received comments pertaining to the automatic, across-the-board 
cuts, known as sequestration, that are included in the Budget Control 
Act of 2011.
    Response: The comments are outside the scope of this rule. However, 
we will consider the comments concerning rebasing in our future 
rebasing efforts.
3. Home Health Quality Reporting Program (QRP)
a. Background and Quality Reporting Requirements
    Section 1895(b)(3)(B)(v)(II) of the Act states that ``each home 
health agency shall submit to the Secretary such data that the 
Secretary determines are appropriate for the measurement of health care 
quality. Such data shall be submitted in a form and manner, and at a 
time, specified by the Secretary for purposes of this clause.''
    In addition, section 1895(b)(3)(B)(v)(I) of the Act states that 
``for 2007 and each subsequent year, in the case of a HHA that does not 
submit data to the Secretary in accordance with subclause (II) with 
respect to such a year, the HH market basket percentage increase 
applicable under such clause for such year shall be reduced by 2 
percentage points.'' This requirement has been codified in regulations 
at Sec.  484.225(i). HHAs that meet the quality data reporting 
requirements are eligible for the full home health market basket 
percentage increase. HHAs that do not meet the reporting requirements 
are subject to a 2 percentage point reduction to the home health market 
basket increase.
    Section 1895(b)(3)(B)(v)(III) of the Act further states that 
``[t]he Secretary shall establish procedures for making data submitted 
under sub clause (II) available to the public. Such procedures shall 
ensure that a home health agency has the opportunity to review the data 
that is to be made public with respect to the agency prior to such data 
being made public.''
    As codified at Sec.  484.250(a), we established that the quality 
reporting requirements could be met by the submission of OASIS 
assessments and Home Health CAHPS. In the CY 2012 HH PPS final rule (76 
FR 68576), we listed selected measures for the HH QRP and also 
established procedures for making the information available to the 
public by placing the information on the Home Health Compare Web site. 
The selected measures that are made available to the public can be 
viewed on the Home Health Compare Web site located at http://www.medicare.gov/HHCompare/Home.asp.
    In the CY 2012 HH PPS final rule (76 FR68575), we finalized that we 
will also use measures derived from Medicare claims data to measure 
home health quality.
b. OASIS Data Submission and OASIS Data for Annual Payment Update
    The Home Health Conditions of Participation (CoPs) at Sec.  
484.55(d) require that the comprehensive assessment must be updated and 
revised (including the administration of the OASIS) no less frequently 
than: (1) The last five days of every 60 days beginning with the start-
of-care date, unless there is a beneficiary elected transfer, 
significant change in condition, or discharge and return to the same 
HHA during the 60-day episode; (2) within 48 hours of the patient's 
return to the home from a hospital admission of 24 hours or more for 
any reason other than diagnostic tests; and (3) at discharge.
    It is important to note that to calculate quality measures from 
OASIS data, there must be a complete quality episode, which requires 
both a Start of Care or Resumption of Care OASIS assessment and a 
Transfer or Discharge OASIS assessment. Failure to submit sufficient 
OASIS assessments to allow calculation of quality measures, including 
transfer and discharge assessments, constitutes failure to comply with 
the CoPs.
    Home Health Agencies do not need to submit OASIS data for those 
patients who are excluded from the OASIS submission requirements under 
the Home Health Conditions of Participation (CoPs) Sec.  484.1 through 
Sec.  484.265. As described in the Medicare and Medicaid Programs: 
Reporting Outcome and Assessment Information Set Data as Part of the 
Conditions of Participation for Home Health Agencies Final Rule (70 FR 
76202), these are:
     Those patients receiving only nonskilled services;
     Those patients for whom neither Medicare nor Medicaid is 
paying for home health care (patients receiving care under a Medicare 
or Medicaid Managed Care Plan are not excluded from the OASIS reporting 
requirement);
     Those patients receiving pre- or post-partum services; or
     Those patients under the age of 18 years.
    As set forth in the Medicare Program; Home Health Prospective 
Payment

[[Page 67093]]

System Refinement and Rate Update for Calendar Year 2008 Final Rule (72 
FR 49863), HHAs that become Medicare-certified on or after May 31 of 
any year are not subject to the OASIS quality reporting requirement nor 
any payment penalty for quality reporting purposes for the following 
calendar year. For example, HHAs certified on or after May 31, 2012 are 
not subject to the 2 percentage point reduction to their market basket 
update for CY 2013. These exclusions only affect quality reporting 
requirements and do not affect the HHA's reporting responsibilities 
under the Conditions of Participation and Conditions of Payment (70 FR 
76202).
c. Home Health Care Quality Reporting Program Requirements for CY 2014 
Payment and Subsequent Years
(1) Submission of OASIS data
    In the CY 2013 HH PPS proposed rule (77 FR 41548), we proposed to 
consider OASIS assessments submitted by HHAs to CMS in compliance with 
HHA Conditions of Participation and Conditions for Payment for episodes 
beginning on or after July 1, 2011 and before July 1, 2012 as 
fulfilling one portion of the quality reporting requirement for CY 
2013. This time period will allow for 12 full months of data collection 
and would provide us with the time necessary to analyze and make any 
necessary payment adjustments to the payment rates for CY 2013. We 
proposed to continue this pattern for each subsequent year beyond CY 
2013, considering OASIS assessments submitted for episodes beginning in 
the time frame between July 1 of the calendar year two years prior to 
the calendar year of the Annual Payment Update (APU) effective date and 
June 30 of the calendar year one year prior to the calendar year of the 
APU effective date, and received timely by CMS (that is, within 30 days 
of the end of that time period), as fulfilling the OASIS portion of the 
quality reporting requirement for the subsequent APU.
    Comment: We received one comment which supported both of these 
proposals. We received no comments in opposition.
    Response: We appreciate the supportive comments.
    As a result of the comments received, we are finalizing these two 
proposals as proposed.
(2) Acute Care Hospitalization Claims-Based measure
    In August 2003, we began to publicly report on Home Health Compare 
a number of OASIS-C outcome measures, including Acute Care 
Hospitalization. Since that time, we have determined that claims data 
are a more robust source of data for accurately measuring acute care 
hospitalizations. For this reason we proposed that the claims-based 
Acute Care Hospitalization measure replace the OASIS-based measure on 
Home Health Compare. The OASIS-based measure will continue to be 
reported on the agency-specific Certification and Survey Provider 
Enhanced Reporting system (CASPER) reports.
    At the time of the publication of the proposed rule, there were 
technical issues with Home Health Compare files which resulted in our 
plan to delay the reporting of the two claims-based measures 
``Emergency Department Use Without Hospitalization'' and ``Acute Care 
Hospitalization'' until such time as the technical issues were 
resolved. We stated that the OASIS-based Acute Care Hospitalization 
measure would continue to be made available to the public via Home 
Health Compare until it is replaced with the claims-based measure.
    To summarize, for the CY 2013 payment update and for subsequent 
annual payment updates, we proposed to continue to use a HHA's 
submission of OASIS assessments between July 1 and June 30 as 
fulfilling one portion of the quality reporting requirement for each 
payment year. Medicare claims data and HHCAHPS data will also be used 
to measure home health care quality.
    Comment: We received nine comments supportive of the proposal and 
the use of claims-based measures in general. One commenter clearly 
prefers the OASIS-based Acute Care Hospitalization measure, stating it 
provides more granularity. Two commenters opposed publicly reporting 
the claims-based Acute Care Hospitalization measure until measure 
specifications and measure detail are made available and requested to 
preview the measure before public reporting. Several commenters 
question how observation stays will be addressed in the measure. We 
also received comment regarding the restriction of claims-based 
measures to Medicare FFS patients, the need to harmonize with other 
reporting programs, the need to retain OASIS items related to these two 
measures, and the resolution of technical issues referenced in the 
proposed rule.
    Response: We have resolved the technical challenges that we noted 
in the proposed rule and in August, the CASPER reports included Acute 
Care Hospitalization and Emergency Department Use Without 
Hospitalization measure rates that we calculated using claims data. We 
will also begin to publicly report the claims-based measure rates for 
these measures on Home Health Compare.
    We wish to clarify that when we referred to the Acute Care 
Hospitalization and Emergency Department Use Without Hospitalization 
measures as ``replacing'' the OASIS-based measures, what we meant is 
that the measures will be calculated using a new source of data. The 
measure concept has not changed. The revised technical specifications 
were provided to the National Quality Forum (NQF), and after a public 
comment period, the NQF endorsed the revised measures in August 2012. 
The Acute Care Hospitalization measure is NQF 0171 and the ED 
Use Without Hospitalization measure is NQF 0173. The technical 
specifications for the claims-based measures been available since 
September 12 on the CMS Home Health Quality Initiative web page at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html.
    HHAs can currently view their performance on both measures 
(calculated using claims data) on their agency-specific CASPER reports. 
To further respond to the commenters who requested more detail on the 
measures, these measures evaluate the utilization of emergency 
department use without hospitalization and acute care hospitalization 
during the 60 days after the start of the home health stay. Thus, the 
measures address outcomes of HHA patients in a fixed interval after the 
start of their home health care, regardless of the length of their home 
health stay. Home health agencies are most often paid in a 60-day 
payment bundle which covers all home health services for 60 days. As a 
result, the claims-based measures address outcomes of home health 
patients during the time period in which their home health agency 
receives payment from Medicare, (that is, for the 60-day period 
beginning with the start of care date). This is in contrast to the 
OASIS-based measures which calculate outcomes based on the time period 
from start of care to discharge, a period which may be greater or less 
than 60 days.
    Similarly, the measurement begins at home health start of care 
(rather than at hospital discharge) as the home health agency cannot be 
held responsible for hospitalizations or emergency department visits 
that occur before home health care begins. Home Health Compare will 
continue to display these

[[Page 67094]]

measures using a rolling twelve months of data updated on a quarterly 
basis.
    As with the OASIS-based measure, planned hospitalizations are 
excluded from the acute care hospitalization claims-based measure 
numerator. In addition, though some hospitalizations may be avoidable, 
it is difficult to determine if a hospitalization was out of the home 
health agency's control or not. As a result, agency rates on this 
measure are not expected to reach zero percent. Instead, the measure 
rates can be used as guidelines for comparing agencies to each other 
and can be used by agencies to improve their quality of care.
    Observation stays that begin in a hospital emergency department but 
do not result in an inpatient stay within the 60 days after the start 
of home health care are counted in the ED Use without Hospitalization 
measure. Observation stays that result in an inpatient stay within the 
60 days after the start of home health care are counted in the Acute 
Care Hospitalization measure. By comparing HHAs on both utilization 
measures, consumers can gain an accurate picture of how often patients 
of each HHA receive care in an emergency department or hospital in the 
60 days following the start of home health care.
    Medicare claims data are reliable because home health agencies are 
required to submit claims in order to receive payment for Medicare 
beneficiaries. Claims data are extremely detailed and include patient 
identifiers, provider identifiers, services rendered, diagnoses, and 
payment, as well as additional information. Because encounter claims 
data are only readily available for Medicare FFS beneficiaries, the 
measure rates generated from claims for both the Acute Care 
Hospitalization and Emergency Department Use Without Hospitalization 
measures will only reflect Medicare FFS data.
    We are considering whether to begin calculating other OASIS-C 
outcome measures using claims data and we are also considering the 
feasibility of proposing to adopt readmission measures, which might 
include a 30-day measure of rehospitalization that would apply to home 
health patients who begin home health immediately after an inpatient 
hospital stay. We note that this measure would be similar to 
``Hospital-Wide All-Cause Unplanned Readmission'' measure that we 
recently adopted for the Hospital Inpatient Quality Reporting Program.
    We believe that the OASIS items related to acute care 
hospitalization and emergency department use should remain in the OASIS 
dataset. It is important for agencies to be aware of their patient's 
hospitalizations and emergency department visits in order to adjust 
care plans in response to changes in the patient's condition, 
medication regimen, and care needs. Maintaining the items in the OASIS 
also allows agencies to monitor their hospitalization and ED use rates 
in real-time rather than waiting for a claims-based measure to be 
calculated and reported in CASPER. The OASIS item related to emergency 
department use is still used for the Emergency Department Use With 
Hospitalization measure reported on CASPER. Agencies can approximately 
compare their rates on the OASIS-based and claims-based Acute Care 
Hospitalization measures, as reported on the CASPER reports, to gauge 
if their patients received treatment in an emergency department or 
hospital significantly more often than they were aware of. This 
comparison could be useful in HHAs' performance improvement activities.
    As a result of the comments received, we are finalizing that the 
claims-based Acute Care Hospitalization measure replace the OASIS-based 
measure on Home Health Compare as proposed.
d. Home Health Care CAHPS Survey (HHCAHPS)
    In the HH PPS Rate Update for CY 2012 Final Rule (76 FR 68577), we 
stated that the expansion of the home health quality measures reporting 
requirements for Medicare-certified agencies includes the Consumer 
Assessment of Healthcare Providers and Systems (CAHPS[supreg]) Home 
Health Care (HHCAHPS) Survey for the CY 2012 annual payment update 
(APU). In CY 2012 we moved forward with the HHCAHPS linkage to the pay-
for-reporting (P4R) requirements affecting the HH PPS rate update for 
CY 2012. We are maintaining the stated HHCAHPS data requirements for CY 
2013 that were set out in the CY 2012 HH PPS final rule, for the 
continuous monthly data collection and quarterly data submission of 
HHCAHPS data.
(1) Background and Description of HHCAHPS
    As part of the United States Department of Health and Human 
Services' (DHHS) Transparency Initiative, we have implemented a process 
to measure and publicly report patient experiences with home health 
care, using a survey developed by the Agency for Healthcare Research 
and Quality's (AHRQ's) CAHPS[supreg] program, and endorsed by the 
National Quality Forum (NQF) (number 0517). The HHCAHPS survey is part 
of a family of CAHPS[supreg] surveys that asks patients to report on 
and rate their experiences with health care. The HHCAHPS survey 
presents home health patients with a set of standardized questions 
about their home health care providers and about the quality of their 
home health care.
    Prior to this survey, there was no national standard for collecting 
information about patient experiences that would enable valid 
comparisons across all home health agencies (HHAs). The history and 
development process for HHCAHPS has been given in previous rules, but 
it is also available on our Web site https://homehealthcahps.org and 
also, in the annually updated HHCAHPS Protocols and Guidelines Manual, 
which is downloadable from https://homehealthcahps.org.
    For public reporting purposes, we present five measures--three 
composite measures and two global ratings of care--from the questions 
on the HHCAHPS survey. The publicly reported data are adjusted for 
differences in patient mix across home health agencies. Each of the 
three composite measures consists of four or more questions on one of 
the following related topics:
     Patient care (Q9, Q16, Q19, and Q24);
     Communications between providers and patients (Q2, Q15, 
Q17, Q18, Q22, and Q23); and
     Specific care issues on medications, home safety, and pain 
(Q3, Q4, Q5, Q10, Q12, Q13, and Q14).
    The two global ratings are the overall rating of care given by the 
HHA's care providers (Q20), and the patient's willingness to recommend 
the HHA to family and friends (Q25).
    The HHCAHPS survey is not supposed to measure the aspects of home 
health clinical care that can be captured through a medical record. 
Rather, the HHCAHPS survey focuses on areas where the home health 
patient is the best or only source for the information. We believe that 
the HHCAHPS survey is a valid measure of a patient's perspectives of 
home health care. The developmental work for the HHCAHPS survey began 
in mid-2006, and the first HHCAHPS survey was field-tested (to validate 
the length and content of the survey) in 2008 by the AHRQ and the 
CAHPS[supreg] grantees, and the final HHCAHPS survey was used in a 
national randomized mode experiment in 2009 through 2010.
    The HHCAHPS survey is currently available in several languages. At 
the time of the CY 2010 HH PPS final rule, HHCAHPS was only available 
in English and Spanish translations. In the proposed rule for CY 2010, 
we stated

[[Page 67095]]

that we would provide additional translations of the survey over time 
in response to suggestions for any additional language translations. We 
now offer HHCAHPS in English, Spanish, Chinese, Russian, and Vietnamese 
languages. We will continue to consider additional translations of the 
HHCAHPS in response to the needs of the home health patient population.
    All of the requirements about home health patient eligibility for 
the HHCAHPS survey and conversely, which home health patients are 
ineligible for the HHCAHPS survey are delineated and detailed in the 
HHCAHPS Protocols and Guidelines Manual, which is downloadable from 
https://homehealthcahps.org. Home health patients are eligible for 
HHCAHPS if they received at least two skilled home health visits in the 
past two months, which are paid for by Medicare or Medicaid.
    Home health patients are ineligible for inclusion in HHCAHPS 
surveys if one of these conditions pertains to them:
     Are under the age of 18;
     Are deceased prior to pulling sample;
     Receive hospice care;
     Received routine maternity care only;
     Are not considered survey eligible because the state in 
which the patient lives restricts release of patient information for a 
specific condition or illness that the patient has; or
     Requested that their names not be released to anyone.
    We stated in previous rules that Medicare-certified agencies are 
required to contract with an approved HHCAHPS survey vendor. This 
requirement is also codified. Beginning in summer 2009, interested 
vendors applied to become approved HHCAHPS survey vendors. HHCAHPS 
survey vendors are required to attend introductory and all update 
trainings conducted by CMS and the HHCAHPS Survey Coordination Team, as 
well as to pass a post-training certification test. We now have 
approximately 40 approved HHCAHPS survey vendors. The list of approved 
HHCAHPS survey vendors is available at https://homehealthcahps.org.
(2) HHCAHPS Oversight Activities
    We stated in prior final rules that vendors would be required to 
participate in HHCAHPS oversight activities to ensure compliance with 
HHCAHPS protocols, guidelines, and survey requirements. The purpose of 
the oversight activities is to ensure that approved survey vendors 
follow the HHCAHPS Protocols and Guidelines Manual. As stated 
previously in the CY 2010, CY 2011, and CY 2012 final rules, all 
approved survey vendors must develop a Quality Assurance Plan (QAP) for 
survey administration in accordance with the HHCAHPS Protocols and 
Guidelines Manual. An HHCAHPS survey vendor's first QAP must be 
submitted within 6 weeks of the data submission deadline date after the 
vendor's first quarterly data submission. The QAP must be updated and 
submitted annually thereafter and at any time that changes occur in 
staff or vendor capabilities or systems. A model QAP is included in the 
HHCAHPS Protocols and Guidelines Manual. The QAP should include the 
following:
     Organizational Background and Staff Experience
     Work Plan
     Sampling Plan
     Survey Implementation Plan
     Data Security, Confidentiality and Privacy Plan
     Questionnaire Attachments
    As part of the oversight activities, the HHCAHPS Survey 
Coordination Team conducts on-site visits to the approved HHCAHPS 
survey vendors. The purpose of the site visits is to allow the HHCAHPS 
Coordination Team to observe the entire Home Health Care CAHPS Survey 
implementation process, from the sampling stage through file 
preparation and submission, as well as to assess how the HHCAHPS data 
are stored. The HHCAHPS Survey Coordination Team reviews the survey 
vendor's survey systems, and assesses administration protocols based on 
the HHCAHPS Protocols and Guidelines Manual posted at https://homehealthcahps.org. The systems and program review includes, but is 
not limited to the following:
     Survey management and data systems;
     Printing and mailing materials and facilities;
     Telephone call center facilities;
     Data receipt, entry and storage facilities; and
     Written documentation of survey processes.
    After the site visits, HHCAHPS vendors are given a defined time 
period in which to correct any identified issues and provide follow-up 
documentation of corrections for review. HHCAHPS survey vendors are 
subject to follow-up site visits on an as-needed basis.
    We proposed to codify the current guideline that all approved 
HHCAHPS survey vendors fully comply with all HHCAHPS oversight 
activities at Sec.  484.250(c) of our regulations.
(3) HHCAHPS Requirements for CY 2014
    For the CY 2014 APU, we proposed to continue monthly HHCAHPS data 
collection and reporting for four quarters. The data collection period 
for CY 2014 would include the second quarter 2012 through the first 
quarter 2013 (the months of April 2012 through March 2013). HHAs would 
be required to submit their HHCAHPS data files to the Home Health CAHPS 
Data Center for CY 2014 for the second quarter 2012 by 11:59 p.m., 
Eastern Time on October 18, 2012; for the third quarter 2012 by 11:59 
p.m., Eastern Time on January 17, 2013; for the fourth quarter 2012 by 
11:59 p.m., Eastern Time on April 18, 2013; and for the first quarter 
2013 by 11:59 p.m., Eastern Time on July 18, 2013.
    We would exempt HHAs receiving Medicare certification on or after 
April 1, 2012 from the full HHCAHPS reporting requirement for the CY 
2014 APU, because these HHAs were not Medicare-certified in the period 
of April 1, 2011 through March 31, 2012. These HHAs would not need to 
complete a Participation Exemption Request Form for the CY 2014 Annual 
Payment Update. We proposed to maintain this stated exemption for new 
HHAs.
    HHAs that had fewer than 60 HHCAHPS-eligible unduplicated or unique 
patients in the period of April 1, 2011 through March 31, 2012 would be 
exempt from the HHCAHPS data collection and submission requirements for 
the CY 2014 APU. Such agencies would be required to submit their 
patient counts for the period of April 1, 2011 through March 31, 2012 
on the Participation Exemption Request form posted at https://homehealthcahps.org by 11:59 p.m., Eastern Time on January 17, 2013. 
This deadline would be firm, as would be all of the quarterly data 
submission deadlines.
(4) HHCAHPS Requirements for CY 2015
    For the CY 2015 APU, we proposed to continue to require the 
continuous monthly HHCAHPS data collection and reporting for four 
quarters. The data collection period for CY 2015 would include the 
second quarter 2013 through the first quarter 2014 (the months of April 
2013 through March 2014). HHAs would be required to submit their 
HHCAHPS data files to the Home Health CAHPS Data Center for CY 2014 for 
the second quarter 2013 by 11:59 p.m., Eastern Time on October 17, 
2013; for the third quarter 2013 by 11:59 p.m., Eastern Time on January 
16, 2014; for the fourth quarter 2013 by 11:59 p.m., Eastern Time on 
April 17, 2014; and for

[[Page 67096]]

the first quarter 2014 by 11:59 p.m., Eastern Time on July 17, 2014.
    We proposed to continue to exempt HHAs receiving Medicare 
certification on or after April 13, which is after the period in which 
HHAs do their patient count (April 1, 2012 through March 31, 2013) on 
or after April 1, 2013 from the full HHCAHPS reporting requirement for 
the CY 2015 APU, because these HHAs are not Medicare-certified 
throughout the period of April 1, 2012 through March 31, 2013. These 
HHAs do not need to complete a Participation Exemption Request Form for 
the CY 2015 Annual Payment Update. We proposed to maintain this stated 
exemption for new HHAs.
    Likewise, all HHAs that had fewer than 60 HHCAHPS-eligible 
unduplicated or unique patients in the period of April 1, 2012 through 
March 31, 2013 would be exempt from the HHCAHPS data collection and 
submission requirements for the CY 2015 APU. Agencies with fewer than 
60 HHCAHPS-eligible, unduplicated or unique patients in the period of 
April 1, 2012 through March 31, 2013 would be required to submit their 
patient counts on the Participation Exemption Request form for CY 2015 
posted at https://homehealthcahps.org by 11:59 p.m., Eastern Time on 
January 16, 2014. This deadline would be firm, as would be all of the 
quarterly data submission deadlines.
(5) HHCAHPS Reconsiderations and Appeals Process
    We believe that HHAs should monitor their respective HHCAHPS survey 
vendors to ensure that vendors submit their HHCAHPS data on time, by 
accessing their HHCAHPS Data Submission Reports on https://homehealthcahps.org. This will help HHAs ensure that their data are 
submitted in the proper format for data processing to the HHCAHPS Data 
Center.
    We believe that the reconsiderations process for HHCAHPS should not 
be burdensome to HHAs. We have modeled the HHCAHPS reconsiderations 
process after the one that is used for Hospital CAHPS, in use for 
nearly 7 years. We have described the HHCAHPS reconsiderations process 
requirements in the notification memorandum that the RHHIs/MACs sent to 
the affected HHAs, on behalf of CMS. HHAs have 30 days to send their 
reconsiderations to CMS. CMS has and will continue to fully examine all 
HHA reconsiderations.
(6) Summary of Proposed Changes in CY 2013
    We proposed one change in the CY 2013 HH PPS proposed rule issued 
in the July 13, 2012 Federal Register (77 FR 41548). We proposed to 
codify the current guideline that all approved HHCAHPS survey vendors 
fully comply with all HHCAHPS oversight activities, and include this at 
Sec.  484.250(c).
(7) For Further Information on the HHCAHPS Survey
    We strongly encourage HHAs to learn about the survey and view the 
HHCAHPS Survey Web site at the official Web site for the HHCAHPS at 
https://homehealthcahps.org. Home health agencies can also send an 
email to the HHCAHPS Survey Coordination Team at HHCAHPS@rti.org, or 
telephone toll-free (1-866-354-0985) for more information about 
HHCAHPS.
    The following is a summary of the comments we received regarding 
the Home Health Care CAHPS Survey (HHCAHPS) proposal.
    Comment: We received several comments that expressed confusion over 
CMS's statement that we would codify the HHCAHPS guideline that home 
health agencies ensure that survey vendors are fully compliant with all 
HHCAHPS requirements because vendors are approved by CMS. These 
commenters noted that an agency should accept CMS's approval as 
verification that the vendor meets all HHCAHPS requirements and should 
not be held responsible for any compliance failures of a CMS-approved 
vendor.
    Response: In the proposed rule, we proposed to codify the current 
guideline that all approved HHCAHPS survey vendors fully comply with 
all HHCAHPS oversight activities. We proposed to include this survey 
requirement at Sec.  484.250(c). This was correct. However, we were not 
clear in the proposed rule about the HHA's role. HHAs do not need to 
participate in vendor oversight activities. We have corrected this in 
the final rule. We have clarified this language in the preamble of the 
final rule based on comments, that the HHCAHPS approved vendors have to 
comply with HHCAHPS oversight activities. We in error noted in the 
preamble of the proposed rule that HHAs have to comply with HHCAHPS 
oversight activities. However, HHAs are responsible for monitoring 
their vendors to ensure that vendors submit their data on time, using 
the information that is available to them on the HHCAHPS data 
submission reports accessible through https://homehealthcahps.org. If 
we become aware of a significant vendor issue that would put HHAs at 
risk for not meeting the APU requirements, we will immediately alert 
the affected HHAs. If we find that a vendor does not comply with 
HHCAHPS protocols and guidelines, or correct in a timely manner any 
deficiencies that are found during oversight activities, then we will 
remove that vendor from the approved list of HHCAHPS survey vendors.
    Comment: One commenter believed that there needs to be enough 
flexibility within the reconsideration process to provide relief to HHA 
providers that have made reasonable efforts to ensure that their survey 
vendors have complied with the HHCAHPS requirements.
    Response: We review each HHA submission for the reconsideration 
process in a standardized manner so that all HHAs are treated fairly in 
the review process. If we become aware of a significant vendor issue 
that would put HHAs at risk for not meeting the APU requirements, we 
will immediately alert the affected HHAs. If we find that a vendor does 
not comply with HHCAHPS protocols and guidelines, or correct in a 
timely manner any deficiencies that are found during oversight 
activities, then we will remove that vendor from the approved list of 
HHCAHPS survey vendors.
    Comment: One commenter stated that there is continued concern that 
the HHCAHPS survey places another unfunded administrative burden on 
HHAs--a mandate that requires significant time to work with CMS's 
approved vendor selected by the HHA provider.
    Response: The collection of the patient's perspectives of care data 
for similar CAHPS surveys, such as Hospital CAHPS, follow the same 
model where providers pay the approved survey vendors for the data 
collection, and CMS pays for the HHCCAHPS survey vendor training, 
technical support and assistance for HHAs and for HHCAHPS survey 
vendors, oversight of HHCAHPS survey vendors, and data analysis of the 
HHCAHPS survey data. HHAs are strongly encouraged to report their 
respective HHCAHPS costs on their cost reports but should note that the 
HHCAHPS costs are not reimbursable under the HH PPS. We encourage HHAs 
to ``shop around'' for the best cost value for them before contracting 
with an approved HHCAHPS vendor to conduct the survey on their behalf.
    Comment: We received a comment requesting that CMS consider 
reporting the percent of patients that would probably recommend this 
agency to family and friends, in addition to reporting the percent of 
patients that

[[Page 67097]]

would definitely recommend this agency to family and friends.
    Response: Thank you for your feedback. We will take it under 
consideration.
    Comment: We received a comment that is in full support of the 
HHCAHPS and would suggest that CMS continue to report updates on 
HHCAHPS in the open door forums. Also, this commenter said that it 
might be very helpful to include HHCAHPS as a scope of work with the 
QIOs so that best practices to increase consumer satisfaction could be 
established and shared.
    Response: We appreciate supportive comments about HHCAHPS. The 
survey provides an opportunity for patients to share their perspectives 
about the care provided. We appreciate your suggestion to include 
HHCAHPS in the SOW for the QIOs and will take it under consideration.
    We are finalizing the proposed requirements for HHCAHPS as proposed 
in the CY 2013 HH PPS proposed rule. We are also codifying the current 
guideline that all approved HHCAHPS survey vendors fully comply with 
all HHCAHPS oversight activities. We are including this at Sec.  
484.250(c). The regulation is identically stated in the proposed rule 
and in this final rule.
4. Home Health Wage Index
    Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the 
Secretary to provide appropriate adjustments to the proportion of the 
payment amount under the HH PPS that account for area wage differences, 
using adjustment factors that reflect the relative level of wages and 
wage-related costs applicable to the furnishing of home health 
services. In the CY 2013 HH PPS proposed rule (77 FR 41548), as in 
previous years, we proposed to base the wage index adjustment to the 
labor portion of the HH PPS rates on the most recent pre-floor and pre-
reclassified hospital wage index. We would apply the appropriate wage 
index value to the labor portion of the HH PPS rates based on the site 
of service for the beneficiary (defined by section 1861(m) of the Act 
as the beneficiary's place of residence). Previously, we determined 
each HHA's labor market area based on definitions of Metropolitan 
Statistical Areas (MSAs) issued by the Office of Management and Budget 
(OMB). We have consistently used the pre-floor, pre-reclassified 
hospital wage index data to adjust the labor portion of the HH PPS 
rates. We believe the use of the pre-floor, pre-reclassified hospital 
wage index data results in an appropriate adjustment to the labor 
portion of the costs, as required by statute.
    In the CY 2006 HH PPS final rule (70 FR 68132), we began adopting 
revised labor market area definitions as discussed in the Office of 
Management and Budget (OMB) Bulletin No. 03-04 (June 6, 2003). This 
bulletin announced revised definitions for Metropolitan Statistical 
Areas (MSAs) and the creation of Micropolitan Statistical Areas and 
Core-Based Statistical Areas (CBSAs). The bulletin is available online 
at www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB 
published subsequent bulletins regarding CBSA changes, including 
changes in CBSA numbers and titles. This rule incorporates the CBSA 
changes published in the most recent OMB bulletin. The OMB bulletins 
are available at http://www.whitehouse.gov/omb/bulletins/index.html.
    Finally, we would continue to use the methodology discussed in the 
CY 2007 HH PPS final rule (71 FR 65884) to address those geographic 
areas in which there were no inpatient prospective payment system 
(IPPS) hospitals and, thus, no hospital wage data on which to base the 
calculation of the HH PPS wage index. For rural areas that do not have 
IPPS hospitals, and therefore, lack hospital wage data on which to base 
a wage index, we would use the average wage index from all contiguous 
CBSAs as a reasonable proxy. For rural Puerto Rico, we do not apply 
this methodology due to the distinct economic circumstances that exist 
there, but instead continue using the most recent wage index previously 
available for that area (from CY 2005).
    For urban areas without IPPS hospitals, we use the average wage 
index of all urban areas within the state as a reasonable proxy for the 
wage index for that CBSA. For CY 2012, the only urban area without IPPS 
hospital wage data is Hinesville-Fort Stewart, Georgia (CBSA 25980).
    The wage index values for rural areas and the CBSAs and their 
associated wage index values are available via the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices.html
    The following is a summary of the comments we received regarding 
the wage index policy in the CY 2013 HH PPS proposed rule.
    Comment: Commenters expressed concern about the inequities between 
the hospital wage index and the home health wage index. Several 
commenters believed that the pre-floor, pre-reclassified hospital wage 
index is inadequate for adjusting home health costs. Commenters cited 
labor market distortions created by reclassification of hospitals in 
areas in which HHAs are not reclassified. However, while hospitals have 
the opportunity to reclassify to neighboring CBSAs or take advantage of 
the rural floor, HHAs do not have this ability. Commenters stated that 
this has resulted in inadequate home health cost adjustment that 
negatively impact HHAs ability to recruit and retain nurses and 
therapists in a highly competitive health care labor market. CMS's 
reasoning for refusing to apply reclassification to HHAs is that 
reclassification applies only to hospitals by statute. However, if 
hospital relative wages are thought to be a reasonable proxy for 
relative wages of HHAs, the impact of hospital reclassifications in an 
area should be applied to the hospital wage index which in turn is 
applied to the home health reimbursement.
    Response: As we have previously stated (see the CY 2009 HH PPS 
final rule at 74 FR 58105), the regulations that govern the HH PPS do 
not provide a mechanism for allowing providers to seek geographic 
reclassification or to utilize the rural floor provisions that exist 
for IPPS hospitals. The rural floor provision can be found in section 
4410 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) and is 
specific to hospitals. The reclassification provision can be found in 
section 1886(d)(10) of the Act is also specific to hospitals. In its 
June 2007 report titled, ``Report to Congress: Promoting Greater 
Efficiency in Medicare'', MedPAC recommended that Congress ``repeal the 
existing hospital wage index statute, including reclassification and 
exceptions, and give the Secretary authority to establish new wage 
index systems.'' We will continue to review and consider MedPAC's 
recommendations on a refined alternative wage index methodology for the 
HH PPS in the future.
    Comment: A commenter believes that CMS's decision 7 years ago to 
switch from Metropolitan Statistical Areas to Core-Based Statistical 
Areas for the wage index calculation has had serious financial 
ramifications for HHAs in certain areas.
    Response: We believe that adjusting payments based on the CBSA 
areas is the best available method of compensating for differences in 
labor markets. We adopted the OMB-revised definitions of the labor 
market areas (CBSAs) in our CY 2006 HH PPS final rule (70 FR 68137). We 
implemented a one-year transition policy consisting of a 50/50 blend of 
the MSA-based and the new CBSA-based wage indexes for that year. The HH 
PPS has been utilizing the

[[Page 67098]]

CBSA based wage index in its entirety since calendar year 2007.
    Comment: Several commenters stated that the year-to-year swings in 
the wage index are unpredictable. Commenters also urged CMS to 
implement a policy to limit the wage index variation between provider 
types within CBSAs and adjacent markets. Commenters suggested that CMS 
establish ``change corridors'' to limit the annual change in wage index 
values in a given year.
    Response: Updating the hospital wage index is done in a budget 
neutral manner. Establishing ``change corridors'' or limits on how much 
a particular wage index could increase or decrease from year-to-year 
would not be consistent with budget neutrality.
    Comment: A commenter stated that the wage index is often based on 
inaccurate or incomplete hospital cost report data.
    Response: We utilize efficient means to ensure and review the 
accuracy of the hospital cost report data and resulting wage index. The 
home health wage index is derived from the pre-floor, pre-reclassified 
wage index which is calculated based on cost report data from hospitals 
paid under the IPPS. All IPPS hospitals must complete the wage index 
survey (Worksheet S-3, Parts II and III) as part of their Medicare cost 
reports. Cost reports will be rejected if Worksheet S-3 is not 
completed. In addition, our intermediaries perform desk reviews on all 
hospitals' Worksheet S-3 wage data, and we run edits on the wage data 
to further ensure the accuracy and validity of the wage data. 
Furthermore, HHAs have the opportunity to submit comments on the 
hospital wage index data during the annual IPPS rulemaking period. 
Therefore, we believe our review processes result in an accurate 
reflection of the applicable wages for the areas given.
    Comment: Several commenters supported a review of the entire wage 
index system and urge CMS to expedite that review and implement a 
system that not only recognizes variations between localities, but also 
treats all provider types within a local market equitably.
    Response: Two studies were undertaken to address concerns that the 
current wage index system does not effectively reflect the true 
variation in labor costs. First, section 3137(b) of the Affordable Care 
Act required the Secretary to submit to the Congress a report that 
includes a plan to comprehensively reform the Medicare wage index 
applied under section 1886(d) of the Act. In developing the plan, the 
Secretary was directed to take into consideration the goals for 
reforming the wage index that were set forth by the Medicare Payment 
Advisory Commission (MedPAC) in its June 2007 report entitled ``Report 
to Congress: Promoting Greater Efficiency in Medicare'' and to 
``consult with relevant affected parties.'' Second, the Secretary 
commissioned the Institute of Medicine (IOM) to ``evaluate hospital and 
physician geographic payment adjustments, the validity of the 
adjustment factors, measures and methodologies used in those factors, 
and sources of data used in those factors.'' Reports on both of these 
studies recently have been released. We refer readers to the FY 2013 
IPPS final rule for summaries of the studies, their findings, and 
recommendations on reforming the wage index system (77 FR 28116).
    Comment: A commenter stated that differences in the occupational 
personnel pool and costs between hospitals and HHAs make use of the 
hospital wage index inappropriate in the home health setting. Hospitals 
benefit from institutional efficiencies and rural hospitals have a 
reclassification mechanism to avoid exposure to the drastic rural rate 
in most states. Despite repeated comments from HHAs opposing the use of 
the hospital wage index each year, CMS has not yet developed a home 
health specific wage index, citing the expense and administrative 
burden of data collection. The commenter stated that CMS has the 
discretion to establish a home health wage index and that the use of 
the hospital wage index to adjust non-hospital reimbursement rates was 
originally intended to be an interim measure while CMS examined 
industry-specific wage data for HHAs, SNFs, IRFs and other post-acute 
services. The commenter cited the following rules: 65 FR 41127 (July 
12, 2000), 65 FR 46770 (July 31, 2000), and 66 FR 41316 (August 7, 
2001).
    Response: Please note that the July 31, 2000 rule (65 FR 46770) is 
a SNF rule and the August 7, 2001 rule (66 FR 41316) is an IRF rule so 
they do not apply to the HH PPS. The HH PPS rule at 65 FR 41127 was 
published on July 3, 2000 and we did not intend or imply that our 
adoption of the pre-floor, pre-reclassified hospital wage index to be 
an interim measure. As we stated in the July 3, 2000 HH PPS final rule 
(65 FR 41173), ``To be consistent with the wage index adjustment under 
the current interim payment system, we proposed and will retain 
applying the appropriate wage index value to the labor portion of the 
PPS rates based on the geographic area in which the beneficiary 
received home health services.'' We further noted that ``In 
establishing the final HHA PPS rates, we used the most recent pre-
floor, pre-reclassified hospital wage index without regard to whether 
these hospitals have been reclassified to a new geographic area by the 
Medicare Geographic Reclassification Board.'' As stated above, we refer 
readers to the FY 2013 IPPS Final Rule (77 FR 28116) for summaries of 
the two studies undertaken to address concerns that the current 
hospital wage index system does not effectively reflect the true 
variation in labor costs, their findings, and recommendations on 
reforming the wage index system.
    Comment: A commenter noted that beginning in FY 2004, CMS dropped 
critical access hospitals (CAHs) from the calculation of the wage 
index. As CAHs are located in rural areas, the absence of CAH wage data 
further compromises the accuracy and appropriateness of using hospital 
wage data to determine labor costs of HHAs located in rural areas.
    Response: Although the pre-floor, pre-reclassified hospital wage 
index data does not include CAHs, we believe it most appropriately 
reflects the relative level of wages and wage-related costs applicable 
to the furnishing of home health services and provide appropriate 
adjustments to the episode payment amounts under the HH PPS to account 
for area wage differences. Therefore, for this final rule, we are 
adopting the pre-floor, pre-reclassified hospital wage index.
    Comment: A commenter suggested, pending development of an industry 
specific wage index, that CMS should investigate adding a population 
density factor to the calculation of the payment formula. This would 
provide incentive to HHAs to service beneficiaries residing in low 
density (primarily rural) areas, while at the same time reducing excess 
reimbursement for services provided in densely populated urban and 
congregate living facilities. The commenter states that travel time and 
mileage costs incurred for providing home health services to patients 
that are grouped in the lowest population density group is more than 
double that of the highest population density group.
    Response: We have received and responded to this comment in prior 
rules. We appreciate the commenter's comment, but we do not have 
evidence that a population density adjustment is an appropriate 
adjustment to a wage index. Section 3131(d) of the Affordable Care Act 
requires the Secretary to conduct a study on HHA costs involved with 
providing ongoing access to care to low-income Medicare beneficiaries 
or beneficiaries in medically underserved

[[Page 67099]]

areas, and in treating beneficiaries with varying levels of severity of 
illness. Because medically underserved areas may be associated with 
population density, the purview of the above mentioned study may 
possibly include feasibility of such an adjustment as part of that 
research. While rural agencies cite the added cost of long distance 
travel to treat their patients, urban/non-rural agencies also cite 
added costs such as needed security measures and the volume of traffic 
that they must absorb. We will consider this suggestion in future 
research activities.
    Comment: A commenter requested that the county in which its HHA is 
located be reclassified into a different CBSA. The commenter believes 
that the ability to attract and retain qualified competent health care 
professionals will be adversely affected if the county is not 
reclassified into another CBSA.
    Response: We adopted the OMB-revised definitions of the labor 
market areas (CBSAs) in our CY 2006 HH PPS final rule (70 FR 68137). We 
implemented a one-year transition policy consisting of a 50/50 blend of 
the MSA-based and the new CBSA-based wage indexes. The HH PPS has been 
utilizing the CBSA based wage index in its entirety since calendar year 
2007. We do not have the authority to redesignate a county into a 
different CBSA.
    We are implementing our proposal to base the wage index adjustment 
to the labor portion of the HH PPS rates on the most recent pre-floor 
and pre-reclassified hospital wage index.
5. Final CY 2013 Payment Update
a. National Standardized 60-Day Episode Rate
    The Medicare HH PPS has been in effect since October 1, 2000. As 
set forth in the July 3, 2000 final rule (65 FR 41128), the base unit 
of payment under the Medicare HH PPS is a national standardized 60-day 
episode rate. As set forth in Sec.  484.220, we adjust the national 
standardized 60-day episode rate by a case-mix relative weight and a 
wage index value based on the site of service for the beneficiary.
    In the CY 2008 HH PPS final rule with comment period, we refined 
the case-mix methodology and also rebased and revised the home health 
market basket. To provide appropriate adjustments to the proportion of 
the payment amount under the HH PPS to account for area wage 
difference, we apply the appropriate wage index value to the labor 
portion of the HH PPS rates. As discussed in section III.C.1, we are 
finalizing a labor-related share of the case-mix adjusted 60-day 
episode rate of 78.535 percent and a non-labor-related share of 21.465 
percent. The final CY 2013 HH PPS rates use the same case-mix 
methodology and application of the wage index adjustment to the labor 
portion of the HH PPS rates as set forth in the CY 2008 HH PPS final 
rule with comment period. Following are the steps we take to compute 
the case-mix and wage adjusted 60-day episode rate:
    (1) Multiply the national 60-day episode rate by the patient's 
applicable case-mix weight.
    (2) Divide the case-mix adjusted amount into a labor (78.535 
percent) and a non-labor portion (21.465 percent).
    (3) Multiply the labor portion by the applicable wage index based 
on the site of service of the beneficiary.
    (4) Add the wage-adjusted portion to the non-labor portion, 
yielding the case-mix and wage adjusted 60-day episode rate, subject to 
any additional applicable adjustments.
    In accordance with section 1895(b)(3)(B) of the Act, this document 
constitutes the annual update of the HH PPS rates. The HH PPS 
regulations at Sec.  484.225 set forth the specific annual percentage 
update methodology. In accordance with Sec.  484.225(i), for a HHA that 
does not submit home health quality data, as specified by the 
Secretary, the unadjusted national prospective 60-day episode rate is 
equal to the rate for the previous calendar year increased by the 
applicable home health market basket index amount minus two percentage 
points. Any reduction of the percentage change will apply only to the 
calendar year involved and will not be considered in computing the 
prospective payment amount for a subsequent calendar year.
    As discussed in the July 3, 2000 HH PPS final rule, for episodes 
with four or fewer visits, Medicare pays the national per-visit amount 
by discipline, referred to as a low utilization payment amount (LUPA). 
We update the national per-visit rates by discipline annually by the 
applicable home health market basket percentage. We adjust the national 
per-visit rate by the appropriate wage index based on the site of 
service for the beneficiary, as set forth in Sec.  484.230. For CY 
2013, we proposed to adjust the labor portion of the updated national 
per-visit rates used to calculate LUPAs by the most recent pre-floor 
and pre-reclassified hospital wage index. We will update the LUPA add-
on payment amount and the NRS conversion factor by the applicable home 
health payment update of 1.3 percent for CY 2013.
    Medicare pays the 60-day case-mix and wage-adjusted episode payment 
on a split percentage payment approach. The split percentage payment 
approach includes an initial percentage payment and a final percentage 
payment as set forth in Sec.  484.205(b)(1) and (2). We may base the 
initial percentage payment on the submission of a request for 
anticipated payment (RAP) and the final percentage payment on the 
submission of the claim for the episode, as discussed in Sec.  409.43. 
The claim for the episode that the HHA submits for the final percentage 
payment determines the total payment amount for the episode and whether 
we make an applicable adjustment to the 60-day case-mix and wage-
adjusted episode payment. The end date of the 60-day episode as 
reported on the claim determines which calendar year rates Medicare 
would use to pay the claim.
    We may also adjust the 60-day case-mix and wage-adjusted episode 
payment based on the information submitted on the claim to reflect the 
following:
     A low utilization payment provided on a per-visit basis as 
set forth in Sec.  484.205(c) and Sec.  484.230.
     A partial episode payment adjustment as set forth in Sec.  
484.205(d) and Sec.  484.235.
     An outlier payment as set forth in Sec.  484.205(e) and 
Sec.  484.240.
b. Final Updated CY 2013 National Standardized 60-Day Episode Payment 
Rate
    In calculating the annual update for the CY 2013 national 
standardized 60-day episode payment rates, we first look at the CY 2012 
rates as a starting point. The CY 2012 national standardized 60-day 
episode payment rate is $2,138.52.
    Next, we update the payment amount by the final CY 2013 home health 
payment update of 1.3 percent.
    As previously discussed in section III.A. (``Case-Mix 
Measurement'') of this final rule, we have updated our analysis of the 
change in case-mix that is not due to an underlying change in patient 
health status. The analysis revealed an additional increase in nominal 
change in case-mix, increasing the reduction needed in CY 2013 to fully 
account for nominal case-mix change from 1.32 percent, using data 
through 2009, to 2.18 percent, using data through 2010. However, we 
will reduce rates by 1.32 percent in CY 2013 as promulgated in the CY 
2012 HH PPS Final Rule. The national 60-day episode payment amount is 
adjusted by the case-mix weight of the patient and by the wage index of 
the geographic area in which the beneficiary is located. The final CY 
2013 national standardized 60-day episode payment rate for an HHA that 
submits the required quality data is

[[Page 67100]]

shown in Table 12. The final CY 2013 national standardized 60-day 
episode payment rate for an HHA that does not submit the required 
quality data is updated by the final CY 2013 home health payment update 
(1.3 percent) minus 2 percentage points and is shown in Table 13.
[GRAPHIC] [TIFF OMITTED] TR08NO12.011

c. National Per-Visit Rates
    The national per-visit rates are used to pay LUPAs and are also 
used to compute imputed costs in outlier calculations. The per-visit 
rates are paid by type of visit or home health discipline. The six home 
health disciplines are as follows:
     Home Health Aide (HH aide);
     Medical Social Services (MSS);
     Occupational Therapy (OT);
     Physical Therapy (PT);
     Skilled Nursing (SN); and
     Speech Language Pathology Therapy (SLP).
    In order to calculate the CY 2013 national per-visit rates, the CY 
2012 national per-visit rates for each discipline are updated by the 
final CY 2013 home health payment update of 1.3 percent. The national 
per-visit rates are adjusted by the wage index based on the site of 
service of the beneficiary. The per-visit rates are not case-mix 
adjusted nor are they subject to the 1.32 percent reduction related to 
the nominal increase in case-mix. The per-visit payment amounts for 
LUPAs are separate from the LUPA Add-On amount which is paid for 
episodes that occur as the only episode or initial episode in a 
sequence of adjacent episodes. The CY 2013 national per-visit rates are 
shown in Table 14.

[[Page 67101]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.012

d. LUPA Add-On Payment Amount Update
    Beginning in CY 2008, LUPA episodes that occur as the only episode 
or initial episode in a sequence of adjacent episodes are adjusted by 
adding an additional amount to the LUPA payment before adjusting for 
area wage differences. We update the LUPA payment amount by the CY 2013 
home health payment update of 1.3 percent. The LUPA add-on payment 
amount is not subject to the 1.32 percent reduction related to the 
nominal increase in case-mix. For CY 2013, the add-on to the LUPA 
payment for HHAs that submit the required quality data will be updated 
by the CY 2013 home health payment update of 1.3 percent. The CY 2013 
LUPA add-on payment amount is shown in Table 15. The add-on to the LUPA 
payment for HHAs that do not submit the required quality data will be 
updated by the CY 2013 home health payment update (1.3 percent) minus 
two percentage points.

[[Page 67102]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.013

e. Nonroutine Medical Supply Conversion Factor Update
    Payments for nonroutine medical supplies (NRS) are computed by 
multiplying the relative weight for a particular severity level by the 
NRS conversion factor. We first increase CY 2012 NRS conversion factor 
($53.28) by the payment update of 1.3 percent. The final updated CY 
2013 NRS conversion factor for 2013 appears in Table 16.
[GRAPHIC] [TIFF OMITTED] TR08NO12.014

    Using the NRS conversion factor ($53.97) for CY 2013, the payment 
amounts for the various severity levels are shown in Table 17.
[GRAPHIC] [TIFF OMITTED] TR08NO12.015

    For HHAs that do not submit the required quality data, we again 
begin with the CY 2012 NRS conversion factor. We increase the CY 2012 
NRS conversion factor ($53.28) by the CY 2013 home health payment 
update of 1.3 percent minus 2 percentage points. The CY 2013 NRS 
conversion factor for

[[Page 67103]]

HHAs that do not submit quality data is shown in Table 18.
[GRAPHIC] [TIFF OMITTED] TR08NO12.016

    The payment amounts for the various severity levels based on the 
updated conversion factor for HHAs that do not submit quality data are 
calculated in Table 19.
[GRAPHIC] [TIFF OMITTED] TR08NO12.017

6. Rural Add-On
    Section 421(a) of the MMA required, for home health services 
furnished in a rural areas (as defined in section 1886(d)(2)(D) of the 
Act), with respect to episodes or visits ending on or after April 1, 
2004 and before April 1, 2005, that the Secretary increase the payment 
amount that otherwise would have been made under section 1895 of the 
Act for the services by 5 percent.
    Section 5201 of the DRA amended section 421(a) of the MMA. The 
amended section 421(a) of the MMA required, for home health services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act), on or after January 1, 2006 and before January 1, 2007, that the 
Secretary increase the payment amount otherwise made under section 1895 
of the Act for those services by 5 percent.
    Section 3131(c) of the Affordable Care Act amended Section 421(a) 
of the MMA to provide an increase of 3 percent of the payment amount 
otherwise made under section 1895 of the Act for home health services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act), for episodes and visits ending on or after April 1, 2010 and 
before January 1, 2016.
    The statute waives budget neutrality related to this provision, as 
the statute specifically states that the Secretary shall not reduce the 
standard prospective payment amount (or amounts) under section 1895 of 
the Act applicable to home health services furnished during a period to 
offset the increase in payments resulting in the application of this 
section of the statute.
    The 3 percent rural add-on is applied to the national standardized 
60-day episode rate, national per-visit rates, LUPA add-on payment, and 
NRS conversion factor when home health services are provided in rural 
(non-CBSA) areas. Refer to Tables 20 through 24 for these payment 
rates.
BILLING CODE 4120-01-P

[[Page 67104]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.018

[[Page 67105]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.019

BILLING CODE 4120-01-C

    The following is a summary of the comments we received regarding 
the HH PPS payment rates.
    Comment: Commenter supports the continuation of the rural add-on 
and CMS's recognition of the challenges faced by rural providers.
    Response: We value the crucial role that rural providers fill in 
providing care to beneficiaries who reside in rural areas. The current 
rural add-on is legislated by section 3131(c) of the Affordable Care 
Act amended section 421(a) of the MMA to provide an increase of 3 
percent of the payment amount otherwise made under section 1895 of the 
Act for home health services furnished in a rural area for episodes and 
visits ending on or after April 1, 2010 and before January 1, 2016.
    Comment: A commenter urges CMS to consider a 5 percent rural add-
on.
    Response: To bolster payment rates for services provided to 
beneficiaries who reside in rural areas, section 421(a) of the MMA, as 
amended by section 3131(c) of the Affordable Care Act, provides for a 3 
percent rural add-on for episodes and visits ending on or after April 
1, 2010 and before January 1, 2016. The statute waives budget 
neutrality related to this provision. The amount of the rural add-on is 
stipulated by section 421(a) of the MMA.
    Comment: A commenter believes that HHAs that serve beneficiaries in 
rural areas are in a particularly precarious financial situation. The 
commenter stated that rural HHAs operating costs are higher than urban 
HHAs. In addition, the commenters are concerned about access to care 
for rural beneficiaries. One commenter goes on to state that rural HHAs 
often function as the primary caregivers for elderly homebound patients 
who have high resource needs which also increase the cost of rural home 
health services.
    Response: As we stated above, we value the crucial role that rural 
providers fill in providing care to beneficiaries who reside in rural 
areas. We will be looking to improve the accuracy of payment to HHAs in 
the future, through a number of efforts. In particular, section 3131(d) 
of the Affordable Care Act requires the Secretary to study and report 
on the development of HH payment revisions that would ensure access to 
care and payment for severity of illness. The study is to be on HHA 
costs involved with providing ongoing access to care to low-income 
Medicare beneficiaries or beneficiaries in medically underserved areas, 
and in treating beneficiaries with varying levels of severity of 
illness. As part of this study, we are required to consult with 
appropriate stakeholders, such as groups representing HHAs and groups 
representing Medicare beneficiaries. At the conclusion of this study, 
we must submit a Report to the Congress by March 1, 2014. Based on the 
findings of this study, the Secretary may provide for a demonstration 
project to test whether making payment adjustments for HH services 
under the Medicare program would substantially improve access to care 
for patients with high severity levels of illness or for low-

[[Page 67106]]

income or underserved Medicare beneficiaries.
    We are implementing the payment rates as they appear in sections 
III.C.5 and III.C.6 above.

D. Home Health Face-to-Face Encounter

1. Additional Flexibility
    As a condition for payment, the Affordable Care Act requires that, 
prior to certifying a patient's eligibility for the home health 
benefit, the physician must document that the physician himself or 
herself or an allowed nonphysician practitioner (NPP) has had a face-
to-face encounter with the patient. Specifically, sections 
1814(a)(2)(C) and 1835 (a)(2)(A) of the Act, as amended by the 
Affordable Care Act state that a nurse practitioner or clinical nurse 
specialist, as those terms are defined in section 1861(aa)(5) of the 
Act, working in collaboration with the physician in accordance with 
state law, or a certified nurse-midwife (as defined in section 1861(gg) 
of the Act) as authorized by state law, or a physician assistant (as 
defined in section 1861(aa)(5) of the Act) under the supervision of the 
physician may perform the face to face encounter and inform the 
certifying physician, who documents the encounter as part of the 
certification of eligibility. In the CY 2012 HH PPS final rule (76 FR 
68597), we stated that, in addition to the certifying physician and 
allowed NPPs, the physician who cared for the patient in an acute or 
post-acute care facility, and who had privileges in such facility, 
could also perform the face-to-face encounter and inform the certifying 
physician, who would document the encounter as part of the 
certification of eligibility, that the encounter supported the 
patient's homebound status and need for skilled services.
    For patients admitted to home health following care in an acute or 
post-acute care facility, the home health industry has asked whether it 
would be acceptable for an allowed NPP, working in the acute or post-
acute facility, to perform the face-to-face encounter in collaboration 
with the acute or post-acute care physician and communicate his or her 
clinical findings to the acute or post-acute care physician and, then, 
for the acute or post-acute care physician to communicate the NPP's 
findings to the certifying physician. In practice, it is our 
understanding from these stakeholders that acute or post-acute care 
physicians utilize NPPs to obtain information about the patient's 
clinical condition. As such, the industry suggested that it would be 
reasonable and appropriate for an allowed NPP working in an acute or 
post-acute facility to perform the face-to-face encounter and 
communicate the clinical findings to the acute or post-acute care 
physician who would then communicate information regarding the 
patient's homebound status and need for skilled services to the 
certifying physician. We do not believe the statute precludes this 
situation from occurring. Therefore, in the CY 2013 HH PPS proposed 
rule (77 FR 41548)), for patients admitted to home health from an acute 
or post-acute facility we proposed to modify the regulations at Sec.  
424.22(a)(1)(v) to allow an NPP in an acute or post-acute facility to 
perform the face-to-face encounter in collaboration with or under the 
supervision of the physician who has privileges and cared for the 
patient in the acute or post-acute facility, and allow such physician 
to inform the certifying physician of the patient's homebound status 
and need for skilled services.
    The following is a summary of the comments we received regarding 
the additional flexibility proposed.
    Comment: Most commenters expressed support of the additional 
flexibility proposed. One commenter stated that the proposal will be 
difficult to implement and educate physicians on and that physicians 
often do not want to certify based on information provided to them from 
a different physician or allowed NPP.
    Response: We thank the commenters for their support and acknowledge 
since the implementation of the face-to-face encounter requirements in 
CY 2011 (75 FR 70372) we have heard that many HHAs and practitioners 
believe that the requirements are confusing and hard for providers to 
understand. As result, we recently released a revised set of Q&As and a 
MLN Matters article. We created this guidance with the goal of 
increasing the understanding of the face-to-face requirements among 
physicians and to provide additional flexibilities that certifying 
physicians can utilize in completing the face-to-face encounter 
documentation. For example, if the certifying physician is hesitant to 
use information provided to them from another physician or allowed NPP, 
the certifying physician can use a hospital's discharge summary as the 
face-to-face documentation as long as it is clearly titled and dated as 
such, and contains all the documentation requirements and is signed by 
the certifying physician. The Q&As are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Downloads/QandAsFull-revised-062712.pdf and the MLN Matters article is 
available at: http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1219.pdf.
    Comment: One commenter recommended that CMS permit allowed NPPs in 
the acute or post-acute setting to speak directly with the certifying 
physician about the patient's clinical and homebound status and need 
for skilled care. Another commenter recommended that CMS allow the 
physician to sign off on the NPP's clinical findings and permit the NPP 
to send his or her clinical findings with the physician signature 
directly to the certifying physician. The commenter also stated that 
HHAs should not have to ensure that the acute or post-acute care 
physician is the supervising physician of the NPP that performed the 
face-to-face encounter.
    Response: In the acute or post-acute care setting, current policy 
permits allowed NPPs to perform the face-to-face encounter and directly 
inform the certifying physician of the clinical findings and how such 
findings support that the patient is homebound and needs skilled 
services. It would also be permissible for the physician in the acute 
or post-acute care facility that cared for the patient in that setting 
to sign off on the NPPs clinical findings, which would be sent to the 
certifying physician by the NPP who is collaborating directly with the 
certifying physician. However, it is still the responsibility of the 
certifying physician to document the date that the face-to-face 
encounter occurred and that the condition for which the patient was 
being treated in the face-to-face encounter is related to the primary 
reason the patient requires home health services and that the clinical 
findings of the encounter support that the patient is homebound and in 
need of either intermittent skilled nursing services or therapy 
services. Likewise, the completion of the face-to-face encounter 
documentation is required to be completed by the physician that is 
certifying the patient for home health services, rather than the HHA. 
As such, the certifying physician should only be documenting an actual 
face-to-face encounter that was performed by an allowed NPP or the 
physician that cared for the patient in the acute or post-acute care 
setting as defined in Sec.  424.22(a)(1)(v) in satisfying the face-to-
face encounter requirements.
    Comment: One commenter expressed concern that claims could be 
denied because the communication between the acute or post-acute care 
physician and the community certifying physician

[[Page 67107]]

might not be evident as it could occur via telephone or in person 
(rather than via email or written correspondence).
    Response: It is the responsibility of the certifying physician to 
document that the face-to-face encounter occurred and to satisfy the 
content requirements. It would be acceptable for the certifying 
physician to obtain information verbally either from a physician in the 
acute or post-acute care facility that cared for the patient in that 
setting, or an allowed NPP who is either collaborating directly or 
under the supervision of either the certifying physician or the 
physician who cared for the patient in the acute or post-acute care 
setting, and document what was conveyed orally as long as all the 
content requirements are met.
    Comment: Some commenters stated that the face-to-face encounter 
documentation requirements create substantial burden for HHAs in 
ensuring documentation compliance. Often times, physicians are confused 
as to what is required of them, view the paperwork as duplicative, and 
are uncooperative, which cause significant resources being invested by 
the HHA into obtaining the required documentation. Further, if the 
face-to-face encounter documentation is not obtained, the HHA is 
penalized for physician noncompliance. One commenter stated that 
electronic medical records and meaningful use standards should result 
in the information being readily available to support the patient's 
homebound status and need for skilled services, negating the need for a 
separate documentation requirements. Other commenters suggested that 
CMS allow a signed and dated discharge summary or physician's office 
note to stand as evidence of the face-to-face encounter, and one 
commenter questioned why it was necessary to document a face-to-face 
encounter when a patient was admitted from an acute or post-acute care 
setting, as the patient was obviously under the care of a physician 
during his or her stay. Moreover, several commenters asked CMS to 
rescind our face-to-face encounter documentation requirements or allow 
providers to bill for Medicare eligible services when the physician 
does not comply with completing the face-to-face documentation. 
Finally, some commenters suggested that if the face-to-face 
documentation is not provided by the certifying physician to the HHA 
within 5 days of referral, the HHA would provide a Home Health Advance 
Beneficiary Notice (HHABN) Option 2 at that time.
    Response: We thank the commenters for their comments, but these 
comments are outside the scope of this rule. However, we would like to 
remind commenters that we do not have the authority to rescind the 
requirement for certifying physicians to document the face-to-face 
encounter, nor exempt HHAs from responsibility for the face-to-face 
encounter requirements regardless of the setting from which the patient 
was admitted or for physician noncompliance, as section 6407 of the 
Affordable Care Act mandates it is a condition for payment. As we 
stated above, a recently revised set of Q&As and a MLN Matters article 
were released, which specify certain flexibilities that certifying 
physicians can utilize in completing the face-to-face encounter 
documentation. For example, the certifying physician can use the 
discharge summary as the face-to-face documentation as long as it is 
clearly titled and dated as such, and contains all the documentation 
requirements and is signed by the certifying physician. In response to 
commenters who suggested that an HHABN Option 2 be delivered to the 
patient if the face-to-face encounter documentation is not provided by 
the certifying physician to the HHA within 5 days, HHAs may issue an 
HHABN Option 2 to the patient after only 5 days; however, the current 
regulations at Sec.  424.22(a)(1)(v) allow a face-to-face encounter to 
occur no more than 90 days prior to the home health start of care date 
or within 30 days of the start of the home health care and HHAs should 
recognize that they are responsible for providing information to 
Medicare beneficiaries prior to the start of care about the extent to 
which Medicare may pay for services and thereafter prior to a change in 
payment status under the Patient Rights Condition of Participation set 
out in Sec.  484.10(e). We want to reiterate that the HHABN Option 2 
does not transfer liability to the beneficiary when technical 
requirements for payment, such as the face-to-face encounter 
documentation, are not met.
    Comment: Several commenters requested that, due to difficulties in 
obtaining face-to-face encounter documentation from physicians, the 
face-to-face documentation requirements should be limited to the date 
which the encounter occurred and that the condition for which the 
patient was being treated in the face-to-face encounter is related to 
the primary reason the patient requires home health services. Some 
commenters suggested that CMS allow the preprinted certification 
statement (from the former CMS 485/plan of treatment) to suffice as 
documentation of the patient's homebound status. In addition, several 
commenters suggested that CMS allow a ``non-PCP specialist'' medical 
director to sign the face-to-face encounter documentation, allow 
additional types of practitioners to conduct the face-to-face 
encounter, allow an HHA's Medical Director to complete the face-to-face 
encounter, including documentation of such encounter, and permit 
allowed NPPs and other types of practitioners to certify patients for 
home health services. Other commenters suggested that CMS allow 
physicians to delegate the documentation requirements to allowed NPPs.
    Response: Some of these comments are outside the scope of this 
rule. However, we would like to respond to the comments that request 
CMS not to require the face-to-face documentation to contain why the 
clinical findings of such encounter support that the patient is 
homebound and in need of intermittent skilled nursing services or 
therapy services or that we allow a preprinted statement from the 
former CMS 485/plan of treatment to suffice as documentation of the 
patient's homebound status. As we stated in the CY 2011 final rule 
implementing the face-to-face encounter documentation requirements (76 
FR 68594), using the words ``document the encounter'' in the statute 
instead of ``attest to the encounter'' suggests that the Congress 
intended the face-to-face encounter documentation to include factual 
information about the patient's condition as seen during the encounter 
which would support the physician's certification of the patient's 
eligibility for home health services (that is, homebound status and 
need for skilled services). Likewise, as the statute requires the 
certifying physician to document the face-to-face encounter, it would 
not be permissible to delegate this responsibility to an allowed NPP or 
to use preprinted statements. In response to the comments suggesting 
that additional types of practitioners, an HHA Medical Director, or a 
``non-PCP specialist'' MD should be able to conduct and/or document the 
face-to-face encounter, we do not have the authority to further define 
the types of practitioners allowed to perform the face-to-face 
encounter and because documentation of a the face-to-face encounter is 
required for certification, the certifying physician is responsible for 
documenting the face-to-face encounter. In addition, we do not have the 
statutory authority to permit allowed NPPs or other types of 
practitioners to certify patients for home health services, nor is it 
permissible for

[[Page 67108]]

HHA Medical Directors to certify patients for home health services, of 
which the face-to-face encounter documentation is one component, as 
longstanding regulations at Sec.  424.22 impose financial restrictions 
on the relationship between an HHA and the certifying physician. The 
face-to-face encounter provision in the Affordable Care Act was 
designed as an anti-fraud provision and CMS is committed to ensuring 
that Medicare reimbursement is available only to patients actually in 
need of home health services.
    Comment: Some commenters asked that we further define ``exceptional 
circumstances'' in which the face-to-face encounter can be waived to 
include circumstances where the patient moves, changes physician, or is 
re-hospitalized within 30 days of the start of the home health episode. 
Several commenters also asked that CMS expand the window of time during 
which a face-to-face encounter can occur to 60 days after admission to 
home health. Other commenters stated that many beneficiaries that are 
homebound and/or live in remote areas are not able to travel to their 
doctor's offices or have limited transportation options to satisfy the 
face-to-face encounter requirements and some commenters suggested that 
Medicare reimburse for the expense of a non-urgent stretcher or 
wheelchair transport to a physician's office to fulfill the face-to-
face encounter requirements, while others suggested that CMS allow 
individuals to meet the face-to-face encounter requirements through 
telehealth technologies that could be made available in patient's 
homes.
    Response: Some of these comments are outside the scope of this 
rule. We will consider the commenters suggestions on further defining 
``exceptional circumstances'' in which face-to-face encounter 
requirements could be waived for future rulemaking. However, we will 
take the opportunity to briefly respond to some of the commenters' 
other concerns. Regarding the timeframe allowed to conduct the face-to-
face encounter, we believe the current timeframe of 90 days prior to 
the start of care and 30 days after the start of care is appropriate 
and best meets the needs of program integrity efforts and quality goals 
associated with the provision. For those patients that are homebound 
and require non-urgent stretcher or wheelchair transport to reach the 
physician's office, we do not have the statutory authority to reimburse 
for these services under the Medicare home health benefit as they are 
not defined as ``home health services'' according to section 1861(m) of 
the Act. In response to allowing telehealth in patient's home, we note 
that section 1834(m) of the Act limits the provision of telehealth 
services to certain originating sites where the service can be 
provided.
    Comment: Several commenters asked CMS to review its claims data to 
determine whether the implementation of the face-to-face encounter 
requirements has impacted access to care.
    Response: We have conducted analyses looking at the number of paid 
claims, both nationally and by state, for 2009 through 2011. Our 
analyses show that face-to-face requirements have not had an adverse 
effect on access to Medicare HH services as the volume of paid claims 
is consistent with previous years.
    After carefully considering all of the comments received, we are 
finalizing the additional flexibility as proposed. We will modify the 
regulations at Sec.  424.22(a)(1)(v) to allow an NPP in an acute or 
post-acute facility to perform the face-to-face encounter in 
collaboration with or under the supervision of the physician who has 
privileges and cared for the patient in the acute or post-acute 
facility, and allow such physician to inform the certifying physician 
of the patient's homebound status and need for skilled services.
2. Regulatory Text Change
    Additionally, we proposed to revise our regulatory language at 
Sec.  424.22(a)(1)(v)(D) as to not be prescriptive as to what entity 
must date and title the face-to-face documentation. The face-to-face 
documentation must still be signed by the certifying physician, and the 
content requirements are not changing.
    Comment: Commenters were supportive of the proposed regulatory text 
change.
    Response: We thank the commenters for their support.
    We are finalizing regulatory text change as proposed. The 
regulation text in part 424 will be changed to not be prescriptive as 
to what entity needs to date and title the face-to-face documentation, 
but will still require the same content and the certifying physician's 
signature.

E. Therapy Policy Changes

1. Therapy Coverage and Reassessments
    In the CY 2011 HH PPS final rule (75 FR 70389), we clarified 
policies related to how therapy services are to be provided and 
documented, and began requiring additional therapy documentation to 
support medical necessity to address continuing concerns regarding the 
provision of unnecessary therapy in the home health setting. However, 
concerns regarding when therapy services are covered if a therapist 
misses a reassessment visit persist. As a result, in the CY 2013 HH PPS 
proposed rule issued in the July 13, 2012 Federal Register (77 FR 
41548), we proposed to revise our regulations at Sec.  
409.44(c)(2)(i)(E) to state that if a qualified therapist missed a 
reassessment visit, therapy coverage would resume with the visit during 
which the qualified therapist completed the late reassessment, not the 
visit after the therapist completed the late reassessment. In addition, 
we proposed to revise our regulations at Sec.  409.44(c)(2)(i)(E) to 
state that in cases where multiple therapy disciplines are involved, if 
the required reassessment visit was missed for any one of the therapy 
disciplines for which therapy services were being provided, therapy 
coverage would cease only for that particular therapy discipline. 
Therefore, as long as the required therapy reassessments were completed 
in a timely manner for the remaining therapy disciplines, therapy 
services would continue to be covered for those therapy disciplines. We 
expect minimal changes to claims submissions as a result of these 
policy changes.
    The following is a summary of the comments we received regarding 
the therapy coverage proposals.
    Comment: Commenters were supportive of our proposals to resume 
coverage of therapy with the visit during which the qualified therapist 
completed the late reassessment rather than with the visit after the 
therapist completed late reassessment and in cases where multiple 
therapy disciplines are involved, if the required reassessment visit 
was missed for any one of the therapy disciplines for which therapy 
services were being provided, therapy coverage would cease only for 
that particular therapy discipline. In particular, one commenter stated 
that these proposals will ``remove a barrier to providing necessary, 
appropriate, and timely home health services'' and ``allows patients to 
get the care they need without risking a decline in status.''
    Response: We agree the reassessment visit should be covered, as 
therapy was also provided during that visit even though it was not 
timely. In addition, we also agree that if left unchanged, the current 
policies have the potential to negatively impact beneficiaries' access 
to therapy services. That is, if an agency anticipates a visit will not 
be covered because one qualified therapist has not

[[Page 67109]]

completed the required reassessment, it might be reluctant for any 
therapy visits to occur until that missed reassessment visit is 
completed. This is obviously not in the best interest of the 
beneficiary.
    Comment: Some commenters were confused as to when therapy coverage 
would resume under the proposals if one or more therapy discipline 
missed the required reassessment. For example, if a patient receives 
occupational therapy on visit 11 (with reassessment requirements met) 
and on visit 14, speech-language pathology services on visit 13 (with 
reassessment requirements met) and 15, and physical therapy is provided 
on visit 12 (but did not meet reassessment requirements) and on visit 
16 (assessment completed). The commenters questioned whether the CY 
2013 HH PPS proposed rule would allow for ongoing coverage of 
occupational therapy and speech-language pathology and would allow for 
coverage of physical therapy on visit 16, when the reassessment was 
completed.
    Response: Under the scenario above, the commenters are correct and 
the proposal would allow for ongoing coverage of occupational therapy 
and speech-language pathology and would allow for coverage of physical 
therapy on visit 16, when the reassessment was completed. The physical 
therapy provided on visit 12 would be non-covered.
    We are finalizing the therapy coverage proposals as proposed. The 
regulation text at Sec.  409.44(c)(2)(i)(E) will be revised to state 
that if a qualified therapist missed a reassessment visit, therapy 
coverage would resume with the visit during which the qualified 
therapist completed the late reassessment, not the visit after the 
therapist completed the late reassessment. In addition, the regulation 
text at Sec.  409.44(c)(2)(i)(E) will be revised to state that in cases 
where multiple therapy disciplines are involved, if the required 
reassessment visit was missed for any one of the therapy disciplines 
for which therapy services were being provided, therapy coverage would 
cease only for that particular therapy discipline.
2. When Therapy Reassessment Visits Are To Be Conducted
    Currently our regulations at Sec.  409.44(c)(2)(i)(C)(2) and Sec.  
409.44(c)(2)(i)(D)(2) state that in cases where the patient is 
receiving more than one type of therapy, the qualified therapist from 
each discipline must provide all of the therapy, and functionally 
reassess the patient during the visit associated with that discipline 
that is scheduled to occur close to the 14th Medicare-covered therapy 
visit, but no later than the 13th Medicare-covered therapy visit and a 
qualified therapist from each discipline must provide all of the 
therapy and functionally reassess the patient during the visit 
associated with that discipline that is scheduled to occur close to the 
20th Medicare-covered therapy visit, but no later than the 19th 
Medicare-covered therapy visit. However, because we received numerous 
inquiries from the home health industry on what CMS considered ``close 
to,'' we believed that more precise guidance was needed. As a result, 
we proposed to revise the regulations at Sec.  409.44(c)(2)(i)(C)(1) 
and Sec.  409.44(c)(2)(i)(D)(1) to clarify that in cases where the 
patient is receiving more than one type of therapy, qualified 
therapists must complete their reassessment visits during the 11th, 
12th, or 13th visit for the required 13th visit reassessment and the 
17th, 18th, or 19th visit for the required 19th visit reassessment.
    The following is a summary of the comments we received regarding 
the therapy reassessment proposal.
    Comment: Several commenters were supportive of the proposal 
specifying where the patient is receiving more than one type of 
therapy, qualified therapists must complete their reassessment visits 
during the 11th, 12th, or 13th visit for the required 13th visit 
reassessment and the 17th, 18th, or 19th visit for the required 19th 
visit reassessment.
    Response: We thank the commenters for their support. We received 
numerous questions from the home health industry about what CMS 
considered ``close to'' the 13th and 19th visit under current policy. 
We believe that the range proposed, which mirrors the flexibility 
already in regulation for therapy provided in rural areas, in most 
cases provides sufficient flexibility for qualified therapists from 
each discipline to functionally reassess the patient.
    Comment: Several commenters stated that often times different 
therapy modalities will have different frequencies depending on patient 
need. As such, the proposal specifying ranges in which the 13th and 
19th reassessment visits can be conducted when the patient is receiving 
more than one type of therapy restricts the flexibility in completing 
assessments that the ``close to'' language provides. In addition, 
commenters stated that the proposal may result in HHAs providing an 
extra unnecessary visit or delaying visits to ensure that the agency is 
in compliance with completing the required assessments during the 
specified window of time. Commenters provided several schedule examples 
illustrating instances where therapies provided at varying frequencies 
would result in having the HHA either provide extra unnecessary therapy 
visits or delaying therapy visits in order for each discipline to 
comply with the proposed timeframe for reassessments in multi-therapy 
cases.
    Response: We find compelling the commenters' concerns regarding the 
feasibility for patients receiving more than one type of therapy of 
qualified therapists from each of the therapy discipline reassessing 
the patient within the proposed timeframes when modalities differ 
significantly in frequency; in those cases we do not expect an HHA to 
schedule an extra unnecessary visit or delay a visit in order to 
reassess the patient within the proposed timeframes. Therefore, in 
instances where patients are receiving more than one type of therapy, 
and the frequency of a particular discipline, as ordered by a 
physician, does not make it feasible for the reassessment to occur 
during the specified timeframes without providing an extra unnecessary 
visit or delaying a visit, it would still be acceptable and satisfy the 
reassessment requirement, for the qualified therapist for that 
discipline to provide the therapy service and functionally reassess the 
patient during the visit associated with that discipline that is 
scheduled to occur close to the 14th Medicare-covered therapy visit, 
but no later than the 13th Medicare-covered therapy visit and for a 
qualified therapist from each discipline to provide all of the therapy 
service and functionally reassess the patient during the visit 
associated with that discipline that is scheduled to occur close to the 
20th Medicare-covered therapy visit, but no later than the 19th 
Medicare-covered therapy visit.
    Comment: Several commenters stated that there is a shortage of 
qualified therapists, especially in rural areas, making compliance with 
therapy reassessment requirements difficult. Additionally, several 
commenters stated that too many evaluations were required in a short 
time period and that the current therapy regulations have added 
administrative burden, caused scheduling problems, increased clinical 
and clerical time, require software changes and as a result, there are 
numerous non-covered visits being provided by HHAs. Moreover, 
commenters stated that often failure to comply is outside the control 
of the HHA or therapist, such as unexpected patient illness, 
hospitalization, or therapist availability.
    Response: We thank the commenters for their comments, but these 
comments are outside the scope of this rule.

[[Page 67110]]

However, regarding the administrative burden of these requirements we 
would like to remind the commenters that the reasons for the therapy 
reassessments outlined in the CY 2011 HHS PPS final rule (75 FR 70372) 
were not only to address payment vulnerabilities that have led to high 
use and sometimes overuse of therapy services, but also to ensure more 
qualified therapist involvement for beneficiaries receiving high 
amounts of therapy, which results in better patient outcomes. Regarding 
factors that are outside of the HHA's control that may result in 
failure to comply with the reassessment requirements, as we stated 
above, the regulation text will be amended to state that if a qualified 
therapist missed a reassessment visit, therapy coverage would resume 
with the visit during which the qualified therapist completed the late 
reassessment, not the visit after the therapist completed late 
reassessment. In addition, changes to the regulation text at Sec.  
409.44(c)(2)(i)(E) will be made to state that in cases where multiple 
therapy disciplines are involved, if the required reassessment visit 
was missed for any one of the therapy disciplines for which therapy 
services were being provided, therapy coverage would cease only for 
that particular therapy discipline. These two changes should help in 
reducing the number of non-covered visits that would have otherwise 
occurred when reassessment visits were missed.
    Comment: Several commenters stated that in cases where the patient 
is not available for therapy services or documented factors preclude a 
visit, payment would not be denied if the qualified therapist conducts 
the therapy assessment during the next visit.
    Response: As we stated above, the regulation text will be amended 
to state that if a qualified therapist missed a reassessment visit, 
therapy coverage would resume with the visit during which the qualified 
therapist completed the late reassessment, not the visit after the 
therapist completed late reassessment. In addition, changes to the 
regulation text at Sec.  409.44(c)(2)(i)(E) will be made to state that 
in cases where multiple therapy disciplines are involved, if the 
required reassessment visit was missed for any one of the therapy 
disciplines for which therapy services were being provided, therapy 
coverage would cease only for that particular therapy discipline.
    Comment: Several commenters suggested other improvements to 
streamline the therapy reassessment requirements, including requiring a 
functional reassessment during the 2nd and 4th weeks of treatment in 
each episode and during the final week of the episode or 5-day OASIS 
window, and amending the regulation to require a qualified therapist to 
perform the assessment and treatment or the qualified therapist perform 
the assessment and observe the assistant providing the treatment. 
Several commenters also recommended that a new therapy payment system 
should be established.
    Response: These comments are outside the scope of this rule. We 
will take the commenters suggestions into consideration for future 
rulemaking. However, we would like to reiterate that we continue to 
believe that the requirement for a qualified therapist (instead of an 
assistant) to perform the needed therapy service at key points in the 
patient's course of treatment, as well as to assess, measure, and 
document the effectiveness of the therapy provided, promotes more 
effective and efficient care.
    Comment: One commenter asked that CMS clarify that ``progress'' 
need not be documented or expected when the patient meets the criteria 
for maintenance therapy as permitted by the regulations. Specifically, 
CMS should revise the preamble text in the CY 2013 HH PPS proposed rule 
(77 FR 41571) that currently reads that ``we cease coverage of therapy 
services if progress towards plan of care goals cannot be measured, 
unless the documentation supports the expectation that progress can be 
expected in a reasonable and predictable timeframe.''
    Response: To clarify, the regulation text at Sec.  
409.44(c)(2)(iv)(B) current states ``clinical records must include 
documentation using objective measures that the patient continues to 
progress towards goals. If progress cannot be measured, and continued 
progress towards goals cannot be expected, therapy services cease to be 
covered except when (1) Therapy progress regresses or plateaus, and the 
reasons for lack of progress are documented to include justification 
that continued therapy treatment will lead to resumption of progress 
toward goals; or (2) Maintenance therapy as described in Sec.  
409.44(c)(2)(iii)(B) or (C) is needed.
    We are finalizing our proposal to revise the regulations at Sec.  
409.44(c)(2)(i)(C)(1) and Sec.  409.44(c)(2)(i)(D)(1) to clarify that 
in cases where the patient is receiving more than one type of therapy, 
qualified therapists must complete their reassessment visits during the 
11th, 12th, or 13th visit for the required 13th visit reassessment and 
the 17th, 18th, or 19th visit for the required 19th visit reassessment 
with the following modification. However, we will also modify the 
regulation text to state that in instances where patients receive more 
than one type of therapy, if the frequency of a particular discipline, 
as ordered by a physician, does not make it feasible for the 
reassessment to occur during the specified timeframes without providing 
an extra unnecessary visit or delaying a visit, then it will still be 
acceptable for the qualified therapist from each discipline to provide 
all of the therapy and functionally reassess the patient during the 
visit associated with that discipline that is scheduled to occur 
closest to the 14th Medicare-covered therapy visit, but no later than 
the 13th Medicare-covered therapy visit. Likewise, a qualified 
therapist from each discipline must provide all of the therapy and 
functionally reassess the patient during the visit associated with that 
discipline that is scheduled to occur closest to the 20th Medicare-
covered therapy visit, but no later than the 19th Medicare-covered 
therapy visit.
3. Technical Correction to G-code Description
    As part of our ``Home Health Prospective Payment System Rate Update 
for Calendar Year 2011,'' (75 FR 70389) we also provided notice of 
changes to existing G-codes and new G-codes related to skilled nursing 
and therapy services (75 FR 43248). In Change Request 7182, we 
finalized these new and revised G-codes. These codes included G0158, 
which had as its description, ``Services performed by a qualified 
occupational therapist assistant in the home health or hospice setting, 
each 15 minutes.'' After the publication of these codes, a national 
therapy association informed us that the use of the word, ``therapist'' 
rather than ``therapy'' is technically incorrect for the occupational 
therapy profession. This association requested that we change the 
terminology in the G-code. Because this description includes the 
terminology, ``occupational therapist assistant,'' we proposed to make 
a technical correction to this terminology in G0158, so that the new 
description would instead include the terminology, ``occupational 
therapy assistant,'' making it also consistent with Sec.  484.4.
    We received one comment on the proposed technical correction to the 
G0158 description. The commenter was supportive of the proposed 
correction and commended CMS on its action to make the code consistent 
with Sec.  484.4 and national occupational therapy practice standards.
    We are finalizing the technical correction to the description for 
G0158 as proposed.

[[Page 67111]]

F. Payment Reform: Home Health Study and Report

    Section 3131(d) of the Affordable Care Act requires the Secretary 
to conduct a study on HHA costs involved with providing access to care 
to low-income Medicare beneficiaries or beneficiaries in medically 
underserved areas, and in treating beneficiaries with varying levels of 
severity of illness (specifically, patients with ``high levels of 
severity of illness''). In the CY 2013 HH PPS proposed rule, we 
provided a description of the varied areas for which we have the 
authority to explore as part of our payment reform activities (77 FR 
41572). We continue to conduct analyses, which include evaluating the 
current HH PPS and developing payment reform options which might 
minimize vulnerabilities and more accurately align payment with patient 
resource costs. The Report to Congress regarding the study must be 
submitted no later than March 1, 2014. We will provide updates 
regarding our progress in future rulemaking and open door forums.
    The following is a summary of the comments we received regarding 
this study and report.
    Comment: Commenters supported the study on access to care for 
vulnerable populations and stated that they appreciate this 
undertaking. Commenters also said that they appreciate the specific 
mention of CMS's demonstration authority of potential revisions to the 
HH PPS and they saw the study as a solution to many of the problems in 
the current payment system. One commenter stated that the across the 
board cuts for nominal case-mix growth as well as the upcoming 
reductions likely resulting from rebasing will continue to create 
incentives for providers to avoid vulnerable patients, whose projected 
cost of care exceeds average-based payments, causing access problems 
for higher cost patients and threatening the viability of this Medicare 
program. Another commenter stated that they are seeing access problems 
for higher cost patients. Commenters stated that they support any 
effort by CMS to address the needs of vulnerable patient populations 
and recommended that the study be expedited, if feasible. One commenter 
stated that they anticipate that the study would include ``an 
examination of care management models, provider options (including 
expanded utilization of nurse practitioners), and payment methods that 
support helping underserved and medically fragile persons remain in 
their community.'' The commenter stated that they ``look forward to 
participating in creative solutions that address medical, social and 
environmental issues that directly impact overall health status and 
risk for avoidable hospitalization.'' Other commenters urged CMS to 
consider information from this study when rebasing. Similarly, a 
commenter stated that CMS should use information from the study, and 
possible demonstration, to determine a fair payment rate. Commenters 
also encouraged CMS ``to make fundamental modifications to the payment 
system to assure that all patients who need home health are served and 
that the agencies that serve them are not ``financially punished'' for 
accepting disproportionate numbers of high cost patients.'' Commenters 
stated that they would like CMS to engage the home health community/
industry in developing both regulatory and legislative remedies to 
other systematic problems in the HH PPS. Another commenter recommended 
that CMS provide updates to the stakeholder community on the plan and 
design of the study through different venues, such as a Special Open 
Door Forum. The commenter believed that physical therapists and home 
health clinicians should be active participants in the collection and 
analysis of data for the study.
    Response: We will take the commenters' suggestions into 
consideration when performing the home health study. As described in 
the CY 2012 proposed rule, we plan to provide updates regarding our 
progress in future rulemaking and open door forums. We note that we are 
open to hearing about any instances of access to care issues that 
vulnerable beneficiaries may face, particularly if they are associated 
with costs and reimbursement, and potential solutions to access issues.

G. International Classification of Diseases, 10th Edition (ICD-10) 
Transition Plan and Grouper Enhancements

    On September 5, 2012 the Department of Health and Human Services 
published a final rule ``Administrative Simplification Adoption of a 
Standard for a Unique Health Plan Identifier; Addition to the National 
Provider Identifier Requirements; and a Change to the Compliance Date 
for ICD-10-CM and ICD-10-PCS Medical Data Code Set'' (77 FR 54664) that 
sets a new compliance date for ICD-10-CM and ICD-10-PCS of October 1, 
2014. We continue to work with the HH PPS Grouper maintenance 
contractor to revise the HH PPS Grouper to accommodate ICD-10-CM codes. 
Our current plans are to describe the testing approach for the HH PPS 
Grouper to accommodate and process ICD-10 codes on the ICD-10 section 
of the CMS Web site in conjunction with the release of the draft 
grouper in the summer/fall 2013. We plan to update providers of any 
changes to our current plans through the following forums: The ICD-10 
Home Health section of the CMS Web site, the Home Health, Hospice and 
DME Open Door Forums, and provider outreach sessions for ICD-10.
    In December 2008, we updated and released Attachment D: Selection 
and Assignment of OASIS Diagnoses to promote accurate selection and 
assignment of the patient's diagnosis (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/OASIS_Attachment_D_Guidance.html). This guidance was designed to ensure that providers 
limited the number of diagnoses assigned to the payment diagnosis field 
(M1024 on OASIS-C). In addition, Attachment D reminded HHA clinicians/
coders to comply with ICD-9-CM coding guidelines when assigning primary 
and secondary diagnoses to the OASIS items (M1020 and M1022 on OASIS-
C), respectively. Analysis conducted by our HH PPS Grouper maintenance 
contractor revealed that many HHAs do not comply with these guidelines. 
Specifically, the analysis demonstrated that HHAs are not limiting the 
number of diagnoses assigned to the payment diagnosis field and are 
also reporting resolved conditions in that field. We have reviewed the 
diagnosis codes identified in the HH PPS Grouper and coding guidelines 
confirm that the only codes that cannot be reported as a primary or 
secondary diagnosis code are the fracture codes. As discussed in the CY 
2012 HH PPS proposed rule, we proposed two enhancements for the HH PPS 
Grouper which we believe will encourage compliance with coding 
guidelines.
    First, we proposed to restrict the payment diagnosis field to only 
permit fracture diagnoses codes, which according to ICD-9-CM coding 
guidelines, cannot be reported in a home health setting as a primary or 
secondary diagnosis. To further ensure compliance with proper coding 
guidelines, we proposed to pair the fracture codes with appropriate 
diagnosis codes and only when these pairings appear in the primary 
payment diagnosis field will the grouper award points.
    Second, we proposed a revision to the HH PPS Grouper logic to score 
Diabetes, Skin 1 or Neuro 1 diagnosis codes when

[[Page 67112]]

submitted immediately following a v-code in the primary diagnosis field 
the same as they are currently scored when a v-code is reported in the 
primary diagnosis field and the supporting diagnosis code is reported 
in the payment diagnosis field. As we stated in the proposed rule, 
these grouper enhancements will enforce appropriate use of our payment 
diagnosis field based upon our long standing policy and as described in 
our Attachment D. We believe that in doing so, we will be in a much 
more favorable position to eventually retire the payment diagnosis 
field when we move to ICD-10 and there is no longer a need for the 
payment diagnosis field for the reporting of fracture codes. Finally, 
we believe these actions will help ensure ICD-9 and ICD-10 coding 
guidelines are followed; and will assist in the eventual transition of 
grouping the diagnoses on the claim, versus OASIS, in determining the 
appropriate HIPPS code for payment.
    The following is a summary of the comments we received regarding 
the ICD-10 Transition Plan and Grouper Enhancements.
    Comment: Several commenters supported our plans for the ICD-10-CM 
transition and look forward to further updates through the final rule 
and provider outreach sessions. Although some commenters supported our 
plans to retire the payment diagnosis field, other commenters noted 
that the OASIS payment field was introduced as a payment vehicle for 
diagnoses that could no longer be reported in the primary or secondary 
positions because of HIPAA requirements. Many commenters also stated 
that Attachment D was designed to permit the submission of resolved 
conditions in the payment diagnosis field and that a majority of the 
conditions reported in the payment diagnosis field represent resolved 
conditions. Many commenters expressed concern that the proposed policy 
to restrict the payment diagnosis field needed additional clarification 
and specificity regarding the reporting of the v-code and the limited 
use of the payment diagnosis field since Attachment D is not 
sufficient. Several commenters also urged us to update Attachment D to 
reflect changes in the OASIS and ICD-9-CM coding guidance.
    Response: We appreciate that some commenters recognize the need for 
compliance with ICD-9-CM coding guidelines and recognize that there is 
a need to update Attachment D and the HH PPS Grouper specifications to 
reflect the restrictions for the payment diagnosis field. We conducted 
a review of Attachment D to determine whether further clarification or 
updates are necessary and conclude that the guidance issued did not 
fully communicate that the reporting of resolved conditions in the 
payment diagnosis field should be limited. However, we disagree that 
the payment diagnosis field was designed to permit ``any'' resolved 
condition to be reported. In CY 2009, 85 percent of OASIS records did 
not contain any diagnosis codes in the payment diagnosis field or 
contained only diagnoses codes that had not been found to be associated 
with additional resources use and as such as are not included in our 
grouper nor impacted by this policy. We analyzed the 15 percent of 
OASIS records that included grouper diagnosis codes in the payment 
diagnosis field and found that 25 percent of those OASIS records 
represent fracture conditions which can continue to be reported and 
scored. Thirty-six percent represent persistent conditions, such as 
diabetic cataract, in which the underlying condition (diabetes) could 
be reported as a primary or secondary diagnosis and thus are not 
impacted by this policy. Thirty-nine percent represent conditions that 
can be reported in the primary or secondary diagnosis fields if the 
diagnosis is active rather than resolved and is appropriate for care in 
the home health setting.
    Based on our review and the commenters' recommendations, we agree 
that Attachment D should be updated to reflect the most current version 
of OASIS and any changes and clarifications in coding guidance.
    Our analysis found that if HHAs were to ensure compliance with 
coding guidelines, there would not be a need to report a resolved 
condition with the exception of fractures. Several commenters provided 
a few examples where they believe the proposed policy would result in a 
decrease in case mix points. One such example is of a low therapy 
patient admitted to home health for post-operative care following 
surgical resolution of an intestinal obstruction would also have a 
surgical wound that receives a lower score. Although this example and 
others could result in a lower score, the diagnosis codes being 
reported in the payment diagnosis field suggests that these are 
extremely rare types of episodes and the impact is negligible. We found 
that more than 99.6 percent of assessments would continue to receive 
the same case-mix weight when the payment diagnosis field is restricted 
to fracture codes only, resulting in a 0.04 percent decrease in 
payments to HHAs.
    Oftentimes, the HHA selected and reported a condition within the 
same diagnosis group as the condition reported in the payment diagnosis 
field or should have selected another diagnosis within the codes 
included in the grouper diagnosis group to report as a resolving 
condition in primary or secondary diagnosis fields. In either case, 
restricting the awarding of points to fracture conditions will ensure 
that HHAs avoid selection of diagnosis codes that are not in compliance 
with coding guidelines.
    Comment: Several commenters noted concerns that CMS is proposing 
changes for the payment diagnosis field when there is not a problem. 
One commenter presented data reported in the Medicare and Medicaid 
Statistical Supplement to demonstrate that there has been a decrease in 
v-code reporting from 2000 through 2009.
    Response: Although, there has been a decrease in the number of 
OASIS records submitted that utilize the payment diagnosis field over 
the last 4 years the volume is still at odds with guidance to code 
sparingly. We must ensure that the HHAs report diagnosis codes that 
comply with ICD-9-CM coding guidelines. Thus, the restriction proposed 
for the payment diagnosis field reporting ensures greater compliance 
with coding guidelines. Furthermore, the restriction supports our 
future plans to use diagnosis information from the claims, rather than 
OASIS, to determine the appropriate HIPPS code for payment.
    Comment: Many commenters provided several examples where they would 
be impacted, if this policy is implemented, such as osteoarthritis 
related to hip replacement, cholelithiasis due to a cholecystectomy, 
breast neoplasm following a mastectomy, amputation due to a non-
pressure ulcer and meningitis. Many commenters stated that when the 
payment diagnosis field was added to the OASIS, it was an assurance to 
the industry to accommodate the reporting of v-codes and receive points 
for resolved conditions such as those resolved by surgery.
    Response: The home health payment is based on resources required to 
care for the patient in their current condition. For example, if the 
patient has a resolved orthopedic condition (osteoarthritis of the hip 
resolved following hip replacement) the episode will receive points 
based on any active comorbid diagnoses plus clinical status (such as 
surgical wound), functional impairments (such as problems with 
ambulation or transferring), and therapy needs. Given the fact that 
some HHAs may have incorrectly interpreted the guidance in Attachment 
D, and were

[[Page 67113]]

reporting resolved conditions, such as those resolved by surgery, which 
may have resulted in the awarding of points; this final rule clarifies 
that with the exception of fracture codes, resolved conditions are not 
appropriate for coding in the home health setting, and will not be 
awarded points when reported.
    Comment: Many commenters expressed concern that we did not provide 
a cost analysis prior to proposing this policy because they believe 
that the restricted use of the payment diagnosis field to fracture 
codes would result in a large reduction in payments to HHAs such as two 
hundred dollars for certain episodes. We also received comments that 
express concern that the policy is not budget neutral or assumed that 
the proposed policy would be budget neutral. One commenter raised 
concerns that the payment diagnosis field changes may have an impact on 
agency risk adjustment of quality measures that are publicly reported. 
The commenters expressed concern that by not permitting the reporting 
of resolved conditions we would be preventing HHAs from reporting 
important information that further describes the patient. In addition, 
a few commenters noted that changing our HH PPS reimbursement when 
rebasing is being studied is not reasonable.
    Response: As we indicated in response to comments received on 
resolved conditions, if the resolved condition is still impacting the 
patient, these impacts are captured by the clinical and functional data 
reported in the OASIS rather than the diagnosis. As stated above, we 
found that more than 99.6 percent of assessments would continue to 
receive the same case-mix weight when the payment diagnosis field is 
restricted to fracture codes only, resulting in a 0.04 percent decrease 
in payments to HHAs. These payments should not have been made because 
they do not reflect resources to care for the patient, nor do these 
coding practices comply with ICD-9 coding guidelines, and thus reflect 
inappropriate coding practices. Our primary purpose is to ensure 
compliance with ICD-9-CM coding guidelines. Implementing these changes 
in a budget neutral manner is not applicable in this instance because 
HHAs should not receive reimbursement for a resolved condition with the 
exception of fracture conditions.
    Abt Associates analyzed data from a 20 percent sample of all home 
health episodes from 2009, or 1.2 million episodes. The total number of 
episodes with an acceptable v-code paired with any ICD-9-CM code in the 
case mix grouper was approximately 174,000 episodes. These data were 
drawn from the Home Health Datalink, a file that links the OASIS 
assessments to the corresponding home health claim. Abt Associates 
conducted three separate sets of analyses. The first analysis assumes 
that only fracture codes are recognized as payment diagnoses and did 
not reflect any accompanying change in agency coding behavior. This 
analysis showed that 99.3 percent of assessments would continue to 
receive the same case-mix weight. The second analysis assumes that 
agencies code for fracture and also assumes that, for many resolved 
conditions, agencies will be able to code underlying persistent 
conditions as primary or secondary diagnoses (for example, coding 
diabetes after a diabetic cataract has been removed). This analysis 
showed that 99.6 percent of assessments would continue to receive the 
same case-mix weight. Finally, the third analysis makes the first two 
analytical assumptions above and also assumes that, for some additional 
conditions currently reported in the payment diagnosis field, agencies 
will be able to code alternate codes that scores points for the same 
diagnosis group. This analysis also showed that 99.6 percent of 
assessments would continue to receive the same case-mix weight. 
Although commenters asserted that there would be a significant impact, 
the three sets of analyses found that HH episodes would essentially 
continue to be scored the same once this policy is implemented as 
revised.
    The risk adjustment models for the quality measures that are 
publicly reported use all the diagnoses that appear on the OASIS (in 
the primary, secondary, payment diagnosis field as well as the 
inpatient diagnosis). Although we do not necessarily agree that by 
preventing resolved conditions related to the plan of care to be 
reported we are losing significant information that describes the 
patient, we are willing to modify our policy in the short term to allow 
these conditions to be reported in the payment diagnosis field but will 
restrict the awarding of points only to fracture conditions. We believe 
that modifying our policy to permit this type of reporting in the 
payment diagnosis field will address the concern expressed by 
commenters that wanted to be able to report additional clinical 
information and public health information about the patient while still 
allowing the agency to move forward with our plans to group the claim, 
versus OASIS, to determine the appropriate HIPPS code for payment.
    Comment: We received several comments in support of the proposed 
logic changes specific to the reporting requirements for secondary 
conditions found in Neuro, Skin 1, or Ortho 1. Several commenters noted 
that once ICD-10-CM is implemented, the payment diagnosis field will no 
longer be needed for the reporting of fracture diagnosis codes. 
However, they advise us that our proposal to restrict the use of the 
payment diagnosis field to only fracture diagnosis codes if paired with 
an appropriate v-code in the primary and payment diagnosis fields is 
not representative of all the sequencing requirements for fracture 
aftercare. Specifically, some encounters are reported as a secondary 
diagnosis because they may not be the primary reason for admission. 
Therefore, we should include v-codes reported as a secondary condition 
when paired with a fracture code in the payment diagnosis field. A few 
commenters would have liked to see a draft listing of the v-code 
pairings in our proposed rule.
    Response: We appreciate the supportive comments to eventually 
eliminate the payment diagnosis field once ICD-10 is fully implemented 
and the recommendation to review the sequencing requirements. We agree 
that restricting the payment diagnosis field to only fracture diagnosis 
codes reported as primary is not representative of the all the 
sequencing requirements for fracture aftercare. We will revise the HH 
PPS grouper logic to award points when fracture codes in the payment 
diagnosis field are paired with v-codes in either the primary or 
secondary diagnosis fields. As requested by a few commenters, we have 
provided a list of valid fracture conditions within our grouper paired 
with appropriate v-codes (See Table 25).
    Comment: Several commenters recommend that we rescind or delay the 
proposed change to restrict the payment diagnosis field to fracture 
codes only.
    Response: We appreciate the feedback. However, we believe that we 
have sufficiently described and explained our rationale for restricting 
the awarding of points for fracture codes only. As we stated above, 
this proposal will allow us to eventually eliminate the payment 
diagnosis field once ICD-10 is fully implemented and ensure that 
agencies are in full compliance, where possible, with coding guidelines 
before ICD-10 is implemented.
    Comment: Several commenters noted that logic within Home Assessment 
Validation and Entry System (HAVEN) has contributed to the confusion

[[Page 67114]]

surrounding v-code reporting by suggesting that the software would not 
group the record (that is, determine the appropriate home health 
resource group) when a v-code was reported in the primary position. The 
commenters noted that vendors have adopted similar logic within their 
own software to require v-code reporting even when the ICD-9-CM v-code 
does not require a diagnosis code to explain the reason for aftercare.
    Response: We appreciate the feedback and will consider whether any 
changes should be made to edits within HAVEN.
    Comment: We also received comments outside the scope of the 
proposed policy. Specifically, a commenter suggested that we should 
Return to Provider (RTP) claims when edits do not permit the proper 
adjudication versus implementing this policy. In addition, other 
commenters suggested that CMS should acknowledge the use of certified 
coders in homecare by permitting them to correct inaccurate coding.
    Response: These comments are outside the scope of this rule, and 
therefore, we are not addressing these issues in this rule.
    We are implementing the Grouper enhancements as proposed with two 
modifications. We will be modifying our policy for the payment 
diagnosis field to reflect that when v-codes are reported as a primary 
or secondary diagnosis and paired with a fracture code in our pairing 
listing, the grouper will award points. We will also be modifying our 
policy for the payment diagnosis field to permit the reporting of 
resolved conditions related to the plan of care that may be significant 
in describing the patient but will restrict the awarding of points to 
fracture conditions.
BILLING CODE 4120-01-P

[[Page 67115]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.020

[[Page 67116]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.021

[[Page 67117]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.022

[[Page 67118]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.023

[[Page 67119]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.024

[[Page 67120]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.025

[[Page 67121]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.026

[[Page 67122]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.027

[[Page 67123]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.028

[[Page 67124]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.029

[[Page 67125]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.030

[[Page 67126]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.031

[[Page 67127]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.032

[[Page 67128]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.033

[[Page 67129]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.034

[[Page 67130]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.035

[[Page 67131]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.036

[[Page 67132]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.037

BILLING CODE 4120-01-C

IV. Quality Reporting for Hospices

A. Background and Statutory Authority

    Section 3004 of the Affordable Care Act amended the Act to 
authorize a quality reporting program for hospices. As added by section 
3004(c), new section 1814(i)(5)(A)(i) of the Act requires that 
beginning with FY 2014 and each subsequent FY, the Secretary shall 
reduce the market basket update by 2 percentage points for any hospice 
that does not comply with the quality data submission requirements with 
respect to that fiscal year. Depending on the amount of the annual 
update for a particular year, a reduction of 2 percentage points could 
result in the annual market basket update being less than 0.0 percent 
for a FY and may result in payment rates that are less than payment 
rates for the preceding FY. Any reduction based on failure to comply 
with the reporting requirements, as required by section 1814(i)(5)(B) 
of the Act, would apply only for the particular FY involved. Any such 
reduction will not be cumulative and will not be taken into account in 
computing the payment amount for subsequent FYs.
    Section 1814(i)(5)(C) of the Act requires that each hospice submit 
data to the Secretary on quality measures specified by the Secretary. 
Such data must be submitted in a form and manner, and at a time 
specified by the Secretary. Any measures selected by the Secretary must 
have been endorsed by the consensus-based entity which holds a contract 
regarding performance measurement with the Secretary under section 
1890(a) of the Act. This contract

[[Page 67133]]

is currently held by the National Quality Forum (NQF). However, section 
1814(i)(5)(D)(ii) of the Act provides that in the case of a specified 
area or medical topic determined appropriate by the Secretary for which 
a feasible and practical measure has not been endorsed by the 
consensus-based entity, the Secretary may specify a measure(s) that 
is(are) not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus-based 
organization identified by the Secretary. Under section 
1814(i)(5)(D)(iii) of the Act, the Secretary must publish selected 
measures that will be applicable with respect to FY 2014 no later than 
October 1, 2012.

B. Public Availability of Data Submitted

    Under section 1814(i)(5)(E) of the Act, the Secretary is required 
to establish procedures for making any quality data submitted by 
hospices available to the public. Such procedures will ensure that a 
hospice will have the opportunity to review the data regarding the 
hospice's respective program before it is made public. In addition, 
under section 1814(i)(5)(E) of the Act, the Secretary is authorized to 
report quality measures that relate to services furnished by a hospice 
on the CMS Web site. We recognize that public reporting of quality data 
is a vital component of a robust quality reporting program and are 
fully committed to developing the necessary systems for public 
reporting of hospice quality data. We also recognize it is essential 
that the data we make available to the public be meaningful data and 
that comparing performance between hospices requires that measures be 
constructed from data collected in a standardized and uniform manner. 
The development and implementation of a standardized data set for 
hospices must precede public reporting of hospice quality measures. We 
will announce the timeline for public reporting of data in future 
rulemaking.

C. Quality Measures for Hospice Quality Reporting Program and Data 
Submission Requirements for the 2014 Payment Year.

1. Quality Measures Required for Payment Year 2014
    In the Hospice Wage Index for Fiscal Year 2012 Final Rule (76 FR 
47302, 47320 (August 4, 2011)), to meet the quality reporting 
requirements for hospices for the FY 2014 payment determination as set 
forth in section 1814(i)(5) of the Act, we finalized the requirement 
that hospices report two measures:
     An NQF-endorsed measure that is related to pain 
management, NQF 0209: The percentage of patients who report 
being uncomfortable because of pain on the initial assessment (after 
admission to hospice services) who report pain was brought to a 
comfortable level within 48 hours. The data collection period for this 
measure is October 1, 2012 through December 31, 2012, and the data 
submission deadline is April 1, 2013. The data for this measure are 
collected at the patient level, but are reported in the aggregate for 
all patients cared for within the reporting period, regardless of 
payor.
     A structural measure that is not endorsed by NQF: 
Participation in a Quality Assessment and Performance Improvement 
(QAPI) program that includes at least three quality indicators related 
to patient care. Specifically, hospice programs are required to report 
whether or not they have a QAPI program that addresses at least three 
indicators related to patient care. In addition hospices are required 
to check off, from a list of topics, all patient care topics for which 
they have at least one QAPI indicator. The data collection period for 
this measure is October 1, 2012 through December 31, 2012, and the data 
submission deadline is January 31, 2013. Hospices are not asked to 
report their level of performance on these patient care related 
indicators. The information being gathered will be used by CMS to 
ascertain the breadth and content of existing hospice QAPI programs. 
This stakeholder input will help inform future measure development.
    Hospice programs will be evaluated for purposes of the quality 
reporting program based on whether or not they respond, not on how they 
respond or on performance level. No additional measures are required 
for the 2014 payment year.
2. Data Submission Requirements for Payment Year 2014
    We will provide a Hospice Data Submission Form to be completed 
using a web-based data entry site. Training for use of this web based 
data submission form will be provided to hospices through webinars and 
other downloadable materials before the data submission date. Though 
similar to the data entry site utilized during the hospice voluntary 
reporting period, the site will be changed to accommodate the addition 
of the NQF 0209 measure, as well as to simplify the data entry 
requirements for the structural measure. Hospices will be asked to 
provide identifying information, and then complete the web based data 
entry for the required measures. For hospices that cannot complete the 
web based data entry, a downloadable data entry form will be available 
upon request.
    The data submission form as well as details regarding education and 
resources related to the data collection and data submission for both 
the NQF 0209 measure and the structural measure will be 
provided on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting/.

D. Quality Measures for Hospice Quality Reporting Program for Payment 
Year FY 2015 and Beyond

1. Quality Measures Required for Payment Year FY 2015 and Subsequent 
Years
    To meet the quality reporting requirements for hospices for the FY 
2015 payment determination and each subsequent year, as set forth in 
section 1814(i)(5) of the Act, in the CY 2013 HH PPS proposed rule (77 
FR 41548), we proposed that hospices report the following:
     The NQF-endorsed measure that is related to pain 
management, NQF 0209: The percentage of patients who report 
being uncomfortable because of pain on the initial assessment (after 
admission to hospice services) who report pain was brought to a 
comfortable level within 48 hours.
     The structural measure: Participation in a Quality 
Assessment and Performance Improvement (QAPI) Program that Includes at 
Least Three Quality Indicators Related to Patient Care. Specifically, 
hospice programs would report whether or not they have a QAPI program 
that addresses at least three indicators related to patient care.
    We are not extending the requirement that hospices provide a list 
of their patient care indicators. We solicited comment on the proposed 
selection of measures.
    Comment: We received six comments in support of and one comment 
opposed to continuing the requirement for the structural measure. We 
received eight comments in support of and one comment opposed to 
continuing the requirement for the NQF 0209 measure. The majority of 
commenters agreed with our proposal that no additional measures be 
required for Payment Year 2015 reporting. Commenters were also 
supportive of CMS's decision not to extend the requirement that 
hospices provide a list of their patient care indicators for Payment 
Year 2015

[[Page 67134]]

structural measure reporting. Some commenters raised concerns about 
each of the measures individually. For the structural measure, one 
commenter did not support the inclusion of this measure for Payment 
Year 2015 reporting. This commenter felt that while the measure was not 
burdensome to hospices, the potential of this measure to affect quality 
of care provided to hospice patients was questionable. We also received 
ten comments that did not specifically oppose the continuation of the 
NQF 0209 measure but did request that various aspects of the 
specifications of the measure be changed.
    Response: While we recognize that the structural measure has 
limitations, it also provides CMS a nationally representative first 
look into the content of hospice providers' QAPI programs and provides 
CMS the opportunity to take that information into consideration for the 
future development of the quality reporting program. We appreciate the 
feedback on selection of the NQF 0209 Pain Measure and 
acknowledge potential issues with measure specifications that were 
detailed by commenters. Measure development and endorsement processes 
include the creation of measure specifications.
    As a result of the comments received, we are finalizing this 
proposal as proposed.
2. Data Submission Requirements for Payment year FY 2015.
    As previously noted, in the Hospice Wage Index for Fiscal Year 2012 
Final Rule, we finalized the following:
     All hospice quality reporting periods subsequent to that 
for Payment Year FY 2014 be based on a calendar year rather than a 
calendar quarter. For example, January 1, 2013 through December 31, 
2013 will be the data collection period used for determination of the 
hospice market basket update for each hospice in FY 2015, etc.; and
     Hospices submit data in the fiscal year prior to the 
payment determination. For FY 2015 and beyond, the data submission 
deadline will be April 1 of each year. For example, April 1, 2014 will 
be the data submission deadline used for determination of the hospice 
market basket update for each hospice in FY 2015, etc.

E. Additional Measures Under Consideration and Standardization of Data 
Collection

    While initially we will build a foundation for quality reporting by 
requiring hospices to report one NQF-endorsed measure and one 
structural measure, we seek to achieve a comprehensive set of quality 
measures to be available for widespread use for quality improvement and 
informed decision making. The provision of quality care to hospice 
patients and families is of utmost importance to CMS. For annual 
payment determinations beyond FY 2015, we are considering an expansion 
of the required measures to include some additional measures endorsed 
by NQF. The measures of particular interest are NQF numbers 1634, 1637, 
1638, 1639, and 0208 and can be found by searching the NQF site at 
www.qualityforum.org. We welcomed comments on whether all, some, any, 
or none of these measures should be considered for future rulemaking. A 
potential timeline and titles of future measures under consideration 
are included below.
    To support the standardized collection and calculation of quality 
measures specifically focused on hospice services, we believe the 
required data elements would potentially require a standardized 
assessment instrument. We are committed to developing a quality 
reporting program for hospices that utilizes standardized methods to 
collect data needed to calculate endorsed quality measures. To achieve 
this goal, we have been working on the initial development and testing 
of a hospice patient-level data item set. This patient level data item 
set could be used by all hospices at some point in the future to 
collect and submit standardized data items about each patient admitted 
to hospice. These data could be used for calculating quality measures. 
Many of the items currently in testing are already standardized and 
included in assessments used by a variety of other providers. Other 
items have been developed specifically for hospice care settings, and 
obtain information needed to calculate the hospice-appropriate quality 
measures that were endorsed by NQF in February 2012. We are considering 
a target date for implementation of a standardized hospice data item 
set as early as CY 2014, dependent on development and infrastructure 
logistics. We welcomed comments on the potential implementation of a 
hospice patient-level data item set in CY 2014.
    Comment: In response to our invitation to comment, we received 19 
comments in support of using a standardized patient level data set, 
noting efforts to standardize data collection would aid in ensuring the 
validity of quality reporting. These comments offered suggestions on 
design and implementation, stressing that we should make every effort 
to streamline the item set so that it contains only data elements 
appropriate for hospice patients and required to calculate quality 
measures for reporting, thereby minimizing burden. Finally, most 
commenters were not supportive of implementing the data item set in CY 
2014 due to the time needed to adequately prepare providers and other 
stakeholders for implementation. Commenters suggested implementing a 
standardized item set that would collect the data elements needed to 
calculate the NQF endorsed measures at least a full year prior to 
implementing the additional measures, or reducing the number of 
measures expected to be implemented at one time. We received two 
comments expressing opposition to the use of a standardized data set.
    Response: We appreciate the comments we received about the 
standardized item set. We are committed to developing a Hospice Quality 
Reporting Program that utilizes standardized items as the basis for 
collecting and reporting quality measures. We have recently concluded a 
pilot test of a draft item set with nine hospices around the country 
providing services in various care settings. The main purposes of the 
pilot were to get a clear understanding of the process of 
implementation of the item set by the hospices and of the burden 
experienced by the hospices as they implemented the item set and 
collected data on patients. The quantitative and qualitative results of 
the pilot test will be used to inform the continued development of the 
item set.
    Our intent is to develop an item set that would collect data 
elements that are already part of hospice practice and could be used to 
calculate the NQF endorsed QMs for hospice. We are in agreement that 
the item set should not add burden for patients and families and should 
be based on information hospices already collect as part of their 
patient assessment and care provision practices to the extent possible.
    We will consider the suggestions offered in comment to the proposed 
rule as we proceed with the development and steps required to implement 
a standardized patient level data item set.
    In developing the standardized data item set, we have included data 
items that will support the following endorsed measures:
     1617 Patients Treated With an Opioid who are Given a Bowel 
Regimen
     1634 Pain Screening
     1637 Pain Assessment
     1638 Dyspnea Treatment
     1639 Dyspnea Screening

[[Page 67135]]

    Starting with data collection in 2015, we envision these measures 
as possible measures that we would implement subject to future 
rulemaking. We welcomed comments on the potential future implementation 
of these measures and the associated projected timeframe for 
implementation.
    Comment: In response to our invitation to comment, we received 30 
comments related to the list of potential future measures. Commenters 
were generally supportive of these measures stating that they are 
important areas to measure for hospices and are already being measured 
by many providers. Commenters also pointed out that the measures being 
considered are limited primarily to organizational processes related to 
physical symptoms. They urged the future adoption of more outcomes 
oriented measures. A majority of the comments advised that the list of 
measures focuses only on the physical realm and is missing critical 
elements of hospice care. They noted that the measures being considered 
do not accurately reflect the holistic care provided to patients and 
families receiving hospice services and urged CMS to consider 
additional measures endorsed by NQF that address the psychosocial, 
spiritual and patient preference aspects of hospice; fourteen 
commenters specifically named NQF 1641 (patient preferences) 
and 1647 (spiritual issues addressed). Commenters also urged 
CMS to consider the development of additional measures to address the 
shortage of endorsed measures that reflect important aspects of care 
such as care coordination and meeting patient preferences as pointed 
out by the Measures Application Partnership (MAP) report from June 
2012. Most commenters supported a phased-in approach, indicating that 
the proposed timeline is too aggressive to allow for adequate 
preparation by hospice providers, vendors and other stakeholders.
    Response: We appreciate the comments received about the measures 
being considered for inclusion in the future expansion of the Hospice 
Quality Reporting Program. As more measures are submitted to NQF and 
endorsed for use as part of quality reporting programs, we will 
consider these measures for future years as well. In addition, we 
appreciate the comments received about the need for the quality 
measures to reflect outcomes of care and care beyond physical symptom 
management. We recognize the shortage of endorsed measures that reflect 
the essence of high quality hospice care, and will continue to look for 
opportunities to work with measure developers to address this 
challenge.
    We appreciate the comments about the timeline for implementation, 
and the many valid concerns hospices have about being adequately 
prepared, supported and trained to implement the item set and the 
measures. In addition, we appreciate the comments about the timeframe 
required for industry preparation including the work needed by vendors 
to help prepare for patient level data collection. We will take these 
comments into consideration as we further refine the implementation 
steps and timeline.
    We are also considering future implementation of measures based on 
an experience of care survey such as the Family Evaluation of Hospice 
Care Survey (FEHC). The NQF endorsed measure 0208 Family 
Evaluation of Hospice Care is such a measure. Implementation of an 
experience of care measure and the associated use of a specified survey 
could precede or follow the implementation of a standardized data set. 
We do not envision implementation of both a data set and an experience 
of care survey in the same year and would project implementation in 
succession in order to avoid excessive burden to hospices. We solicited 
comment on the succession of implementation of these two potential 
requirements.
    Comment: In response to our invitation to comment, we received 19 
comments related to use of a patient/family experience of care survey 
and measure. The 0208 measure, which is derived from the 
specific Family Evaluation of Hospice Care (FEHC) survey, was generally 
supported but most commenters indicated that they would only support 
the use of the FEHC if it were administered by a third party. Others 
felt third party administration is burdensome. Six commenters expressed 
problems with the FEHC survey, primarily that it is too long and 
therefore burdensome. Several commenters suggested that the survey 
should be electronic. One commenter opposed the use of any standardized 
survey.
    Response: We appreciate comments received on the use of a patient/
family experience of care survey and associated measure. We will 
utilize the suggestions offered as we proceed with the development and 
steps required to implement a hospice-specific patient/family 
experience of care survey and resulting measures.
    Comment: Some commenters offered suggestions related to the 
succession of implementation of the two potential requirements: A 
standardized patient level data set and a standardized patient/family 
experience of care survey. Several commenters requested delay in the 
introduction of a data set beyond 2014. Other commenters preferred the 
implementation of the standardized data item set before the experience 
of care survey, indicating that the standardized data item set poses a 
greater challenge for implementation for hospices since many hospices 
already use the FEHC or similar survey. Some commenters preferred 
implementing an experience of care measure first. Two commenters 
suggested both be implemented in CY2014.
    Response: We appreciate the comments received on the succession of 
implementation of these two potential requirements. We recognize the 
challenges associated with implementing a standardized data item set 
and an experience of care survey. We will carefully consider the 
suggestions offered as we finalize a timeline for introduction of a 
data set and a patient/family experience of care survey.
    Summary Tables:
BILLING CODE 4120-01-P

[[Page 67136]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.038

BILLING CODE 4120-01-C

V. Survey and Enforcement Requirements for Home Health Agencies (HHAs)

A. Background and Statutory Authority

    To participate in the Medicare program as an HHA provider, an 
agency or organization must meet the definition of an HHA in section 
1891(o) of the Act. Additionally, section 1891(a) of the Act sets out 
specific participation requirements for HHAs, referred to as conditions 
of participation (CoPs), which are implemented in 42 CFR part 484. The 
CoPs apply to an HHA as an entity, as well as to the services furnished 
to each individual under the care of the HHA, unless the CoP is 
specifically limited to Medicare/Medicaid beneficiaries, such as the 
Outcome and Assessment Information Set (OASIS) requirements at Sec.  
484.11, Sec.  484.20 and Sec.  484.55. Under section 1891(b) of the 
Act, the Secretary is responsible for assuring that the CoPs and their 
enforcement are adequate to protect the health and safety of 
individuals under the care of an HHA and to promote the effective and 
efficient use of public monies.
    The Secretary is authorized to enter into an agreement with a State 
Survey Agency (SA) under section 1864(a) of the Act or a national 
accreditation organization (AO) under section 1865(a) of the Act, with 
oversight by CMS Regional Offices, to determine whether HHAs meet the 
federal participation requirements for Medicare. Section 1902(a)(33)(B) 
of the Act provides for SAs to perform the same survey tasks for 
facilities participating or seeking to participate in the Medicaid 
program. The results of Medicare and Medicaid-related surveys are used 
by CMS and the Medicaid State Agency, respectively, as

[[Page 67137]]

the basis for a decision to enter into, deny, or terminate a provider 
agreement with the agency. To assess compliance with federal 
participation requirements, surveyors conduct onsite inspections 
(surveys) of agencies. In the survey process, surveyors directly 
observe the actual provision of care and services to patients and the 
effect or possible effects of that care to assess whether the care 
provided meets the assessed needs of individual patients. An SA 
periodically surveys HHAs and certifies its findings to CMS and to the 
State Medicaid Agency if the HHA is seeking to acquire or maintain 
Medicare or Medicaid certification, respectively. The general 
requirements regarding the survey and certification process are 
codified at 42 CFR part 488 and specific survey instructions are 
detailed in our State Operations Manual (SOM) (IOM Pub. 100-07) and in 
policy transmittals. Certain providers and suppliers, including HHAs, 
are also deemed by us to meet the federal requirements for 
participation if they are accredited by an AO whose program is approved 
by us to meet or exceed federal requirements under section 1865(a). 
However, these deemed providers and suppliers are subject to validation 
surveys under Sec.  488.7.

B. Summary of Proposed Provisions and Analysis of and Responses to 
Public Comments

    In the following sections, we provide a brief summary of the 
proposed provisions, followed by our responses to public comments 
received on each issue. For a detailed discussion of the proposed rule, 
see the July 13, 2012 proposed rule (77 FR 41575).
1. General Provisions and Comments
    Sections 4022 and 4023 of OBRA '87 amended the Act by adding 
sections 1891(c) through (f) to establish requirements for surveying 
and certifying HHAs as well as to establish the authority of the 
Secretary to utilize varying enforcement mechanisms to terminate 
participation and to impose alternative sanctions if HHAs were found 
out of compliance with the CoPs. In the July 13, 2012 proposed rule, we 
proposed to add new subparts I and J to 42 CFR part 488 to implement 
sections 1891(c) through (f) of the Act. New subpart I would provide 
survey and certification guidance while new subpart J would outline the 
basis for enforcement of compliance standards for HHAs that are not in 
substantial compliance with the CoPs. Also, we proposed to amend 
certain sections of 42 CFR part 488, subpart A to include references to 
HHAs, where appropriate, since the current regulations only reference 
the survey, certification and enforcement procedures for long term care 
facilities. Specifically, we proposed to amend Sec.  488.2 to include 
the statutory reference to home health services (section 1861(m) of the 
Act), HHAs (section 1861(o) of the Act), and the Conditions of 
Participation (CoPs) for HHAs and home health quality (section 1891 of 
the Act). We also proposed to revise Sec.  488.3(a)(1) to include the 
statutory citations concerning HHAs mentioned above. In addition, we 
proposed to amend Sec.  488.26 by revising paragraphs (c)(2) and (e) to 
include references to ``patient'' and ``patients'' which is how 
individuals receiving services from an HHA are referenced. Finally, we 
proposed to revise the heading for Sec.  488.28 to include reference to 
HHAs with deficiencies. We did not receive any comments on these 
sections and are therefore finalizing the proposed provisions.
    We received the following general comments on the proposed rule.
    Comments: Several commenters stated that CMS should delay the 
implementation of the proposed rule until a joint CMS/Industry task 
force could be formed to rework the regulation and develop procedures 
and guidance to Regional Offices and SAs. A few commenters submitted 
comments in the form of procedural questions regarding SA and CMS 
operations to implement the regulation.
    Response: We will engage industry, patient advocacy organizations, 
and other stakeholders in the implementation process and we will do 
this through the interpretive guidance process. We do not agree that an 
overall delay of the regulation is warranted, as this could be a 
lengthy delay which would only further impede implementation of an 
enforcement policy that is highly advisable to protect beneficiaries, 
aligns home health enforcement with other programs, is mandated by the 
Social Security Act, and is long overdue. However, we will stage the 
effective date of the civil money penalty (Sec.  488.845), the Informal 
Dispute Resolution (IDR) provisions (Sec.  488.745), and the suspension 
of payment for new admissions (Sec.  488. 840) to permit more time for 
both dialogue and design of information system changes for effective 
administration of these provisions. We will also develop associated 
interpretive guidance that will address many of the concerns raised by 
commenters regarding the actual procedures that will be followed to 
implement the alternative sanctions. We will share proposed guidance 
with the HHA industry and patient advocacy organizations for comment. 
The effective date of the civil money penalty (Sec.  488.845), 
suspension of payment for new admissions (Sec.  488.840), and Informal 
Dispute Resolution (IDR) provisions (Sec.  488.745) will be July 1, 
2014. The effective date of all other survey and enforcement provisions 
in parts 488, 489, and 498 will be July 1, 2013.
2. Subpart I--Survey and Certification of HHAs
a. Basis and Scope (Sec.  488.700)
    We proposed in Sec.  488.700 to specify the statutory authority for 
and general scope of standards proposed in 42 CFR part 488 that 
establishes the requirements for surveying HHAs to determine whether 
they meet the Medicare conditions of participation. We are finalizing 
this rule as proposed. In general, this final rule is based on the 
rulemaking authority in section 1891 of the Act as well as specific 
statutory provisions identified in the preamble where appropriate.
    Comments: Several commenters complimented CMS on the implementation 
of unannounced inspections and more specific survey protocols. Other 
commenters stated that the CoPs should be revised.
    Response: We appreciate the comments regarding the sections of the 
regulation which addressed unannounced surveys and more specific survey 
protocols.
    Regarding the comments requesting revisions to the CoPs, we 
appreciate the commenters concerns, but find that those comments are 
beyond the scope of this final rule. Any changes to the CoPs would be 
made through subsequent notice and comment rulemaking, to give 
stakeholders an opportunity to provide comments on any proposed 
changes.
b. Definitions (Sec.  488.705)
    We proposed to add Sec.  488.705 which defines certain terms. 
Sections 1891(c)(1) and (2) of the Act specify the requirements for 
types and frequency of surveys to be performed in HHAs, utilizing the 
terms ``standard'', ``abbreviated standard'', ``extended'', ``partial 
extended'' and ``complaint'' surveys, as well as specifying the minimum 
components of the standard and extended surveys. Therefore, we proposed 
to add definitions for these surveys at Sec.  488.705.
    In addition to those terms, we proposed definitions for 
``condition-level deficiency,'' ''deficiency,'' ``noncompliance,'' 
``standard-level

[[Page 67138]]

deficiency,'' ``substandard care,'' and ``substantial compliance.'' The 
definitions of the different surveys, as well as the additional 
proposed definitions, have been a part of longstanding CMS policy. 
Except for the few modifications noted in our responses below, we are 
finalizing Sec.  488.705 as proposed.
    Comments: A few commenters could not tell from the definition of 
``standard-level deficiency'' whether an alternative sanction could be 
imposed for standard-level deficiencies alone.
    Response: Proposed Sec.  488.810(b) specifically provides that 
alternative sanctions are applied on the basis of noncompliance with 
the conditions of participation. Where a condition-level deficiency is 
determined, an alternative sanction may be imposed. However, there may 
be occasions where serious noncompliance with a single standard could 
be cited as a condition-level deficiency, and such a finding could lead 
to the imposition of a sanction. For example, if a noncompliance with a 
standard is determined to constitute a significant or a serious finding 
that adversely affects, or has the potential to adversely affect, 
patient outcomes, then it may be considered a condition-level 
deficiency. While alternative sanctions are generally not based on 
standard-level deficiencies alone, noncompliance with a standard that 
is determined to be so serious as to constitute a condition-level 
deficiency could result in termination from Medicare or an alternative 
sanction, or both.
    Comment: Several commenters were unclear as to the meaning of an 
``abbreviated standard survey,'' ``substandard care'' and ``extended 
survey.''
    Response: The abbreviated standard survey focuses on particular 
tasks that relate, for example, to complaints received, or a change of 
ownership, or management. It does not cover all the aspects reviewed in 
the standard survey, but rather concentrates on a particular area or 
areas of concern. The surveyor may investigate any area of concern and 
make a compliance decision regarding any regulatory requirement, 
whether or not it is related to the original purpose of the survey or 
complaint. The abbreviated standard survey can be expanded and changed 
to a standard, partial extended or extended survey when necessary. We 
have revised the definition to reflect that an abbreviated standard 
survey may address fewer standards or conditions than a standard 
survey. Regarding the commenters' concerns with ``substandard care,'' 
we agree that the definition is not entirely clear and should be 
refined. In this final rule, we are clarifying the definition to 
explain that a finding of substandard care is a condition-level finding 
that is identified on a standard survey that includes one or more 
deficiencies which result in actual or potential harm to patients. 
Condition level deficiencies may also be cited based on findings of a 
complaint, abbreviated, extended or partial extended survey, but 
section1891(c)(2)(D) of the Act provides that substandard care found as 
a result of a standard survey will always trigger an extended survey. 
We appreciate that substandard care could be defined in terms of just a 
few CoPs rather than any CoP, and that a narrower definition would 
reduce the number of extended surveys. However, we consider all CoPs to 
be important. We regard the statutory directive for an extended survey 
pursuant to a finding of substandard care to mean that CMS should make 
a deeper inquiry (via an extension of the survey) when findings are 
serious, and that we ought to calibrate the extent of the inquiry to 
the degree of risk to patients. Therefore, we made two changes in this 
final rule. First, we retained the broad scope of the definition of 
substandard care (so as to refer to any CoP for which noncompliance was 
identified), but refined the definition to focus on actual harm or 
potential for harm to the patient. Second, we revised the definition of 
extended survey to state that an extended survey reviews ``additional'' 
rather than ``all'' CoPs that were not examined during the standard 
survey. Whether the extended survey then examines all, or a focused 
number, of the additional CoPs not examined during the standard survey 
can then be determined on the basis of the nature and extent of serious 
risk to patients that is identified in the standard survey.
c. Standard Surveys (Sec.  488.710)
    We proposed in Sec.  488.710, that a standard survey will be 
conducted not later than 36 months after the date of the previous 
standard survey, as specified at section 1891(c)(2)(A) of the Act. 
Section 1891(c)(2)(C) of the Act requires for standard surveys, to the 
extent practicable, to review a case-mix stratified sample of 
individuals to whom the HHA furnishes services, which is proposed in 
Sec.  488.710(a)(1). The statute specifies that we actually visit the 
homes of sampled patients, and that we conduct a survey of the quality 
of services being provided (as measured by indicators of medical, 
nursing, and rehabilitative care). In proposed Sec.  488.710(a), we 
specified minimum requirements and provided that visits to homes of 
patients will be done only with the consent of the patient, their 
guardian or legal representative. The purpose of the home visit is to 
evaluate the extent to which the quality and scope of services 
furnished by the HHA has attained and maintained the highest 
practicable functional capacity of each patient, as reflected in the 
patient's written plan of care and clinical records. Other forms of 
communication with patients, such as through telephone calls, could be 
used to complete surveys, if determined necessary by the SA or CMS 
Regional Office. We had also proposed in Sec.  488.710(b) that the 
survey agency's failure to follow its own survey procedures will not 
invalidate otherwise legitimate determinations that deficiencies 
existed in an HHA. For example, if the Statement of Deficiencies was 
not forwarded to the provider within 10 days of the end of the exit 
conference, this will not invalidate the underlying determinations.
    Comments: Two commenters stated that CMS should conduct HHA surveys 
more frequently than at a minimum of every 36 months as proposed.
    Response: While we agree that frequent HHA surveys are desirable, 
we also recognize that some HHAs have much a better history of 
compliance with the CoPs than others. Rather than performing more 
frequent surveys in every HHA, we will seek to conduct more frequent 
surveys of those particular HHAs for which available information 
indicates that they may have higher risks of quality of care problems 
than other HHAs. Such a more focused approach will enable us to focus 
our efforts and resources on those HHAs which require greater oversight 
and assistance.
d. Partial Extended Survey (Sec.  488.715)
    We proposed in Sec.  488.715 that the partial extended survey will 
be conducted to determine if deficiencies and/or deficient practice(s) 
exist that were not fully examined during the standard survey. It will 
be conducted when a standard-level noncompliance was identified; or, if 
the surveyor believed that a deficient practice existed at a standard 
or condition-level that was not examined during the standard survey. 
During the partial extended survey, the surveyor will review, at a 
minimum, additional standard(s) under the same CoP in which the 
deficient practice was identified during the standard survey. The 
surveyors could also review any additional standards under the same or 
related condition which will assist in making a compliance decision. 
Under Sec.  488.24, which applies to most other providers

[[Page 67139]]

and suppliers and upon which this provision is modeled, the SA 
certifies that a provider is not in compliance with the CoPs where the 
deficiencies are of such character as to substantially limit the 
provider's capacity to furnish adequate care or which adversely affect 
the health and safety of patients. A CoP may be considered to be out of 
compliance (and thus at a condition-level) for one or more standard-
level deficiencies, if, in a surveyor's judgment, the standard-level 
deficiency constitutes a significant or a serious finding that 
adversely affects, or has the potential to adversely affect, patient 
outcomes. Surveyors are to use their professional judgment, in concert 
with the federal forms, policies and interpretive guidelines, in their 
assessment of a provider's compliance with the CoPs. The same 
procedures will be used for HHAs. We are finalizing this section as 
proposed.
    Comments: One commenter stated that there was no timeframe stated 
for the completion of a partially extended survey. The commenter 
recommended that CMS add a timeframe to the final regulation.
    Response: A partial extended survey is conducted when (1) standard-
level deficiencies are found during a standard survey and the surveyor 
determines that a more comprehensive review of the CoPs examined under 
the standard survey would result in condition-level deficiencies, or 
(2) it is necessary to determine if standard or condition-level 
deficiencies are present in the CoPs not examined in the standard 
survey. The standard survey can be expanded to become a partial 
extended survey and thus is conducted on the same interval as the 
standard survey. Therefore it is not necessary to add any timeframe for 
the completion of a partially extended survey. This is also true if a 
complaint or abbreviated survey identifies issues beyond the original 
scope of the survey. These surveys would then be considered partial 
extended surveys.
e. Extended Surveys (Sec.  488.720)
    We proposed in Sec.  488.720, that the extended survey will review 
compliance with conditions and standards applicable to the HHA. It 
could be conducted at any time, at the discretion of CMS or the SA, but 
will be conducted when any condition-level deficiency was found during 
a standard survey. The extended survey will review and identify the 
HHA's policies, procedures, and practices that produced the substandard 
care, which we define in Sec.  488.705 as noncompliance with one or 
more conditions of participation at the condition-level. We regard the 
statutory directive for an extended survey pursuant to a finding of 
substandard care to mean that CMS should make a deeper inquiry (via an 
extension of the survey) when findings are serious, and that we ought 
to calibrate the extent of the inquiry to the degree of risk to 
patients. Whether the extended survey then examines all, or a focused 
number, of the additional CoPs not examined during the standard survey 
can then be determined on the basis of the nature and extent of serious 
risk to patients that is identified in the standard survey. The 
extended survey will be conducted no later than 14 calendar days after 
the completion of a standard survey which found the HHA had furnished 
substandard care. Additionally, the survey will review any associated 
activities that might have contributed to the deficient practice.
    Comments: Several comments were received regarding the definition 
of substandard care and the association of that definition with an 
extended survey. In addition, as noted above in reference to Sec.  
488.710, some commenters stated that more frequent surveys should be 
conducted.
    Response: As we noted above, in reference to the discussion of 
Sec.  488.705, we have refined the definition of substandard care in 
Sec.  488.705 in order to provide additional clarity. We are also 
clarifying the regulatory language at Sec.  488.720, associated with 
the extended survey, to state that the extended survey reviews 
``additional'' conditions that were not evaluated during the standard 
survey. The extended survey may review all conditions of participation, 
or may review a targeted number of conditions, that were not examined 
in the standard survey. We are making this refinement in response both 
to the request for greater clarity and to the exhortation from some 
commenters, previously discussed above in reference to Sec.  488.710, 
that more frequent surveys be conducted. If every extended survey 
reviewed every condition of participation, we would consume scarce 
survey resources examining some conditions that are low risk in a 
particular HHA. The result is that we would conduct fewer standard and 
extended surveys than we will be able to conduct when the extended 
survey may focus on those additional conditions (not examined during 
the standard survey) that we judge to present higher risk of 
noncompliance compared to other conditions in the specific HHA that is 
being surveyed. By such judicious targeting of survey attention, we 
believe we will increase the surveyors' ability to identify problems 
that are serious and also allow us to increase frequency of surveys 
through targeting additional surveys where they are most needed. We 
have also changed Sec.  488.720(b) to instruct that the extended survey 
must be conducted no later than 14 calendar days after completion of a 
standard survey which found the HHA was out of compliance with a 
condition of participation.
f. Unannounced Surveys (Sec.  488.725)
    Section 1891(c)(1) of the Act requires that standard surveys be 
unannounced. Moreover, CMS policy (State Operations Manual (SOM) 
section 2700A) requires that all HHA surveys be unannounced; this 
policy is set out at proposed Sec.  488.725, which also provides that 
surveys be conducted with procedures and scheduling that renders the 
onsite surveys as unpredictable in their timing as possible. In 
addition, section 1891(c)(1) of the Act requires CMS to review state 
scheduling and survey procedures to ensure that the agency has taken 
all reasonable steps to avoid giving advance notice to HHAs of 
impending surveys through these procedures. Generally, as with respect 
to other provider-types, State Survey Agencies make every effort to 
lessen the predictability of a survey occurring at a specific time, 
day, or month. Moreover, section 1891(c)(1) of the Act states that any 
individual who notifies (or causes to be notified) an HHA of the time 
or date of the standard survey is subject to a civil money penalty 
(CMP) not to exceed $2,000. Accordingly, the proposed regulations at 
Sec.  488.725 reflect these survey requirements. We did not receive any 
comments in response to our proposals in Sec.  488.725. Therefore, we 
are finalizing these provisions as proposed.
g. Survey Frequency and Content (Sec.  488.730)
    In Sec.  488.730, we proposed to establish the requirements for 
survey frequency and the substantive content of the survey, as 
discussed in Sec.  488.710, Sec.  488.715, and Sec.  488.720. Section 
1891(c)(2) of the Act requires HHAs to be subject to a standard survey 
at least every 36 months and the frequency of a standard survey to be 
commensurate with the need to assure the delivery of quality home 
health services. This 36 month interval is based upon the last day of 
the last standard survey. This section of the Act also gives CMS the 
authority to conduct a survey as often as necessary to assure the 
delivery of quality home health services by determining whether an HHA 
complies with the CoP or to confirm the correction of previous 
deficiencies. A

[[Page 67140]]

standard survey or abbreviated standard survey may be conducted within 
two months of a change in ownership, administration or management of an 
HHA, as specified in 1891(c)(2)(B)(ii) of the Act, and must be 
conducted within two months of a significant number of complaints 
reported against the HHA (as determined by CMS), and will also be 
conducted as otherwise directed by CMS to determine compliance with the 
CoP, such as the investigation of a complaint. Extended surveys and 
partial extended surveys may also be conducted at any time at the 
discretion of CMS or the SA in order to determine compliance with the 
CoPs. However, under section 1891(c)(2)(D) of the Act, extended surveys 
and partial extended surveys must be conducted when an HHA is found to 
have furnished substandard care.
    Comments: Several commenters stated that CMS should require more 
frequent surveys specific to complaints and substandard care issues 
(i.e., greater than the statutorily mandated 36 months). Commenters 
also suggested some complaints be investigated within 48 hours.
    Response: As was stated earlier, we agree that frequent HHA surveys 
are desirable. However, instead of performing more frequent surveys in 
every HHA, we will seek to conduct more frequent surveys of those HHAs 
that available information indicates have a higher risk of quality of 
care issues. With regard to the investigation of complaints, we 
currently maintain a complaint tracking and prioritization system which 
prioritizes complaints according to the level of risk for the patients 
at the HHA. Complaints that indicate the possibility of an immediate 
jeopardy situation are given the highest priority and are investigated 
as soon as possible. With regard to the commenter's suggestion that 
complaints which indicate potential immediate jeopardy be investigated 
within 48 hours, we agree that prompt attention to these complaints is 
very important. We consider the SOM to be the most appropriate venue 
for specifying the timeframes by which all types of complaints should 
be investigated. We will take the commenter's suggestion into 
consideration as we develop such interpretive guidance.
h. Surveyor Qualifications (Sec.  488.735)
    Section 1891(c)(2)(C)(iii) of the Act requires ``an individual who 
meets the minimum qualifications established by the Secretary'' to 
conduct a survey of an HHA. We interpret this statutory language to 
mean that each individual on a survey team must meet certain minimum 
CMS qualifications. We set forth our criteria for surveyor minimum 
qualifications in proposed Sec.  488.735. We are adding that the 
surveyor must successfully complete the relevant CMS-sponsored Basic 
HHA Surveyor Training Course and any associated course prerequisites 
prior to conducting an HHA survey. These prerequisites will be further 
explained in guidance.
    In proposed Sec.  488.735, we also set out the circumstances that 
will disqualify a surveyor from surveying a particular HHA as required 
by section 1891(c)(2)(C)(iii) of the Act. A surveyor will be prohibited 
from surveying an HHA if the surveyor currently serves, or within the 
previous two years has served, on the staff of or as a consultant to, 
the HHA undergoing the survey. Specifically, the surveyor could not 
have been a direct employee, employment agency staff at the HHA, or an 
officer, consultant or agent for the surveyed HHA regarding compliance 
with CoPs. A surveyor will be prohibited from surveying an HHA if he or 
she has a financial interest or an ownership interest in that HHA. The 
surveyor will also be disqualified if he or she has a family member who 
has a financial interest or ownership interest with the HHA to be 
surveyed or has a family member who is a patient of the HHA to be 
surveyed.
    Comments: Several commenters stated that although surveyors are 
adequately trained and are competent, there is still inconsistency 
among surveyors nationally. Several commenters stated that CMS should 
develop formal competencies for surveyors and publish these 
competencies. A few commenters suggested that surveyors be tested on 
the competencies and skills for the program they will survey. A few 
commenters recommended that surveyors be required to have continuing 
education hours annually. A few commenters suggested that there should 
be additional CMS commitment of time and resources to train surveyors 
on the CoPs in collaboration with provider associations.
    Response: We appreciate these comments regarding surveyor 
competencies. However, we believe that the SOM rather than the 
regulation should contain this level of specificity concerning surveyor 
competencies, and we will consider additional specification for 
training as we further develop the interpretive guidance. We currently 
require successful completion of a national HHA Basic training course 
(with pre-requisites) before a surveyor is allowed to survey a program 
independently. This is a comprehensive course and there are pre and 
post tests to ensure surveyor understanding. Additionally, all SAs 
conduct reviews of HHA surveyor work before it is released as a final 
set of findings. This process serves as the quality assurance for the 
SA. Requirements for HHA surveyor educational and experience 
backgrounds are determined by the SAs that employ them. Therefore, we 
are not accepting these recommendations.
    Comments: A few commenters stated that surveyors should be 
disqualified if he/she worked at a competitor of the HHA being surveyed 
within the last two years. One commenter stated that the surveyor 
should be disqualified if he/she worked at any HHA within the last two 
years. One commenter requested clarification as to what constitutes a 
family member.
    Response: While we appreciate the comments regarding surveyor 
disqualifications, we do not agree that additional criteria for 
surveyor disqualification beyond those specified in the statute are 
necessary or indicated at this time. The Act specifies at section 
1891(c)(2)(C)(iii)(II), that the survey be conducted by an individual, 
``who is not serving (or has not served within the previous 2 years) as 
a member of the staff of, or as a consultant to, the home health agency 
surveyed respecting compliance with the conditions of participation 
specified to section 1861(o) or subsection (a) of this section, and 
(III) who has no personal or familiar interest in the home health 
agency surveyed.'' Therefore, we are not accepting the recommendation 
for these additional requirements. In regards to the definition of 
``family member,'' in the above statement, we will utilize the 
definition of family member located at Sec.  411.351 in the development 
of interpretive guidance for this regulation. This definition includes 
husband or wife; birth or adoptive parent, child, or sibling; 
stepparent, stepchild, stepbrother, or stepsister; father-in-law, 
mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-
in-law; grandparent or grandchild; and spouse of a grandparent or 
grandchild.
    Comment: A few commenters recommended that CMS allocate funds 
annually for national training of the HHA industry on the CoPs and 
alternative sanction policies.
    Response: We appreciate the interest of the HHA industry for CMS 
training. We look forward to partnering with the national associations 
to promote knowledge and education regarding the CoPs and the 
provisions of this rule. We do issue periodic communications to 
providers and host regular open door forums to communicate important

[[Page 67141]]

information and engage in dialogue with the HHA industry, patient 
advocacy organizations, and the public. We also use webinars to train 
survey staff and these webinars are posted on our Web site and are 
available to the HHA industry. Since the recommendation to allocate 
funds for the HHA industry falls outside the scope of the proposed 
regulation, we are not accepting that aspect of the recommendation.
    Comments: One commenter suggested that CMS require the use of the 
2011 Survey protocols when conducting surveys to ensure consistency.
    Response: Use of the survey protocols is currently our policy.
i. Certification of Compliance or Noncompliance (Sec.  488.740)
    We proposed in Sec.  488.740 to cross reference the rules for 
certification, documentation of findings, periodic review of compliance 
and approval, certification of noncompliance, and determining 
compliance for HHAs as set forth, respectively at Sec.  488.12, Sec.  
488.18, Sec.  488.24 and Sec.  488.26 of this part. These general rules 
must be followed when a State Agency certifies compliance or 
noncompliance of the HHA with the Act and CoPs.
    Comment: One commenter stated that the language does not explain 
when or on what basis condition-level deficiencies will be identified.
    Response: Guidance on how surveyors determine condition-level and 
standard-level deficiencies is provided in the State Operations Manual 
(SOM), Appendix B. These new rules do not change that practice. With 
the establishment of alternative sanctions, we will continue to address 
this issue in the development of interpretive guidance. In addition, we 
will consult with stakeholders prior to publication of any guidance on 
this issue.
    Based on these comments, we are finalizing this section as 
proposed.
j. Informal Dispute Resolution (IDR) (Sec.  488.745)
    We proposed in Sec.  488.745 to make available to HHAs an IDR 
process to address disputes related to condition-level survey findings 
following an HHA's receipt of the official statement of deficiencies. 
We have proposed adding an IDR process that will provide HHAs an 
informal opportunity to resolve disputes in the survey findings for 
those HHAs that are seeking recertification from the SA for continued 
participation in Medicare and for those HHAs that are currently under 
SA monitoring (either through a complaint or validation survey). 
Whenever possible, we want to provide every opportunity to settle 
disagreements at the earliest stage, prior to a formal hearing, 
conserving time and money potentially spent by the HHA, the State 
agency, and CMS. The goal of IDR is to offer an HHA the opportunity to 
refute one or more condition-level deficiencies cited on the official 
Statement of Deficiencies. An IDR between an HHA and the SA or RO, as 
appropriate, will allow the HHA an opportunity to provide an 
explanation of any material submitted to the SA and respond to the 
reviewer's questions.
    In Sec.  488.745, we proposed to provide HHAs with the option to 
dispute condition-level survey findings upon their receipt of the 
official Statement of Deficiencies. When survey findings indicate a 
condition-level deficiency (or deficiencies), CMS or the State, as 
appropriate, will notify the HHA in writing of its opportunity to 
request an IDR of those deficiencies. This notice will be provided to 
the HHA at the time the Statement of Deficiencies is issued to the HHA. 
The HHA's request for IDR must be submitted in writing, should include 
the specific deficiencies that are disputed, and should be submitted 
within the same 10 calendar day period that the HHA has for submitting 
an acceptable plan of correction.
    An HHA's initiation of the IDR process will not postpone or 
otherwise delay the effective date of any enforcement action. The 
failure to complete an IDR will not delay the effective date of any 
enforcement action. Further, if any findings are revised or removed 
based on IDR, the official Statement of Deficiencies is revised 
accordingly and any enforcement actions imposed solely as a result of 
those revised or removed deficiencies are adjusted accordingly. We 
believe that the IDR procedures will maintain the balance between an 
HHA's due process concerns and the public's interest in the timely 
correction of HHA deficiencies.
    Comments: Several commenters applauded our introduction of an 
Informal Dispute Process (IDR) but added that CMS should delay the 
imposition of a sanction until the completion of the IDR process.
    Response: We do not agree with the commenters regarding a delay of 
the imposition of a sanction until after IDR is completed. Section 
1891(f)(3) directs us to ensure that our procedures for imposing 
sanctions be designed so as to minimize the time between identification 
of deficiencies and imposition of the sanctions. We are providing for 
IDR beginning with the provider's receipt of the official Statement of 
Deficiencies, in order to give facilities an opportunity to rebut 
survey findings early in the process. While IDR is not required under 
the statute, by adding this feature to the enforcement process we are 
balancing the needs of agencies to avoid unnecessary disputes and 
protracted litigation, on one hand, with the interests of HHA patients, 
which we believe to be paramount, in assuring the most rapid correction 
of deficiencies. The IDR is meant to be an informal process whereby the 
provider has an informal opportunity to address the surveyor's 
findings, either by disputing them or providing additional information. 
This process is offered immediately after the survey and a request for 
IDR must be made within the same 10 calendar day period that the HHA 
has for submitting a plan of correction, as we provide in Sec.  
488.745(d). In those occasions where an IDR may occur after a remedy is 
imposed, the IDR will still be conducted in time for the IDR results to 
be taken into account in the remedial action. In the case of civil 
money penalties that may be imposed with an accrual effective date 
beginning on the last day of the survey, we explicitly provide at Sec.  
488.845(f) that the due date for the collection of a CMP is 15 days 
after a final administrative decision. This provides time for an IDR or 
administrative hearing to take place before the due date for 
collection. We also specify at Sec.  488.745(c) that if any findings 
are revised or removed by CMS or the state (for surveys conducted by 
the SA) based on IDR, the CMS-2567 is revised accordingly. Furthermore, 
if CMS accepts the SA's revised CMS-2567 and any enforcement actions 
imposed solely as a result of those cited deficiencies, CMS will adjust 
such enforcement actions accordingly.
    Comments: Several commenters referenced the IDR process as an 
independent dispute resolution and submitted comments regarding the use 
of third parties not associated with the SA. One commenter stated that 
the HHA could share the cost of the independent dispute resolution.
    Response: We wish to provide clarification for these commenters. 
The proposed rule discussed ``informal dispute resolution'' and not 
independent informal dispute resolution. The proposed process will be 
conducted internally by the SA or CMS as indicated. Each SA is 
responsible for setting up its own IDR process. We do not preclude SAs 
from involving independent contractors.
    Comments: Several commenters stated that the IDR process should be

[[Page 67142]]

available for standard-level deficiencies as well as condition-level 
deficiencies.
    Response: We thank the commenters for this recommendation. However, 
we do not agree that the IDR process should be expanded to standard-
level deficiencies. The purpose of the IDR is for the HHA to dispute 
condition-level findings that may be the impetus for an alternative 
sanction. Standard-level findings alone do not trigger an alternative 
sanction. Some findings of noncompliance with specific standards (that 
is, standard level findings), however, may be cited at the condition-
level if they are repeat deficiencies or are evaluated as being 
extremely serious. If noncompliance is cited at the condition-level, 
such condition-level classification will be clearly communicated to the 
HHA and will be accompanied by rights to request an IDR as well as 
appeal. Additional guidance will be provided in survey protocols.
    Comment: Several commenters requested further clarification of how 
the IDR process will be implemented.
    Response: We understand the interest of the commenters in specific 
procedures for the implementation of the IDR process. CMS will develop 
them as a part of the interpretive guidance associated with the final 
regulation.
    Comments: Several commenters requested specific timeframes for the 
IDR process due to the delays that may occur at the SA level in getting 
the Statement of Deficiencies to the HHA.
    Response: We agree that these timeframes are essential to the 
effective implementation of the IDR process. We will develop these 
instructions through interpretive guidance, internal policy directives 
and SA performance standards.
    Comments: A few commenters requested that CMS expedite the IDR 
process.
    Response: We agree that timeframes for the expeditious 
accomplishment of the IDR process are essential. We will develop 
instructions through interpretive guidance, internal policy directives 
and SA performance standards.
    Comments: One commenter recommended that the patient, their 
representative and the State ombudsman should be notified of the IDR so 
that they might provide valuable input into the IDR process.
    Response: We understand the interest voiced by the commenter. The 
IDR process is provided primarily as an opportunity for the provider to 
provide additional information and to dispute condition-level 
deficiencies. This is not an adversarial setting and it will not be 
necessary for the SA or CMS to seek additional input from other 
parties. However, we will consider the inclusion of such members in 
interpretive guidance as appropriate.
    Comments: One commenter felt the 10 day response time required for 
the provider to request IDR and submit evidence was too brief.
    Response: We appreciate the concern of the commenter regarding the 
response time provided. However, because of the need to address 
disputed findings timely and enable the provider to begin corrections 
to regain compliance as soon as possible, we do not feel that a shorter 
time period will be prudent.
    Based on the comments above, we are finalizing this section as 
proposed.
3. Subpart J--Alternative Sanctions for Home Health Agencies With 
Deficiencies
a. Statutory Basis (Sec.  488.800)
    We proposed to add rules for enforcement actions for HHAs with 
deficiencies, including alternative sanctions, at new subpart J. Under 
sections 1866(b)(2)(B) and 1891(e) of the Act and Sec.  489.53(a)(3), 
we may terminate an HHA's provider agreement if that HHA is not in 
substantial compliance with the Medicare requirements (that is, the 
failure to meet one or more conditions of participation is considered a 
lack of substantial compliance). We may also terminate an HHA that 
fails to correct its deficiencies within a reasonable time (ordinarily 
no more than 60 days), even if those deficiencies are at the standard- 
(rather than condition-) level at Sec.  488.28. Prior to OBRA '87, the 
only action available to CMS to address HHAs out of compliance with 
federal requirements was termination of their Medicare provider 
agreement. Section 4023 of OBRA '87 added subsections 1891(e) and (f) 
to the Act, which expanded the Secretary's options to enforce federal 
requirements for HHAs. Under section 1891(e)(1) of the Act, if the 
Secretary determines on the basis of a standard, extended, or partial 
extended survey or otherwise, that a home health agency that is 
certified for participation under this title is no longer in compliance 
with the requirements specified in or pursuant to section 1861(o) or 
section 1891(a) of the Act and determines that the deficiencies 
involved immediately jeopardize the health and safety of the 
individuals to whom the agency furnishes items and services, the 
Secretary shall take immediate action to remove the jeopardy and 
correct the deficiencies through the remedy specified in section 
1891(f)(2)(A)(iii) or terminate the certification of the agency, and 
may provide, in addition, for one or more of the other sanctions 
described in section 1891(f)(2)(A). We proposed to set out the 
statutory basis for the new subsection at Sec.  488.800, which is 
sections 1891(e) and (f) of the Act. Section 1891(e) provides for 
termination of home health agencies that fail to comply with conditions 
of participation. This section also provides for ensuring that the 
procedures with respect to the conditions under which each of the 
alternative sanctions developed by the Secretary shall be designed to 
minimize the time between identification of deficiencies and imposition 
of these sanctions, including imposition of incrementally more severe 
fines for repeated or uncorrected deficiencies. Furthermore, we 
proposed that this section specifies that these sanctions are in 
addition to any others available under state or federal law, and, 
except for civil money penalties, are imposed prior to the conduct of a 
hearing.
    Comments: Two commenters stated that CMS had exceeded the 
authorization of the statute with the extensive sanctions, the 
excessive amounts of civil money penalties and dependence on the 
subjective determinations of state surveyors. Another commenter stated 
that CMS improperly, and without statutory authority, limits 
enforcement to condition-level deficiencies.
    Response: We do not agree that the alternative sanctions in this 
final rule exceed the authority of the statute. Section 1891(f)(1)(A) 
directs the Secretary to develop a range of sanctions to impose on a 
HHA that is not in compliance with the federal requirements, which must 
include civil money penalties, suspension of payments for new 
admissions and temporary management. We do not believe that this is an 
exhaustive list. Therefore we are adding through rulemaking two 
additional sanctions to be included within that range of sanctions. 
Under the HHA enforcement context, we have added the additional 
remedies of directed plan of correction and directed in-service 
training, which have both been successfully used in our enforcement of 
the nursing home requirements. In our experience with skilled nursing 
facilities, we realize that some compliance problems are a result of 
imperfect knowledge on the part of health services staff relative to 
state-of-the-art practices and resident outcome expectations. This is 
also the case with services provided to HHA patients. We believe that 
the HHA provider would benefit from a directed in-service training 
program conducted by sources

[[Page 67143]]

with an in-depth knowledge of the area(s) which require specific 
training so that positive change is achieved and maintained. Similarly, 
under a directed plan of correction, an HHA would be guided by 
individuals with knowledge of necessary corrective actions (for 
example, us, the SA, or a temporary manager (with CMS approval)) to 
ensure that the underlying cause of cited deficiency or deficiencies 
does not recur. This remedy sets forth the expected correction actions 
which an HHA must take to achieve compliance and the dates by which the 
actions must be taken.
    We disagree with the comment that the proposed rule limits the 
enforcement to condition-level deficiencies without statutory 
authority. Section 1891 does not specify the level of noncompliance 
that would trigger the imposition of an enforcement remedy; rather, it 
provides that remedies are to be imposed when an HHA is not in 
compliance with the requirements of section 1861(o) and 1891(a), which 
includes implementing regulations at Part 484. We consider an HHA to be 
in substantial compliance with the CoPs when all deficiencies cited are 
at a standard-level. Thus it will not be consistent for CMS to impose 
alternative sanctions based upon standard-level deficiencies alone when 
the HHA is considered to be in compliance with the CoPs.
    Comment: Several commenters stated that, because of the risk that 
sanctions could cause HHAs to close, CMS should either not implement 
the sanctions at all or should progressively implement the sanctions 
that are non-monetary sanctions first and then later implement monetary 
sanctions (civil money penalties and suspension of payment). Another 
commenter stated that CMS should only impose alternative sanctions in 
situations where an HHA has shown reckless disregard of its 
responsibilities or intentionally ignored its compliance obligations. 
One commenter stated that the statute allowed CMS the discretion to 
impose sanctions incrementally. One commenter stated that no sanction 
should be imposed when the natural and foreseeable outcome of the 
sanction(s) is closure of the agency. One commenter stated that 
sanctions are meant to be an alternative to the ``death-knell penalty'' 
of termination.
    Response: We appreciate the concerns of the commenters that 
alternative sanctions may cause HHAs to close, although we believe that 
risk to be lower than the risk of closure if the alternative were not 
available and CMS terminated Medicare participation altogether. 
Alternative sanctions allow providers who have been cited for 
noncompliance to make the necessary corrections to achieve compliance 
and avoid termination from the Medicare program. There is a range of 
sanctions available which we may impose based upon the nature and 
severity of the noncompliance. Because it is not our intent that 
alternative sanctions force HHA closure, we have made revisions to the 
CMP amounts by expanding the ranges within the regulatory text so as to 
permit CMS greater flexibility in correlating amount of the CMP with 
the extent and seriousness of noncompliance. Additional information 
will be provided in interpretive guidance. We must terminate any HHA 
provider who is not in compliance with the CoPs at the end of 6 months 
following the imposition of an alternative sanction. With regard to the 
suggestion of incremental sanctions, the statute at section 1891(f)(1) 
allows a range of possible sanction options. Our policy is generally 
one of progressive action. We will be developing guidance for this 
process in the SOM. Development of guidance also provides an 
appropriate opportunity to engage stakeholders in the process and we 
will do so. Section 1891(f)(1) of the Act requires that we develop and 
implement a range of sanctions to include at minimum civil money 
penalties, suspension of payments for new admission and temporary 
management. Incremental imposition of sanctions and choice of specific 
sanctions will be discussed in the interpretive guidance.
    Comment: Several commenters stated that CMS should only impose 
alternative sanctions after one or more survey revisits validate that 
compliance has not been re-gained by the agency.
    Response: We do not agree that the imposition of sanctions should 
always be delayed until after revisits are conducted. Many of the 
alternative sanctions, such as civil money penalties and suspension of 
payments that are imposed upon a finding of noncompliance will end only 
upon an HHA's correction. This process was intended to prompt immediate 
correction. An important goal of the alternative sanctions is to 
encourage more expeditious correction of any noncompliance with the 
conditions of participation.
    Comment: One commenter stated that the contentious nature of the 
alternative sanctions may damage the relationship between CMS and the 
HHA industry.
    Response: We work to maintain an open and positive relationship 
with the HHA industry. These sanctions, which are statutorily required, 
are established with the purpose of increasing compliance by the HHAs 
with the CoPs, which is a goal which we share with the HHA industry. We 
plan to continue dialogue with all stakeholders as we prepare for 
implementation.
    Comment: Several commenters were concerned that CMS is implementing 
alternative sanctions for HHAs using 26 years of, ``flawed experience 
with nursing home enforcement.''
    Response: We have found that the nursing home enforcement sanctions 
have been instrumental in addressing and changing compliance in the 
nursing home industry. By using our experience with the nursing home 
sanction program in the development of the HHA sanctions, we were able 
to identify those concerns and issues which will require specific 
interpretive guidance and more consistent application of the sanctions.
    Comments: Several commenters stated that the alternative sanctions 
will drive surveyors to cite deficiencies at a higher level in order to 
increase revenue for the SA. One commenter stated that the sanctions 
would change the role of the surveyor from one of educator/partner to a 
bounty hunter.
    Response: Determinations on whether to impose alternative sanctions 
and the specific sanction to be imposed will not be left to the sole 
discretion of an HHA surveyor. First, condition-level-findings by the 
surveyor are reviewed by the SA Office before the SA sends their 
noncompliance certification and enforcement recommendation to the CMS 
RO. Second, all final decisions regarding whether or not to impose a 
sanction and what type of sanction to be imposed, will be made by the 
applicable CMS RO. Any funds collected as a result of civil money 
penalties imposed upon an HHA are distributed to the state Medicaid 
Agency and to the US Treasury under section 1128A(f) and Sec.  
488.845(g). In order to avoid any appearance that the imposition of 
sanctions would become a revenue source, it is our policy under this 
rule in Sec.  488.845(g)(2) that no penalty funds may be utilized for 
survey and certification operations or as the state's Medicaid non-
federal medical assistance or administrative match. We believe these 
are effective protocols to safeguard the integrity of the HHA 
enforcement process.
    Comment: Several commenters stated that CMS should do joint and 
recurring training courses on alternative sanctions with the HHA 
industry, Accrediting Organizations and surveyors.
    Response: We appreciate this recommendation. We will provide this 
training through a web based

[[Page 67144]]

application and provide for additional dialog with stakeholders.
    Based on the comments above, we are finalizing this section as 
proposed.
b. Definitions (Sec.  488.805)
    We proposed in Sec.  488.805 to define the frequently used terms, 
including ``directed plan of correction,'' ``immediate jeopardy,'' 
``new admission,'' ``per instance,'' ``plan of correction,'' ``repeat 
deficiency'' and ``temporary management.''
    Although section 1891 of the Act uses the term ``intermediate 
sanctions,'' for consistency with other enforcement rules, this final 
rule uses ``alternative sanctions,'' which we consider to have the same 
meaning.
    Based on the comments below, we are revising the definitions for 
``repeat deficiency,'' and ``temporary management'' and are finalizing 
the remaining definitions as proposed.
    Comments: Several commenters requested that CMS clarify the meaning 
of ``repeat deficiency'' and ``immediate jeopardy'' as well as 
``temporary management.''
    Response: We agree that the proposed definition of ``repeat 
deficiency'' was somewhat confusing and have revised the regulatory 
text to further clarify that ``repeat deficiency'' means a condition-
level deficiency cited on the survey that is substantially the same as 
or similar to, a finding of standard-level or condition-level 
deficiency citation issued on the most recent previous standard survey 
or on any intervening survey since the most recent standard survey. 
Additionally, we will publish further guidance in the SOM to surveyors 
for identifying and citing repeat deficiencies. Current CMS policy on 
the determination of immediate jeopardy has been in effect for a 
significant period of time and clearly defines the criteria for such a 
determination. Generally, immediate jeopardy situations are infrequent 
in HHAs. For example, there were only 11 immediate jeopardy 
determinations cited in 2011, during the course of over 5,500 surveys 
of HHAs. Based upon our experience, the existing guidance in the SOM, 
and the infrequency of this determination, we believe the definition of 
immediate jeopardy is sufficiently clear. Regarding the definition of 
temporary management, we have revised the definition to provide clarity 
that the governing body must ensure that the temporary manager has 
authority to hire, terminate or reassign staff, obligate funds, alter 
procedures, and manage the HHA to correct deficiencies identified in 
the HHA's operations.
c. General Provisions (Sec.  488.810)
    We proposed in Sec.  488.810 the general rules for enforcement 
actions against an HHA with condition-level deficiencies. Sections 
1891(e)(1) and (2) of the Act provide that if CMS finds that an HHA is 
not in compliance with the Medicare home health CoPs and the 
deficiencies involved either do or do not immediately jeopardize the 
health and safety of the individuals to whom the agency furnishes items 
and services, then we may terminate the provider agreement, impose an 
alternative sanction(s), or both. Therefore, our decision to impose one 
or more sanctions, including termination, will be based on condition-
level deficiencies, found in an HHA during a survey. We will be able to 
impose one or more sanctions for each deficiency constituting 
noncompliance or for all deficiencies constituting noncompliance.
    It is also important to note that HHAs acquire certification for 
participation in Medicare via a SA survey or via accreditation by a 
CMS-approved AO. Accreditation by a CMS-approved AO is voluntary and 
not necessary to participate in the Medicare program. The AO 
communicates any condition-level findings to the applicable CMS 
Regional Office. When an accredited HHA is to lose its accreditation 
status from the AO due to condition-level findings found by the SA 
during a complaint or validation survey and that remain uncorrected, 
oversight of that HHA is transferred to CMS, through the SA. In such a 
case where deemed status is removed, we will follow the usual 
procedures for such oversight, as indicated in sections 3257 and 5100 
of the SOM, and under the processes in this final rule, as appropriate. 
Once a sanction is imposed on an accredited HHA and deemed status is 
removed, oversight and enforcement of that HHA will be performed by the 
SA and not the accrediting organization, until the HHA achieves 
compliance and the alternative sanction(s) is removed or until the HHA 
is terminated from the Medicare program.
    It is our policy that any deficiencies found at a branch of the HHA 
will be counted against the HHA provider as a business entity. 
Therefore, regardless of whether the deficient practice is identified 
at the branch or the parent location, all sanctions imposed will apply 
to the parent HHA. However, these sanctions will not apply to any non-
branch subunit that was associated with an HHA if such subunit is 
independently required to meet the CoPs for HHAs. In such case, the 
subunit could have sanctions imposed on it independently based on 
deficient practices found at that subunit. For HHAs that operate branch 
offices in multiple states, we will base enforcement decisions on 
surveys conducted by the state in which the parent office is located.
    Comments: We received one comment requesting clarification of the 
regulation text at Sec.  488.810(d) pertaining to the application of 
sanctions to subunits, particularly the second sentence.
    Response: We agree that the second sentence of the regulation text 
of this section of the proposed rule was confusing and unnecessary, so 
we have removed the second sentence for clarification.
    We proposed in Sec.  488.810(e) that an HHA that is not compliant 
with the CoPs will be required to submit an acceptable plan of 
correction (POC) to CMS. We defined plan of correction in Sec.  488.805 
as a plan developed by the HHA and approved by CMS that is the HHA's 
written response to survey findings detailing corrective actions to 
cited deficiencies and that specifies the date by which those 
deficiencies will be corrected. A POC is required for any deficiency, 
whether it is at the condition-level or standard-level. More 
specifically, a POC will detail how an HHA has or will correct each 
deficiency, how the HHA will act to protect patients in similar 
situations, how the HHA will ensure that each deficiency does not 
recur, how the HHA will monitor performance to sustain solutions, and 
in what timeframe corrective actions will be taken by the HHA. We will 
determine if the POC was acceptable based on the information presented 
in the POC.
    We proposed in Sec.  488.810(f) that we will provide written 
notification to the HHA of our intent to impose a sanction. This notice 
will specify the specific sanction, the statutory basis for the 
sanction, and appeal rights. The notice periods specified in Sec.  
488.825(b) and Sec.  488.830(b) begin the day after the HHA receives 
the notice.
    An HHA may appeal the determination of noncompliance leading to the 
imposition of a sanction under the provisions of 42 CFR part 498. A 
pending hearing does not delay the effective date of a sanction against 
an HHA, and sanctions continue to be in effect regardless of any 
pending appeals proceedings. Civil money penalties continue to accrue 
during the pendency of an appeal, but will not be collected until a 
final agency determination, as we note in Sec.  488.845(f).
    Comments: Several commenters requested additional clarification 
regarding our statement that the SA

[[Page 67145]]

would follow ``usual procedures'' when an accredited HHA loses its 
deemed status due to uncorrected condition-level deficiencies.
    Response: For HHAs who are accredited by an AO with a CMS-approved 
program, the SA and CMS may still conduct complaint surveys or 
validation surveys of these agencies. Condition-level deficiencies may 
be cited by a SA or CMS Regional Office during a complaint 
investigation or validation survey of a deemed agency. In these cases, 
the SA or Regional Office removes deemed status of the agency and the 
SA or Regional Office resumes oversight activity of this provider. We 
may impose alternative sanctions or begin termination proceedings of 
the accredited HHA just as we do with a non-deemed agency.
    Based on the comments below, we are finalizing this section as 
proposed.
    Comment: Several commenters stated that deemed HHAs receive an 
unfair advantage as they are allowed a sanction free opportunity to 
correct before termination and alternative sanctions are not applied.
    Response: While CMS-approved AOs may have a different approach in 
enforcement actions, agencies will still face enforcement actions, 
including termination, by us for noncompliance. Under Sec.  488.8(a), 
CMS reviews and evaluates an AO for, among other things, the 
equivalency of the AO's accreditation requirements to that of CMS's 
requirements and the comparability of the AO survey procedures to those 
of the SA. Additionally, the AO must agree to provide CMS with a copy 
of the most current accreditation survey report together with any other 
information related to the survey as we may require (including 
corrective action plans). Furthermore, AOs notify us in writing within 
10 days of a deficiency cited during an AO survey where the deficiency 
poses an immediate jeopardy to the patients or a hazard to the general 
public. In addition, we perform validation and complaint surveys of 
accredited providers. If a condition-level finding is cited during a 
complaint or validation survey, the HHA loses deemed status and 
oversight is resumed by the SA or Regional Office and the HHA will then 
be subject to imposition of alternative sanctions.
    Comments: A few commenters stated that any condition-level finding 
that leads to the imposition of a sanction at a sub-unit (that is not a 
branch office) should have that sanction be applied against the parent 
as a business entity as well.
    Response: We disagree with the commenters. Sub-units are considered 
independent entities for the purpose of Medicare Provider Enrollment 
and have separate certification numbers and separate provider 
agreements from the parent HHA. Sub-units are independently required to 
meet the CoPs and thus any sanctions imposed for deficient practices 
would apply only to that sub-unit.
d. Factors To Be Considered in Selecting Sanctions (Sec.  488.815)
    Section 1891(e)(2) of the Act provides that if we find that an HHA 
is not in compliance with the Medicare home health CoPs and the 
deficiencies involved do not immediately jeopardize the health and 
safety of the individuals to whom the agency furnishes items and 
services, we may terminate the provider agreement, impose an 
alternative sanction(s), or both, at CMS's discretion, for a period not 
to exceed 6 months. The choice of any alternative sanction or 
termination will reflect the impact on patient care and the seriousness 
of the HHA's patterns of noncompliance and will be based on the factors 
proposed in Sec.  488.815. We could impose termination of the provider 
agreement (that is, begin termination proceedings that would become 
effective at a future date, but not later than 6 months from the 
determination of noncompliance) and apply one or more sanctions for 
HHAs with the most egregious deficiencies, for an HHA that was 
unwilling or unable to achieve compliance within a maximum timeframe of 
6 months, whether or not the violations constituted an ``immediate 
jeopardy'' situation. We proposed in Sec.  488.815, consistent with 
section 1891(f)(3) of the Act, procedures for selecting the appropriate 
alternative sanction, including the amount of any CMP and the severity 
of each sanction, which have been designed to minimize the time between 
the identification of deficiencies and the final imposition of 
sanctions. To determine which sanction or sanctions to apply, we will 
consider the following:
     Whether the deficiencies pose immediate jeopardy to 
patient health and safety;
     The nature, incidence, degree, manner, and duration of the 
deficiencies or noncompliance;
     The presence of repeat deficiencies, the HHA's compliance 
history in general, and specifically with reference to the cited 
deficiencies, and any history of repeat deficiencies at either the 
parent or branch location;
     Whether the deficiencies are directly related to a failure 
to provide quality patient care;
     Whether the HHA is part of a larger organization with 
documented performance problems;
     Whether the deficiencies indicate a system wide failure of 
providing quality care.
    Based on the comments below, we are finalizing this section as 
proposed.
    Comment: Several commenters stated that CMS should include 
requirements that decision makers be subject to rigorous training on 
established standards. Other commenters wanted more specific clarity on 
how decisions will be made in order to promote consistency.
    Response: We appreciate the commenter's requests for more detailed 
instruction on the selection of sanctions. We will provide greater 
details in interpretive guidance that will be developed for the 
regulations. We will also provide extensive training for our SAs and 
Regional Offices on the factors for the selection of sanctions.
    Comment: Several commenters stated that the factors related to 
quality of care issues are vague.
    Response: Because each determination that an HHA agency has failed 
to provide quality patient care is unique, based on individual patient 
and agency observations and occurrences, we are not able to include an 
all inclusive listing of such failures within the regulation. Therefore 
we will not accept this recommendation.
    Comment: Several commenters did not agree that the fact that the 
HHA is part of a larger organization should be included as a factor to 
be considered in the selection of sanctions.
    Response: We included this factor to address those situations where 
the policies of the umbrella organization may be incompatible with the 
unique operation of the HHA to the extent of causing noncompliance.
    Comments: Several commenters questioned why a system wide-failure 
was included as a factor in the selection of alternative sanctions.
    Response: We included the system-wide failure as a relevant factor 
because such a failure may indicate that the current HHA administration 
is not able to make the needed corrections. Furthermore, temporary 
management directed in-service and directed plan of correction may be 
crucial in order for the HHA to make necessary corrections to regain 
compliance.
    Comments: One commenter stated that CMS should consider access to 
care as a factor in the selection of sanctions.
    Response: While we are always mindful of access to care concerns, 
it is unlikely that access to additional HHAs would not be available 
should a

[[Page 67146]]

sanction make an agency temporarily or permanently unavailable for new 
admissions. An important goal of alternative sanctions is to encourage 
more expeditious compliance with the CoPs regardless of access issues. 
We do not believe that patients in remote areas should be accorded any 
less quality of care than patients in other areas.
    Section 1891(f)(3) of the Act provides for the imposition of 
incrementally more severe fines for repeated or uncorrected 
deficiencies. We define ``repeat deficiency'' in Sec.  488.805 as a 
standard or condition-level deficiency that was cited on a survey that 
was substantially the same as, or similar to, a finding of 
noncompliance issued on the most recent previous standard survey or any 
intervening survey since the most recent standard survey. Any standard-
level findings will be evaluated for condition-level noncompliance 
based on the HHA's failure to correct and sustain compliance. As noted 
in 488.815(c), we will consider the presence of repeat deficiencies as 
a factor in selecting sanctions and civil money penalties.
    Based on the comments below, we are finalizing this section as 
proposed.
    Comments: Several commenters stated that the definition of ``repeat 
deficiency'' was not clear. The commenters wanted to know if the same 
tag had to be cited, what time frame was referenced and if standard-
level deficiencies would cause the imposition of sanctions.
    Response: We appreciate this comment and have revised the 
definition of ``repeat deficiency'' to clarify that a repeat deficiency 
is a condition-level citation that is the same as, or similar to, a 
previous standard or condition-level deficiency cited on the most 
recent previous standard survey or any intervening survey since the 
most recent standard survey. Further information will be provided in 
guidance as it is developed. This guidance will be shared with 
stakeholders for comment.
e. Available Sanctions (Sec.  488.820)
    Section 1891(f)(1)(A) of the Act provides that CMS shall ``develop 
a range of intermediate [or alternative] sanctions'' that may be 
imposed in addition to, or instead of, termination when CMS finds that 
an HHA is no longer in compliance with the CoPs. Section 1891(f)(2) of 
the Act explicitly provides for the following sanctions to be included 
in the range of sanctions: Civil money penalties, suspension of payment 
for new admissions, and temporary management. We proposed in Sec.  
488.820 those specific alternate sanctions and we are finalizing them 
in this final rule. In addition to those specified in the statute, we 
are adding the following additional alternative sanctions: A directed 
plan of correction and directed in-service training. The list of 
alternative sanctions that could be imposed for a noncompliant HHA is 
in Sec.  488.820.
    Based on the comment below, we are finalizing this section as 
proposed.
    Comments: One commenter requested that CMS develop a tracking 
system for alternative sanctions.
    Response: CMS has developed a tracking system for alternative 
sanctions in long term care within our automated survey system (ASPEN) 
and plan to expand this system to include alternative sanctions for 
home health.
f. Actions When Deficiencies Pose Immediate Jeopardy (Sec.  488.825) 
and Termination (Sec.  489.53)
    Under section 1891(e)(1) of the Act, if CMS determines that an 
HHA's deficiencies immediately jeopardize the health or safety of its 
patients, then CMS must take immediate action to remove the immediate 
jeopardy situation and prompt correction of the deficiencies by 
imposing a sanction or terminating the HHA's certification, or both. We 
proposed in Sec.  488.825(a) to implement the statutory requirement by 
specifying that if the immediate jeopardy situation is not addressed 
and resolved within 23 days from the last day of the survey because the 
HHA is unable or unwilling to correct the deficiencies, CMS will 
terminate the HHA's provider agreement. In addition, CMS could impose 
one or more other alternative sanctions including a civil money penalty 
(CMP), temporary management and/or suspension of all Medicare payments 
before the effective date of termination. We proposed these provisions 
in Sec.  488.825.
    We also proposed in Sec.  488.825(b) a two day notice requirement 
for sanctions, except for civil money penalties, that are imposed when 
there is an immediate jeopardy situation. For terminations, we will 
give notice of the termination within 2 days before the effective date 
of the termination, as we proposed in Sec.  489.53(d)(2)(iii), which is 
consistent with the requirement for skilled nursing facilities in Sec.  
489.53(d)(2)(ii). Under our existing survey process, providers are 
advised of any immediate jeopardy findings upon discovery of the 
immediate jeopardy situation during the survey or as part of the exit 
conference at the end of the survey. This will give an HHA time to 
remove the immediate jeopardy and correct the deficiencies that gave 
rise to the immediate jeopardy finding. If the HHA fails to remove the 
immediate jeopardy situation, we will terminate the provider agreement 
no later than 23 days from the last day of the survey. We proposed to 
amend Sec.  489.53 by adding a new basis for termination at paragraph 
(a)(17), establishing that we will terminate an HHA's provider 
agreement if the HHA failed to correct a deficiency or deficiencies 
within the required time frame.
    The notice of our intent to impose a sanction at Sec.  488.825(b) 
will include the nature of the noncompliance, the sanctions to be 
imposed, the effective date of the sanction, and the right to appeal 
the determination leading to the sanction. In order to assure an HHA 
achieved prompt compliance, we expect that we will give HHAs written 
notice of impending enforcement actions against them as quickly as 
possible following the completion of a survey of any kind.
    Finally, in Sec.  488.825(c), we will require an HHA whose provider 
agreement is terminated to appropriately and safely transfer its 
patients to another local HHA within 30 days of termination. The HHA 
will be responsible for providing information, assistance and any 
arrangements necessary for the safe and orderly transfer of its 
patients. The state will be required to assist the HHA with this 
process. This is consistent with existing regulations at Sec.  
488.55(a)(2) providing for payments to be made up to 30 days for HHA 
services furnished under a plan established before the effective date 
of termination.
    Based on the comments below, we are finalizing these sections as 
proposed.
    Comments: Several commenters stated that HHAs do not have control 
over the patient's home environment and accordingly immediate jeopardy 
situations identified in the patient's home cannot be considered to be 
under the control of the HHA.
    Response: We disagree with the commenters and note that generally 
most immediate jeopardy findings made against a certified HHA are based 
upon actions that either the HHA took or failed to take to meet the 
CoPs, such as failure to take patient care actions which were indicated 
by either the care plan for the patient or current standards of 
practice. Other situations that may cause immediate jeopardy may 
include, but are not limited to, situations listed in current CMS 
guidance, located in the SOM, Appendix Q.
    Comments: Several commenters stated there is confusion as to the 
definition of immediate jeopardy and the difference between immediate

[[Page 67147]]

jeopardy and condition-level findings. Several commenters also 
expressed a concern that the determination of immediate jeopardy is 
surveyor dependent.
    Response: Our policy on the determination of immediate jeopardy has 
been in effect a considerable length of time and is clear that patient 
(even one patient) health and safety must be at risk of injury or harm 
to support the determination. (See SOM Appendix Q). Surveyor findings 
which indicate a possible finding of immediate jeopardy are vetted by 
the state and CMS Regional Office before the final determination is 
made. Thus, a finding of immediate jeopardy is not made by the surveyor 
in isolation. As a general matter, immediate jeopardy determinations 
occur infrequently in home health agencies. For example, there were 
only 11 immediate jeopardy determinations in HHAs made in 2011.
    Comment: A few commenters asked that CMS reconsider the 2 day 
notice of termination with an immediate jeopardy finding.
    Response: The 2 day termination notice for immediate jeopardy 
findings is a long standing CMS policy that has been successful with 
other providers and has been used with immediate jeopardy 
determinations of HHAs for many years. We find that the 2 day notice is 
prudent considering the short 23 day time frame to attain compliance 
and also given the serious risk to patient health and safety. The 
purpose of the 2 day notice is to inform the HHA of the immediate 
jeopardy situation, its egregious nature and that the HHA will be 
terminated in 23 days unless the immediate jeopardy is corrected.
g. Actions When Deficiencies Are at the Condition-Level, but Do Not 
Pose Immediate Jeopardy (Sec.  488.830)
    While section 1891(e)(2) of the Act provides for termination of the 
HHA's provider agreement as an enforcement option in non-immediate 
jeopardy situations, we are interested in providing incentives for HHAs 
to achieve and maintain full compliance with the requirements specified 
under sections 1861(o) and 1891(a) of the Act before termination 
becomes necessary. Accordingly, the provisions we proposed at Sec.  
488.830 reflect this enforcement policy and address the definition of 
``noncompliance,'' the requirement of 15 day notice of sanctions, the 
criteria for continuation of payment, and the termination time frame 
when there is no immediate jeopardy.
    Section 1891 of the Act does not require CMS to discontinue 
alternative sanctions when it also proposes to terminate an HHA's 
participation in Medicare; thus, these sanctions, as finalized, will 
continue while we initiate termination proceedings. Therefore, 
alternative sanctions could be imposed before the termination became 
effective, but could not continue for a period that exceeded six 
months. Also, to protect the health and safety of individuals receiving 
services from the HHA, alternative sanctions will apply until the HHA 
achieves compliance or has its Medicare participation terminated, 
whichever occurs earlier. For example, the suspension of payment 
sanction will end when the HHA corrected all condition-level 
deficiencies or was terminated from the program.
    We proposed in Sec.  488.830(b) that for a deficiency or 
deficiencies that do not pose immediate jeopardy, we will give the HHA 
at least 15 days advance notice of any proposed sanctions, except civil 
money penalties (which is discussed below under Sec.  488.845), which 
will remain effective until the effective date of an impending 
termination (at 6 months) or until the HHA achieved compliance with 
CoPs, whichever was earlier. This is consistent with the general rule 
for providers and suppliers in Sec.  489.53(d).
    Section 1891(f)(3) of the Act provides that the Secretary shall 
develop and implement specific procedures for determining the 
conditions under which alternative sanctions are to be applied, 
including the amount of any penalties and the severity of each 
sanction. Sections 488.830 to 488.865, describe each possible sanction 
and procedures for imposing them.
    Finally, in Sec.  488.830(e), we will require an HHA whose provider 
agreement is terminated to appropriately and safely transfer its 
patients to another local HHA within 30 days of termination. The HHA 
will be responsible for providing information, assistance and any 
arrangements necessary for the safe and orderly transfer of its 
patients. The state will be required to assist the HHA with this 
process.
    Based on the comments below, we are finalizing Sec.  488.830 with 
minor technical modifications for grammar.
    Comments: Several commenters recommended that CMS not impose any 
sanction until the HHA had received revisits from the survey agency and 
the determination was made that the HHA had not corrected the 
noncompliance even after an opportunity to correct.
    Response: We do not agree that the imposition of alternative 
sanctions should be delayed until after the conclusion of revisits. The 
primary goal of alternative sanctions is to encourage more expeditious 
correction of noncompliance. Such a delay as the commenter recommends 
will not be consistent with the intent of the statute.
h. Temporary Management Sec.  488.835
    We proposed in Sec.  488.835 when and how we apply temporary 
management, the duration and effect of this sanction, and the payment 
procedures for temporary managers' salaries and other additional costs. 
As we provide in Sec.  488.805, temporary management means the 
temporary appointment by CMS or a CMS authorized agent of an authorized 
substitute manager or administrator (based on qualifications described 
in Sec.  484.4 and Sec.  484.14(c)) who will be under the direction of 
the HHA's governing body and who will have authority to hire, terminate 
or reassign staff, obligate HHA funds, alter HHA procedures, and manage 
the HHA to correct deficiencies identified in the HHA's operation.
    We will impose temporary management when we determine that an HHA 
has condition-level deficiencies and that the deficiencies or the 
management limitations of the HHA are likely to impair the HHA's 
ability to correct the deficiencies and return the HHA to full 
compliance with the CoPs within the required timeframe. We will impose 
temporary management to bring an HHA into compliance with program 
requirements in non-IJ cases within 6 months, as we indicate in Sec.  
488.835(c). We will also choose to impose temporary management as a 
sanction for deficiencies that pose immediate jeopardy to patient 
health and safety, as permitted under Sec.  488.825(a)(3).
    The individual appointed as a temporary manager will be required to 
have work experience and education that will qualify such individual to 
oversee the correction of deficiencies so that the HHA could achieve 
substantial compliance with the Medicare requirements. Each SA will 
maintain a list of recommended individuals who will be eligible to 
serve as temporary managers, and annually submit the list to CMS.
    If the HHA refuses to relinquish authority and control to the 
temporary manager, we will terminate the HHA's provider agreement. If a 
temporary manager was appointed, but the HHA failed to correct the 
condition-level deficiencies within 6 months from the last day of the 
survey, the HHA's Medicare participation will be terminated. 
Additionally, if the HHA resumes management control without CMS's 
approval, it will be deemed to be

[[Page 67148]]

a failure to relinquish authority and control to the temporary manager 
and we will impose termination and could impose any additional 
sanctions. The appointment of a temporary manager will not relieve the 
HHA of its responsibility to achieve compliance. We proposed in Sec.  
488.835(c) that temporary management will end when:
     We determined that the HHA was in substantial compliance 
with all CoPs and had the management capability to remain in full 
compliance;
     The HHA provider agreement is terminated; or
     The HHA resumed management control without CMS approval.
    We believe that Sec.  488.805 and Sec.  488.835 will provide the 
temporary manager with the authority necessary to manage the HHA and 
cause positive changes. The temporary manager will have the authority 
to hire, terminate, or reassign staff; obligate HHA funds; alter HHA 
policies and procedures; and otherwise manage an HHA to correct 
deficiencies identified in the HHA's operations. Furthermore, temporary 
management will be provided at the HHA's expense. Before the temporary 
manager is installed, the HHA will have to agree to pay his/her salary 
directly for the duration of the appointment. We believe that the 
responsibility for the HHA to pay the expenses of the temporary manager 
is an inherent management responsibility of the agency for which the 
HHA is regularly reimbursed by Medicare and though such temporary 
outside management might be necessary in some cases to bring the HHA 
back into compliance with the conditions of participation. We have 
indicated that the salary for the temporary manager will not be less 
than the amount equivalent to the prevailing salary paid by providers 
in the geographic area for positions of this type, based on the based 
on the Geographic Guide by the Department of Labor (BLS Wage Data by 
Area and Occupation). In addition, the HHA will have to pay for any 
additional costs that will have reasonably been incurred if such person 
had been in an employment relationship, and any other costs incurred by 
such a person in furnishing services under such an arrangement or as 
otherwise set by the state. An HHA's failure to pay the salary of the 
temporary manager will be considered by CMS to be a failure to 
relinquish authority and control to temporary management.
    Comments: There were numerous comments expressing opposition to the 
use of temporary management as an alternative sanction. Some commenters 
stated that this takes control away from the HHA Governing Body. Some 
commenters stated that temporary manager should be allowed control only 
over the CoPs.
    Response: Section 1891(f)(2)(A) of the Act requires the Secretary 
to include temporary management as an available alternative sanction 
for non-compliant HHAs. This particular sanction will be used in 
situations where the current administration of the HHA has demonstrated 
an inability to achieve or maintain compliance with the CoPs. The HHA 
accepts the alternative sanction in lieu of immediate termination from 
Medicare and agrees to relinquish the operation of the agency to a 
qualified temporary manager. The temporary manager works under the 
direction of the HHA Governing Body to take whatever actions are 
indicated to regain compliance with the CoPs.
    Based on the comments below, we are finalizing this section as 
discussed below. We note that we are replacing the term ``deficiency'' 
used in the proposed rule at Sec.  488.835(a)(1) with ``noncompliance'' 
in this final rule as a technical modification.
    Comments: Several commenters expressed concern about the liability 
of the HHA when a temporary manager is appointed and assumes control.
    Response: The temporary manager works under the direction of the 
HHA's existing Governing Body, which has ultimate liability 
responsibility. Therefore, we do not agree that this sanction creates 
new liability for the HHA.
    Comment: Several commenters expressed concern regarding the 
availability and costs of the temporary manager.
    Response: CMS policy places the responsibility upon each SA to 
ensure the availability of qualified temporary managers by maintaining 
of list of possible candidates. We maintain that it is critical that 
temporary managers be reimbursed at prevailing rates in order to ensure 
qualified candidates. The cost of the temporary manager must be borne 
by the HHA as a component of their inherent management 
responsibilities.
    Comments: One commenter recommended that CMS use temporary 
management in only extraordinary circumstances, that any temporary 
manager be bonded and that the HHA be given the choice of three 
possible temporary managers.
    Response: We will develop interpretive guidance for this provision 
that will provide specific direction to the SAs and Regional Offices. 
This guidance will emphasize that temporary management is used to 
address situations where the current management of the agency has shown 
an inability to achieve or maintain compliance with the CoPs. We do not 
agree that it is necessary to add a requirement to this regulation that 
the temporary manager be bonded.
    Comments: One commenter recommended that CMS impose no additional 
sanctions in conjunction with temporary management. They also 
recommended that CMS not terminate the HHA if the temporary manager is 
at fault for not bringing the HHA back into compliance.
    Response: Section 1891 of the Act does not prohibit the concurrent 
imposition of more than one sanction. For example, it may be 
appropriate for the appointment of a temporary manager to be imposed in 
combination with a directed plan of correction. We do not agree that 
the HHA should not be terminated if the temporary manager fails to 
bring the agency back into compliance. The failure may be due to the 
HHA's policies, processes, or procedures or issues outside the control 
of the temporary manager. The agency can accept this alternative 
sanction in lieu of termination as a method to promptly regain 
compliance with the requirements. Section 1891(e) of the Act requires 
that no alternative sanction may be in effect for a period of more than 
6 months and thus must be terminated if compliance is not achieved 
within this 6 month window of the sanction.
    Comment: Several commenters objected to the regulation at Sec.  
488.835(d)(3) where we indicated that we would not allow the costs of 
the temporary manager as an allowable cost on the cost report.
    Response: We agree and are removing Sec.  488.835(d)(3). Removal of 
this prohibition is also responsive to concerns from several commenters 
about the potential for sanctions to cause closure of a HHA, and is 
consistent with CMS treatment of temporary managers in nursing homes.
i. Suspension of Payment for all New Admissions and New Payment 
Episodes (Sec.  488.840)
    We proposed in Sec.  488.840 provisions describing when and how we 
would apply a suspension of payment for new Medicare admissions and new 
PPS episodes of care. If an HHA has a condition-level deficiency or 
deficiencies (regardless of whether or not immediate jeopardy exists), 
we may suspend payments for new Medicare patient admissions to the HHA 
that were made on or after the effective date of the sanction. The 
suspension of payment will be for a period not to

[[Page 67149]]

exceed 6 months and will end when the HHA either achieved substantial 
compliance or was terminated. We will provide the HHA with written 
notice of our intent to impose this sanction at least 2 calendar days 
before the effective date of the sanction in immediate jeopardy 
situations (Sec.  488.825(b)) or at least 15 calendar days before the 
effective date of the sanction in non-immediate jeopardy situations 
(Sec.  488.830(b)). Our notice of suspension of payment for new 
admissions and new payment episodes will generally include the 
following: the nature of the noncompliance; the effective date of the 
sanction; and the right to appeal the determination leading to the 
sanction.
    We added the definition of a ``new admission'' in Sec.  488.805 to 
mean an individual who becomes a patient (is admitted) or readmitted to 
the HHA under Medicare on or after the effective date of a suspension 
of payment sanction. We proposed to expand the definition of ``new 
admission'' to include new payment episodes because we believed that 
each new payment episode (the 60 day payment episode of HHA care) marks 
the beginning of a new assessment and a new care plan for the patient.
    Furthermore, patients who are admitted before the effective date of 
the suspension and who have temporarily interrupted their treatment but 
are not discharged will be considered neither a new admission nor will 
the resumption of their services be subject to the suspension of 
payment.
    Further, section 1891(f)(2)(C) of the Act provides that a 
suspension of payment sanction shall terminate when CMS finds that the 
HHA is in substantial compliance with all of the requirements specified 
in, or developed in accordance with, sections 1861(o) and 1891(a) of 
the Act. That is, the suspension of payment sanction will end when the 
HHA was determined to have corrected all condition-level deficiencies, 
or upon termination, whichever is earlier.
    Before the suspension becomes effective, we will notify the HHA of 
the imposition of this sanction under Sec.  488.840(b)(1). Once such a 
sanction is imposed, the HHA will be required to notify any new patient 
admission and patients with new payment episodes that Medicare payment 
will not be available to this HHA because of the imposed suspension 
before care could be initiated. Moreover, the HHA is precluded from 
charging the Medicare patient for those services unless it could show 
that, before initiating or continuing care, it had notified the patient 
or his/her representative both orally and in writing in a language that 
the patient or representative could understand, that Medicare payment 
may not be available. The suspension of payment will end when we 
terminate the provider agreement or CMS finds the HHA to be in 
compliance with all CoPs.
    In Sec.  488.840(b)(3), if we terminate the provider agreement, or 
if the HHA achieves substantial compliance with the CoPs (as determined 
by CMS) thereby ending the suspension period, the HHA will not be 
eligible for any payments for services provided to new Medicare 
patients admitted during the time the suspension was in effect, or for 
existing Medicare patients beginning a new payment episode during their 
care. This policy is consistent with the legislative history of OBRA 
'87, which states that ``suspended payments [are] not [to] be repaid to 
any agency once it has come back into compliance and the suspension has 
been lifted. It is the Committee's belief that if such repayment were 
permitted, there would be little incentive for deficient agencies to 
come back into compliance as quickly as possible.'' See H.R. Rep. No. 
100-391(I) at 423 (1987). In accordance with the Committee's intent, we 
have interpreted the term ``suspend'' to mean to temporarily stop 
Medicare payments, without the possibility of recovering the suspended 
payments. Once compliance with the CoPs is achieved after the 
suspension takes effect, we will resume payment to the HHA 
prospectively from the date that CMS determines correction.
    We proposed in Sec.  488.840(c) that the suspension of payment will 
end either when we terminate the provider agreement or when we find the 
HHA to be in substantial compliance with all of the CoPs. Based on the 
comments below, we have modified this section as noted below and have 
also modified the proposed definition of ``new admission'' in Sec.  
488.805 to reflect the modifications under this section.
    Comments: Two commenters agreed that the imposition of suspension 
of payment for new admissions to the agency as well as suspension for 
new payment episodes for patients already being seen by the agency 
would be effective as alternative sanctions. However, the vast majority 
of commenters responded that the use of payment suspension for new 
payment episodes would be detrimental to the agency in their efforts to 
make corrections necessary to confirm compliance and would be 
disruptive to patients.
    Response: We appreciate these comments and agree that the use of 
suspension of payment for new patient admissions would be an effective 
sanction while suspension of new payment episodes may be disruptive to 
patients as they would have to transfer to different HHAs with 
different staff. It would also be difficult for the HHA to maintain a 
caseload of patients to ensure compliance with requirements. Therefore, 
we will keep the suspension of payment for new patients as an option, 
but remove references to new payment episodes from the suspension of 
payment sanction as well as the definition of ``new admission'' in 
Sec.  488.805.
j. Civil Money Penalties (CMPs) Sec.  488.845
    We proposed in Sec.  488.845 provisions for imposition of CMPs. 
Under sections 1891(e) and 1891(f)(2)(A)(i) of the Act, CMS may impose 
a CMP against an HHA that is determined to be out of compliance with 
one or more CoPs, regardless of whether the HHA's deficiencies pose 
immediate jeopardy to patient health and safety.
    Comment: Many comments were received stating the belief that 
decisions about imposition of and amounts of CMPs imposed will be at 
the discretion of individual surveyors and that this would lead to 
adversarial and contentious relationships.
    Response: We appreciate the comments and repeat that decisions 
regarding whether to impose alternative sanctions and the specific 
sanction to be imposed will not be left to the HHA surveyor alone. 
First, condition-level-findings are vetted at both the state and 
Regional level. Second, all decisions regarding whether to impose a 
sanction and the type of sanction to be imposed, will be made by the 
applicable CMS Regional Office.
    Comments: Additional comments were received requesting 
clarification of when CMPs would be imposed.
    Response: We have set forth the framework for the imposition of 
CMPs. Further instructions will be published in interpretive guidance.
    Comments: Many comments were received reflecting that the proposed 
amounts of CMPs were excessive; would put HHAs out of business; would 
take away funds from indigent care; would affect access to care in 
rural areas and should not be imposed prior to the end of the appeal 
process.
    Response: It is not our intent to put agencies out of business 
through the use of alternative sanctions. CMPs are an effective 
sanction because HHA's are subject to its financial impact. The CMPs 
are an incentive for the HHA to promptly correct the noncompliance.

[[Page 67150]]

Per day CMPs carry a built-in incentive to correct noncompliance 
promptly since the faster the correction the sooner the CMP can stop 
accruing. It is also our intent when imposing alternative sanctions to 
provide agencies with time to correct any condition-level noncompliance 
and thus avoid the interruption of services to patients that might 
occur if the HHA were to be terminated from Medicare. It is the 
responsibility of the HHA to make any necessary corrections in an 
expeditious manner and regain compliance with the CoPs.
    However, in response to the commenters' concerns, we have revised 
the proposed regulation in order to expand the lower range of CMP 
amounts in the middle category. Such added additional flexibility may 
permit CMS to better correlate the level of seriousness of the 
noncompliance with the amount of the CMP. We may also impose a civil 
money penalty for the number of days of immediate jeopardy. The CMP 
amount cannot exceed $10,000 for each day of noncompliance. A 
deficiency found during a survey at a parent HHA or any of its branches 
results in a noncompliance issue for the entire HHA, which can be 
subject to the imposition of a CMP.
    In this section, we have proposed both a per day and a per instance 
CMP at Sec.  488.845(a). The per day CMP will be imposed for each day 
of noncompliance with the CoPs. Additionally, should a survey identify 
a particular instance or instances of noncompliance during a survey, we 
will impose a CMP for that instance or those individual instances of 
noncompliance. We have defined per instance in Sec.  488.805 as a 
single event of noncompliance identified and corrected during a survey, 
for which the statute authorizes CMS to impose a sanction. While there 
may be a single event which leads to noncompliance, there can also be 
more than one instance of noncompliance identified and more than one 
CMP imposed during a survey. For penalties imposed per instance of 
noncompliance, we are adding penalties from $1,000 to $10,000 per 
instance. Such penalties would be assessed for one or more singular 
events of condition-level noncompliance that were identified at the 
survey and where the noncompliance was corrected during the onsite 
survey. The total CMP amount cannot exceed $10,000 for each day of 
noncompliance per instance.
    Comments: Commenters were opposed to per day penalties as the 
penalties would lead to a rapid drain on HHA capital. Other commenters 
were opposed to per instance CMPs. Several commenters included examples 
of per episode payment rates and how these payments would be 
insufficient to meet the financial obligations of any CMP imposed 
against the HHA. One commenter seemed to confuse per instance with 
self-reported situations of noncompliance.
    Responses: Civil money penalties were designed to present an 
incentive to correct a deficiency in a short amount of time. As 
indicated previously, we have expanded the lower range of permitted per 
day CMP amounts to enable CMS to better correlate the seriousness of 
noncompliance with the amount of the CMP. The expanded lower end of the 
range may be particularly important if CMS imposes a CMP that begins at 
the lower or middle range and then increases in amount over time the 
longer the noncompliance remains uncorrected. In such a case, prompt 
remedial action by the HHA can limit the total amount of per day CMP 
that accrues. Per instance penalties permit us to focus on individual 
instances of noncompliance without having to track the duration of time 
the HHA remains out of compliance. As we found with SNFs and NFs, prior 
to establishing per instance CMPs it has largely been the case that, 
except where immediate jeopardy has been involved or the provider has 
been found to be a poor performing facility, CMPs had not been imposed 
where facilities have been able to correct deficiencies before a 
predetermined date for the completion of corrections. As a result, we 
believed many facilities had avoided the imposition of CMPs, that were 
otherwise warranted, and subsequent to achieving compliance these same 
facilities failed to maintain substantial compliance (otherwise known 
as ``yo-yo'' compliance). Thus, when the per instance CMP is selected 
for nursing homes, we do not envision a period to correct prior to 
imposition. We believe this will also be the case with HHA enforcement. 
What we mean by an ``instance'' in this regulation is a single 
deficiency identified by the tag number used as a reference on the 
statement of deficiencies. While we consider an instance as a singular 
event of noncompliance, there can be more than one instance of 
noncompliance identified during a survey. For example, during the 
course of a survey, CMS or a state may identify several instances of 
noncompliance, each in distinct regulatory areas. As a general matter, 
we anticipate imposing per instance penalties most frequently in the 
situation where a surveyor identifies a condition-level deficiency 
during the survey and the HHA took sufficient action to correct the 
deficiency during the time of the survey.
    Since the range of possible deficiencies is great and depends upon 
the specific circumstances at a particular time, it will be impossible 
to assign a specific monetary amount for each type of noncompliance 
that could be found. Thus, we believe that each deficiency will fit 
into a range of CMP amounts, which we discuss below.
    We will consider the following factors when determining a CMP 
amount, in addition to those factors that we will consider when 
choosing a type of sanction in Sec.  488.815:
     The size of the agency and its resources.
     The availability of other HHAs within a region, including 
service availability in a given region.
     Accurate and credible resources such as PECOS and Medicare 
cost reports and claims information, that provide information on the 
operations and the resources of the HHA.
     Evidence that the HHA has a built-in, self-regulating 
quality assessment and performance improvement system to provide proper 
care, prevent poor outcomes, control patient injury, enhance quality, 
promote safety, and avoid risks to patients on a sustainable basis that 
indicates the ability to meet the conditions of participation and to 
ensure patient health and safety. When several instances of 
noncompliance would be identified at a survey, more than one per-day or 
per instance CMP could be imposed as long as the total CMP did not 
exceed $10,000 per day. Also, a per-day and a per-instance CMP would 
not be imposed simultaneously for the same deficiency.
    Based on the comments below, we are finalizing this section with 
the modifications noted below.
    Comment: One commenter did not feel that size was an appropriate 
factor to use in determining the type of sanction. The commenter felt 
it discriminated against larger HHAs.
    Response: The size of the HHA can significantly increase the scope 
of the noncompliance and impact a greater number of patients. In 
addition, we believe that the motivating force of the sanction may vary 
with the scope and resources of the HHA. Therefore we have retained 
size as a consideration.
    Comment: One commenter felt that the availability of other agencies 
within a region would be used to discriminate against HHAs when there 
were many agencies in the area as opposed to not using the sanction 
when there was a shortage of HHAs.
    Response: We appreciate the comment and we have removed this

[[Page 67151]]

factor from the list of factors to be considered.
    Comment: One commenter did not think that accurate resources and 
data was a valid factor.
    Response: We appreciate the comment. However, this information may 
give CMS valuable information as it relates to operations, for example, 
cost allocations. Therefore, we are not accepting this recommendation.
    Comments: One commenter was opposed to use of the factor of the 
internal Quality Assessment/Performance Improvement program (QAPI).
    Response: We wish to ensure that problems in HHAs are addressed 
promptly and that program improvements are sustained over time. Our 
experience with other types of providers has shown that an effectively-
functioning QAPI system assists providers to restore compliance more 
quickly and to sustain compliance longer. Many organ transplant 
hospitals, for example, have a recent and exemplary history of 
implementing QAPI in a manner that is demonstrably saving lives. While 
this is not currently a specific requirement within the conditions of 
participation for HHAs, we believe that HHAs that have an effective 
QAPI program are more likely to improve the quality of their care and 
outcomes and to sustain those improvements over time. We wish to retain 
CMS discretion to accord an HHA that has implemented an effectively-
functioning QAPI program with some recognition of the value in having 
done so on its own volition. Our experience with QAPI in other programs 
points to the positive association between QAPI, quality of care, and 
outcomes. For organ transplant programs, for example, we examined the 
relationship between findings of noncompliance for outcomes and 
findings of noncompliance in QAPI for the first 334 transplant programs 
surveyed under the new regulation that became effective on June 26, 
2007. Of the transplant programs that were cited for having 1 year 
patient deaths or graft failures that exceeded the expected number, 19 
percent were also cited for noncompliance with QAPI requirements, 
compared to only 8 percent for programs that were not cited for 
outcomes. In other words, organ transplant programs that did not have 
an effectively-functioning QAPI program were 2.4 times more likely to 
have patient outcomes that exceed the tolerance limits of the 
regulation.
    By explicit inclusion of this factor in our consideration of CMPs, 
we recognize that QAPI promotes the same goals as alternative 
sanctions. Therefore, we have retained QAPI as a factor in our 
considerations.
    Comment: Several commenters did not feel that more than one penalty 
should be imposed at one time.
    Response: The statute does not prohibit the imposition of more than 
one alternative sanction and there may be instances where a combination 
of sanctions may be appropriate, such as the appointment of a temporary 
manager and a directed plan of correction.
    At Sec.  488.845(b)(2), we have provided CMS the discretion to 
increase or reduce the amount of the CMP during the period of 
noncompliance depending on whether the level of noncompliance had 
changed at the time of a revisit survey. We could increase a CMP in 
increments based upon an HHA's inability or failure to correct 
deficiencies, the presence of a system wide failure in the provision of 
quality care or a determination of immediate jeopardy with potential 
for harm. We may also decrease a CMP in increments to the extent that 
SAs find, pursuant to a revisit, that substantial and sustainable 
improvements have been implemented even though the HHA is not yet in 
full compliance if sufficient efforts have been made to address the 
causes of deficiencies and sustain improvement. If an HHA resolved the 
immediate jeopardy situation, but not the condition-level deficiencies, 
we may reduce those penalties from the upper range to a lower range 
imposed in non-immediate jeopardy situations.
    Comments: Several comments were received related to the timing of a 
revisit survey, which is required to determine correction of condition-
level deficiencies and how it would affect the length of time a per day 
CMP accrues.
    Response: We appreciate the comments and will develop guidance in 
the SOM to direct the SAs to schedule these revisits in a timely 
manner.
    Section 1891(f)(2)(A)(i) of the Act specifies that the sanctions 
shall include a CMP in an amount not to exceed $10,000 for each day of 
noncompliance. Therefore, we added at Sec.  488.845(b)(2)(iii) that no 
CMP assessment exceed $10,000 per day of noncompliance. Because the Act 
directs us to establish the amounts of fines and the levels of 
severity, we are establishing a three-tier system with subcategories 
which will establish the amount of a CMP. In Sec.  488.845 (b)(3), 
(b)(4), and (b)(5), we have added the following ranges of civil money 
penalty amounts based on three levels of seriousness--upper, middle and 
lower:
     Upper range--For a deficiency that poses immediate 
jeopardy to patient health and safety, we would assess a penalty within 
the range of $8,500 to $10,000 per day of condition-level 
noncompliance.
    Specifically, based on the comments and our responses below, we 
will impose a CMP at $10,000 per day for a deficiency or deficiencies 
that posed an immediate jeopardy to patients and that resulted in 
actual harm. For a deficiency or deficiencies that pose an immediate 
jeopardy situation and result in a potential for harm (but no actual 
harm), we will impose a CMP of $9,000 per day. For an isolated employee 
incident of noncompliance in violation of established HHA policy, we 
will impose a CMP of $8,500 per day.
     Middle range--For repeat and/or a condition-level 
deficiency that did not pose immediate jeopardy, but is directly 
related to poor quality patient care outcomes, we would assess a 
penalty within the range of $1,500 to $8,500 per day of noncompliance 
with the CoPs.
     Lower range--For repeated and/or condition-level 
deficiencies that did not constitute immediate jeopardy and were 
deficiencies in structures or processes that did not directly relate to 
poor quality patient care, we would assess a penalty within the range 
of $500 to $4,000 per day of noncompliance.
    Comments: As indicated previously, several commenters felt that the 
CMP amounts are excessive and they did not agree with the manner in 
which CMS structured the amount categories. Several commenters 
disagreed with the way CMS categorized each of the COPs within the CMP 
list of possible CMPs. One commenter stated that therapy service (Sec.  
484.32) was omitted from the grid.
    Response: The specified grouping of CoPs noted in the proposed rule 
is consistent with the groups of high risk CoPs currently used in the 
HHA Survey protocols. We regret the inadvertent omission of therapy 
services and will add this CoP to the guidance text with the grouping 
that includes nursing and other clinical services. Regarding the 
proposed ranges of CMPs, we have removed the specific sub-categories 
within the middle and lower ranges at Sec.  488.845(b)(4)(i) and (ii) 
and Sec.  488.845(b)(5)(i) and (ii), as we felt that this level of 
specificity would be more appropriate in subsequent interpretive 
guidance. We added instead specific amounts within the upper range to 
provide more guidance for imposing the CMP amount within that range. We 
provide that a $10,000 per day CMP will be imposed for noncompliance 
that is immediate jeopardy and that results in actual harm. For 
noncompliance that is immediate jeopardy but is not actual

[[Page 67152]]

harm, but is a potential for harm, we will impose $9,000 per day in 
CMPs. Finally, for noncompliance that is immediate jeopardy and is an 
isolated incident that is in violation of established HHA policies, we 
will impose a CMP of $8,500 per day. We will develop interpretive 
guidance which will provide flexibility within the ranges for the 
specific penalty to be imposed to better correlate the consequences 
with the seriousness of the noncompliance.
    When we impose a CMP, we will send the HHA written notification of 
the intent to impose it, including the amount of the CMP being imposed 
and the proposed effective date of the sanction. After a final agency 
determination is made, a final notice will be sent with the final 
amount due and the rate of interest to be charged on unpaid balances 
(as published in the Federal Register). The notice will include 
reference to the nature of the noncompliance; the statutory basis for 
the penalty; the amount of the penalty per day/instance of 
noncompliance; the criteria we considered when determining the amount 
per-day or per-instance; the date on which the penalty will begin to 
accrue; when the penalty would stop accruing; when the penalty would be 
collected; and instructions for responding to the notice, including a 
statement of the HHA's appeal rights, including an opportunity to 
participate in the IDR process and, as discussed below, the right to a 
hearing, and the implications of waiving a hearing. In accordance with 
our existing regulations at Sec.  498.22(b)(3) and Sec.  498.40 and at 
Sec.  488.845(c)(2), once a notice of intent to impose the CMP had been 
sent to the HHA, the HHA will have 60 days from the receipt of the 
notice to request an administrative hearing under Sec.  498.40 or waive 
its right to an administrative hearing in writing and receive a 35 
percent reduction in the CMP amount. This reduction will be offered to 
encourage HHAs to address deficiencies more expeditiously and to save 
the cost of hearings and appeals. Upon such reduction, the CMP will be 
due within 15 days of the receipt of the HHA's written request for 
waiver. The HHA could waive its right to a hearing in writing within 60 
calendar days from the date of the notice initial determination.
    The per day CMP would begin to accrue on the day of the survey that 
identified the HHA noncompliance, and would end on the date of 
correction of all deficiencies, or the date of termination. We are 
adding at 488.845(d) that in immediate jeopardy cases, if the immediate 
jeopardy was not removed, the CMP will continue to accrue until we 
terminate the provider agreement (within 23 calendar days after the 
last day of the survey which first identified the immediate jeopardy). 
Under 488.845(d)(4), if immediate jeopardy did not exist, the CMP will 
continue to accrue until the HHA achieved substantial compliance or 
until we terminated the provider agreement. Additionally, we are adding 
language at Sec.  488.845(d)(2) to specify that the per-day and per-
instance CMP will not be imposed simultaneously in conjunction with a 
survey. In no instance will the period of noncompliance be allowed to 
extend beyond 6 months from the last day of the original survey that 
determined noncompliance. If the HHA has not achieved compliance with 
the CoPs within those 6 months, we would terminate the HHA. The accrual 
of the CMP stops on the day the HHA provider agreement is terminated or 
the HHA achieves substantial compliance, whichever is earlier. Total 
CMP amounts will be computed after a final agency determination; that 
is, after: (1) Compliance was verified; (2) the HHA provider agreement 
was involuntarily terminated; or (3) administrative remedies had been 
exhausted. If the HHA had achieved substantial compliance, we would 
send a separate notice to the HHA describing the amount of penalty per 
day, the number of days the penalty accrued, the total amount due, the 
due date of the penalty, and the interest rate for any unpaid balance. 
For a per-instance CMP, we would include the amount of the penalty, the 
total amount due, the due date of the penalty, and the rate of interest 
for any unpaid balance. In the case of the HHA that was terminated, we 
would send the HHA any CMP notice of final amount or a due and payable 
notice information in the termination notice, as described in Sec.  
489.53(d).
    In Sec.  488.845(f), we have added that a CMP will become due and 
payable 15 days from the notice of final administrative decision, which 
is after:
     The time to appeal had expired without the HHA appealing 
its initial determination;
     CMS received a request from the HHA waiving its right to 
appeal the initial determination;
     A final decision of an Administrative Law Judge and/or DAB 
Appellate Board upheld CMS's determinations;
     After an HHA achieves substantial compliance; or
     The HHA was terminated from the program and no appeal 
request was received.
    A request for hearing will not delay the imposition of the CMP, but 
will only affect the collection schedule of any final amounts due to 
CMP. If an HHA timely waived its right to a hearing under Sec.  
488.845(c)(2)(ii), we will reduce the final CMP amount by 35 percent. 
This reduction would be reflected once the CMP stops accruing: when the 
HHA achieved compliance, or the effective date of the termination.
    The final CMP receivable amount will be determined when the per-day 
CMP accrual period ends (either when the HHA achieved compliance or was 
terminated).
    Within 10 days of receipt of the notice of the imposition of a 
penalty, the HHA could request an IDR. Within 60 days of receipt of the 
notice of imposition of a penalty, the HHA could either submit a 
written request to waive its appeal and receive a 35 percent reduction 
on the final CMP amount or it could file a request directly to the 
Departmental Appeals Board in the Office of the Secretary, Department 
of Health and Human Services with a copy to the state and CMS. In 
accordance with Sec.  498.40(b), the HHA's appeal request will identify 
the specific issues of contention, the findings of fact and conclusions 
of the law with which the agency disagreed, and the specific bases for 
contending that the survey findings and determinations were invalid. A 
hearing will be completed before any penalty was collected. However, 
sanctions will continue regardless of the timing of any appeals 
proceedings if the HHA had not met the CoPs. Requesting an appeal will 
not delay or end the imposition of a sanction. A CMP will begin to 
accrue on the date of the survey which identified the noncompliance. 
These include penalties imposed on a per day basis, as well as 
penalties imposed per instance of noncompliance.
    Comment: Several commenters requested clarification on what day the 
penalty would begin to accrue.
    Response: We appreciate the requests for clarification. A CMP will 
begin to accrue on the last day of the survey and would end on the day 
compliance was attained or the HHA was terminated.
(1) Offsets
    To maintain consistency in recovering a CMP among other types of 
providers who are subject to a CMP, we are adding that the amount of 
any penalty, when determined, could be deducted (offset) from any sum 
CMS or the State Medicaid Agency owed to the HHA. Interest would be 
assessed on the

[[Page 67153]]

unpaid balance of the penalty beginning on the due date. The rate of 
interest assessed on any unpaid balance will be based on the Medicare 
interest rate published in the Federal Register, as specified in Sec.  
405.378(d). We will recover a CMP as set forth in section 1128A (f) of 
the Act. Those CMP receipts not recovered due to HHA failure to pay or 
inadequate funds for offset will be collected through the Debt 
Collection Improvement Act of 1996 which requires all debt owed to any 
federal agency that is more than 180 days delinquent to be transferred 
to the Department of the Treasury for debt collection services.
    If payment was not received by the established due date, we will 
initiate action to collect the CMP through offset of monies owed or 
owing to the HHA. To initiate such an offset, we will instruct the 
appropriate Medicare Administrative Contractors/Fiscal Intermediaries 
and, when applicable, the State Medicaid Agencies to deduct unpaid CMP 
balances from any money owed to the agency.
    We received no comments on this section of the proposed regulation 
and are finalizing as written.
(2) Disbursement of Recovered CMP Funds
    Under 488.845(g)(1), we proposed to divide the CMP amounts 
recovered and any corresponding interest between the Medicare and 
Medicaid programs, based on a proportion that is commensurate with the 
comparative federal expenditures under Titles XVIII and XIX of the Act, 
using an average of years 2007 to 2009 based on Medicaid Statistical 
Information System (MSIS) and HHA Prospective Payment System (PPS) 
claims. Based on the proportions of HHA claims payments attributed to 
Medicare and Medicaid, respectively, for the FY 2007-2009 period, we 
proposed that approximately 63 percent of the CMP amounts recovered 
would be deposited as miscellaneous receipts to the U.S. Department of 
the Treasury and approximately 37 percent would be returned to the 
State Medicaid Agency to improve the quality of care for those who need 
home-based care. We also proposed that, beginning 1 year after these 
rules are finalized and become effective, these proportions would be 
updated annually based on the most recent 3 year period for which we 
determine that the Medicare and Medicaid expenditure data were 
essentially complete.
    Comments: Several comments we received indicated that they were 
opposed to the states sharing in the revenues from CMPs. Specifically 
the commenters indicated it would provide an incentive to surveyors and 
state agencies to impose fines so that the state agency would retain 
the funds for survey and certification activities.
    Response: Under section 1128A(f) of the Act, collected CMP amounts 
are returned both to the State Medicaid Agency and to the US Treasury, 
as appropriate. Also, under Sec.  1817(k)(3)(C)(ii) a portion of 
collected CMP funds may be used by CMS in anti-fraud functions. The 
amounts are disbursed in accordance with Sec.  488.845(g). We disagree 
with the commenters that states would have an incentive to recommend 
CMP remedies in order to gain revenue. We would make the enforcement 
determination to impose a CMP remedy based on the survey findings. 
Additionally, we specifically prohibit in this rule the use of 
collected CMP amounts for Survey and Certification operations or the 
State Medicaid match.
(3) Costs of Home Health Surveys
    We proposed to amend Sec.  431.610(g)--Relations with standard-
setting and survey agencies--to require that Medicaid State Plans 
explicitly include Medicaid's appropriate contribution to the cost of 
home health surveys. We proposed to add a reference to HHAs, along with 
NFs and ICFs/IIDs at Sec.  431.610(g). We estimated that the 
appropriate national Medicaid share of total Medicare and Medicaid HHA 
survey costs is approximately 37 percent of the combined Medicare/
Medicaid cost of surveys for dually-certified programs, based on the 
same cost allocation methodology we proposed to use for the 
disbursement to states of CMP collections, as described above. While 
this is a national estimate, the Medicaid share of the combined 
Medicare and Medicaid expense for each individual state could instead 
be based on the state-specific dollar amount paid by Medicaid for home 
health services provided by HHAs in the state compared to the combined 
Medicare/Medicaid total for the most recent 3-year fiscal period, prior 
to the year in question, for which CMS determines that the relevant 
data are essentially complete.
    Comments: Two commenters stated that they did not think the states 
should share in the costs of performing surveys. One stated that these 
costs to the states would encourage surveyors to cite more condition-
level deficiencies and not all states have voluntarily chosen to 
require Medicare HHA participation. One commenter stated that in many 
cases the states are already paying the survey costs for those agencies 
that are licensed but not Medicare certified.
    Response: Surveys are required for determining a provider's or 
supplier's compliance with program participation requirements and the 
HHA surveys benefit both Medicare and Medicaid programs where the HHAs 
seek such dual certification. Thus, in accordance with OMB Circular A-
87, the costs for surveys of HHAs that are certified for both Medicare 
and Medicaid should be shared between Medicare and Medicaid. However, 
to provide more time for dialogue with states and for any necessary 
adjustments to State Medicaid Plans, we are currently removing the 
proposed rule provision at Sec.  431.610(g) in this final rule.
    With regard to the concern that surveyors might be incentivized to 
cite more condition-level deficiencies and levy CMPs, as we have 
indicated previously, individual surveyors will not make the final 
decision as to whether a sanction may be imposed. The final decisions 
as to sanctions under Medicare are made by us. Finally, with regard to 
the comment that states are already paying the survey costs for those 
HHAs that are licensed, but not Medicare-certified, we appreciate that 
such payments are being made. We expect that states will continue to 
pay for the survey costs of unique state licensure requirements. Such 
expectations were not intended to be changed by the proposed rule.
k. Directed Plan of Correction Sec.  488.850
    We proposed in Sec.  488.850 to include a directed plan of 
correction as an available sanction. This sanction is a part of the 
current nursing home alternative sanction procedures and has been an 
effective tool to encourage correction of deficient practices. 
Specifically, we may impose a directed plan of correction on an HHA 
which is out of compliance with the conditions of participation. A 
directed plan of correction sanction will require the HHA to take 
specific actions in order to bring the HHA back into compliance and 
correct the deficient practice(s) if the HHA failed to submit an 
acceptable plan of correction. As indicated in Sec.  488.850(b)(2) an 
HHA's directed plan of correction will have to be developed by us or by 
the temporary manager, with our approval. The directed plan of 
correction will set forth the outcomes to be achieved, the corrective 
action necessary to achieve these outcomes, and the specific date the 
HHA will be expected to achieve such outcomes. For example, a directed 
plan of correction for a deficiency finding involving poor drug regimen 
review will likely indicate

[[Page 67154]]

that the HHA would be required to: (1) Develop policies and procedures 
for assessing each patient and before accepting any new admissions; (2) 
assess every patient's drug regimen according to the regulations at 
Sec.  484.55(c); and (3) train staff in correct policies and procedures 
and implement them. The HHA will be responsible for achieving 
compliance. If the HHA failed to achieve compliance within the 
timeframes specified in the directed plan of correction, we will impose 
one or more additional alternative sanctions until the HHA achieved 
compliance or was terminated from the Medicare program. Before imposing 
this sanction, we will provide appropriate notice to the HHA of this 
sanction under Sec.  488.810(f).
    Comments: One commenter felt that the development of the plan of 
correction should be solely the responsibility of the HHAs Board of 
Directors. Another commenter felt this sanction was not needed since 
the plan of correction was already required to be approved by the state 
agency.
    Response: We appreciate the comments received. Imposition of this 
sanction will occur when, based upon the facts of the finding, a 
specific corrective action will be required by the SA or CMS in order 
for the agency to regain compliance. The SA or CMS may also impose this 
sanction when the HHA fails to submit an acceptable plan of correction.
l. Directed In-Service Training Sec.  488.855
    We proposed in Sec.  488.855 the requirements for conducting 
directed in-service training for HHAs with deficiencies. We have found 
that compliance problems are frequently a result of a lack of knowledge 
on the part of the health care provider relative to advances in health 
care technology and best practices for favorable patient outcomes, such 
as advances in infection control and reducing pressure ulcers. In Sec.  
488.855(a) directed in-service training would be imposed where staff 
performance resulted in noncompliance and it is determined that a 
directed in-service training program would correct this deficient 
practice through retraining the staff in the use of clinically and 
professionally sound methods to produce quality outcomes. Directed in-
service training could be imposed alone or in addition to other 
alternative sanctions.
    At Sec.  488.855(a)(3), HHAs will be required to use in-service 
programs conducted by instructors with an in-depth knowledge of the 
area(s) that would require specific training, so that positive changes 
would be achieved and maintained. HHAs will be required to participate 
in programs developed by well-established centers of health services 
education and training. These centers include, but are not limited to, 
schools of medicine or nursing, area health education centers, and 
centers for aging. We will only recommend possible training locations 
to an HHA and not require that the HHA utilize a specific school/
center/provider. The HHA itself will pay for the directed in-service 
training for its staff. The ultimate evaluation of the usefulness of 
the training program would be in the demonstrated competencies of the 
HHA's staff in achieving the desired patient care outcomes after 
completion of the training program. In Sec.  488.855(b), if the HHA did 
not achieve compliance after such training, we could impose one or more 
additional sanctions.
    Comments: One commenter objected to this sanction on the grounds 
that it felt the RNs at their agency were already educated at the BS 
level and that the expense of the sanction to require consultation from 
the university level would be prohibitive.
    Response: We appreciate the comment and feel the commenter may have 
misunderstood the context of the proposed language. Directed in-service 
will need to be at a high level of expertise, not necessarily at the 
university level. We included this requirement to require additional 
professional support/training for current HHA staff. Since the 
usefulness of the training will be demonstrated by the improved 
competency of the HHA staff, we encourage the HHA to find and evaluate 
the directed-in service programs that will best suit the HHA's needs.
    Comment: One commenter feels that CMS should have a greater level 
of commitment to provide training on CoPs with the industry.
    Response: We make every effort to include the HHA industry in their 
educational efforts. When webinars are utilized for surveyor training, 
these webinars are available to the industry for their use. 
Nonetheless, we appreciate the comment and will consider additional 
means to reach out to HHAs.
m. Continuation of Payments to HHAs With Deficiencies Sec.  488.860
    We proposed in Sec.  488.860 provisions concerning the continuation 
of Medicare payments to HHAs with condition-level deficiencies. Section 
1891(e)(4) of the Act provides that the Secretary may continue Medicare 
payments to HHAs not in compliance with the conditions of participation 
for up to six months if:
     The survey agency finds it more appropriate to impose 
alternative sanctions to assure compliance with program requirements 
than to terminate the HHA from the Medicare program, and
     The HHA submits a plan of correction to the Secretary, and 
to the office the Secretary has delegated the authority to approve the 
plan of correction and the plan has been approved; and
     The HHA agrees to repay the federal government the 
payments under this arrangement should the HHA fail to take the 
corrective action as set forth in its approved plan of correction by 
the time of the revisit.
    We proposed these three criteria in Sec.  488.860(a). If any of 
these three requirements set forth in the Act and in our final rule are 
not met, an HHA with condition-level deficiencies will not receive any 
federal payments from the time that deficiencies were initially 
identified. We will also terminate the agreement before the end of the 
6-month correction period, which begins on the last day of the survey, 
in accordance with Sec.  488.865 if the requirements at Sec.  
488.860(a)(1) are not met. If any sanctions are also imposed, they will 
stop accruing or end when the HHA achieves compliance with all 
requirements, or when the HHA's provider agreement is terminated, 
whichever is earlier.
    Finally, if an HHA provides an acceptable plan of correction but 
cannot achieve compliance with the CoPs within 6 months of the last day 
of the survey, we have proposed in Sec.  488.830(d) that we will 
terminate the provider agreement.
    Comments: One commenter wanted greater clarification of this 
section. They indicated that this sanction seemed to make the 
imposition of alternative sanctions mandatory, unless the HHA meets the 
criteria set forth in this section.
    Response: Alternative sanctions are not mandatory, but may be 
imposed if we believe it is a more appropriate action to prompt and to 
bring the HHA into compliance. The significant benefit of most 
alternative sanctions is that payment may continue to the HHA while the 
sanction is in place. Without the choice of alternative sanctions, the 
HHA is subject only to termination, either within 90 days or 
immediately in the case of immediate jeopardy. Section 1891(e)(4)(c) of 
the Act provides that if alternative sanctions are imposed, and the HHA 
submits an acceptable plan of correction, then the HHA agrees to repay 
the payments received if the HHA ultimately fails to take corrective 
action

[[Page 67155]]

in accordance with the approved plan of correction and its established 
timetables.
n. Termination of Provider Agreement (Sec.  488.865)
    We proposed in Sec.  488.865(a), to address the termination of an 
HHA's Medicare provider agreement, as well as the effect of such 
termination. Termination of the provider agreement would end all 
payments to the HHA, including any payments that were continued under 
Sec.  488.860. Termination will also end any alternative sanctions 
imposed against the HHA, regardless of any proposed timeframes for the 
sanction(s) originally specified. In Sec.  488.865(b) we will terminate 
the provider agreement if (1) the HHA failed to correct condition-level 
deficiencies (that are not immediate jeopardy) within 6 months if the 
HHA is not in compliance with the conditions of participation; (2) the 
HHA failed to submit an acceptable plan of correction for approval by 
us under Sec.  488.810; (3) the HHA failed to relinquish control to the 
temporary manager, if that sanction is imposed or (4) the HHA failed to 
meet the eligibility criteria for continuation of payments under Sec.  
488.860. If CMS or the SA determined deficiencies existed which posed 
immediate jeopardy to patient health and safety, we will terminate the 
provider agreement in accordance with Sec.  488.825. The provider could 
also voluntarily terminate its agreement. CMS and the SA will, if 
necessary, work with all Medicare-approved HHAs that were terminated to 
ensure the safe discharge and orderly transfer of all patients to 
another Medicare-approved HHA.
    The procedures for terminating a provider agreement are set forth 
in Sec.  489.53 and we are continuing to use those procedures for an 
enforcement action terminating an HHA at Sec.  488.865(d). These 
procedures form the basis for termination by CMS and specify a 
provider's notice and appeal rights. Under Sec.  488.865(e), we added 
that the HHA could appeal the termination of its provider agreement in 
accordance with 42 CFR part 498.
    Comments: Several commenters alleged that CMS would not be 
affording due process to the HHA with the implementation of sanctions, 
including CMPs, before the HHA has been allowed full access to appeal 
and the appeal is resolved. One commenter stated that the HHA should be 
made ``whole'' in the event that the HHA prevails in the appeal.
    Response: We disagree that the HHA is denied due process because 
the sanctions are applied prior to the completion of the appeals 
process, primarily because we believe the intent of the Act is to 
impose remedies as soon as possible in order to protect the patients. 
We believe that post-sanction hearings are entirely compatible with due 
process. Courts that have addressed this issue have concluded that, 
because the provider has numerous opportunities to prevent mistakes 
from occurring and to present its side of the story both during the 
survey process, at the exit interview, and by submitting written 
statements and a plan of correction, due process is satisfied by the 
availability of post-sanction hearings. See, for example, Caton Ridge 
Nursing Home v. Califano, 596 F.2d 608 (4th Cir. 1979), Green v. 
Cashman, 605 F.2d 945 (6th Cir. 1979), Northlake Community Hospital v. 
United States, 654 F.2d 1234 (7th Cir. 1981), Geriatrics, Inc. v. 
Harris, 640 F.2d 262 (10th Cir. 1981), cert. denied454 U.S. 832, 102 
S.Ct. 1295, Americana Healthcare Corp. v. Schweiker, 688 F.2d 1072, 
1082-83 (7th Cir. 1982), cert. denied, 459 U.S. 1201 (1983), Cathedral 
Rock of North College Hill, Inc. v. Shalala, 223 F.3d 354, 364-65 (6th 
Cir. 2000). Although the Supreme Court has not directly decided the 
issue of due process requirements when a provider is terminated, the 
Court has decided in O'Bannon v. Town Court, 447 U.S. 773, 100 S.Ct. 
2467 (1980), that nursing home residents are not entitled to a pre-
termination hearing. The Court reached this result notwithstanding the 
fact that residents were the intended beneficiaries of the provider 
agreement through their entitlement to high quality care. Moreover, 
consistent with the balancing of interests formula first enunciated by 
the Supreme Court in Mathews v. Eldridge, 434 U.S. 319 (1976), we have 
concluded, first and foremost, that the private interest that HHAs have 
in their continued participation in the Medicare and Medicaid programs 
must give way to the Government's interest in protecting the health and 
safety of the patient population. Additionally, in light of the 
opportunities available to providers to question the accuracy of survey 
findings at various points during the survey process (including during 
the survey, exit conference, and through informal meetings with state 
or federal officials), we believe that the chances for an erroneous 
deprivation are quite small when compared to the enormous delay in the 
correction of noncompliance that could occur were hearings to be 
routinely held prior to the institution of remedies. The use of an 
informal dispute resolution process, as we discussed earlier in this 
preamble, should serve to reduce even further the chances of an 
erroneous deprivation.
    The statutory provisions clearly reflect the desire expressed in 
the enactment's legislative history that remedies be applied swiftly 
once deficiencies are identified. Specifically, section 1891(f)(3) of 
the Act requires that the Secretary develop criteria detailing the 
manner in which remedies are to be imposed and that they be designed so 
as to minimize the time between the identification of violations and 
final imposition of the remedies. We believe it would be incompatible 
with these pronouncements were we to devise an appeal scheme that would 
provide for hearings before the imposition of remedies. Moreover, we 
conclude that this is the case regardless of whether the HHA's 
deficiencies pose immediate jeopardy to resident health or safety since 
the Act makes no distinction on this basis and because the delay in 
imposing remedies once noncompliance has been identified could be 
considerable.
    Although not required by law, we also added a provision for 
Informal Dispute Resolution so as to offer an additional safeguard that 
enables the HHA to provide information to dispute any condition-level 
finding that prompts a sanction. We are also adding an exception to the 
general notice provision and amending Sec.  489.53(a) by adding a new 
paragraph (17) establishing that when an HHA failed to correct any 
deficiency (either standard-level or condition-level), we could 
terminate its provider agreement.
    The notification requirements in Sec.  489.53(d)(1) requires that 
we give notice to any provider and the public at least 15 days before 
the effective date of a termination of a provider agreement. We added a 
new clause in Sec.  489.53(d)(2)(iii) which will provide for a timing 
exception to this general notice rule. Specifically, we added that for 
HHA terminations based on deficiencies that posed immediate jeopardy to 
patient health and safety, we will give notice to the HHA of such 
termination at least 2 days before the effective date of the 
termination. As currently provided in Sec.  489.53(d)(4), we will give 
concurrent notice to the public when such termination occurred.
    Comment: One commenter wanted assurance of a smooth transition of 
patients if an HHA is terminated.
    Response: It is current CMS policy for the SA and CMS Regional 
Office, if applicable, to assist with the safe and timely transfer of 
HHA patients in the event of HHA termination. Current policy requires 
SA and the CMS

[[Page 67156]]

Regional Offices to assist with the safe transition of patients to new 
HHAs, if needed.

C. Provider Agreements and Supplier Approval

    We are amending Sec.  498.3, Scope and applicability, by revising 
paragraphs (b)(13), (b)(14) introductory text, (b)(14)(i), and (d)(10) 
to include specific reference to HHAs and to cross-refer to our 
regulation at Sec.  488.740 concerning appeals.
    We did not receive any comments in response to our proposals in 
this section. Therefore, we are finalizing these provisions as 
proposed.

D. Solicitation of Comments

    Presently, we are required only to give notice of an HHA 
termination to the public 15 days before the effective date of an 
involuntary termination. We have solicited comments related to 
additional public notices. We considered that when a suspension of 
payments for new admissions and new payment episodes or a civil money 
penalty is imposed, we could, at our discretion, issue a public notice. 
The issuance of additional publicly-reported notices when certain 
sanctions are imposed would offer information to patients who were 
choosing a provider of home health services, as well as to current 
recipients of home health care. A home health patient does not 
necessarily know when a survey has been conducted at an HHA and if 
deficiencies had been determined or any sanctions imposed unless a 
surveyor visited the patient during a survey or the patient requested a 
copy of a Statement of Deficiencies from the SA or HHA. We also 
solicited comments on the definition of a ``per instance'' of 
noncompliance when imposing a CMP sanction.
    Comments: We received many comments opposed to any public notice 
other than for termination. Several commenters thought that public 
notice would be posted on Home Care Compare. Several comments indicated 
that a public notice would damage an agency's reputation.
    Response: We appreciate the comments received and want to clarify 
that by public notice we meant a notice published in the local 
newspaper, similar to the notices published for termination. We agree 
with these comments and we will not include in the regulation a 
requirement for public notice when alternative sanctions are imposed.

VI. Collection of Information Requirements

    While this final rule contains information collection requirements, 
this rule does not revise any of the information collection 
requirements or burden estimates with regard to: Sec.  424.22(a) (OCN 
0938-1083), Sec.  488.710 (OCN 0938-0355; CMS-1515 and CMS-1572), and 
Sec.  488.810(e) (OCN 0938-0391; CMS-2567). Nor does this final rule 
revise any of the information collection requirements or burden 
estimates pertaining to OASIS as discussed in preamble section III.C.3. 
and approved under OCN 0938-0760 or Home Health Care CAHPS as discussed 
in the same preamble section but approved under OCN 0938-1066. All of 
the requirements and burden estimates associated with these collections 
are currently approved by OMB and are not subject to additional OMB 
review under the authority of the Paperwork Reduction Act of 1995 (44 
U.S.C. 3501 et seq.).
    In Sec.  488.710, for each HHA the SA must (existing requirement) 
conduct standard surveys according to their agreements with CMS under 
sections 1864 and 1891(c)(1) of the Act. CMS believes that the 
additional survey agency administrative activity required to impose 
alternative sanctions created by this rule will not generate a 
significant amount of additional paperwork burden at the state survey 
agency or at the HHA level. Imposing sanctions may require that states 
engage in some additional communication and carry out follow-up 
surveys, and CMS Regional Offices may need additional time for 
determining, imposing and tracking sanctions. In estimating appeal 
volume and costs, we note that in 2010 only 260 providers out of 11,821 
had condition level-deficiencies, and only seven of these involved 
immediate jeopardy situations.
    SAs survey HHAs to determine compliance with the CoPs under part 
484 and follow the guidance contained in the State Operations Manual, 
S&C Memoranda, and Interpretive Guidelines. This rule codifies some 
existing CMS policies and establishes new requirements that are 
consistent with OBRA `87 mandates as discussed in the Background and 
Statutory Authority sections of this preamble. State Surveyor 
recordkeeping requirements already exist in Forms CMS-1515 and CMS-1572 
(OCN 0938-0355) and in CMS-2567 (OCN 0938-0391). CMS anticipates 
enhancing survey protocols and Interpretive Guidelines and providing 
additional S&C Memoranda and Surveyor Training in response to the 
issuance of new regulations, when necessary.
    In Sec.  488.735, state and federal surveyors would be required to 
complete the CMS-sponsored Basic HHA Surveyor Training Course before 
they can serve on a HHA survey team. The CMS Central Office currently 
provides national training to all state surveyors for all of the 
provider types that are surveyed for Medicare and Medicaid. Those 
training courses are funded entirely by the Central Office and there is 
no burden to states since our annual budgets to the states (for the 
performance of survey activities) includes the cost of the salaries and 
the travel for participating in all national training courses, with 
minimal state expense. These training courses are designed to teach the 
surveyors how to conduct the survey process in accordance with the 
applicable regulations and associated Interpretive Guidance. During the 
course of the survey, all of the data collection tools that may be used 
(see the reference to CMS-1515, -1572, and -2567 above) have been 
approved by OMB through the PRA process.
    Section 488.810(e) requires each HHA that has deficiencies 
constituting noncompliance to submit a plan of correction for approval 
by CMS. This is a current requirement for both standard and condition 
level deficiencies, so the burden associated with this requirement that 
is above and beyond the existing effort put forth by the HHA is to 
prepare and submit a plan of correction would be to notify their 
governing body, potentially prepare for IDR or to issue a check for a 
CMP. While there is paperwork burden associated with this plan of 
correction requirement, it is already required and currently approved 
under OCN 0938-0391 (CMS-2567).

Information Collection Requests Exempt From the Paperwork Reduction Act

    In accordance with 5 CFR 1320.4(a)(2) and (c), the following 
information collection activities are exempt from the requirements of 
the Paperwork Reduction Act since they are associated with 
administrative actions: (1) Section 488.745(a) regarding HHA request to 
dispute condition-level survey findings; (2) Sec.  488.810(g) regarding 
appeals; (3) Sec.  488.845(c)(2)(i) regarding the submission of a 
written request for a hearing or waiver of a hearing; (4) Sec.  
488.840(b)(1)(ii) regarding HHA disclosure requirements; (5) Sec.  
488.845(c) regarding hearings; and (6) Sec.  488.855 regarding HHA 
deficiencies and directed in-service training.
    The information collection requirement in Sec.  488.825(c) 
regarding

[[Page 67157]]

the transfer of care is exempt from the requirements of the Paperwork 
Reduction Act since it is associated with an administrative action (5 
CFR 1320.4(a)(2) and (c)) and we estimate fewer than ten provider 
agreements will be terminated annually (5 CFR 1320.3(c)).

Information Collection Requests Regarding the Quality Reporting for 
Hospices

    In section IV of the preamble, we note that section 3004 of the 
Affordable Care Act amends the Act to authorize a quality reporting 
program for hospices. Section 1814(i)(5)(C) of the Act requires that 
each hospice submit data to the Secretary on quality measures specified 
by the Secretary. Such data must be submitted in a form and manner, and 
at a time specified by the Secretary. As added by section 3004(c), new 
section 1814(i)(5)(A)(i) of the Act requires that beginning with FY 
2014 and each subsequent FY, the Secretary shall reduce the market 
basket update by two percentage points for any hospice that does not 
comply with the quality data submission requirements with respect to 
that fiscal year.
    In implementing the Hospice quality reporting program, CMS seeks to 
collect measure-related information with as little burden to the 
providers as possible and which reflects the full spectrum of quality 
performance. Our purpose in collecting this data is to help achieve 
better health care and improve health through the widespread 
dissemination and use of performance information.
    The Hospice Data Submission form intended for data submission by 
January 31, 2013 (for the structural measure related to patient care-
focused QAPI indicators) and for data submission by April 1, 2013 (for 
the NQF 0209 measure related to pain) was approved by OMB on 
September 28, 2012, under OCN 0938-1153. Technically, the form is not 
associated with this rule but is discussed within the preamble to 
provide background information.

VII. Regulatory Impact Analysis

A. Introduction

    We have examined the impact of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any 1 year). This final rule does not reach the economic threshold 
and thus is not considered a major rule. We are not required to prepare 
an analysis for the RFA. However, as a courtesy we are providing the 
public with the impact analysis. In accordance with the provisions of 
Executive Order 12866, this regulation was reviewed by the Office of 
Management and Budget.

B. Statement of Need

    This final rule adheres to the following statutory requirements. 
Section 4603(a) of the BBA mandated the development of a HH PPS for all 
Medicare-covered HH services provided under a plan of care (POC) that 
were paid on a reasonable cost basis by adding section 1895 of the Act, 
entitled ``Prospective Payment For Home Health Services''. Section 
1895(b)(1) of the Act requires the Secretary to establish a HH PPS for 
all costs of HH services paid under Medicare. In addition, section 
1895(b)(3)(A) of the Act requires (1) the computation of a standard 
prospective payment amount include all costs for HH services covered 
and paid for on a reasonable cost basis and that such amounts be 
initially based on the most recent audited cost report data available 
to the Secretary, and (2) the standardized prospective payment amount 
be adjusted to account for the effects of case-mix and wage levels 
among HHAs. Section 1895(b)(3)(B) of the Act addresses the annual 
update to the standard prospective payment amounts by the HH applicable 
percentage increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
case-mix and geographic differences in wage levels. Section 
1895(b)(4)(B) of the Act requires the establishment of appropriate 
case-mix adjustment factors for significant variation in costs among 
different units of services. Lastly, section 1895(b)(4)(C) of the Act 
requires the establishment of wage adjustment factors that reflect the 
relative level of wages, and wage-related costs applicable to HH 
services furnished in a geographic area compared to the applicable 
national average level.
    Section 1895(b)(5) of the Act, as amended by section 3131 of the 
Affordable Care Act, gives the Secretary the option to make changes to 
the payment amount otherwise paid in the case of outliers because of 
unusual variations in the type or amount of medically necessary care. 
Section 1895(b)(3)(B)(v) of the Act requires HHAs to submit data for 
purposes of measuring health care quality, and links the quality data 
submission to the annual applicable percentage increase. Also, section 
3131 of the Affordable Care Act requires that HH services furnished in 
a rural area (as defined in section 1886(d)(2)(D) of the Act) with 
respect to episodes and visits ending on or after April 1, 2010, and 
before January 1, 2016, receive an increase of 3 percent of the payment 
amount otherwise made under section 1895 of the Act.

C. Overall Impact

    The update set forth in this final rule applies to Medicare 
payments under HH PPS in CY 2013. Accordingly, the following analysis 
describes the impact in CY 2013 only. We estimate that the net impact 
of the provisions in this rule is approximately $10 million in CY 2013 
savings. The -$10 million impact reflects the distributional effects of 
an updated wage index ($70 million decrease), the 1.3 percent HH 
payment update ($260 million increase), the revised FDL ratio ($50 
million increase), and the 1.32 percent case-mix adjustment applicable 
to the national standardized 60-day episode rates ($250 million 
decrease). The $10 million in savings is reflected in the first row of 
column 3 of Table 28 as a 0.01 percent decrease in expenditures when 
comparing the current CY 2012 HH PPS to the CY 2013 HH PPS. The RFA 
requires agencies to analyze options for regulatory relief of small 
entities, if a rule has a significant impact on a substantial number of 
small entities. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $7.0 million to $34.5 million in any 1 year.

[[Page 67158]]

For the purposes of the RFA, our updated data show that approximately 
98 percent of HHAs are considered to be small businesses according to 
the Small Business Administration's size standards with total revenues 
of $13.5 million or less in any 1 year. Individuals and states are not 
included in the definition of a small entity. The Secretary has 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities. We define small HHAs as 
either non-proprietary or proprietary with total revenues of $13.5 
million or less in any 1 year. We estimate that approximately 25 
percent of HHAs are classified as non-proprietary. Analysis of Medicare 
claims data reveals a 0.05 percent decrease in estimated payments to 
small HHAs in CY 2013.
    A discussion on the alternatives considered is presented in section 
VII.E. below. The following analysis, with the rest of the preamble, 
constitutes our RFA analysis.
    In this final rule, we stated that our analysis shows that nominal 
case-mix continues to grow under the HH PPS. Specifically, nominal 
case-mix has grown from the 19.03 percent growth identified in our 
analysis for CY 2012 rulemaking to 20.08 percent for this year's 
rulemaking (see further discussion in section III.A.). As such, we 
believe it is appropriate to reduce the HH PPS rates using the 1.32 
percent payment reduction promulgated in the CY 2012 HH PPS Final Rule 
(76 FR 68532) in moving towards more accurate payment for the delivery 
of home health services. Our analysis shows that smaller HHAs are 
impacted more than larger HHAs by the provisions of this rule.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This final rule applies 
to HHAs. Therefore, the Secretary has determined that this final rule 
will not have a significant economic impact on the operations of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2012, that 
threshold is approximately $139 million. This final rule is not 
anticipated to have an effect on state, local, or tribal governments in 
the aggregate, or by the private sector, of $139 million or more.

D. Detailed Economic Analysis

    This final rule sets forth updates to the HH PPS rates contained in 
the CY 2012 HH PPS final rule. The impact analysis of this final rule 
presents the estimated expenditure effects of policy changes finalized 
in this rule. We use the latest data and best analysis available, but 
we do not make adjustments for future changes in such variables as 
number of visits or case-mix.
    This analysis incorporates the latest estimates of growth in 
service use and payments under the Medicare home health benefit, based 
on Medicare claims from 2010. We note that certain events may combine 
to limit the scope or accuracy of our impact analysis, because such an 
analysis is future-oriented and, thus, susceptible to errors resulting 
from other changes in the impact time period assessed. Some examples of 
such possible events are newly-legislated general Medicare program 
funding changes made by the Congress, or changes specifically related 
to HHAs.
    Table 28 represents how HHA revenues are likely to be affected by 
the policy changes finalized in this rule. For this analysis, we used 
linked home health claims and OASIS assessments; the claims represented 
a 100-percent sample of 60-day episodes occurring in CY 2010. The first 
column of Table 28 classifies HHAs according to a number of 
characteristics including provider type, geographic region, and urban 
and rural locations. The second column shows the payment effects of the 
wage index only. The third column shows the payment effects of all the 
policies outlined earlier in this rule. For CY 2013, the average impact 
for all HHAs due to the effects of the wage index is a 0.37 percent 
decrease in payments. The overall impact for all HHAs, in estimated 
total payments from CY 2012 to CY 2013, is a decrease of approximately 
0.01 percent.
    As shown in Table 28, the combined effects of all of the changes 
vary by specific types of providers and by location. In general, 
facility-based, proprietary agencies in rural areas will be impacted 
positively as a result of the provisions in this rule. In addition, 
free-standing, other volunteer/non-profit agencies and facility-based 
volunteer/non-profit agencies in urban areas will be impacted 
positively.
BILLING CODE 4120-01-P

[[Page 67159]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.039

[[Page 67160]]

[GRAPHIC] [TIFF OMITTED] TR08NO12.040

BILLING CODE 4120-01-C

E. Alternatives Considered

    In implementing the case-mix adjustment for CY 2013, along with the 
home health payment update and the updated wage index, the aggregate 
impact will be a net decrease of $10 million in payments to HHAs, 
resulting from a $70 million decrease due to the updated wage index, a 
$260 million increase due to the home health payment update, a $50 
million increase due to the revised FDL ratio, and a $250 million 
decrease from the 1.32 percent case-mix adjustment. In the proposed 
rule, we considered not implementing the 1.32 percent case-mix 
adjustment. However, if we were to not implement the 1.32 case-mix 
adjustment, Medicare would pay an estimated $250 million more to HHAs 
in CY 2013. In the proposed rule, we stated that we believed that not 
implementing a case-mix adjustment, and paying out an additional $250 
million to HHAs when those additional payments are not reflective of 
HHAs treating sicker patients, would not be in line with the HH PPS, 
which is to pay accurately and

[[Page 67161]]

appropriately for the delivery of home health services to Medicare 
beneficiaries.
    Section 1895(b)(3)(B)(iv) of the Act gives CMS the authority to 
implement payment reductions for nominal case-mix growth, changes in 
case-mix that are unrelated to actual changes in patient health status. 
We are committed to monitoring the accuracy of payments to HHAs, which 
includes the measurement of the increase in nominal case-mix, which is 
an increase in case-mix that is not due to patient acuity. As discussed 
in section III.A. of this rule, we have determined that there is a 
20.08 percent nominal case-mix change from 2000 to 2010. For CY 2013, 
we are finalizing a 1.32 percent payment reduction to the national 
standardized 60-day episode rates as promulgated in the CY 2012 HH PPS 
final rule (76 FR 68532).
    We believe that the alternative of not implementing a case-mix 
adjustment to the payment system in CY 2013 to account for the increase 
in case-mix that is not real would be detrimental to the integrity of 
the PPS. As discussed in section III.A. of this rule, because nominal 
case-mix continues to grow as we update our analysis with more current 
data and thus to date we have not accounted for all the increase in 
nominal case-mix growth, we believe it is appropriate to reduce HH PPS 
rates now, thereby paying more accurately for the delivery of home 
health services under the Medicare home health benefit. The other 
reduction to HH PPS payments, a 1.0 percentage point reduction to the 
CY 2013 home health market basket update, is discussed in this rule and 
is not discretionary as it is a requirement in section 
1895(b)(3)(B)(vi) of the Act (as amended by the Affordable Care Act).

F. Survey and Enforcement Requirements for Home Health Agencies

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$7.0 million to $34.5 million in any 1 year. Individuals and states are 
not included in the definition of a small entity. We are not preparing 
an analysis for the RFA because we have determined, and the Secretary 
certifies, that this regulation will not have a significant economic 
impact on a substantial number of small entities. In 2010, out of a 
total of 11,814 HHAs enrolled in the Medicare program, only 260 HHA 
providers had the potential to be sanctioned based on noncompliance 
with one or more CoPs. This was approximately 2.2 percent of the HHAs 
(small entities affected) which is less than 5 percent of total HHAs 
surveyed.
    We believe the benefit will be in assuring public health and 
safety. We believe this final rule will have a minor impact on HHAs and 
SAs. This minor rule determination was made by examining the following 
survey data for calendar year (CY) 2010 in the CMS Providing Data 
Quickly (PDQ) System: Survey Activity Report, the Citation Frequency 
Report, the Condition-Level Deficiencies Report and the Active Provider 
Count Report(s).
    Our data below reflects the probability of low impact for monetary 
sanctions. In any given year approximately 11,814 surveyed agencies 
have the possibility of having a mandatory unannounced survey, but only 
260 are likely to be cited for condition level noncompliance.
[GRAPHIC] [TIFF OMITTED] TR08NO12.041

    Also, by comparison, in our review of the nursing home data 
reports, we have found less than 0.3 percent of nursing homes have been 
subject to the Temporary Management Sanction in 2008, therefore we do 
not anticipate any major impact on home health provider costs with this 
sanction in the final regulation.
    Because implementation of the complex and far-reaching provisions 
of this final rule for CMS will require an infrastructure overhaul with 
changes to current tracking mechanisms and a nationwide training effort 
to train surveyors, their supervisors and related CMS personnel, we 
provide for staggered effective dates of July 1, 2013 for the 
provisions of part 488, subparts I and J and parts 489 and 498 of the 
rule and July 1, 2014 for Sec.  488.745, Sec.  488.840 and Sec.  
488.845.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must also conform to the provisions of section 604 of the RFA. 
For purposes of section 1102(b) of the Act, we define a ``small rural 
hospital'' as a hospital that is located outside of a Metropolitan 
Statistical Area for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
final regulation will

[[Page 67162]]

not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2012, that 
threshold level is approximately $139 million. This rule will have no 
consequential effect on state, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has Federalism implications. We will 
incur certain administrative expenses in the course of designing and 
managing a CMP process. One-time costs are estimated at $2 million for 
redesigning certain parts of the survey information system (ASPEN) and 
ongoing expenses for maintenance and associated modifications of the 
system are estimated at $75,000 per year. In addition, we will incur 
expenses for training federal and state surveyors, developing and 
publishing the necessary training and instruction documents and 
procedures, and tracking and reporting of CMP data. We estimate one 6 
hour webinar training and trouble-shooting session per year involving 
approximately 302 surveyor and ancillary state and federal personnel 
(1812 person-hours) and 190 hours for training development and design. 
We also estimate 104 hours per year in trouble-shooting and responding 
to questions. The total combined person hours of 2106 will cost 
$299,052 annually. We also estimate ongoing CMS costs for managing the 
collection and disbursement of CMPs to require about 260 person hours 
per year or approximately $36,920. The grand total amounts to $2 
million in onetime expenses and approximately $410,972 in annual 
operating costs. The provisions in this final rule related to survey 
protocols have already been incorporated into long standing CMS survey 
policy, implemented in the years after 1987 and most recently revised 
in 2011.

G. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 30, we have 
prepared an accounting statement showing the classification of the 
transfers associated with the provisions of this final rule. This table 
provides our best estimate of the decrease in Medicare payments under 
the HH PPS as a result of the changes presented in this final rule.
[GRAPHIC] [TIFF OMITTED] TR08NO12.042

H. Conclusion

    In conclusion, we estimate that the net impact of the proposals 
finalized in this rule is approximately $10 million in CY 2013 savings. 
The $10 million impact to the CY 2013 HH PPS reflects the 
distributional effects of an updated wage index ($70 million decrease), 
the 1.3 percent home health payment update ($260 million increase), a 
new FDL ratio of 0.45 ($50 million increase), and a 1.32 percent case-
mix adjustment applicable to the national standardized 60-day episode 
rates ($250 million decrease). This analysis, together with the 
remainder of this preamble, provides a Regulatory Impact Analysis.

VIII. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) establishes 
certain requirements that an agency must meet when it promulgates a 
final rule that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. We have reviewed this final rule under the threshold 
criteria of Executive Order 13132, Federalism, and have determined that 
it will not have substantial direct effects on the rights, roles, and 
responsibilities of states, local or tribal governments.

List of Subjects

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

42 CFR Part 484

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements

42 CFR Part 488

    Administrative practice and procedure, Health facilities, Medicare, 
Record and reporting requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements

42 CFR Part 498

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 409--HOSPITAL INSURANCE BENEFITS

0
1. The authority citation for part 409 continues to read as follows:

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

0
2. Section 409.44 is amended by revising paragraphs (c)(2)(i)(C)(2), 
(c)(2)(i)(D)(2), (c)(2)(i)(E) introductory text, and (c)(2)(i)(E)(1) to 
read as follows:

Sec.  409.44  Skilled services requirements.

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (C) * * *
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide all of the 
therapy services and functionally reassess the patient in

[[Page 67163]]

accordance with paragraph (c)(2)(i)(A) of this section during the visit 
associated with that discipline which is scheduled to occur after the 
10th therapy visit but no later than the 13th therapy visit per the 
plan of care. In instances where the frequency of a particular 
discipline, as ordered by a physician, does not make it feasible for 
the reassessment to occur during the specified timeframes without 
providing an extra unnecessary visit or delaying a visit, then it is 
acceptable for the qualified therapist from that discipline to provide 
all of the therapy and functionally reassess the patient during the 
visit associated with that discipline that is scheduled to occur 
closest to the 14th Medicare-covered therapy visit, but no later than 
the 13th Medicare-covered therapy visit.
    (D) * * *
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide all of the 
therapy services and functionally reassess the patient in accordance 
with paragraph (c)(2)(i)(A) of this section during the visit associated 
with that discipline which is schedule to occur after the 16th therapy 
visit but no later than the 19th therapy visit per the plan of care. In 
instances where the frequency of a particular discipline, as ordered by 
a physician, does not make it feasible for the reassessment to occur 
during the specified timeframes without providing an extra, unnecessary 
visit or delaying a visit, then it is acceptable for the qualified 
therapist from that discipline to provide all of the therapy and 
functionally reassess the patient during the visit associated with that 
discipline that is scheduled to occur closest to the 20th Medicare-
covered therapy visit, but no later than the 19th Medicare-covered 
therapy visit.
    (E) As specified in paragraphs (c)(2)(i)(A), (B), (C), and (D) of 
this section, therapy visits for the therapy discipline(s) not in 
compliance with these policies will not be covered until the following 
conditions are met:
    (1) The qualified therapist has completed the reassessment and 
objective measurement of the effectiveness of the therapy as it relates 
to the therapy goals. As long as paragraphs (c)(2)(i) (E)(2) and 
(c)(2)(i) (E)(3) of this section are met, therapy coverage resumes with 
the completed reassessment therapy visit.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
3. The authority citation for part 424 continues to read as follows:

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

0
4. Section 424.22 is amended by--
0
A. Revising paragraph (a)(1)(v) introductory text.
0
B. Redesignating paragraphs (a)(1)(v)(A), (B), (C), and (D) as 
paragraphs (a)(1)(v)(C), (D), (E), and (F), respectively.
0
C. Adding new paragraphs (a)(1)(v)(A) and (B).
0
D. Revising newly redesignated paragraphs (a)(1)(v)(C) and (F).
    The revisions and additions read as follows:

Sec.  424.22  Requirements for home health services.

* * * * *
    (a) * * *
    (1) * * *
    (v) The physician responsible for performing the initial 
certification must document that the face-to-face patient encounter, 
which is related to the primary reason the patient requires home health 
services, has occurred no more than 90 days prior to the home health 
start of care date or within 30 days of the start of the home health 
care by including the date of the encounter, and including an 
explanation of why the clinical findings of such encounter support that 
the patient is homebound and in need of either intermittent skilled 
nursing services or therapy services as defined in Sec.  409.42(a) and 
(c) of this chapter, respectively.
    (A) The face-to-face encounter must be performed by one of the 
following:
    (1) The certifying physician himself or herself.
    (2) A physician, with privileges, who cared for the patient in an 
acute or post-acute care facility from which the patient was directly 
admitted to home health.
    (3) A nurse practitioner or a clinical nurse specialist (as those 
terms are defined in section 1861(aa)(5) of the Act) who is working in 
accordance with State law and in collaboration with the certifying 
physician or in collaboration with an acute or post-acute care 
physician with privileges who cared for the patient in the acute or 
post-acute care facility from which the patient was directly admitted 
to home health.
    (4) A certified nurse midwife (as defined in section 1861(gg)of the 
Act) as authorized by State law, under the supervision of the 
certifying physician or under the supervision of an acute or post-acute 
care physician with privileges who cared for the patient in the acute 
or post-acute care facility from which the patient was directly 
admitted to home health.
    (5) A physician assistant (as defined in section 1861(aa)(5) of the 
Act) under the supervision of the certifying physician or under the 
supervision of an acute or post-acute care physician with privileges 
who cared for the patient in the acute or post-acute care facility from 
which the patient was directly admitted to home health.
    (B) The documentation of the face-to-face patient encounter must be 
a separate and distinct section of, or an addendum to, the 
certification, and must be clearly titled and dated and the 
certification must be signed by the certifying physician.
    (C) In cases where the face-to-face encounter is performed by a 
physician who cared for the patient in an acute or post-acute care 
facility or by a nonphysician practitioner in collaboration with or 
under the supervision of such an acute or post-acute care physician and 
that nonphysician practitioner is not directly communicating to the 
certifying physician the clinical findings (that is, the patient's 
homebound status and need for intermittent skilled nursing services or 
therapy services as defined in Sec.  409.42(a) and (c) of this 
chapter), the acute or post-acute care physician must communicate the 
clinical findings of that face-to-face encounter to the certifying 
physician. In all other cases where a nonphysician practitioner 
performs the face-to-face encounter, the nonphysician practitioner must 
communicate the clinical findings of that face-to-face patient 
encounter to the certifying physician.
* * * * *
    (F) The physician responsible for certifying the patient for home 
care must document the face-to-face encounter on the certification 
itself, or as an addendum to the certification (as described in 
paragraph (a)(1)(v) of this section), that the condition for which the 
patient was being treated in the face-to-face patient encounter is 
related to the primary reason the patient requires home health 
services, and why the clinical findings of such encounter support that 
the patient is homebound and in need of either intermittent skilled 
nursing services or therapy services as defined in Sec.  409.42(a) and 
(c) respectively. The documentation must be clearly titled and dated 
and the

[[Page 67164]]

documentation must be signed by the certifying physician.
* * * * *

PART 484--HOME HEALTH SERVICES

0
5. The authority citation for part 484 continues to read as follows:

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

0
6. Section 484.250 is amended by adding paragraph (c)(3) to read as 
follows:

Sec.  484.250  Patient assessment data.

* * * * *
    (c) * * *
    (3) Approved HHCAHPS survey vendors must fully comply with all 
HHCAHPS oversight activities, including allowing CMS and its HHCAHPS 
program team to perform site visits at the vendors' company locations.

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

0
7. The authority citation for part 488 continues to read as follows:

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

0
8. Section 488.2 is amended by adding the following statutory basis in 
numerical order as follows:

Sec.  488.2  Statutory basis.

* * * * *
1861(m)--Requirements for Home Health Services
1861(o)--Requirements for Home Health Agencies
* * * * *
1891--Conditions of participation for home health agencies; home health 
quality.
* * * * *

0
9. Section 488.3 is amended by revising paragraph (a)(1) to read as 
follows:

Sec.  488.3  Conditions of participation; conditions for coverage; and 
long-term care requirements.

    (a) * * *
    (1) Meet the applicable statutory definition in sections 1138(b), 
1819, 1832(a)(2)(F), 1861, 1881, 1891, or 1919 of the Act.
* * * * *

0
10. Section 488.26 is amended by revising paragraphs (c)(2) and (e) to 
read as follows:

Sec.  488.26  Determining compliance.

* * * * *
    (c) * * *
    (2) The survey process uses resident and patient outcomes as the 
primary means to establish the compliance process of facilities and 
agencies. Specifically, surveyors will directly observe the actual 
provision of care and services to residents and/or patients, and the 
effects of that care, to assess whether the care provided meets the 
needs of individual residents and/or patients.
* * * * *
    (e) The State survey agency must ensure that a facility's or 
agency's actual provision of care and services to residents and 
patients and the effects of that care on such residents and patients 
are assessed in a systematic manner.

0
11. The section heading for Sec.  488.28 is revised to read as follows:

Sec.  488.28  Providers or suppliers, other than SNFs, NFs, and HHAs 
with deficiencies.

* * * * *

0
12. Subpart I is added to read as follows:
Subpart I--Survey and Certification of Home Health Agencies
Sec.
488.700 Basis and scope.
488.705 Definitions.
488.710 Standard surveys.
488.715 Partial extended surveys.
488.720 Extended surveys.
488.725 Unannounced surveys.
488.730 Survey frequency and content.
488.735 Surveyor qualifications.
488.740 Certification of compliance or noncompliance.
488.745 Informal Dispute Resolution (IDR).

Subpart I--Survey and Certification of Home Health Agencies

Sec.  488.700  Basis and scope.

    Section 1891 of the Act establishes requirements for surveying HHAs 
to determine whether they meet the Medicare conditions of 
participation.

Sec.  488.705  Definitions.

    As used in this subpart--
    Abbreviated standard survey means a focused survey other than a 
standard survey that gathers information on an HHA's compliance with 
fewer specific standards or conditions of participation. An abbreviated 
standard survey may be based on complaints received, a change of 
ownership or management, or other indicators of specific concern such 
as reapplication for Medicare billing privileges following a 
deactivation.
    Complaint survey means a survey that is conducted to investigate 
specific allegations of noncompliance.
    Condition-level deficiency means noncompliance as described in 
Sec.  488.24 of this part.
    Deficiency is a violation of the Act and regulations contained in 
part 484, subparts A through C of this chapter, is determined as part 
of a survey, and can be either standard or condition-level.
    Extended survey means a survey that reviews additional conditions 
of participation not examined during a standard survey. It may be 
conducted at any time but must be conducted when substandard care is 
identified.
    Noncompliance means any deficiency found at the condition-level or 
standard-level.
    Partial extended survey means a survey conducted to determine if 
deficiencies and/or deficient practice(s) exist that were not fully 
examined during the standard survey. The surveyors may review any 
additional requirements which would assist in making a compliance 
finding.
    Standard-level deficiency means noncompliance with one or more of 
the standards that make up each condition of participation for HHAs.
    Standard survey means a survey conducted in which the surveyor 
reviews the HHA's compliance with a select number of standards and/or 
conditions of participation in order to determine the quality of care 
and services furnished by an HHA as measured by indicators related to 
medical, nursing, and rehabilitative care.
    Substandard care means noncompliance with one or more conditions of 
participation identified on a standard survey, including deficiencies 
which could result in actual or potential harm to patients of an HHA.
    Substantial compliance means compliance with all condition-level 
requirements, as determined by CMS or the State.

Sec.  488.710  Standard surveys.

    (a) For each HHA, the survey agency must conduct a standard survey 
not later than 36 months after the date of the previous standard survey 
that includes, but is not limited to, all of the following (to the 
extent practicable):
    (1) A case-mix stratified sample of individuals furnished items or 
services by the HHA.
    (2) Visits to the homes of patients, (the purpose of the home visit 
is to evaluate the extent to which the quality and scope of services 
furnished by the HHA attained and maintained the highest practicable 
functional capacity of each patient as reflected in the patient's 
written plan of care and clinical records), but only with their 
consent, and, if determined necessary by CMS or the survey team, other 
forms

[[Page 67165]]

of communication with patients including telephone calls.
    (3) Review of indicators that include the outcomes of quality care 
and services furnished by the agency as indicated by medical, nursing, 
and rehabilitative care.
    (4) Review of compliance with a select number of regulations most 
related to high-quality patient care.
    (b) The survey agency's failure to follow the procedures set forth 
in this section will not invalidate otherwise legitimate determinations 
that deficiencies exist at an HHA.

Sec.  488.715  Partial extended surveys.

    A partial extended survey is conducted to determine if standard or 
condition-level deficiencies are present in the conditions of 
participation not fully examined during the standard survey and there 
are indications that a more comprehensive review of conditions of 
participation would determine if a deficient practice exists.

Sec.  488.720  Extended surveys.

    (a) Purpose of survey. The purpose of an extended survey is:
    (1) To review and identify the policies and procedures that caused 
an HHA to furnish substandard care.
    (2) To determine whether the HHA is in compliance with one or more 
or all additional conditions of participation not examined during the 
standard survey.
    (b) Timing and basis for survey. An extended survey must be 
conducted not later than 14 calendar days after completion of a 
standard survey which found that a HHA was out of compliance with a 
condition of participation.

Sec.  488.725  Unannounced surveys.

    (a) Basic rule. All HHA surveys must be unannounced and conducted 
with procedures and scheduling that renders the onsite surveys as 
unpredictable in their timing as possible.
    (b) State survey agency's scheduling and surveying procedures. CMS 
reviews each survey agency's scheduling and surveying procedures and 
practices to assure that the survey agency has taken all reasonable 
steps to avoid giving notice of a survey through the scheduling 
procedures and conduct of the surveys.
    (c) Civil money penalties. Any individual who notifies an HHA, or 
causes an HHA to be notified, of the time or date on which a standard 
survey is scheduled to be conducted is subject to a Federal civil money 
penalty not to exceed $2,000.

Sec.  488.730  Survey frequency and content.

    (a) Basic period. Each HHA must be surveyed not later than 36 
months after the last day of the previous standard survey. 
Additionally, a survey may be conducted as frequently as necessary to--
    (1) Assure the delivery of quality home health services by 
determining whether an HHA complies with the Act and conditions of 
participation; and
    (2) Confirm that the HHA has corrected deficiencies that were 
previously cited.
    (b) Change in HHA information. A standard survey or an abbreviated 
standard survey may be conducted within 2 months of a change, or 
knowledge of a change, in any of the following:
    (1) Ownership;
    (2) Administration; or,
    (3) Management of the HHA.
    (c) Complaints. A standard survey, or abbreviated standard survey--
    (1) Must be conducted of an HHA within 2 months of when a 
significant number of complaints against the HHA are reported to CMS, 
the State, the State or local agency responsible for maintaining a 
toll-free hotline and investigative unit, or any other appropriate 
Federal, State, or local agency; or
    (2) As otherwise required to determine compliance with the 
conditions of participation such as the investigation of a complaint.

Sec.  488.735  Surveyor qualifications.

    (a) Minimum qualifications. Surveys must be conducted by 
individuals who meet minimum qualifications prescribed by CMS. In 
addition, before any State or Federal surveyor may serve on an HHA 
survey team (except as a trainee), he/she must have successfully 
completed the relevant CMS-sponsored Basic HHA Surveyor Training Course 
and any associated course prerequisites. All surveyors must follow the 
principles set forth in Sec.  488.24 through Sec.  488.28 according to 
CMS policies and procedures for determining compliance with the 
conditions of participation.
    (b) Disqualifications. Any of the following circumstances 
disqualifies a surveyor from surveying a particular agency:
    (1) The surveyor currently works for, or, within the past two 
years, has worked with the HHA to be surveyed as:
    (i) A direct employee;
    (ii) An employment agency staff at the agency; or
    (iii) An officer, consultant, or agent for the agency to be 
surveyed concerning compliance with conditions of participation 
specified in or pursuant to sections 1861(o) or 1891(a) of the Act.
    (2) The surveyor has a financial interest or an ownership interest 
in the HHA to be surveyed.
    (3) The surveyor has a family member who has a relationship with 
the HHA to be surveyed.
    (4) The surveyor has an immediate family member who is a patient of 
the HHA to be surveyed.

Sec.  488.740  Certification of compliance or noncompliance.

    Rules to be followed for certification, documentation of findings, 
periodic review of compliance and approval, certification of 
noncompliance, and determining compliance of HHAs are set forth, 
respectively, in Sec. Sec.  488.12, 488.18, 488.20, 488.24, and 488.26 
of this part.

Sec.  488.745  Informal Dispute Resolution (IDR).

    (a) Opportunity to refute survey findings. Upon the provider's 
receipt of an official statement of deficiencies, HHAs are afforded the 
option to request an informal opportunity to dispute condition-level 
survey findings.
    (b) Failure to conduct IDR timely. Failure of CMS or the State, as 
appropriate, to complete IDR shall not delay the effective date of any 
enforcement action.
    (c) Revised statement of deficiencies as a result of IDR. If any 
findings are revised or removed by CMS or the State based on IDR, the 
official statement of deficiencies is revised accordingly and any 
enforcement actions imposed solely as a result of those cited 
deficiencies are adjusted accordingly.
    (d) Notification. When the survey findings indicate a condition-
level deficiency, CMS or the State, as appropriate, must provide the 
agency with written notification of the opportunity for participating 
in an IDR process at the time the official statement of deficiencies is 
issued. The request for IDR must be submitted in writing to the State 
or CMS, must include the specific deficiencies that are disputed, and 
must be made within the same 10 calendar day period that the HHA has 
for submitting an acceptable plan of correction.

0
13. Subpart J is added to read as follows:
Subpart J--Alternative Sanctions for Home Health Agencies With 
Deficiencies
Sec.
488.800 Statutory basis.
488.805 Definitions.
488.810 General provisions.
488.815 Factors to be considered in selecting sanctions.
488.820 Available sanctions.
488.825 Action when deficiencies pose immediate jeopardy.

[[Page 67166]]

488.830 Action when deficiencies are at the condition-level but do 
not pose immediate jeopardy.
488.835 Temporary management.
488.840 Suspension of payment for all new patient admissions.
488.845 Civil money penalties.
488.850 Directed plan of correction.
488.855 Directed in-service training.
488.860 Continuation of payments to an HHA with deficiencies.
488.865 Termination of provider agreement.

Subpart J--Alternative Sanctions for Home Health Agencies With 
Deficiencies

Sec.  488.800  Statutory basis.

    Section 1891(e) through (f) of the Act authorizes the Secretary to 
take actions to remove and correct deficiencies in an HHA through an 
alternative sanction or termination or both. Furthermore, this section 
specifies that these sanctions are in addition to any others available 
under State or Federal law, and, except for the final determination of 
civil money penalties, are imposed prior to the conduct of a hearing.

Sec.  488.805  Definitions.

    As used in this subpart--
    Directed plan of correction means CMS or the temporary manager 
(with CMS/SA approval) may direct the HHA to take specific corrective 
action to achieve specific outcomes within specific timeframes.
    Immediate jeopardy means a situation in which the provider's 
noncompliance with one or more requirements of participation has 
caused, or is likely to cause serious injury, harm, impairment, or 
death to a patient(s).
    New admission means an individual who becomes a patient or is 
readmitted to the HHA on or after the effective date of a suspension of 
payment sanction.
    Per instance means a single event of noncompliance identified and 
corrected through a survey, for which the statute authorizes CMS to 
impose a sanction.
    Plan of correction means a plan developed by the HHA and approved 
by CMS that is the HHA's written response to survey findings detailing 
corrective actions to cited deficiencies and specifies the date by 
which those deficiencies will be corrected.
    Repeat deficiency means a condition-level citation that is cited on 
the current survey and is substantially the same as or similar to, a 
finding of a standard-level or condition-level deficiency citation 
cited on the most recent previous standard survey or on any intervening 
survey since the most recent standard survey.
    Temporary management means the temporary appointment by CMS or by a 
CMS authorized agent, of a substitute manager or administrator based 
upon qualifications described in Sec. Sec.  484.4 and 484.14(c) of this 
chapter. The HHA's governing body must ensure that the temporary 
manager has authority to hire, terminate or reassign staff, obligate 
funds, alter procedures, and manage the HHA to correct deficiencies 
identified in the HHA's operation.

Sec.  488.810  General provisions.

    (a) Purpose of sanctions. The purpose of sanctions is to ensure 
prompt compliance with program requirements in order to protect the 
health and safety of individuals under the care of an HHA.
    (b) Basis for imposition of sanctions. When CMS chooses to apply 
one or more sanctions specified in Sec.  488.820, the sanctions are 
applied on the basis of noncompliance with one or more conditions of 
participation found through a survey and may be based on failure to 
correct previous deficiency findings as evidenced by repeat 
deficiencies.
    (c) Number of sanctions. CMS may apply one or more sanctions for 
each deficiency constituting noncompliance or for all deficiencies 
constituting noncompliance.
    (d) Extent of sanctions imposed. When CMS imposes a sanction, the 
sanction applies to the parent HHA and its respective branch offices.
    (e) Plan of correction requirement. Regardless of which sanction is 
applied, a non-compliant HHA must submit a plan of correction for 
approval by CMS.
    (f) Notification requirements. (1) Notice. CMS provides written 
notification to the HHA of the intent to impose the sanction.
    (2) Date of enforcement action. The notice periods specified in 
Sec.  488.825(b) and Sec.  488.830(b) begin the day after the HHA 
receives the notice.
    (g) Appeals. (1) The provisions of part 498 of this chapter apply 
when the HHA requests a hearing on a determination of noncompliance 
leading to the imposition of a sanction, including termination of the 
provider agreement.
    (2) A pending hearing does not delay the effective date of a 
sanction, including termination, against an HHA. Sanctions continue to 
be in effect regardless of the timing of any appeals proceedings.

Sec.  488.815  Factors to be considered in selecting sanctions.

    CMS bases its choice of sanction or sanctions on consideration of 
one or more factors that include, but are not limited to, the 
following:
    (a) The extent to which the deficiencies pose immediate jeopardy to 
patient health and safety.
    (b) The nature, incidence, manner, degree, and duration of the 
deficiencies or noncompliance.
    (c) The presence of repeat deficiencies, the HHA's overall 
compliance history and any history of repeat deficiencies at either the 
parent or branch location.
    (d) The extent to which the deficiencies are directly related to a 
failure to provide quality patient care.
    (e) The extent to which the HHA is part of a larger organization 
with performance problems.
    (f) An indication of any system-wide failure to provide quality 
care.

Sec.  488.820  Available sanctions.

    In addition to termination of the provider agreement, the following 
alternative sanctions are available:
    (a) Civil money penalties.
    (b) Suspension of payment for all new admissions.
    (c) Temporary management of the HHA.
    (d) Directed plan of correction, as set out at Sec.  488.850.
    (e) Directed in-service training, as set out at Sec.  488.855.

Sec.  488.825  Action when deficiencies pose immediate jeopardy.

    (a) Immediate jeopardy. If there is immediate jeopardy to the HHA's 
patient health or safety--
    (1) CMS immediately terminates the HHA provider agreement in 
accordance with Sec.  489.53 of this chapter.
    (2) CMS terminates the HHA provider agreement no later than 23 days 
from the last day of the survey, if the immediate jeopardy has not been 
removed by the HHA.
    (3) In addition to a termination, CMS may impose one or more 
alternative sanctions, as appropriate.
    (b) 2-day notice. Except for civil money penalties, for all 
sanctions specified in Sec.  488.820 that are imposed when there is 
immediate jeopardy, notice must be given at least 2 calendar days 
before the effective date of the enforcement action.
    (c) Transfer of care. An HHA, if its provider agreement terminated, 
is responsible for providing information, assistance, and arrangements 
necessary for the proper and safe transfer of patients to another local 
HHA within 30 days of termination. The State must assist the HHA in the 
safe and orderly transfer of care and services for the patients to 
another local HHA.

[[Page 67167]]

Sec.  488.830  Action when deficiencies are at the condition-level but 
do not pose immediate jeopardy.

    (a) Noncompliance. If the HHA is no longer in compliance with the 
conditions of participation, either because the deficiency or 
deficiencies substantially limit the provider's capacity to furnish 
adequate care but do not pose immediate jeopardy, have a condition-
level deficiency or deficiencies that do not pose immediate jeopardy, 
or because the HHA has repeat noncompliance that results in a 
condition-level deficiency based on the HHA's failure to correct and 
sustain compliance, CMS will:
    (1) Terminate the HHA's provider agreement; or
    (2) Impose one or more alternative sanctions set forth in Sec.  
488.820(a) through (f) of this part as an alternative to termination, 
for a period not to exceed 6 months.
    (b) 15-day notice. Except for civil money penalties, for all 
sanctions specified in Sec.  488.820 imposed when there is no immediate 
jeopardy, notice must be given at least 15 calendar days before the 
effective date of the enforcement action. The requirements of the 
notice are set forth in Sec.  488.810(f) of this part.
    (c) Not meeting criteria for continuation of payment. If an HHA 
does not meet the criteria for continuation of payment under Sec.  
488.860(a) of this part, CMS will terminate the HHA's provider 
agreement in accordance with Sec.  488.865 of this part.
    (d) Termination time frame when there is no immediate jeopardy. CMS 
terminates an HHA within 6 months of the last day of the survey, if the 
HHA is not in compliance with the conditions of participation, and the 
terms of the plan of correction have not been met.
    (e) Transfer of care. An HHA, if its provider agreement terminated, 
is responsible for providing information, assistance, and arrangements 
necessary for the proper and safe transfer of patients to another local 
HHA within 30 days of termination. The State must assist the HHA in the 
safe and orderly transfer of care and services for the patients to 
another local HHA.

Sec.  488.835  Temporary management.

    (a) Application. (1) CMS may impose temporary management of an HHA 
if it determines that an HHA has a condition-level noncompliance and 
CMS determines that management limitations or the deficiencies are 
likely to impair the HHA's ability to correct deficiencies and return 
the HHA to full compliance with the conditions of participation within 
the timeframe required.
    (2) [Reserved]
    (b) Procedures. (1) CMS notifies the HHA that a temporary manager 
is being appointed.
    (2) If the HHA fails to relinquish authority and control to the 
temporary manager, CMS terminates the HHA's provider agreement in 
accordance with Sec.  488.865.
    (c) Duration and effect of sanction. Temporary management continues 
until--
    (1) CMS determines that the HHA has achieved substantial compliance 
and has the management capability to ensure continued compliance with 
all the conditions of participation;
    (2) CMS terminates the provider agreement; or
    (3) The HHA reassumes management control without CMS approval. In 
such case, CMS initiates termination of the provider agreement and may 
impose additional sanctions.
    (4) Temporary management will not exceed a period of 6 months from 
the date of the survey identifying noncompliance.
    (d) Payment of salary. (1) The temporary manager's salary--
    (i) Is paid directly by the HHA while the temporary manager is 
assigned to that HHA; and
    (ii) Must be at least equivalent to the sum of the following:
    (A) The prevailing salary paid by providers for positions of this 
type in what the State considers to be the HHA's geographic area 
(prevailing salary based on the Geographic Guide by the Department of 
Labor (BLS Wage Data by Area and Occupation);
    (B) Any additional costs that would have reasonably been incurred 
by the HHA if such person had been in an employment relationship; and
    (C) Any other costs incurred by such a person in furnishing 
services under such an arrangement or as otherwise set by the State.
    (2) An HHA's failure to pay the salary and other costs of the 
temporary manager described in paragraph (d)(1) of this section is 
considered a failure to relinquish authority and control to temporary 
management.

Sec.  488.840  Suspension of payment for all new patient admissions.

    (a) Application. (1) CMS may suspend payment for all new admissions 
if an HHA is found to have condition-level deficiencies, regardless of 
whether those deficiencies pose immediate jeopardy.
    (2) CMS will consider this sanction for any deficiency related to 
poor patient care outcomes, regardless of whether the deficiency poses 
immediate jeopardy.
    (b) Procedures. (1) Notices. (i) Before suspending payments for new 
admissions, CMS provides the HHA notice of the suspension of payment 
for all new admissions as set forth in Sec.  488.810(f). The CMS notice 
of suspension will include the nature of the noncompliance; the 
effective date of the sanction; and the right to appeal the 
determination leading to the sanction.
    (ii) The HHA may not charge a newly admitted HHA patient who is a 
Medicare beneficiary for services for which Medicare payment is 
suspended unless the HHA can show that, before initiating care, it gave 
the patient or his or her representative oral and written notice of the 
suspension of Medicare payment in a language and manner that the 
beneficiary or representative can understand.
    (2) Restriction. (i) Suspension of payment for all new admissions 
sanction may be imposed anytime an HHA is found to be out of 
substantial compliance.
    (ii) Suspension of payment for patients with new admissions will 
remain in place until CMS determines that the HHA has achieved 
substantial compliance or is involuntarily terminated with the 
conditions of participation, as determined by CMS.
    (3) Resumption of payments. Payments to the HHA resume 
prospectively on the date that CMS determines that the HHA has achieved 
substantial compliance with the conditions of participation.
    (c) Duration and effect of sanction. This sanction ends when--
    (1) CMS determines that the HHA is in substantial compliance with 
all of the conditions of participation; or
    (2) When the HHA is terminated or CMS determines that the HHA is 
not in compliance with the conditions of participation at a maximum of 
6 months from the date noncompliance was determined.

Sec.  488.845  Civil money penalties.

    (a) Application. (1) CMS may impose a civil money penalty against 
an HHA for either the number of days the HHA is not in compliance with 
one or more conditions of participation or for each instance that an 
HHA is not in compliance, regardless of whether the HHA's deficiencies 
pose immediate jeopardy.
    (2) CMS may impose a civil money penalty for the number of days of 
immediate jeopardy.
    (3) A per-day and a per-instance CMP may not be imposed 
simultaneously for the same deficiency.

[[Page 67168]]

    (b) Amount of penalty. (1) Factors considered. CMS takes into 
account the following factors in determining the amount of the penalty:
    (i) The factors set out at Sec.  488.815.
    (ii) The size of an agency and its resources.
    (iii) Accurate and credible resources, such as PECOS, Medicare cost 
reports and Medicare/Medicaid claims information that provide 
information on the operation and resources of the HHA.
    (iv) Evidence that the HHA has a built-in, self-regulating quality 
assessment and performance improvement system to provide proper care, 
prevent poor outcomes, control patient injury, enhance quality, promote 
safety, and avoid risks to patients on a sustainable basis that 
indicates the ability to meet the conditions of participation and to 
ensure patient health and safety.
    (2) Adjustments to penalties. Based on revisit survey findings, 
adjustments to penalties may be made after a review of the provider's 
attempted correction of deficiencies.
    (i) CMS may increase a CMP in increments based on a HHA's inability 
or failure to correct deficiencies, the presence of a system-wide 
failure in the provision of quality care, or a determination of 
immediate jeopardy with actual harm versus immediate jeopardy with 
potential for harm.
    (ii) CMS may also decrease a CMP in increments to the extent that 
it finds, pursuant to a revisit, that substantial and sustainable 
improvements have been implemented even though the HHA is not yet in 
full compliance with the conditions of participation.
    (iii) No penalty assessment shall exceed $10,000 for each day of 
noncompliance.
    (3) Upper range of penalty. Penalties in the upper range of $8,500 
to $10,000 per day of noncompliance are imposed for a condition-level 
deficiency that is immediate jeopardy. The penalty in this range will 
continue until compliance can be determined based on a revisit survey.
    (i) $10,000 per day for a deficiency or deficiencies that are 
immediate jeopardy and that result in actual harm.
    (ii) $9,000 per day for a deficiency or deficiencies that are 
immediate jeopardy and that result in a potential for harm.
    (iii) $8,500 per day for an isolated incident of noncompliance in 
violation of established HHA policy.
    (4) Middle range of penalty. Penalties in the range of $1,500-
$8,500 per day of noncompliance are imposed for a repeat and/or 
condition-level deficiency that does not constitute immediate jeopardy, 
but is directly related to poor quality patient care outcomes.
    (5) Lower range of penalty. Penalties in this range of $500-$4,000 
are imposed for a repeat and/or condition-level deficiency that does 
not constitute immediate jeopardy and that are related predominately to 
structure or process-oriented conditions (such as OASIS submission 
requirements) rather than directly related to patient care outcomes.
    (6) Per instance penalty. Penalty imposed per instance of 
noncompliance may be assessed for one or more singular events of 
condition-level noncompliance that are identified and where the 
noncompliance was corrected during the onsite survey. When penalties 
are imposed for per instance of noncompliance, or more than one per 
instance of noncompliance, the penalties will be in the range of $1,000 
to $10,000 per instance, not to exceed $10,000 each day of 
noncompliance.
    (7) Decreased penalty amounts. If the immediate jeopardy situation 
is removed, but condition-level noncompliance continues, CMS will shift 
the penalty amount imposed per day from the upper range to the middle 
or lower range. An earnest effort to correct any systemic causes of 
deficiencies and sustain improvement must be evident.
    (8) Increased penalty amounts. (i) In accordance with paragraph 
(b)(2) of this section, CMS will increase the per day penalty amount 
for any condition-level deficiency or deficiencies which, after 
imposition of a lower-level penalty amount, become sufficiently serious 
to pose potential harm or immediate jeopardy.
    (ii) CMS increases the per day penalty amount for deficiencies that 
are not corrected and found again at the time of revisit survey(s) for 
which a lower-level penalty amount was previously imposed.
    (iii) CMS may impose a more severe amount of penalties for repeated 
noncompliance with the same condition-level deficiency or uncorrected 
deficiencies from a prior survey.
    (c) Procedures. (1) Notice of intent. CMS provides the HHA with 
written notice of the intent to impose a civil money penalty. The 
notice includes the amount of the CMP being imposed, the basis for such 
imposition and the proposed effective date of the sanction.
    (2) Appeals. (i) Appeals procedures. An HHA may request a hearing 
on the determination of the noncompliance that is the basis for 
imposition of the civil money penalty. The request must meet the 
requirements in Sec.  498.40 of this chapter.
    (ii) Waiver of a hearing. An HHA may waive the right to a hearing, 
in writing, within 60 days from the date of the notice imposing the 
civil money penalty. If an HHA timely waives its right to a hearing, 
CMS reduces the penalty amount by 35 percent, and the amount is due 
within 15 days of the HHAs agreeing in writing to waive the hearing. If 
the HHA does not waive its right to a hearing in accordance to the 
procedures specified in this subsection, the civil money penalty is not 
reduced by 35 percent.
    (d) Accrual and duration of penalty. (1)(i) The per day civil money 
penalty may start accruing as early as the beginning of the last day of 
the survey that determines that the HHA was out of compliance, as 
determined by CMS.
    (ii) A civil money penalty for each per instance of noncompliance 
is imposed in a specific amount for that particular deficiency, with a 
maximum of $10,000 per day per HHA.
    (2) A penalty that is imposed per day and per instance of 
noncompliance may not be imposed simultaneously.
    (3) Duration of per day penalty when there is immediate jeopardy. 
(i) In the case of noncompliance that poses immediate jeopardy, CMS 
must terminate the provider agreement within 23 calendar days after the 
last day of the survey if the immediate jeopardy is not removed.
    (ii) A penalty imposed per day of noncompliance will stop accruing 
on the day the provider agreement is terminated or the HHA achieves 
substantial compliance, whichever occurs first.
    (4) Duration of penalty when there is no immediate jeopardy. (i) In 
the case of noncompliance that does not pose immediate jeopardy, the 
daily accrual of per day civil money penalties is imposed for the days 
of noncompliance prior to the notice specified in paragraph (c)(1) of 
this section and an additional period of no longer than 6 months 
following the last day of the survey.
    (ii) If the HHA has not achieved compliance with the conditions of 
participation, CMS terminates the provider agreement. The accrual of 
civil money penalty stops on the day the HHA agreement is terminated or 
the HHA achieves substantial compliance, whichever is earlier.
    (e) Computation and notice of total penalty amount. (1) When a 
civil money penalty is imposed on a per day basis and the HHA achieves 
compliance with the conditions of participation as determined by a 
revisit survey, CMS

[[Page 67169]]

sends a final notice to the HHA containing all of the following 
information:
    (i) The amount of penalty assessed per day.
    (ii) The total number of days of noncompliance.
    (iii) The total amount due.
    (iv) The due date of the penalty.
    (v) The rate of interest to be assessed on any unpaid balance 
beginning on the due date, as provided in paragraph (f)(4) of this 
section.
    (2) When a civil money penalty is imposed for per instance of 
noncompliance, CMS sends a notice to the HHA containing all of the 
following information:
    (i) The amount of the penalty that was assessed.
    (ii) The total amount due.
    (iii) The due date of the penalty.
    (iv) The rate of interest to be assessed on any unpaid balance 
beginning on the due date, as provided in paragraph (f)(6) of this 
section.
    (3) In the case of an HHA for which the provider agreement has been 
involuntarily terminated and for which a civil money penalty was 
imposed on a per day basis, CMS sends this penalty information after 
one of the following actions has occurred:
    (i) Final administrative decision is made.
    (ii) The HHA has waived its right to a hearing in accordance with 
paragraph (c)(2)(ii) of this section.
    (iii) Time for requesting a hearing has expired and CMS has not 
received a hearing request from the HHA.
    (f) Due date for payment of penalty. A penalty is due and payable 
15 days from notice of the final administrative decision.
    (1) Payments are due for all civil money penalties within 15 days:
    (i) After a final administrative decision when the HHA achieves 
substantial compliance before the final decision or the effective date 
of termination before final decision,
    (ii) After the time to appeal has expired and the HHA does not 
appeal or fails to timely appeal the initial determination,
    (iii) After CMS receives a written request from the HHA requesting 
to waive its right to appeal the determinations that led to the 
imposition of a sanction,
    (iv) After substantial compliance is achieved, or
    (v) After the effective date of termination.
    (2) A request for hearing does not delay the imposition of any 
penalty; it only potentially delays the collection of the final penalty 
amount.
    (3) If an HHA waives its right to a hearing according to paragraph 
(c)(2)(ii) of this section, CMS will apply a 35 percent reduction to 
the CMP amount when:
    (i) The HHA achieved compliance with the conditions of 
participation before CMS received the written waiver of hearing; or
    (ii) The effective date of termination occurs before CMS received 
the written waiver of hearing.
    (4) The period of noncompliance may not extend beyond 6 months from 
the last day of the survey.
    (5) The amount of the penalty, when determined, may be deducted 
(offset) from any sum then or later owing by CMS or State Medicaid to 
the HHA.
    (6) Interest is assessed and accrues on the unpaid balance of a 
penalty, beginning on the due date. Interest is computed at the rate 
specified in Sec.  405.378(d) of this chapter.
    (g) Penalties collected by CMS. (1) Disbursement of CMPs. Civil 
money penalties and any corresponding interest collected by CMS from 
Medicare and Medicaid participating HHAs are disbursed in proportion to 
average dollars spent by Medicare and Medicaid at the national level 
based on MSIS and HHA PPS data for a three year fiscal period.
    (i) Based on expenditures for the FY 2007-2009 period, the initial 
proportions to be disbursed are 63 percent returned to the U.S. 
Treasury and 37 percent returned to the State Medicaid agency.
    (ii) Beginning one year after the effective date of this section, 
CMS shall annually update these proportions based on the most recent 3-
year fiscal period, prior to the year in which the CMP is imposed, for 
which CMS determines that the relevant data are essentially complete.
    (iii) The portion corresponding to the Medicare payments is 
returned to the U.S. Department of Treasury as miscellaneous receipts.
    (iv) The portion corresponding to the Medicaid payments is returned 
to the State Medicaid agency.
    (2) Penalties may not be used for Survey and Certification 
operations nor as the State's Medicaid non-Federal medical assistance 
or administrative match.

Sec.  488.850  Directed plan of correction.

    (a) Application. CMS may impose a directed plan of correction when 
an HHA:
    (1) Has one or more deficiencies that warrant directing the HHA to 
take specific actions; or
    (2) Fails to submit an acceptable plan of correction.
    (b) Procedures. (1) Before imposing this sanction, CMS provides the 
HHA notice of the impending sanction.
    (2) CMS or the temporary manager (with CMS approval) may direct the 
HHA to take corrective action to achieve specific outcomes within 
specific timeframes.
    (c) Duration and effect of sanction. If the HHA fails to achieve 
compliance with the conditions of participation within the timeframes 
specified in the directed plan of correction, CMS:
    (1) May impose one or more other sanctions set forth in Sec.  
488.820; or
    (2) Terminates the provider agreement.

Sec.  488.855  Directed in-service training.

    (a) Application. CMS may require the staff of an HHA to attend in-
service training program(s) if CMS determines that--
    (1) The HHA has deficiencies that indicate noncompliance;
    (2) Education is likely to correct the deficiencies; and
    (3) The programs are conducted by established centers of health 
education and training or consultants with background in education and 
training with Medicare Home Health Providers, or as deemed acceptable 
by CMS and/or the State (by review of a copy of curriculum vitas and/or 
resumes/references to determine the educator's qualifications).
    (b) Procedures. (1) Action following training. After the HHA staff 
has received in-service training, if the HHA has not achieved 
compliance, CMS may impose one or more other sanctions specified in 
Sec.  488.820.
    (2) Payment. The HHA pays for the directed in-service training for 
its staff.

Sec.  488.860  Continuation of payments to an HHA with deficiencies.

    (a) Continued payments. CMS may continue payments to an HHA with 
condition-level deficiencies that do not constitute immediate jeopardy 
for up to 6 months from the last day of the survey if the criteria in 
paragraph (a)(1) of this section are met.
    (1) Criteria. CMS may continue payments to an HHA not in compliance 
with the conditions of participation for the period specified in 
paragraph (a) of this section if all of the following criteria are met:
    (i) The HHA has been imposed an alternative sanction or sanctions 
and termination has not been imposed.
    (ii) The HHA has submitted a plan of correction approved by CMS.
    (iii) The HHA agrees to repay the Federal government payments 
received under this provision if corrective action

[[Page 67170]]

is not taken in accordance with the approved plan and timetable for 
corrective action.
    (2) CMS may terminate the HHA's provider agreement any time if the 
criteria in paragraph (a)(1) of this section are not met.
    (b) Cessation of payments for new admissions. If termination is 
imposed, either on its own or in addition to an alternative sanction or 
sanctions, or if any of the criteria set forth in paragraph (a)(1) of 
this section are not met, the HHA will receive no Medicare payments, as 
applicable, for new admissions following the last day of the survey.
    (c) Failure to achieve compliance with the conditions of 
participation. If the HHA does not achieve compliance with the 
conditions of participation by the end of the period specified in 
paragraph (a) of this section, CMS will terminate the provider 
agreement of the HHA in accordance with Sec.  488.865.

Sec.  488.865  Termination of provider agreement.

    (a) Effect of termination by CMS. Termination of the provider 
agreement ends--
    (1) Payment to the HHA; and
    (2) Any alternative sanction(s).
    (b) Basis for termination. CMS terminates an HHA's provider 
agreement under any one of the following conditions--
    (1) The HHA is not in compliance with the conditions of 
participation.
    (2) The HHA fails to submit an acceptable plan of correction within 
the timeframe specified by CMS.
    (3) The HHA fails to relinquish control to the temporary manager, 
if that sanction is imposed by CMS.
    (4) The HHA fails to meet the eligibility criteria for continuation 
of payment as set forth in Sec.  488.860(a)(1).
    (c) Notice. CMS notifies the HHA and the public of the termination, 
in accordance with procedures set forth in Sec.  489.53 of this 
chapter.
    (d) Procedures for termination. CMS terminates the provider 
agreement in accordance with procedures set forth in Sec.  489.53 of 
this chapter.
    (e) Appeal. An HHA may appeal the termination of its provider 
agreement by CMS in accordance with part 498 of this chapter.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
14. The authority citation continues to read as follows:

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

0
15. Section 489.53 is amended by adding paragraphs (a)(17) and 
(d)(2)(iii) to read as follows:

Sec.  489.53  Termination by CMS.

    (a) * * *
    (17) In the case of an HHA, it failed to correct any deficiencies 
within the required time frame.
* * * * *
    (d) * * *
    (2) * * *
    (iii) Home health agencies (HHAs). For an HHA with deficiencies 
that pose immediate jeopardy to the health and safety of patients, CMS 
gives notice to the HHA at least 2 days before the effective date of 
termination of the provider agreement.
* * * * *

PART 498-APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT 
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT 
AFFECT THE PARTICIPATION OF ICFS/MR AND CERTAIN NFs IN THE MEDICAID 
PROGRAM

0
16. The authority citation for part 498 continues to read as follows:

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

0
17. Section 498.3 is amended by revising paragraphs (b)(13), (b)(14) 
introductory text, (b)(14)(i), and (d)(10) to read as follows:

Sec.  498.3  Scope and applicability.

* * * * *
    (b) * * *
    (13) Except as provided at paragraph (d)(12) of this section for 
SNFs, NFs, and HHAs the finding of noncompliance leading to the 
imposition of enforcement actions specified in Sec.  488.406 or Sec.  
488.740 of this chapter, but not the determination as to which sanction 
was imposed. The scope of review on the imposition of a civil money 
penalty is specified in Sec.  488.438(e) of this chapter.
    (14) The level of noncompliance found by CMS in a SNF, NF, or HHA 
but only if a successful challenge on this issue would affect--
    (i) The range of civil money penalty amounts that CMS could collect 
(for SNFs or NFs, the scope of review during a hearing on imposition of 
a civil money penalty is set forth in Sec.  488.438(e) of this 
chapter); or
* * * * *
    (d) * * *
    (10) For a SNF, NF, or HHA--
    (i) The finding that the provider's deficiencies pose immediate 
jeopardy to the health or safety of the residents or patients;
    (ii) Except as provided in paragraph (b)(13) of this section, a 
determination by CMS as to the provider's level of noncompliance; and
    (iii) For SNFs and NFs, the imposition of State monitoring.
* * * * *

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

    Dated: October 24, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 25, 2012.
Kathleen Sebelius,
Secretary.
[FR Doc. 2012-26904 Filed 11-7-12; 8:45 am]
BILLING CODE 4120-01-P
```