Vol. 78 Wednesday, 

No. 128 July 3, 2013 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Part 431 

Medicare and Medicaid Programs; Home Health Prospective Payment 

System Rate Update for CY 2014, Home Health Quality Reporting 

Requirements, and Cost Allocation of Home Health Survey Expenses; 

Proposed Rule 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40272 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 431 

[CMS–1450–P] 

RIN 0938–AR52 

Medicare and Medicaid Programs; 

Home Health Prospective Payment 

System Rate Update for CY 2014, 

Home Health Quality Reporting 

Requirements, and Cost Allocation of 

Home Health Survey Expenses 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

update the Home Health Prospective 

Payment System (HH PPS) rates, 

including the national, standardized 60- 

day episode payment rates, the national 

per-visit rates, the low-utilization 

payment adjustment (LUPA) add-on, the 

nonroutine medical supplies (NRS) 

conversion factor, and outlier payments 

under the Medicare prospective 

payment system for home health 

agencies (HHAs), effective January 1, 

2014. As required by the Affordable 

Care Act, this rule also proposes 

rebasing adjustments, with a 4-year 

phase-in, to the national, standardized 

60-day episode payment rates; the 

national per-visit rates; and the NRS 

conversion factor. Finally, the proposed 

rule would also establish home health 

quality reporting requirements for CY 

2014 payment and subsequent years and 

would clarify that a state Medicaid 

program must provide that, in certifying 

home health agencies, the state’s 

designated survey agency must carry out 

certain other responsibilities that 

already apply to surveys of nursing 

facilities and Intermediate Care 

Facilities for Individuals with 

Intellectual Disabilities (ICF–IID), 

including sharing in the cost of HHA 

surveys. For that portion of costs 

attributable to Medicare and Medicaid, 

we would assign 50 percent to Medicare 

and 50 percent to Medicaid, the 

standard method that CMS and states 

use in the allocation of expenses related 

to surveys of SNF/NF nursing homes. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on August 26, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–1450–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–1450– 

P, P.O. Box 8016, Baltimore, MD 21244– 

8016. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1450–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244– 

1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Kristine Chu, (410) 786–8953, for 

information about rebasing and the HH 

payment reform study and report. Jenny 

Filipovits, (410) 786–8141, for 

information about cost allocation of 

survey expenses. Mollie Knight, (410) 

786–7948, for information about the HH 

market basket. Hillary Loeffler, (410) 

786–0456, for general information about 

the HH PPS. Joan Proctor, (410) 786– 

0949, for information about the HH PPS 

Grouper and ICD–10 Conversion. Kim 

Roche, (410) 786–3524, for information 

about the HH quality reporting program. 

Lori Teichman, (410) 786–6684, for 

information about HH CAHPS®. 

SUPPLEMENTARY INFORMATION: Inspection 

of Public Comments: All comments 

received before the close of the 

comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. EST. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

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. Provisions of the Proposed Rule 

A. Proposed ICD–9–CM Grouper 

Refinements, Effective January 1, 2014 

B. International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM) Conversion and Diagnosis 

Reporting on Home Health Claims 

1. International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM) Conversion 

2. Diagnosis Reporting on Home Health 

Claims 

C. Proposed Adjustment to the HH PPS 

Case-Mix Weights 

D. Rebasing the National, Standardized 60- 

day Episode Payment Rate, LUPA PerVerDate Mar<15>2010 19:27 Jul 02, 2013 Jkt 229001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 E:\FR\FM\03JYP2.SGM 03JYP2

tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40273 

Visit Payment Amounts, and Nonroutine 

Medical Supply (NRS) Conversion Factor 

1. Rebasing the National, Standardized 60- 

day Episode Payment Rate 

2. Rebasing the Low-Utilization Payment 

Adjustment (LUPA) Per-Visit Payment 

Amounts 

3. Rebasing the Nonroutine Medical 

Supply (NRS) Conversion Factor 

E. Proposed CY 2014 Rate Update 

1. Proposed CY 2014 Home Health Market 

Basket Update 

2. Home Health Care Quality Reporting 

Program 

3. Proposed Home Health Wage Index 

4. Proposed CY 2014 Annual Payment 

Update 

a. National, Standardized 60-Day Episode 

Payment Rate 

b. Proposed CY 2014 National, 

Standardized 60-Day Episode Payment 

Rate 

c. Proposed CY 2014 National Per-Visit 

Rates 

d. Proposed Low-Utilization Payment 

Adjustment (LUPA) Add-On Factor 

e. Proposed Nonroutine Medical Supply 

(NRS) Conversion Factor and Relative 

Weights 

5. Rural Add-On 

F. Outlier Policy 

1. Background 

2. Regulatory Updates 

3. Statutory Updates 

4. Loss-Sharing Ratio and Fixed Dollar 

Loss (FDL) Ratio 

5. Outlier Relationship to the Home Health 

Study and Report 

G. Payment Reform: Home Health Study 

and Report 

H. Cost Allocation of Survey Expenses 

IV. Collection of Information Requirements 

V. Response to Comments 

VI. Regulatory Impact Analysis 

VII. Federalism Analysis 

Regulations Text 

Acronyms 

In addition, because of the many 

terms to which we refer by abbreviation 

in this proposed rule, we are listing 

these abbreviations and their 

corresponding terms in alphabetical 

order below: 

ACA The Affordable Care Act. 

ACH LOS Acute care hospital length of 

stay. 

ADL Activities of daily living. 

AHRQ Agency for Healthcare Research and 

Quality. 

APU Annual payment update. 

BBA Balanced Budget Act of 1997 (Pub. L. 

105–33, enacted August 5, 1997). 

BBRA Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 1999 

(Pub. L. 106–113, enacted November 29, 

1999). 

CAD Coronary artery disease. 

CAH Critical access hospital. 

CAHPS® Consumer assessment of 

healthcare providers and systems. 

CBSA Core-based statistical area. 

CASPER Certification and survey provider 

enhanced reports. 

CHF Congestive heart failure. 

CMI Case-mix index. 

CMP Civil monetary penalties. 

CMS Centers for Medicare & Medicaid 

Services. 

CoPs Conditions of participation. 

COPD Chronic obstructive pulmonary 

disease. 

CVD Cardiovascular disease. 

CY Calendar year. 

DG Diagnostic group. 

DHHS Department of Health and Human 

Services. 

DM Diabetes mellitus. 

DME Durable medical equipment. 

DRA Deficit Reduction Act of 2005 (Pub. L. 

109–171, enacted February 8, 2006). 

FDL Fixed dollar loss. 

FFP Federal financial participation. 

FI Fiscal intermediaries. 

FR Federal Register 

FY Fiscal year. 

GEM General equivalency mapping. 

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. 

HHAs Home health agencies. 

HHCAHPS® Home Health Care Consumer 

Assessment of Healthcare Providers and 

Systems Survey. 

HH PPS Home health prospective payment 

system. 

HHQRP Home Health Quality Reporting 

Program. 

HHRG Home health resource group. 

HIPAA Health Insurance Portability 

Accountability Act of 1996 (Pub. L. 104– 

191, enacted August 21, 1996). 

HIPPS Health insurance prospective 

payment system. 

ICD–9 International Classification of 

Diseases, 9th Edition. 

ICD–9–CM International Classification of 

Diseases, 9th Edition, Clinical 

Modification. 

ICD–10 International Classification of 

Diseases, 10th Edition. 

ICD–10–CM International Classification of 

Diseases, 10th Edition, Clinical 

Modification. 

ICF–IID Intermediate care facilities for 

individuals with intellectual disabilities. 

IH Inpatient hospitalization. 

IPPS Acute Inpatient Prospective Payment 

System. 

IRF Inpatient rehabilitation facility. 

LTCH Long-term care hospital. 

LUPA Low-utilization payment adjustment. 

MAC Medicare Administrative Contractor. 

MAP Measure applications partnership. 

MedPAC Medicare Payment Advisory 

Commission. 

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. 

NF Nursing facility. 

NQF National Quality Forum. 

NRS Non-routine supplies. 

OASIS Outcome & Assessment Information 

Set. 

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. 

P4R Pay-for-reporting. 

PAC–PRD Post-Acute Care Payment Reform 

Demonstration. 

PEP Partial episode payment [Adjustment]. 

POC Plan of care. 

PRRB Provider Reimbursement Review 

Board. 

PT Physical therapy. 

QAP Quality assurance plan. 

QIES CMS Health Care Quality 

Improvement System. 

PRRB Provider Reimbursement Review 

Board. 

RAP Request for anticipated payment. 

RF Renal failure. 

RFA Regulatory Flexibility Act (Pub. L. 96– 

354, enacted on September 19, 1980). 

RHHIs Regional home health 

intermediaries. 

RIA Regulatory impact analysis. 

SCHIP State Children’s Health Insurance 

Program. 

SLP Speech-language pathology. 

SN Skilled nursing. 

SNF Skilled nursing facility. 

TEP Technical Expert Panel. 

UMRA Unfunded Mandates Reform Act of 

1995 (Pub. L. 104–04, enacted on March 

22, 1995). 

I. Executive Summary 

A. Purpose 

This rule proposes updates to the 

payment rates for home health agencies 

(HHAs) for calendar year (CY) 2014, as 

required under section 1895(b) of the 

Social Security Act (the Act), including 

the rebasing adjustments to the national, 

standardized 60-day episode payment 

rate, the national per-visit rates, the 

non-routine supplies (NRS) conversion 

factor, required under section 3131(a) of 

the Patient Protection and Affordable 

Care Act of 2010 (Pub. L. 111–148), as 

amended by the Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152) (collectively referred 

to as the ‘‘Affordable Care Act’’). This 

proposed rule would also address: 

International Classification of Diseases, 

9th Edition (ICD–9) grouper 

refinements; implementation of the 

International Classification of Diseases, 

10th Edition (ICD–10); an adjustment to 

the case-mix weights; updates to the 

payment rates by the HH payment 

update percentage (market basket); 

adjustments for geographic differences 

in wage levels; outlier payments; the 

submission of quality data; and 

additional payments for services 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40274 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

provided in rural areas. This proposed 

rule would also clarify state Medicaid 

program requirements related to the cost 

of HHA surveys. 

B. Summary of the Major Provisions 

We recently completed a thorough 

review of the ICD–9–CM codes included 

in our home health prospective payment 

system (HH PPS) Grouper as part of our 

work transitioning from the ICD–9–CM 

to ICD–10–CM code set. As a result of 

that review, we identified two categories 

of codes, made up of 170 ICD–9–CM 

diagnosis codes, which we are 

proposing to remove from the HH PPS 

Grouper, effective January 1, 2014. In 

addition, we are proposing to 

implement, on October 1, 2014, the use 

of ICD–10–CM codes within our HH 

PPS Grouper. 

Section 3131(a) of the Affordable Care 

Act requires that, starting in CY 2014, 

we apply an adjustment to the national, 

standardized 60-day episode payment 

rate and other applicable payment 

amounts to reflect factors such as 

changes in the number of visits in an 

episode, the mix of services in an 

episode, the level of intensity of services 

in an episode, the average cost of 

providing care per episode, and other 

relevant factors. In addition, we must 

phase-in any adjustment over a 4-year 

period in equal increments, not to 

exceed 3.5 percent of the amount (or 

amounts) in any given year, and be fully 

implemented by CY 2017. As such, we 

are proposing rebasing adjustments to 

the national, standardized 60-day 

episode payment rate, the national pervisit rates, the NRS conversion factor, 

and an update to the LUPA add-on 

amount. 

Section 3131(d) of the Affordable Care 

Act also requires us to report on 

whether a home health care access 

problem exists for patients with high 

severity of illness, low income patients, 

and/or patients in medically 

underserved areas and assess the costs 

associated with providing access to care 

for these populations. It also gives us 

the authority to analyze other areas of 

concern in the HH PPS and allows for 

demonstration authority to test the PPS 

changes. Finally, it requires us to 

recommend HH PPS improvements, if 

needed, based on the study findings 

and/or necessary additional analysis, in 

a Report to Congress due in March 2014. 

Our contractor held a Technical Expert 

Panel (TEP) meeting and a special Open 

Door Forum to gather input from the 

industry on the three vulnerable 

populations. We are currently 

conducting surveys of HHAs and 

physicians on access to care, and 

performing analyses of cost report and 

claims data to determine whether 

patient characteristics/types may be 

under-reimbursed. We will continue to 

collaborate with stakeholders, soliciting 

them for their thoughts, and provide 

updates on our progress. 

We also propose to continue to use 

Outcome & Assessment Information Set 

(OASIS) data, claims data, and patient 

experience of care data, as forms of 

quality data to meet the requirement 

that HHAs submit data appropriate for 

the measurement of HH care quality for 

annual payment update (APU) 2014 and 

each subsequent year thereafter until 

further notice. Additionally, we propose 

two claims-based measures of HH 

patients who were recently hospitalized, 

as these patients are at an increased risk 

of additional acute care hospital use. We 

also propose to reduce the number of 

HH quality measures currently reported 

to HHAs. Lastly, we propose to review 

each state’s allocation of costs for HHA 

surveys for compliance with OMB 

Circular A–87 principles and the 

statutes in 2014 with the goal of 

ensuring full compliance no later than 

July 2014. This proposed rule would 

clarify that a state Medicaid program 

must provide that, in certifying HHAs, 

the state’s designated survey agency 

must carry out certain other 

responsibilities that already apply to 

surveys of nursing facilities (NF) and 

Intermediate Care Facilities for 

Individuals with Intellectual Disabilities 

(ICF–IID), including sharing in the cost 

of HHA surveys. For that portion of 

costs attributable to Medicare and 

Medicaid, we would assign 50 percent 

to Medicare and 50 percent to Medicaid. 

This is the standard method that CMS 

and states use in the allocation of 

expenses related to surveys of skilled 

nursing facility (SNF)/NF nursing 

homes. 

C. Summary of Costs and Benefits 

Provision description Total costs Total benefits Transfers 

CY 2014 HH PPS Payment Rate Update.N/A The benefits of this proposed rule include paying 

more accurately for the delivery of home 

health services.

The overall economic impact of this proposed 

rule is an estimated $290 million in decreased 

payments to HHAs. 

Cost Allocation of HHA 

Survey Expenses.

N/A The benefits of this rule include clarifying that 

state Medicaid programs must share in the 

cost of HHA surveys. For that portion of costs 

attributable to Medicare and Medicaid, we 

would assign 50 percent to Medicare and 50 

percent to Medicaid.

If implemented in the beginning of FY 2014 we 

project that aggregate Medicare and Medicaid 

home health survey costs in FY 2014 would 

be approximately $37.2 million. As these costs 

would be assigned 50 percent to Medicare 

and 50 percent to Medicaid for each state, the 

anticipated national state Medicaid share 

would amount to $18.6 million. The cost of 

surveys is treated as a Medicaid administrative 

cost, reimbursable at the professional staff 

rate of 75 percent. At this rate the maximum 

net state costs for Medicaid matching funds incurred in FY 2014 would be approximately 

$4.65 million, spread out across all states and 

2 territories. However, the proposed adherence date of July FY 2014 would reduce the 

Medicaid aggregate share to $4.65 million and 

the state Medicaid share to approximately 

$1.16 million. Some state Medicaid programs 

may currently pay for HHA surveys to some 

extent, but the amount is unknown. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40275 

II. Background 

A. Statutory Background 

Home Health PPS 

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 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 that includes all costs 

for HH services that would have been 

covered and paid for on a reasonable 

cost basis had the HH PPS not been in 

effect 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 

compared to the applicable national 

average level. Under section 

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

may be the factors used under section 

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

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

Secretary the option to make additions 

or adjustments to the payment amount 

otherwise paid in the case of outliers 

due to unusual variations in the type or 

amount of medically necessary care. 

Section 3131(b)(2) of the Affordable 

Care Act 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 CY 2007 HH PPS final rule (71 

FR 65884, 65935), we implemented the 

pay-for-reporting requirement of the 

DRA, which was codified at 

§ 484.225(h) and (i). The pay-forreporting 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(c) 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) for 

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. 

Section 3131(a) of the Affordable Care 

Act mandates that, starting in CY 2014, 

the Secretary must apply an adjustment 

to the national, standardized 60-day 

episode payment rate and other 

amounts applicable under section 

1895(b)(3)(A)(i)(III) of the Act to reflect 

factors such as changes in the number 

of visits in an episode, the mix of 

services in an episode, the level of 

intensity of services in an episode, the 

average cost of providing care per 

episode, and other relevant factors. In 

addition, section 3131(a) of the 

Affordable Care Act mandates that this 

rebasing must be phased-in over a 4- 

year period in equal increments, not to 

exceed 3.5 percent of the amount (or 

amounts) in any given year applicable 

under section 1895(b)(3)(A)(i)(III) of the 

Act and be fully implemented in CY 

2017. 

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 (PT), speech-language 

pathology (SLP), occupational therapy 

(OT), and medical social services 

(MSS)). 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. 

of this proposed rule). Payment for 

durable medical equipment (DME) 

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 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40276 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

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. Specifically, 

the 60-day episode base rate is 

multiplied by the case-mix weight when 

determining 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 LUPA. 

Medicare also adjusts the national, 

standardized 60-day episode payment 

rate for certain intervening events that 

are subject to a partial episode payment 

adjustment (PEP adjustment). For 

certain cases that exceed a specific cost 

threshold, an outlier adjustment may 

also be available. 

C. Updates to the HH PPS 

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

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. The August 29, 2007 

final rule with comment period set forth 

an update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HHAs for CY 2008. 

The CY 2008 rule included an analysis 

performed on CY 2005 HH claims data, 

which indicated a 12.78 percent 

increase in the observed case-mix since 

2000. Case-mix represents the variations 

in conditions of the patient population 

served by the HHAs. Subsequently, a 

more detailed analysis was performed 

on the 2005 case-mix data to evaluate if 

any portion of the 12.78 percent 

increase was associated with a change 

in the actual clinical condition of HH 

patients. We examined data on 

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

predict the average case-mix weight for 

2005. We identified 8.03 percent of the 

total case-mix change as real, and 

therefore, decreased the 12.78 percent of 

total case-mix change by 8.03 percent to 

get a final nominal case-mix increase 

measure of 11.75 percent (0.1278 * (1 ¥ 

0.0803) = 0.1175). 

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

underlying change in patient health 

status, we implemented a reduction 

over 4 years in the national, 

standardized 60-day episode payment 

rates. That reduction was to be 2.75 

percent per year for 3 years beginning in 

CY 2008 and 2.71 percent for the fourth 

year in CY 2011. In the CY 2011 HH PPS 

final rule (76 FR 68532), we updated our 

analyses of case-mix change and 

finalized a reduction of 3.79 percent, 

instead of 2.71 percent, for CY 2011 and 

deferred finalizing a payment reduction 

for CY 2012 until further study of the 

case-mix change data and methodology 

was completed. 

In the CY 2012 HH PPS final rule (76 

FR 68526), we updated the 60-day 

national episode rates and the national 

per-visit rates. In addition, as discussed 

in the CY 2012 HH PPS 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 casemix. 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. 

In the CY 2013 HH PPS final rule (77 

FR 67078), we implemented a 1.32 

percent reduction to the payment rates 

for CY 2013 to account for nominal 

case-mix growth through 2010. When 

taking into account the total measure of 

case-mix change (23.90 percent) and the 

15.97 percent of total case-mix change 

estimated as real from 2000 to 2010, we 

obtained a final nominal case-mix 

change measure of 20.08 percent from 

2000 to 2010 (0.2390 * (1 ¥ 0.1597) = 

0.2008). To fully account for the 

remainder of the 20.08 percent increase 

in nominal case-mix beyond that which 

was 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; however, we moved 

forward with the 1.32 percent payment 

reduction to the national, standardized 

60-day episode rates in the CY 2012 HH 

PPS final rule (76 FR 68532). 

III. Provisions of the Proposed Rule 

A. Proposed ICD–9–CM Grouper 

Refinements, Effective January 1, 2014 

CMS clinical staff (along with clinical 

and coding staff from Abt Associates 

(our support contractor) and 3M (our 

HH PPS grouper maintenance 

contractor), recently completed a 

thorough review of the ICD–9–CM codes 

included in our HH PPS Grouper. The 

HH PPS Grouper, which is used by the 

CMS OASIS submission system, is the 

official grouping software of the HH 

PPS. As a result of that review, we 

identified two categories of codes, made 

up of 170 ICD–9–CM diagnosis codes, 

which we are proposing to remove from 

the HH PPS Grouper, effective January 

1, 2014. The first category (Category 1 in 

Table 2) includes codes that we propose 

to remove from the HH PPS grouper 

based upon clinical judgment that the 

ICD–9–CM code is ‘‘too acute’’, meaning 

that this condition could not be 

appropriately cared for in a HH setting. 

These codes likely reflect conditions the 

patient had prior to the HH admission 

(for example, while being treated in a 

hospital setting). It is anticipated that 

the condition progressed to a less acute 

state, or is completely resolved for the 

patient to be cared for in the home 

setting (and that often times another 

diagnosis code would have been a more 

accurate reflection of the patient’s 

condition in the home). The second 

category (Category 2 in Table 2) 

includes codes that we propose to 

remove from the HH PPS Grouper based 

upon clinical judgment that the 

condition would not require HH 

intervention, would not impact the HH 

plan of care (POC), or would not result 

in additional resource use when 

providing HH services to the patient. 

Table 2 comprises ICD–9–CM codes that 

we propose to remove from the HH PPS 

grouper, effective January 1, 2014, along 

with the category classification. 

TABLE 2—ICD–9–CM CODES REMOVED FROM THE HH PPS GROUPER AS OF JANUARY 1, 2014 

ICD–9–CM 

Code ICD–9–CM Long description Category 

003.1 .............................. Salmonella septicemia ............................................................................................................................ 1 

250.20 ............................ Diabetes with hyperosmolarity, type II or unspecified type, not stated as uncontrolled ........................ 1 

250.21 ............................ Diabetes with hyperosmolarity, type I [juvenile type], not stated as uncontrolled ................................. 1 

250.22 ............................ Diabetes with hyperosmolarity, type II or unspecified type, uncontrolled .............................................. 1 

250.23 ............................ Diabetes with hyperosmolarity, type I [juvenile type], uncontrolled ........................................................ 1 

250.30 ............................ Diabetes with other coma, type II or unspecified type, not stated as uncontrolled ............................... 1 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40277 

TABLE 2—ICD–9–CM CODES REMOVED FROM THE HH PPS GROUPER AS OF JANUARY 1, 2014—Continued 

ICD–9–CM 

Code ICD–9–CM Long description Category 

250.31 ............................ Diabetes with other coma, type I [juvenile type], not stated as uncontrolled ......................................... 1 

250.32 ............................ Diabetes with other coma, type II or unspecified type, uncontrolled ..................................................... 1 

250.33 ............................ Diabetes with other coma, type I [juvenile type], uncontrolled ............................................................... 1 

282.42 ............................ Sickle-cell thalassemia with crisis ........................................................................................................... 1 

282.5 .............................. Sickle-cell trait ......................................................................................................................................... 2 

282.62 ............................ Hb-SS disease with crisis ....................................................................................................................... 1 

282.64 ............................ Sickle-cell/Hb-C disease with crisis ........................................................................................................ 1 

282.69 ............................ Other sickle-cell disease with crisis ........................................................................................................ 1 

285.1 .............................. Acute posthemorrhagic anemia .............................................................................................................. 1 

289.52 ............................ Splenic sequestration .............................................................................................................................. 1 

333.81 ............................ Blepharospasm ....................................................................................................................................... 2 

333.84 ............................ Organic writers’ cramp ............................................................................................................................ 2 

333.93 ............................ Benign shuddering attacks ...................................................................................................................... 2 

333.94 ............................ Restless legs syndrome .......................................................................................................................... 2 

348.5 .............................. Cerebral edema ...................................................................................................................................... 1 

401.0 .............................. Malignant essential hypertension ............................................................................................................ 1 

414.12 ............................ Dissection of coronary artery .................................................................................................................. 1 

447.2 .............................. Rupture of artery ..................................................................................................................................... 1 

493.21 ............................ Chronic obstructive asthma with status asthmaticus .............................................................................. 1 

530.21 ............................ Ulcer of esophagus with bleeding ........................................................................................................... 1 

530.4 .............................. Perforation of esophagus ........................................................................................................................ 1 

530.7 .............................. Gastroesophageal laceration-hemorrhage syndrome ............................................................................. 1 

530.81 ............................ Esophageal reflux ................................................................................................................................... 2 

530.82 ............................ Esophageal hemorrhage ......................................................................................................................... 1 

531.00 ............................ Acute gastric ulcer with hemorrhage, without mention of obstruction .................................................... 1 

531.01 ............................ Acute gastric ulcer with hemorrhage, with obstruction ........................................................................... 1 

531.10 ............................ Acute gastric ulcer with perforation, without mention of obstruction ...................................................... 1 

531.11 ............................ Acute gastric ulcer with perforation, with obstruction ............................................................................. 1 

531.20 ............................ Acute gastric ulcer with hemorrhage and perforation, without mention of obstruction .......................... 1 

531.21 ............................ Acute gastric ulcer with hemorrhage and perforation, with obstruction ................................................. 1 

531.31 ............................ Acute gastric ulcer without mention of hemorrhage or perforation, with obstruction ............................. 1 

531.40 ............................ Chronic or unspecified gastric ulcer with hemorrhage, without mention of obstruction ......................... 1 

531.41 ............................ Chronic or unspecified gastric ulcer with hemorrhage, with obstruction ................................................ 1 

531.50 ............................ Chronic or unspecified gastric ulcer with perforation, without mention of obstruction ........................... 1 

531.51 ............................ Chronic or unspecified gastric ulcer with perforation, with obstruction .................................................. 1 

531.60 ............................ Chronic or unspecified gastric ulcer with hemorrhage and perforation, without mention of obstruction 1 

531.61 ............................ Chronic or unspecified gastric ulcer with hemorrhage and perforation, with obstruction ...................... 1 

531.71 ............................ Chronic gastric ulcer without mention of hemorrhage or perforation, with obstruction .......................... 1 

531.91 ............................ Gastric ulcer, unspecified as acute or chronic, without mention of hemorrhage or perforation, with 

obstruction.

1 

532.00 ............................ Acute duodenal ulcer with hemorrhage, without mention of obstruction ............................................... 1 

532.01 ............................ Acute duodenal ulcer with hemorrhage, with obstruction ....................................................................... 1 

532.10 ............................ Acute duodenal ulcer with perforation, without mention of obstruction .................................................. 1 

532.11 ............................ Acute duodenal ulcer with perforation, with obstruction ......................................................................... 1 

532.20 ............................ Acute duodenal ulcer with hemorrhage and perforation, without mention of obstruction ...................... 1 

532.21 ............................ Acute duodenal ulcer with hemorrhage and perforation, with obstruction ............................................. 1 

532.31 ............................ Acute duodenal ulcer without mention of hemorrhage or perforation, with obstruction ......................... 1 

532.40 ............................ Chronic or unspecified duodenal ulcer with hemorrhage, without mention of obstruction .................... 1 

532.41 ............................ Chronic or unspecified duodenal ulcer with hemorrhage, with obstruction ............................................ 1 

532.50 ............................ Chronic or unspecified duodenal ulcer with perforation, without mention of obstruction ....................... 1 

532.51 ............................ Chronic or unspecified duodenal ulcer with perforation, with obstruction .............................................. 1 

532.60 ............................ Chronic or unspecified duodenal ulcer with hemorrhage and perforation, without mention of obstruction.1 

532.61 ............................ Chronic or unspecified duodenal ulcer with hemorrhage and perforation, with obstruction .................. 1 

532.71 ............................ Chronic duodenal ulcer without mention of hemorrhage or perforation, with obstruction ..................... 1 

532.91 ............................ Duodenal ulcer, unspecified as acute or chronic, without mention of hemorrhage or perforation, with 

obstruction.

1 

533.00 ............................ Acute peptic ulcer of unspecified site with hemorrhage, without mention of obstruction ...................... 1 

533.01 ............................ Acute peptic ulcer of unspecified site with hemorrhage, with obstruction ............................................. 1 

533.10 ............................ Acute peptic ulcer of unspecified site with perforation, without mention of obstruction ........................ 1 

533.11 ............................ Acute peptic ulcer of unspecified site with perforation, with obstruction ................................................ 1 

533.20 ............................ Acute peptic ulcer of unspecified site with hemorrhage and perforation, without mention of obstruction.1 

533.21 ............................ Acute peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction .................... 1 

533.31 ............................ Acute peptic ulcer of unspecified site without mention of hemorrhage and perforation, with obstruction.1 

533.40 ............................ Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, without mention of obstruction.1 

533.41 ............................ Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, with obstruction .................. 1 

533.50 ............................ Chronic or unspecified peptic ulcer of unspecified site with perforation, without mention of obstruction.1 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40278 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

TABLE 2—ICD–9–CM CODES REMOVED FROM THE HH PPS GROUPER AS OF JANUARY 1, 2014—Continued 

ICD–9–CM 

Code ICD–9–CM Long description Category 

533.51 ............................ Chronic or unspecified peptic ulcer of unspecified site with perforation, with obstruction ..................... 1 

533.60 ............................ Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, without 

mention of obstruction.

1 

533.61 ............................ Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction.1 

533.71 ............................ Chronic peptic ulcer of unspecified site without mention of hemorrhage or perforation, with obstruction.1 

533.91 ............................ Peptic ulcer of unspecified site, unspecified as acute or chronic, without mention of hemorrhage or 

perforation, with obstruction.

1 

534.00 ............................ Acute gastrojejunal ulcer with hemorrhage, without mention of obstruction .......................................... 1 

534.01 ............................ Acute gastrojejunal ulcer, with hemorrhage, with obstruction ................................................................ 1 

534.10 ............................ Acute gastrojejunal ulcer with perforation, without mention of obstruction ............................................ 1 

534.11 ............................ Acute gastrojejunal ulcer with perforation, with obstruction ................................................................... 1 

534.20 ............................ Acute gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction ................ 1 

534.21 ............................ Acute gastrojejunal ulcer with hemorrhage and perforation, with obstruction ....................................... 1 

534.31 ............................ Acute gastrojejunal ulcer without mention of hemorrhage or perforation, with obstruction ................... 1 

534.40 ............................ Chronic or unspecified gastrojejunal ulcer with hemorrhage, without mention of obstruction ............... 1 

534.41 ............................ Chronic or unspecified gastrojejunal ulcer, with hemorrhage, with obstruction ..................................... 1 

534.50 ............................ Chronic or unspecified gastrojejunal ulcer with perforation, without mention of obstruction ................. 1 

534.51 ............................ Chronic or unspecified gastrojejunal ulcer with perforation, with obstruction ........................................ 1 

534.60 ............................ Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction.1 

534.61 ............................ Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, with obstruction ............ 1 

534.71 ............................ Chronic gastrojejunal ulcer without mention of hemorrhage or perforation, with obstruction ................ 1 

534.91 ............................ Gastrojejunal ulcer, unspecified as acute or chronic, without mention of hemorrhage or perforation, 

with obstruction.

1 

535.01 ............................ Acute gastritis, with hemorrhage ............................................................................................................ 1 

535.11 ............................ Atrophic gastritis, with hemorrhage ........................................................................................................ 1 

535.21 ............................ Gastric mucosal hypertrophy, with hemorrhage ..................................................................................... 1 

535.31 ............................ Alcoholic gastritis, with hemorrhage ....................................................................................................... 1 

535.41 ............................ Other specified gastritis, with hemorrhage ............................................................................................. 1 

535.51 ............................ Unspecified gastritis and gastroduodenitis, with hemorrhage ................................................................ 1 

535.61 ............................ Duodenitis, with hemorrhage .................................................................................................................. 1 

535.71 ............................ Eosinophilic gastritis, with hemorrhage .................................................................................................. 1 

536.1 .............................. Acute dilatation of stomach ..................................................................................................................... 1 

537.3 .............................. Other obstruction of duodenum .............................................................................................................. 1 

537.4 .............................. Fistula of stomach or duodenum ............................................................................................................ 1 

537.6 .............................. Hourglass stricture or stenosis of stomach ............................................................................................ 1 

537.83 ............................ Angiodysplasia of stomach and duodenum with hemorrhage ................................................................ 1 

537.84 ............................ Dielulafoy lesion (hemorrhagic) of stomach and duodenum .................................................................. 1 

540.0 .............................. Acute appendicitis with generalized peritonitis ....................................................................................... 1 

540.1 .............................. Acute appendicitis with peritoneal abscess ............................................................................................ 1 

540.9 .............................. Acute appendicitis without mention of peritonitis .................................................................................... 1 

541 ................................. Appendicitis, unqualified ......................................................................................................................... 1 

542 ................................. Other appendicitis ................................................................................................................................... 1 

543.0 .............................. Hyperplasia of appendix (lymphoid) ....................................................................................................... 1 

557.0 .............................. Acute vascular insufficiency of intestine ................................................................................................. 1 

560.0 .............................. Intussusception ....................................................................................................................................... 1 

560.1 .............................. Paralytic ileus .......................................................................................................................................... 1 

560.2 .............................. Volvulus ................................................................................................................................................... 1 

560.81 ............................ Intestinal or peritoneal adhesions with obstruction (postoperative) (postinfection) ................................ 1 

560.89 ............................ Other specified intestinal obstruction ...................................................................................................... 1 

560.9 .............................. Unspecified intestinal obstruction ........................................................................................................... 1 

562.02 ............................ Diverticulosis of small intestine with hemorrhage ................................................................................... 1 

562.03 ............................ Diverticulitis of small intestine with hemorrhage ..................................................................................... 1 

562.12 ............................ Diverticulosis of colon with hemorrhage ................................................................................................. 1 

562.13 ............................ Diverticulitis of colon with hemorrhage ................................................................................................... 1 

567.0 .............................. Peritonitis in infectious diseases classified elsewhere ........................................................................... 1 

567.1 .............................. Pneumococcal peritonitis ........................................................................................................................ 1 

567.21 ............................ Peritonitis (acute) generalized ................................................................................................................ 1 

567.22 ............................ Peritoneal abscess .................................................................................................................................. 1 

567.23 ............................ Spontaneous bacterial peritonitis ............................................................................................................ 1 

567.29 ............................ Other suppurative peritonitis ................................................................................................................... 1 

567.31 ............................ Psoas muscle abscess ........................................................................................................................... 1 

567.38 ............................ Other retroperitoneal abscess ................................................................................................................. 1 

567.81 ............................ Choleperitonitis ........................................................................................................................................ 1 

567.82 ............................ Sclerosing mesenteritis ........................................................................................................................... 1 

567.89 ............................ Other specified peritonitis ....................................................................................................................... 1 

567.9 .............................. Unspecified peritonitis ............................................................................................................................. 1 

568.81 ............................ Hemoperitoneum (nontraumatic) ............................................................................................................ 1 

569.3 .............................. Hemorrhage of rectum and anus ............................................................................................................ 1 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40279 

TABLE 2—ICD–9–CM CODES REMOVED FROM THE HH PPS GROUPER AS OF JANUARY 1, 2014—Continued 

ICD–9–CM 

Code ICD–9–CM Long description Category 

569.43 ............................ Anal sphincter tear-old ............................................................................................................................ 2 

569.83 ............................ Perforation of intestine ............................................................................................................................ 1 

569.85 ............................ Angiodysplasia of intestine with hemorrhage ......................................................................................... 1 

569.86 ............................ Dieulafoy lesion (hemorrhagic) of intestine ............................................................................................ 1 

572.0 .............................. Abscess of liver ....................................................................................................................................... 1 

572.1 .............................. Portal pyemia .......................................................................................................................................... 1 

574.00 ............................ Calculus of gallbladder with acute cholecystitis, without mention of obstruction ................................... 1 

574.01 ............................ Calculus of gallbladder with acute cholecystitis, with obstruction .......................................................... 1 

574.10 ............................ Calculus of gallbladder with other cholecystitis, without mention of obstruction ................................... 1 

574.11 ............................ Calculus of gallbladder with other cholecystitis, with obstruction ........................................................... 1 

574.21 ............................ Calculus of gallbladder without mention of cholecystitis, with obstruction ............................................. 1 

574.30 ............................ Calculus of bile duct with acute cholecystitis, without mention of obstruction ....................................... 1 

574.31 ............................ Calculus of bile duct with acute cholecystitis, with obstruction .............................................................. 1 

574.41 ............................ Calculus of bile duct with other cholecystitis, with obstruction ............................................................... 1 

574.51 ............................ Calculus of bile duct without mention of cholecystitis, with obstruction ................................................. 1 

574.60 ............................ Calculus of gallbladder and bile duct with acute cholecystitis, without mention of obstruction ............. 1 

574.61 ............................ Calculus of gallbladder and bile duct with acute cholecystitis, with obstruction .................................... 1 

574.71 ............................ Calculus of gallbladder and bile duct with other cholecystitis, with obstruction ..................................... 1 

574.80 ............................ Calculus of gallbladder and bile duct with acute and chronic cholecystitis, without mention of obstruction.1 

574.81 ............................ Calculus of gallbladder and bile duct with acute and chronic cholecystitis, with obstruction ................ 1 

574.91 ............................ Calculus of gallbladder and bile duct without cholecystitis, with obstruction ......................................... 1 

575.0 .............................. Acute cholecystitis ................................................................................................................................... 1 

575.2 .............................. Obstruction of gallbladder ....................................................................................................................... 1 

575.3 .............................. Hydrops of gallbladder ............................................................................................................................ 1 

575.4 .............................. Perforation of gallbladder ........................................................................................................................ 1 

576.1 .............................. Cholangitis ............................................................................................................................................... 1 

576.2 .............................. Obstruction of bile duct ........................................................................................................................... 1 

576.3 .............................. Perforation of bile duct ............................................................................................................................ 1 

577.0 .............................. Acute pancreatitis .................................................................................................................................... 1 

578.0 .............................. Hematemesis .......................................................................................................................................... 1 

578.9 .............................. Hemorrhage of gastrointestinal tract, unspecified .................................................................................. 1 

873.63 ............................ Broken tooth-uncomplic .......................................................................................................................... 2 

998.11 ............................ Hemorrhage complicating a procedure ................................................................................................... 1 

998.12 ............................ Hematoma complicating a procedure ..................................................................................................... 1 

998.2 .............................. Accidental puncture or laceration during a procedure, not elsewhere classified ................................... 1 

Analysis of CY 2012 claims data 

shows that the average case-mix weight 

before the removal of the codes in Table 

2 was 1.3517. It is estimated that the 

proposed removal of the 170 codes in 

Table 2 results in an average case-mix 

weight for CY 2012 of 1.3417. As 

described above, clinical judgment is 

that these codes are ‘‘too acute,’’ 

meaning that this condition could not 

be appropriately cared for in a HH 

setting (Category 1) or would not impact 

the HH POC or result in additional 

resource use (Category 2). Therefore, the 

inclusion of these diagnosis codes in the 

grouper was producing inaccurate 

overpayments. 

B. International Classification of 

Diseases, 10th Revision, Clinical 

Modification (ICD–10–CM) Conversion 

and Diagnosis Reporting on Home 

Health Claims 

1. International Classification of 

Diseases, 10th Revision, Clinical 

Modification (ICD–10–CM) Conversion 

The Compliance date for adoption of 

the ICD–10–CM and ICD–10–PCS 

Medical Data Code Set is October 1, 

2014, as announced in September 5, 

2012 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 the 

International Classification of Diseases, 

10th Edition (ICD–10–CM and ICD–10– 

PCS) Medical Data Code Sets’’ (77 FR 

54664). Under that final rule, the 

transition to ICD–10–CM is required for 

entities covered by the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) (Pub. L. 104–191, enacted 

on August 21, 1996). CMS, along with 

our support contractors, Abt Associates 

and 3M, spent the last 2 years 

implementing a process for the 

transition from the use of ICD–9–CM 

diagnosis codes to ICD–10–CM 

diagnosis codes within the HH PPS 

Grouper. As we outlined in the section 

above, we began this process with a 

review of the ICD–9–CM codes included 

in our HH PPS Grouper and identified 

certain codes that should be removed, 

and thus will not be included in our 

translation list of ICD–9–CM to ICD–10– 

CM codes. 

3M produced a translation list using 

the General Equivalency Mappings 

(GEMs) tool. That translation list, 

produced by the GEMs tool, was then 

reviewed and revised to ensure the 

included codes are appropriate for use 

in the HH setting, based upon ICD–10– 

CM coding guidance. Modifications 

included: 

• Elimination of codes with ‘‘initial 

encounter’’ extensions listed in the 

GEMs translation. ICD–10–CM codes 

that begin with S and T are used for 

reporting traumatic injuries, such as 

fractures and burns. These codes have a 

7th character that indicates whether the 

treatment is for an initial encounter, 

subsequent encounter or a sequela (a 

residual effect (condition produced) 

after the acute phase of an illness or 

injury has terminated). The GEMs 

translation mapped ICD–9–CM 

traumatic injury codes to ICD–10–CM 

codes with the 7th character for an 

initial encounter. This extension is 

intended to be used when the patient is 

receiving active treatment such as 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40280 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

surgical treatment, an emergency 

department encounter, or evaluation 

and treatment by a new physician. 

These initial encounter extension codes 

are not appropriate for care in the HH 

setting and were deleted. Code 

extensions D, E, F, G, H, J, K, M, N, P, 

Q and R indicate the patient is being 

treated for a subsequent encounter (care 

for the injury during the healing or 

recovery phase) were included in the 

translation list in place of the initial 

encounter extensions. For example, 

S72.024A ‘‘Nondisplaced fracture of 

epiphysis (separation) (upper) of right 

femur, initial encounter for closed 

fracture’’ was deleted and S72.024D, 

S72.024E, S72.024F, S72.024G, 

S72.024H, S72.024J, S72.024K, 

S72.024M, S72.024N, S72.024P, 

S27.024Q, and S72.024R were retained 

for the reporting of aftercare provided 

by the HHA. 

• Elimination of codes for nonspecific conditions when the clinician 

should be able to identify a more 

specific diagnosis based on clinical 

assessment. The initial GEMs 

translation included non-specific codes, 

for example, ICD–10–CM code L02.519 

‘‘cutaneous abscess of unspecified 

hand’’. These have been deleted from 

the translation list whenever a more 

specific diagnosis could be identified by 

the clinician performing the initial 

assessment. The example code above 

(L02.519) was deleted because the 

clinician should be able to identify 

which hand had the abscess, and 

therefore, would report the injury using 

the code that specifies the right or left 

hand. 

• The diagnostic group (DG) 

assignment of ICD–10–CM codes in the 

translation replicates the ICD–9–CM 

assignment whenever possible. Since 

ICD–9–CM to ICD–10–CM translation is 

not a 1-to-1 mapping process, there were 

cases where the DG assignment was 

ambiguous. When there was a conflict 

(such as 2 ICD–9–CM codes being 

translated to a single ICD–10–CM code 

that covered both conditions), DG 

assignment was based on clinical 

appropriateness and comparisons of 

relative resource use data (when 

available), such that the code was 

assigned to single DG that included 

other codes with similar resource use. 

A draft list of ICD–10–CM codes to be 

included in the HH PPS Grouper has 

been developed based upon the process 

outlined above and 3M, our HH PPS 

Grouper maintenance contractor, has 

begun building and testing a Grouper 

version for use starting October 1, 2014, 

when OASIS–C1, the new version of the 

OASIS assessment which will use ICD– 

10–CM diagnosis codes, will be 

implemented. The draft translation list 

is available on the CMS HHA Center 

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

Provider-Type/Home-Health-AgencyHHA-Center.html. We plan to 

participate in any ICD–10–CM provider 

outreach sessions that are scheduled 

and to provide updates, such as 

notifying HHAs of the draft translation 

list’s availability during the HH, 

Hospice, and DME Open Door Forums 

and through list-serve announcements. 

We plan to post a draft ICD–10–CM 

HH PPS Grouper via the CMS Web site 

on or before July 1, 2014. We also plan 

to share the draft ICD–10–CM HH PPS 

Grouper with those vendors that have 

registered as beta-testers in advance of 

posting the draft ICD–10 HH PPS 

Grouper on the CMS Web site. The 

purpose of early release to the beta 

testers is to identify any significant 

issues early in the process. Providers 

who are interested in enrolling as a beta 

site can obtain more information on the 

HH PPS Grouper Web site at http:// 

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

CaseMixGrouperSoftware.html. 

2. Diagnosis Reporting on Home Health 

Claims 

Adherence to coding guidelines when 

assigning diagnosis codes is required 

under HIPAA. 3M conducted analysis of 

OASIS records and claims from CY 2011 

and found that some HHAs were not 

complying with coding guidelines. 

Section 1.A.6 in the 2012 ICD–9–CM 

Coding Guidelines require that the 

underlying condition be sequenced first 

followed by the manifestation. 

Wherever such a combination exists, 

there is a ‘‘use additional code’’ note at 

the etiology code, and a ‘‘code first’’ 

note at the manifestation code. These 

instructional notes indicate the proper 

sequencing order of the codes, etiology 

followed by manifestation. In most 

cases, the title of these manifestation 

codes will include ‘‘in diseases 

classified elsewhere’’ or ‘‘in conditions 

classified elsewhere.’’ Codes with these 

phrases in the title are generally 

manifestation codes. ‘‘In diseases 

classified elsewhere’’ or ‘‘in conditions 

classified elsewhere’’ codes are never 

permitted to be used as first listed or 

principal diagnosis codes and they must 

be listed following the underlying 

condition. In ICD–10–CM, the same 

coding convention applies and can be 

found in section 1.A.13 of the ICD–10– 

CM guidance. Note, however, that there 

are also other manifestation codes that 

do not have ‘‘in diseases classified 

elsewhere’’ or ‘‘in conditions classified 

elsewhere’’ in their title. For such codes 

a ‘‘use additional code’’ note would still 

be present, and the rules for coding 

sequencing still apply. It should be 

noted that several dementia codes, 

which are not allowable as principal 

diagnoses per ICD–9–CM coding 

guidelines, are under the classification 

of ‘‘Mental, Behavioral and 

Neurodevelopmental Disorders’’. 

According to section 1.A6 of the ICD– 

9–CM coding guidelines for ‘‘Mental, 

Behavioral and Neurodevelopmental 

Disorders’’, dementias that fall under 

this category are ‘‘most commonly a 

secondary manifestation of an 

underlying causal condition.’’ To ensure 

additional compliance with ICD–10–CM 

Coding Guidelines, we will be adopting 

additional claims processing edits for all 

HH claims effective October 1, 2014. HH 

claims containing inappropriate 

principal or secondary diagnosis codes 

will be returned to the provider and will 

have to be corrected and resubmitted to 

be processed and paid. Additional 

details describing the specific edits that 

will be applied will be announced 

through a change request, an 

accompanying Medicare Learning 

Network article, and other CMS 

communication channels, such as the 

HH, Hospice, and DME Open Door 

Forum. 

Finally, effective October 1, 2014, 

with the implementation of ICD–10–CM 

diagnosis code reporting, we anticipate 

that HHAs will be able to report all of 

the conditions included in the HH PPS 

Grouper as a primary or secondary 

diagnosis. There will no longer be a 

need for any conditions to be reported 

in the payment diagnosis field because 

all of the ICD–10–CM codes included in 

our HH PPS Grouper will be appropriate 

for reporting as a primary or secondary 

condition. As such, we are retiring 

Appendix D of OASIS (also referred to 

as Attachment D), effective October 1, 

2014. All necessary guidance for 

providers is provided in the ICD–10–CM 

Coding Guidelines. 

C. Proposed Adjustment to the HH PPS 

Case-Mix Weights 

In the November 4, 2011 CY 2012 HH 

PPS final rule (76 FR 68543), we 

recalibrated the HH PPS case-mix 

weights to address incentives that 

existed in the HH PPS to provide 

unnecessary therapy services. In that 

final rule, we described that our review 

of HH PPS utilization data showed an 

increase in the share of episodes with 

very high numbers of therapy visits. 

This shift was first observed in 2008 and 

it continued in 2009. As described in 

the CY 2012 HH PPS final rule, we 

observed an increase of 25 percent in 

the share of episodes with 14 or more 

therapy visits from 2007 to 2008. In the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40281 

2009 sample, the share with 14 or more 

therapy visits continued to increase 

while the share of episodes with no 

therapy visits continued to decrease. 

The frequencies also indicated that the 

share of episodes with 20 or more 

therapy visits was 6 percent in 2009. 

This was a 50 percent increase from the 

share of episodes in 2007, when 

episodes with at least 20 therapy visits 

accounted for only 4 percent of episodes 

(76 FR 41003). Furthermore, in the CY 

2012 HH PPS final rule, we described 

that in their 2010 and 2011 Reports to 

Congress, the Medicare Payment 

Advisory Commission (MedPAC) 

suggested that the HH PPS contains 

incentives which likely result in 

agencies providing more therapy than is 

needed. Moreover, in its 2011 Report to 

Congress, MedPAC suggested that the 

HH PPS may ‘‘overvalue therapy 

services and undervalue nontherapy 

services.’’ Our analysis of cost report 

data showed that in 2009, the average 

amount that payment exceeded cost for 

a normal (non-LUPA, non-PEP, nonoutlier) episode with 14–19 therapy 

visits was more than $1,100 and the 

average amount that payment exceeded 

costs for a normal episode with 20 or 

more therapy visits was more than 

$1,500. In contrast, we noted that the 

average amount that payment exceeded 

costs for a normal episode with 1 to 5 

therapy visits was around $300 (76 FR 

68556). Therefore, we lowered the casemix weights for high therapy episodes 

and increased the weights for episodes 

with little or no therapy. We then 

increased the average case-mix weights 

to 1.3440 to achieve budget neutrality to 

the most current, complete data 

available at the time, which was 2009. 

We stated that we believed the revision 

to the payment weights would result in 

more accurate HH PPS payments for 

targeted case-mix groups while 

addressing MedPAC’s concerns that our 

reimbursement for therapy episodes was 

too high and our reimbursement for 

non-therapy episodes was too low. Also, 

we stated that we believed our revision 

of the payment weights will discourage 

the provision of unnecessary therapy 

services and will slow the growth of 

nominal case-mix (76 FR 68545). 

As described in section III.D. of this 

proposed rule, we are proposing to 

rebase the national, standardized 60-day 

episode payment rate. One view of the 

goal for rebasing is to reset the payments 

under the HH PPS. When the HH PPS 

was created, we expected that the 

average case-mix weight would be 

around 1.00, but analysis has shown 

that it has consistently been above 1.00 

since the start of the HH PPS. Therefore, 

as part of rebasing, for CY 2014, we 

propose to reset the average case-mix 

weight to 1.00. Specifically, we propose 

to use the 2012 revised case-mix 

weights, but lower them to an average 

case-mix weight of 1.00. We plan to 

implement the weight reduction by 

applying the same reduction factor to 

each weight, thereby maintaining the 

relative values in the weight set. 

Preliminary CY 2012 claims data shows 

that the average case-mix weight for 

non-LUPA episodes in 2012 is 1.3517. 

For CY 2014, we propose to reduce the 

average case-mix weight for 2012 from 

1.3517 to 1.0000. We obtain the CY 2014 

proposed weights shown in Table 3 by 

dividing the CY 2013 weights (which 

are the same weights as those finalized 

in CY 2012 rulemaking) by 1.3517. To 

offset the effect of resetting the case-mix 

weights such that the average is 1.00, we 

inflate the national, standardized 60-day 

episode payment rate by the same factor 

(1.3517) used to decrease the weights. 

The result will be the starting point 

from which rebasing adjustments are 

implemented. We note that the average 

case-mix weight for 2012 of 1.3517 is 

based on non-LUPA episodes starting 

from January 1, 2012 to May 31, 2012. 

As more 2012 data become available, we 

plan to update the estimated average 

case-mix weight for CY 2012 and adjust 

the case-mix weights and budget 

neutrality factor accordingly. Therefore, 

the weight reduction factor in the CY 

2014 HH PPS final rule may be different 

from the one used to produce the 

proposed weights in this proposed rule. 

Please see the proposed weights in the 

Table 3. 

TABLE 3—PROPOSED CY 2014 CASE-MIX WEIGHTS

Payment 

group Description 

Clinical, 

functional, 

and service 

levels 

2013 HH PPS 

case-mix 

weights 

2014 

Proposed 

HH PPS 

case-mix 

weights 

10111 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C1F1S1 0.8186 0.6056 

10112 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C1F1S2 0.9793 0.7245 

10113 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C1F1S3 1.1401 0.8435 

10114 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C1F1S4 1.3008 0.9623 

10115 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C1F1S5 1.4616 1.0813 

10121 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C1F2S1 1.0275 0.7602 

10122 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C1F2S2 1.1657 0.8624 

10123 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C1F2S3 1.3039 0.9646 

10124 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C1F2S4 1.4421 1.0669 

10125 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C1F2S5 1.5804 1.1692 

10131 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C1F3S1 1.1233 0.8310 

10132 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C1F3S2 1.2520 0.9262 

10133 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C1F3S3 1.3807 1.0215 

10134 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C1F3S4 1.5094 1.1167 

10135 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C1F3S5 1.6381 1.2119 

10211 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C2F1S1 0.8340 0.6170 

10212 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C2F1S2 1.0302 0.7622 

10213 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C2F1S3 1.2265 0.9074 

10214 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C2F1S4 1.4228 1.0526 

10215 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C2F1S5 1.6190 1.1978 

10221 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C2F2S1 1.0429 0.7715 

10222 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C2F2S2 1.2166 0.9001 

10223 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C2F2S3 1.3903 1.0286 

10224 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C2F2S4 1.5641 1.1571 

10225 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C2F2S5 1.7378 1.2856 

10231 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C2F3S1 1.1387 0.8424 

10232 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C2F3S2 1.3029 0.9639 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40282 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

TABLE 3—PROPOSED CY 2014 CASE-MIX WEIGHTS—Continued 

Payment 

group Description 

Clinical, 

functional, 

and service 

levels 

2013 HH PPS 

case-mix 

weights 

2014 

Proposed 

HH PPS 

case-mix 

weights 

10233 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C2F3S3 1.4671 1.0854 

10234 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C2F3S4 1.6313 1.2069 

10235 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C2F3S5 1.7956 1.3284 

10311 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C3F1S1 0.9071 0.6711 

10312 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C3F1S2 1.1348 0.8395 

10313 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C3F1S3 1.3624 1.0079 

10314 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C3F1S4 1.5900 1.1763 

10315 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C3F1S5 1.8177 1.3448 

10321 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C3F2S1 1.1160 0.8256 

10322 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C3F2S2 1.3211 0.9774 

10323 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C3F2S3 1.5262 1.1291 

10324 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C3F2S4 1.7313 1.2808 

10325 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C3F2S5 1.9364 1.4326 

10331 ........... 1st and 2nd Episodes, 0 to 5 Therapy Visits .................................................... C3F3S1 1.2118 0.8965 

10332 ........... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C3F3S2 1.4074 1.0412 

10333 ........... 1st and 2nd Episodes, 7 to 9 Therapy Visits .................................................... C3F3S3 1.6030 1.1859 

10334 ........... 1st and 2nd Episodes, 10 Therapy Visits ......................................................... C3F3S4 1.7986 1.3306 

10335 ........... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................ C3F3S5 1.9942 1.4753 

21111 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C1F1S1 1.6223 1.2002 

21112 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C1F1S2 1.8331 1.3561 

21113 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C1F1S3 2.0438 1.5120 

21121 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C1F2S1 1.7186 1.2714 

21122 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C1F2S2 1.9496 1.4423 

21123 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C1F2S3 2.1807 1.6133 

21131 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C1F3S1 1.7668 1.3071 

21132 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C1F3S2 2.0252 1.4983 

21133 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C1F3S3 2.2836 1.6894 

21211 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C2F1S1 1.8153 1.3430 

21212 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C2F1S2 2.0224 1.4962 

21213 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C2F1S3 2.2294 1.6493 

21221 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C2F2S1 1.9116 1.4142 

21222 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C2F2S2 2.1389 1.5824 

21223 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C2F2S3 2.3663 1.7506 

21231 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C2F3S1 1.9598 1.4499 

21232 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C2F3S2 2.2145 1.6383 

21233 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C2F3S3 2.4691 1.8267 

21311 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C3F1S1 2.0453 1.5131 

21312 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C3F1S2 2.2682 1.6780 

21313 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C3F1S3 2.4911 1.8429 

21321 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C3F2S1 2.1415 1.5843 

21322 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C3F2S2 2.3848 1.7643 

21323 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C3F2S3 2.6280 1.9442 

21331 ........... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................ C3F3S1 2.1897 1.6200 

21332 ........... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................ C3F3S2 2.4603 1.8202 

21333 ........... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................ C3F3S3 2.7309 2.0203 

22111 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C1F1S1 1.6822 1.2445 

22112 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C1F1S2 1.8730 1.3857 

22113 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C1F1S3 2.0638 1.5268 

22121 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C1F2S1 1.7628 1.3041 

22122 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C1F2S2 1.9791 1.4642 

22123 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C1F2S3 2.1954 1.6242 

22131 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C1F3S1 1.9247 1.4239 

22132 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C1F3S2 2.1305 1.5762 

22133 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C1F3S3 2.3362 1.7283 

22211 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C2F1S1 1.8508 1.3692 

22212 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C2F1S2 2.0460 1.5136 

22213 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C2F1S3 2.2412 1.6581 

22221 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C2F2S1 1.9314 1.4289 

22222 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C2F2S2 2.1521 1.5921 

22223 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C2F2S3 2.3729 1.7555 

22231 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C2F3S1 2.0933 1.5486 

22232 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C2F3S2 2.3035 1.7042 

22233 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C2F3S3 2.5136 1.8596 

22311 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C3F1S1 2.0747 1.5349 

22312 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C3F1S2 2.2878 1.6925 

22313 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C3F1S3 2.5009 1.8502 

22321 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C3F2S1 2.1553 1.5945 

22322 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C3F2S2 2.3940 1.7711 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40283 

TABLE 3—PROPOSED CY 2014 CASE-MIX WEIGHTS—Continued 

Payment 

group Description 

Clinical, 

functional, 

and service 

levels 

2013 HH PPS 

case-mix 

weights 

2014 

Proposed 

HH PPS 

case-mix 

weights 

22323 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C3F2S3 2.6326 1.9476 

22331 ........... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C3F3S1 2.3172 1.7143 

22332 ........... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C3F3S2 2.5453 1.8830 

22333 ........... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C3F3S3 2.7734 2.0518 

30111 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C1F1S1 0.6692 0.4951 

30112 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C1F1S2 0.8718 0.6450 

30113 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C1F1S3 1.0744 0.7949 

30114 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C1F1S4 1.2770 0.9447 

30115 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C1F1S5 1.4796 1.0946 

30121 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C1F2S1 0.8421 0.6230 

30122 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C1F2S2 1.0263 0.7593 

30123 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C1F2S3 1.2104 0.8955 

30124 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C1F2S4 1.3945 1.0317 

30125 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C1F2S5 1.5787 1.1679 

30131 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C1F3S1 0.9352 0.6919 

30132 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C1F3S2 1.1331 0.8383 

30133 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C1F3S3 1.3310 0.9847 

30134 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C1F3S4 1.5289 1.1311 

30135 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C1F3S5 1.7268 1.2775 

30211 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C2F1S1 0.7361 0.5446 

30212 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C2F1S2 0.9591 0.7096 

30213 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C2F1S3 1.1820 0.8745 

30214 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C2F1S4 1.4049 1.0394 

30215 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C2F1S5 1.6278 1.2043 

30221 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C2F2S1 0.9091 0.6726 

30222 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C2F2S2 1.1136 0.8239 

30223 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C2F2S3 1.3180 0.9751 

30224 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C2F2S4 1.5225 1.1264 

30225 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C2F2S5 1.7269 1.2776 

30231 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C2F3S1 1.0022 0.7414 

30232 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C2F3S2 1.2204 0.9029 

30233 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C2F3S3 1.4386 1.0643 

30234 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C2F3S4 1.6568 1.2257 

30235 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C2F3S5 1.8751 1.3872 

30311 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C3F1S1 0.9324 0.6898 

30312 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C3F1S2 1.1609 0.8588 

30313 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C3F1S3 1.3893 1.0278 

30314 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C3F1S4 1.6178 1.1969 

30315 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C3F1S5 1.8463 1.3659 

30321 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C3F2S1 1.1054 0.8178 

30322 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C3F2S2 1.3154 0.9731 

30323 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C3F2S3 1.5254 1.1285 

30324 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C3F2S4 1.7353 1.2838 

30325 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C3F2S5 1.9453 1.4392 

30331 ........... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C3F3S1 1.1985 0.8867 

30332 ........... 3rd+ Episodes, 6 Therapy Visits ....................................................................... C3F3S2 1.4222 1.0522 

30333 ........... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C3F3S3 1.6460 1.2177 

30334 ........... 3rd+ Episodes, 10 Therapy Visits ..................................................................... C3F3S4 1.8697 1.3832 

30335 ........... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C3F3S5 2.0935 1.5488 

40111 ........... All Episodes, 20+ Therapy Visits ....................................................................... C1F1S1 2.2546 1.6680 

40121 ........... All Episodes, 20+ Therapy Visits ....................................................................... C1F2S1 2.4117 1.7842 

40131 ........... All Episodes, 20+ Therapy Visits ....................................................................... C1F3S1 2.5419 1.8805 

40211 ........... All Episodes, 20+ Therapy Visits ....................................................................... C2F1S1 2.4364 1.8025 

40221 ........... All Episodes, 20+ Therapy Visits ....................................................................... C2F2S1 2.5936 1.9188 

40231 ........... All Episodes, 20+ Therapy Visits ....................................................................... C2F3S1 2.7238 2.0151 

40311 ........... All Episodes, 20+ Therapy Visits ....................................................................... C3F1S1 2.7140 2.0078 

40321 ........... All Episodes, 20+ Therapy Visits ....................................................................... C3F2S1 2.8712 2.1241 

40331 ........... All Episodes, 20+ Therapy Visits ....................................................................... C3F3S1 3.0014 2.2205 

We also note that we plan to continue 

to evaluate and potentially revise the 

case-mix weights relative to one another 

as more recent utilization and cost 

report data become available. Fully 

addressing MedPAC’s concerns with the 

way the HH PPS factors therapy visits 

into the case-mix system is a complex 

process which will require more 

comprehensive analysis and potentially 

additional structural changes to the HH 

PPS. While we plan to address 

MedPAC’s concerns in a more 

comprehensive way in future years, we 

propose that for the short term, we use 

the CY 2012 case-mix weights reset to 

an average case-mix of 1.0. We plan to 

continue to monitor case-mix growth 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40284 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

1 Visit information was taken from worksheet S3, 

column 5, rows 1–6 for freestanding providers and 

worksheet H6, column 4, rows 1–6 for hospitalbased providers. 

(both real and nominal case-mix 

growth), and address it accordingly in 

the future. 

D. Rebasing the National, Standardized 

60-day Episode Payment Rate, LUPA 

Per-Visit Payment Amounts, and 

Nonroutine Medical Supply (NRS) 

Conversion Factor 

1. Rebasing the National, Standardized 

60-Day Episode Payment Rate 

Section 3131(a) of the Affordable Care 

Act mandates that starting in CY 2014, 

the Secretary must apply an adjustment 

to the national, standardized 60-day 

episode payment rate and other 

amounts applicable under section 

1895(b)(3)(A)(i)(III) of the Act to reflect 

factors such as changes in the number 

of visits in an episode, the mix of 

services in an episode, the level of 

intensity of services in an episode, the 

average cost of providing care per 

episode, and other relevant factors. In 

addition, section 3131(a) of the 

Affordable Care Act mandates that this 

rebasing must be phased-in over a 4- 

year period in equal increments, not to 

exceed 3.5 percent of the amount (or 

amounts) in any given year applicable 

under section 1895(b)(3)(A)(i)(III) of the 

Act, and be fully implemented by CY 

2017. To fulfill this mandate, we have 

performed extensive analysis of cost 

report and claims data. We used FY 

2011 cost report data as of December 31, 

2012; which was the latest, complete 

cost report data available at the time of 

the analysis. 

a. Trimming Methodology 

When examining data from all 10,327 

Medicare cost reports from FY 2011, we 

found that a number of the cost reports 

had missing or questionable data and 

extreme values. These cost reports were 

often missing necessary information for 

calculating episode costs, reported 

significantly different data than data 

from prior cost reports for the same 

provider, or were markedly different 

than cost reports from the majority of 

HHAs during the same time period. 

Since these extreme values can 

significantly affect average estimated 

costs and are more indicative of 

misreporting rather than actual costs, 

we developed a trimming methodology 

to obtain a more robust estimate of 

costs. 

The trimming methodology applied to 

the cost reports consisted of a two-tier 

process. First, providers’ cost reports 

were compared longitudinally to 

identify large year-to-year discrepancies. 

Second, cost reports were compared 

cross-sectionally to cost reports from the 

same fiscal year. It should be noted that 

the trimming methodology was 

developed using FY 2000 through FY 

2010 cost reports and then applied to 

the FY 2011 cost reports. The first step 

in the trimming methodology excluded 

all cost reports with missing provider 

numbers. In FY 2011, zero providers 

were excluded by this exclusion 

criterion. Next, cost reports that did not 

report the number of episodes were 

excluded from the FY 2011 sample. This 

restriction eliminated 2,348 of the FY 

2011 cost reports. Of these 2,348 cost 

reports, 1,629 were also missing data on 

total costs or payments. The next step in 

the trimming methodology excluded 

cost reports that were significantly 

different from prior cost reports from 

the same provider. Specifically, we 

sorted the FY 2000 to FY 2011 cost 

reports by fiscal year for each provider 

and excluded a cost report if the number 

of episodes reported increased from the 

provider’s previous cost report to the 

current cost report by: (1) More than a 

factor of ten and the new report of 

episodes is greater than 1,000; or (2) 

more than a factor of five and the new 

report of episodes is greater than or 

equal to 5,000. After dropping cost 

reports which met these exclusion 

criteria, the process was repeated for 

two additional iterations. This exclusion 

criterion resulted in the exclusion of 

171 cost reports from the FY 2011 

sample. The goal of this longitudinal 

exclusion criterion was to 

systematically eliminate misreporting of 

episodes. 

Initially, we did not apply 

longitudinal trims; however, when 

looking at the cost reports from FY 2000 

through FY 2011, we identified large 

drops in the average number of visits 

per episode across the years, which then 

resulted in a lower average cost per 

episode. Further examination of the 

cause of the drops in average visits per 

episode led to the identification of a 

number of providers who seemingly 

misreported the number of episodes on 

the cost report. The data showed that 

the number of episodes on the cost 

reports often outnumbered the number 

of episodes from the claims by factors of 

10 or 20. Therefore, we developed the 

longitudinal trim to increase the 

accuracy of the data from the cost 

reports. After the longitudinal 

restriction was applied, there were 

7,808 cost reports in the FY 2011 cost 

report sample. 

After the longitudinal trims, we 

applied cross sectional trims to the 

sample, consisting of basic exclusions, 

some of which are similar to MedPAC’s 

exclusion criteria. Specifically, cost 

reports were excluded if they met any 

of the following criteria: 

• Cost report was not settled or 

tentatively settled (for freestanding 

facilities only). 

• Time covered by the cost report was 

less than 10 months or greater than 14 

months. 

• The cost report was missing total 

payment or total cost information. 

• Costs per episode were in the 

highest and lowest 1 percent across 

providers in the given year. 

• The cost report had a negative value 

for the number of visits per episode for 

any discipline, as reported directly in 

the visit information.1

• The cost report showed an 

unreasonably high visit count (greater 

than 500,000,000) in any discipline. 

(Note: There were no cost reports with 

unreasonable high visit counts in FY 

2011.) 

• The cost report had negative 

average costs per visit in any discipline, 

derived from reported costs and visits 

on the cost report. 

• The cost report had negative total 

costs. 

• The provider reported fewer than 

10 Medicare non-LUPA episodes on the 

FY cost report. 

• The cost report was missing 

discipline-specific cost information 

where there was information on visits or 

vice versa. 

In Table 4, we list information on the 

number of cost reports trimmed for each 

criterion. After applying the cross 

sectional trims, 6,252 cost reports were 

left in the 2011 sample. These cost 

reports were then used to estimate the 

average cost per visit and average cost 

per episode for 2011. We note that using 

the trimmed sample results in an 

estimated average cost per episode that 

was $1,000 more than the estimated cost 

per episode using the untrimmed, 

complete cost report sample. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40285 

TABLE 4—COUNTS FOR EXCLUSION CRITERIA USED TO DEVELOP THE TRIMMED COST REPORT SAMPLE

Restrictions in cost report sample Number of 

cost reports 

Untrimmed sample size ................................................................................................................................................................. 10,327 

Longitudinal restrictions: 

Missing Provider Number ....................................................................................................................................................... 0 

Missing Episode Count ........................................................................................................................................................... 2348 

Significant Episode Change from year to year ...................................................................................................................... 92 

2nd iteration ..................................................................................................................................................................... 54 

3rd iteration ..................................................................................................................................................................... 25 

Sample Size after Longitudinal Restrictions .................................................................................................................................. 7808 

Cross Sectional Restrictions: 

Not Settled (freestanding only) ............................................................................................................................................... 874 

<10 or >14 months in report .................................................................................................................................................. 210 

Missing Payments or Costs .................................................................................................................................................... 11 

Top and Bottom 1% of costs/episode .................................................................................................................................... 163 

Greater than 500,000,000 visits ............................................................................................................................................. 0 

Negative costs per visit .......................................................................................................................................................... 5 

Negative visits per episode .................................................................................................................................................... 0 

Negative total costs ................................................................................................................................................................ 0 

Less than ten episodes .......................................................................................................................................................... 60 

Missing visits when costs are reported or vice versa ............................................................................................................ 375 

Number of Cost Reports excluded by Cross Sectional Restrictions ..................................................................................... 1,556 

Trimmed Cost Report sample ......................................................................................................................................... 6,252 

Note(s): The cross sectional restrictions are implemented simultaneously so cost reports may be counted in a number of the cross sectional 

restrictions (the numbers describing the cost reports for each of the cross sectional restrictions are not mutually exclusive). There were 1,556 

cost reports excluded from the sample as a result of the cross sectional restrictions. 

b. Cost Report Audits 

To verify the integrity of the cost 

report data and to assess the validity of 

the trimming methodology, one of our 

Medicare Administrative Contractors 

(MAC) was tasked with performing 

audits of 100 HH cost reports. The cost 

reports were selected from a trimmed 

sample of FY 2010 cost reports, which 

was the latest data available at the time, 

and the audit sample was stratified 

across provider characteristics (such as 

agency size and ownership status) to 

ensure representation across provider 

types. Cost reports with 95 or fewer 

episodes were excluded from the audit 

sample so that we could focus the audits 

on providers that have a significant 

weight in the sample and that may have 

a substantial influence on the average 

costs per visit and the cost per episode 

estimates. In addition, we note that the 

audit sample was selected from a 

trimmed sample that had additionally 

been cross-referenced with claims data 

for accuracy. 

The MAC conducted 98 audits. Two 

providers did not provide the 

information needed to complete the 

audit. The audit results showed that the 

majority of providers in the audit 

sample overstated their costs on the cost 

report by an average of about 8 percent. 

Commonly, providers reported nonallowable costs or lacked sufficient 

documentation to justify the allowable 

costs, which led to a decrease in the 

costs per visit. There were a small 

number of cases where the costs per 

visit either increased or were unchanged 

as a result of the audit. Of the 98 

providers audited, eight providers were 

referred to the Zone Program Integrity 

Contractors for further fraud 

investigation as a result of the findings 

in their audits. 

After obtaining the audit results, we 

applied weights to the data in the audit 

sample so that it would be 

representative of the trimmed sample 

and we could compare the costs per 

visit per discipline in the trimmed 

sample to the pre-audit sample and the 

post audit sample. The trimmed sample 

resulted in a slightly higher average cost 

per episode when compared to data in 

the pre-audit sample. When comparing 

the pre-audit sample data to the postaudit sample data, we observed an 

average reduction of 8 to 9 percent in 

the costs per visit across all disciplines, 

except medical social services which 

averaged a 5 percent reduction in the 

allowable costs per visit. These audited 

costs per visit across the disciplines 

reduced the average cost per episode by 

7.8 percent when comparing the preaudit data to the post-audit adjusted 

data. The results of the audits indicate 

that the trimmed sample used for this 

proposed rule likely over-estimates the 

average cost per visit and average cost 

per episode for providers. 

c. Weighting the 2011 Trimmed 

Medicare Cost Report Sample and 

Computation of the 2011 Estimated Cost 

per Episode 

After applying the trimming 

methodology to the 2011 Medicare cost 

reports, we computed the estimated 

mean cost per visit per discipline by 

dividing the total costs for a discipline 

by the total number of visits in our 

sample. We then applied weights to the 

sample to ensure that the costs per visit, 

per discipline used to calculate the 

average costs per episode were 

nationally representative. We calculated 

and applied weights based on three 

characteristics: provider type, provider 

size, and the providers’ urban/rural 

status. We determined provider size by 

examining the number of episodes by 

provider on the 2011 claim. We 

determined provider type and urban/ 

rural status by matching the trimmed 

cost report sample to the Provider of 

Services file. The Provider of Service 

file is data collected through the survey 

and certification process conducted for 

any institutional provider seeking 

inclusion in the Medicare and Medicaid 

programs. It contains information such 

as provider name, address, staffing, 

number of beds, ownership, and is used 

internally and by researchers to obtain 

certification information about the 

provider. 

To weight the costs per visit per 

discipline in our sample to be nationally 

representative, we compared the 

number of visits in our sample in each 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40286 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

provider type-size-urban/rural 

combination to the number of visits in 

the provider type-size-urban/rural 

combination as taken from the national 

2011 claims. The visits for a particular 

provider were weighted by the ratio of 

the number of visits in the type-sizeurban/rural combination in the national 

claims over the number of visits in the 

type-size-urban/rural combination in 

our sample. That is, the total number of 

visits in the sample were weighted such 

that the total weights (weighted visits) 

in each of the type-size-urban/rural 

combination equaled the number of 

visits in the type-size-urban/rural 

combination as recorded on the claims, 

and the sum of weighted visits across all 

type-size-urban/rural combinations 

equals the total number of visits 

recorded on the claims. After 

reweighting the visits, the average costs 

per visit for each discipline for a 

provider was recalculated. We note that 

the weight each provider contributes to 

the average costs per visit is equal to the 

number of visits the provider reported 

on the cost report times the total 

number of visits for the provider’s typesize-urban/rural combination in the 

national claims divided by the number 

of visits in the provider’s type-sizeurban/rural combination in our sample. 

As such, providers with a higher 

number of visits still receive more 

weight in calculating the mean, aside 

from the type-size-urban/rural 

representativeness adjustment. The 

estimated costs per visit per episode 

before and after weighting are shown in 

Table 5. The weighting results in higher 

average costs per visit for all disciplines 

as compared to the un-weighted average 

costs per visit. The CMS Home Health 

Agency (HHA) Center Web site (http:// 

www.cms.gov/Center/Provider-Type/ 

Home-Health-Agency-HHACenter.html?redirect=/center/hha.asp) 

provides a file with the resulting 

weights, the provider number, provider 

type, provider size, and urban/rural 

status and average costs per visit by 

discipline that can be used to produce 

the weighted average costs per visit for 

all disciplines as presented in Table 5. 

Documentation describing the fields on 

the cost report we used in our 

calculations is also available at http:// 

www.cms.gov/Center/Provider-Type/ 

Home-Health-Agency-HHACenter.html?redirect=/center/hha.asp. 

TABLE 5—2011 ESTIMATED COSTS PER VISIT, UN-WEIGHTED AND WEIGHTED

Discipline 

2011 Per-visit 

costs, 

unweighted 

2011 Per-visit 

costs, weighted 

Skilled Nursing ................................................................................................................................................. $129.56 $131.51 

Home Health Aide ........................................................................................................................................... 65.07 65.22 

Physical Therapy ............................................................................................................................................. 159.99 160.69 

Occupational Therapy ...................................................................................................................................... 158.96 159.55 

Speech-Language Pathology .......................................................................................................................... 169.28 170.80 

Medical Social Services ................................................................................................................................... 217.63 218.91 

Source: CY 2011 Medicare claims data and FY 2011 Medicare cost report data as of December 31, 2012. 

Notes(s): The costs per visit, per discipline for providers were weighted by provider type, provider size and urban/rural status to be nationally 

representative. 

Using the nationally-weighted average 

costs per visit from the trimmed FY 

2011 HH Medicare cost report sample 

and the visits per episode estimates for 

each discipline from 2011 national 

claims data, we estimated the 2011 

average cost per episode. As shown in 

Table 6, we multiplied the average cost 

per visit by the average number of visits 

for each of the six disciplines and 

summed the results to generate an 

estimated 60-day episode cost for 2011 

of $2,453.71. This methodology used to 

calculate the episode cost is consistent 

with the methodology used in setting 

the 60-day episode base rate for the HH 

PPS in 2000. We note that the 2011 

estimated cost per episode includes 

normal, PEP, and outlier episodes. 

TABLE 6—2011 AVERAGE COSTS PER VISIT AND AVERAGE NUMBER OF VISITS FOR A 60-DAY EPISODE

Discipline 2011 Average 

costs per visit 

2011 Average 

number of visits 

2011 60-Day 

episode costs 

Skilled Nursing ....................................................................................................................... $131.51 9.43 $1,240.14 

Home Health Aide ................................................................................................................. 65.22 2.80 182.62 

Physical Therapy ................................................................................................................... 160.69 4.86 780.95 

Occupational Therapy ............................................................................................................ 159.55 1.15 183.48 

Speech- Language Pathology ............................................................................................... 170.80 0.21 35.87 

Medical Social Services ......................................................................................................... 218.91 0.14 30.65 

Total ................................................................................................................................ .......................... .......................... $2,453.71 

Source: CY 2011 Medicare claims data and 2011 Medicare cost report data as of December 31, 2012. 

d. Calculating the Estimated Average 

Cost per Episode 

To determine the rebasing adjustment 

to the 60-day national, standardized 

episode payment rate, we compared the 

2013 estimated average payment per 

episode to the 2013 estimated average 

cost per episode. To calculate the 2013 

estimated average cost per episode, we 

first applied an adjustment to account 

for the visit distribution change 

observed in claims data from 2011 to 

2012 (Table 7). We compared the 2011 

estimated cost per episode using the 

2011 visit distribution to the 2011 

estimated cost per episode using the 

2012 visit distribution. The 2011 

estimated cost per episode is $2,453.71 

when using the 2011 visit profile and 

the 2011 estimated cost per episode is 

$2,443.34 when using the 2012 visit 

profile. Using the two 2011 estimated 

costs per episode, we calculated an 

adjustment factor to account for the visit 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40287 

difference between 2011 and 2012 

claims (1 + (2443.34–2453.71)/2453.71 = 

0.9958). We plan to update the 2012 

visit distribution as more data become 

available, and therefore, the estimated 

cost per episode may change slightly for 

the final rule. 

TABLE 7—COMPARISON OF THE 2011 AND 2012 VISIT DISTRIBUTION FROM CLAIMS DATA

Discipline 

2011 Average 

number of visits 

per episode 

2012 Average 

number of visits 

per episode 

Skilled Nursing ................................................................................................................................................. 9.43 9.39 

Home Health Aide ........................................................................................................................................... 2.80 2.62 

Physical Therapy ............................................................................................................................................. 4.86 4.88 

Occupational Therapy ...................................................................................................................................... 1.15 1.15 

Speech- Language Pathology ......................................................................................................................... 0.21 0.23 

Medical Social Services ................................................................................................................................... 0.14 0.14 

Total Number of Visits per Episode ......................................................................................................... 18.59 18.41 

Source: CY 2011 Medicare claims data and CY 2012 Medicare claims data for episodes starting between January 1, 2012, and May 31, 2012. 

After applying the adjustment to 

account for the visit distribution change 

between 2011 and 2012, we multiplied 

the estimated, average cost per episode 

by the HH market basket update for 

2012 and by the HH market basket 

update for 2013. We note that when 

setting the 60-day episode base rate for 

the HH PPS in 2000, we also updated 

costs from cost reports by the market 

basket updates to reflect expected cost 

increases. This gives us an estimated, 

average cost per episode for CY 2013. 

TABLE 8—2013 ESTIMATED COST PER EPISODE

2011 Estimated cost per episode 

Factor for 

2011–2012 

visit 

distribution 

difference 

2012 Market 

basket update 

2013 Market 

basket update 

2013 

Estimated 

cost per 

episode 

$2,453.71 ......................................................................................................... × 0.9958 × 1.024 × 1.023 = $2,559.59 

e. Calculating the Estimated Average 

Payment per Episode 

To develop the 2013 estimated 

average payment per episode, we started 

with the CY 2012 national, standardized 

60-day episode payment rate and 

applied a number of factors. Since we 

are proposing to reset the average casemix weight from 1.3517 to 1.0000 (see 

section III.C. of this proposed rule), we 

first increased the CY 2012 60-day 

episode payment rate by 1.3517. The 60- 

day episode payment rate in CY 2012 

was $2,138.52. By inflating the CY 2012 

60-day episode payment rate by the 

budget neutrality factor to account for 

the downward adjustment of the 

weights to an average case-mix of 

1.0000, we obtain the average CY 2012 

payment per episode. Then by applying 

the CY 2013 payment policy updates 

(1.3 percent HH payment update 

percentage and the 1.32 percent 

payment reduction for nominal casemix growth), we obtain the estimated 

average CY 2013 payment per episode. 

We note that the Medicare cost reports 

do not differentiate between normal, 

PEP, and outlier episodes in the 

reporting of costs per discipline. 

Therefore, the CY 2013 estimated 

average cost per episode includes costs 

for normal, PEP, and outlier episodes. 

To compare the episode payment to the 

average cost of an episode, we add the 

dollars from the 2.5 percent outlier pool 

back into the payment per episode 

(Table 9). In our calculation of the 

proposed CY 2014 national, 

standardized 60-day episode payment 

rate, we remove the outlier dollars (see 

Tables 16 and 17 in section III.E.4.b. of 

this proposed rule). 

TABLE 9—2013 ESTIMATED AVERAGE PAYMENT PER EPISODE

2012 National, standardized 60-day episode payment rate 

Budget 

neutrality 

factor to account for casemix weight 

adjustment to 

1.00 

2013 Payment 

reduction for 

nominal 

case-mix 

growth 

2013 HH 

Payment 

update 

percentage 

Outlier 

adjustment 

2013 

Estimated 

average 

payment per 

episode 

$2,138.52 ............................................................................. × 1.3517 × 0.9868 × 1.013 ÷ 0.975 = $2,963.65 

f. Calculating the Rebasing Adjustment 

to the National, Standardized 60-day 

Episode Payment Rate 

Comparing the 2013 estimated 

average payment per episode to the 

2013 estimated average cost per episode; 

we obtain a difference of ¥13.63 

percent (($2,559.59–$2,963.65)/ 

$2,963.65) (see Table 10). 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40288 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

TABLE 10—COMPARISON OF THE AVERAGE PAYMENT PER EPISODE TO THE AVERAGE COST PER EPISODE

2013 Payment per episode 2013 Estimated 

cost per episode 

Percent 

difference 

$2,963.65 ......................................................................................................................................................... $2,559.59 ¥13.63 

Phasing-in the ¥13.63 percent 

reduction over 4 years in equal 

increments would result in an annual 

reduction of 3.60 percent. Since the 

Affordable Care Act states that the 

reduction may be no more than 3.5 

percent, we propose to reduce payments 

in each year from CY 2014 to CY 2017 

by 3.5 percent. 

2. Rebasing the Low Utilization 

Payment Adjustment (LUPA) Per-Visit 

Payment Amounts 

For episodes with four or fewer visits, 

Medicare pays on the basis of a national 

per-visit amount by discipline, referred 

to as a LUPA. 

a. Calculating the Rebasing Adjustment 

to the LUPA Per-Visit Amounts 

To determine the rebasing adjustment 

for the per-visit payment rates, we 

compare the current per-visit, perdiscipline payment rates to the 

estimated cost per visit, per discipline. 

The 2013 estimated per-visit costs per 

discipline are shown in Table 11. The 

2011 per-visit costs per discipline are 

the same as those derived for the 

rebasing of the national, standardized 

60-day episode payment rate (see Table 

6). The average cost per-visit for NRS 

from the cost report sample is added to 

the 2011 estimated per-visit costs per 

discipline (see section III.D.3. of this 

proposed rule for more information on 

the calculation of the average NRS cost 

per visit). The per-visit costs are then 

increased by the HH market basket in 

2012 and 2013 to obtain an estimate of 

the 2013 costs per visit, per discipline. 

TABLE 11—2013 ESTIMATED AVERAGE COST PER-VISIT, PER-DISCIPLINE

Discipline 

2011 

Estimated 

average costs 

per visit 

Average NRS 

cost per visit 

2012 Market 

basket update 

2013 Market 

basket update 

2013 

Estimated 

average cost 

per visit 

Skilled Nursing ..................................................................... $131.51 + $2.26 × 1.024 × 1.023 = $140.13 

Home Health Aide ................................................................ 65.22 + 2.26 ×1.024 × 1.023 = 70.69 

Physical Therapy ................................................................. 160.69 + 2.26 ×1.024 × 1.023 = 170.70 

Occupational Therapy .......................................................... 159.55 + 2.26 × 1.024 × 1.023 = 169.50 

Speech-Language Pathology ............................................... 170.80 + 2.26 × 1.024 × 1.023 = 181.29 

Medical Social Services ....................................................... 218.91 + 2.26 × 1.024 × 1.023 = 231.69 

Similar to the methodology used to 

determine the rebasing adjustment to 

the national, standardized 60-day 

episode payment rate, we took the 

current 2013 per-visit payment rates 

and, for comparison purposes only, put 

the dollars from the 2.5 percent outlier 

pool back into the payment rates (see 

Table 12). This allows us to compare the 

CY 2013 cost per-visit, per-discipline on 

the Medicare cost reports (which 

includes normal and outlier episodes) to 

the CY 2013 payment per-visit, per 

discipline. 

TABLE 12—2013 PER-VISIT PAYMENT RATES

Discipline 

2013 Per-visit 

payment rates 

(excluding 

outliers) 

Outlier 

adjustment 

2013 Per-visit 

payment rates 

(including 

outliers) 

Skilled Nursing ............................................................................................................................. $114.35 ÷ 0.975 = 117.28 

Home Health Aide ....................................................................................................................... 51.79 ÷ 0.975 = 53.12 

Physical Therapy ......................................................................................................................... 125.03 ÷ 0.975 = 128.24 

Occupational Therapy .................................................................................................................. 125.88 ÷ 0.975 = 129.11 

Speech-Language Pathology ...................................................................................................... 135.86 ÷ 0.975 = 139.34 

Medical Social Services ............................................................................................................... 183.31 ÷ 0.975 = 188.01 

When comparing the payment pervisit, per discipline for LUPA episodes 

to the estimated average cost per-visit, 

per-discipline, we observe that costs per 

visit are higher than the 2013 per-visit 

payment rates (see Table 13) in the 

range of 19.5 percent to 33.1 percent. 

However, section 3131(a) of the 

Affordable Care Act mandates that we 

can only adjust the per-visit payment 

rates by 3.5 percent each year. 

Therefore, in this CY 2014 HH PPS 

propose rule, we propose to increase the 

per-visit payment rates by 3.5 percent 

every year from 2014 to 2017. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40289 

TABLE 13—DIFFERENCES BETWEEN THE CY 2013 PER VISIT PAYMENT RATES AND THE CY 2013 ESTIMATED AVERAGE

COST PER VISIT

Discipline 2013 Per-visit 

payment rates 

2013 

Estimated 

average cost 

per visit 

Difference 

Skilled Nursing ............................................................................................................................. $117.28 $140.13 +19.48% 

Home Health Aide ....................................................................................................................... 53.12 70.69 +33.08% 

Physical Therapy ......................................................................................................................... 128.24 170.70 +33.11% 

Occupational Therapy .................................................................................................................. 129.11 169.50 +31.28% 

Speech- Language Pathology ..................................................................................................... 139.34 181.29 +30.11% 

Medical Social Services ............................................................................................................... 188.01 231.69 +23.23% 

3. Rebasing the Nonroutine Medical 

Supply (NRS) Conversion Factor 

Payments for NRS are currently paid 

for by multiplying one of six severity 

levels by the NRS conversion factor. 

When the HH PPS was implemented on 

October 1, 2000, the national, 

standardized 60-day episode payment 

rate included an amount for NRS that 

was calculated based on costs from 

audited FY 1997 cost reports and the 

average cost of NRS unbundled and 

billed through Medicare part B (65 FR 

41180). The NRS costs for all the 

providers in the audited cost report 

sample were weighted to represent the 

national population. That weighted total 

was divided by the number episodes for 

the providers in the audited cost report 

sample, to obtain an average cost per 

episode for NRS of $43.54. Added to 

this amount was $6.08 to account for the 

average cost of unbundled NRS billed 

through Medicare Part B, resulting in a 

total of $49.62 included in the national, 

standardized 60-day episode payment 

rate to account for NRS. 

As stated in our CY 2008 HH PPS 

proposed rule, after the HH PPS went 

into effect, we received comments and 

correspondence expressing concern 

about the cost of supplies for certain 

patients with ‘‘high’’ supply costs (72 

FR 25427, May 4, 2007). We 

acknowledged that, in general, NRS use 

is unevenly distributed across episodes 

of care. Therefore, we created an NRS 

conversion factor of $52.35 (the amount 

CMS originally included in the national, 

standardized 60-day episode payment 

rate of $49.62, updated by the market 

basket, and after an adjustment to 

account for nominal change in case-mix) 

that is further adjusted by one of six 

severity levels to ensure that the 

variation in NRS usage is more 

appropriately reflected in the HH PPS 

(72 FR 49852, August 29, 2007). Using 

additional variables from OASIS items 

and targeting certain conditions 

expected to be predictors of NRS use 

based on clinical considerations, a 

classification algorithm puts cases into 

one of the six severity levels and a 

regression model was used to develop 

the payment weights associated with 

each severity level. For more detail on 

how the final six NRS severity levels 

and associated payment weights were 

developed please see the CY 2008 HH 

PPS final rule (72 FR 49850, August 29, 

2007). The 2008 NRS conversion factor 

has been updated by HH payment 

update percentages in years 2009 

through 2013. The CY 2013 NRS 

conversion factor is $53.97 and CY 2013 

NRS payments range from $14.56 for 

severity level 1 to $568.06 for severity 

level 6 (77 FR 67102). 

a. Calculating the Rebasing Adjustment 

to the NRS Conversion Factor 

In rebasing the NRS conversion factor, 

we used the trimmed sample of 6,252 

cost reports from FY 2011, as described 

in section III.D.1. of this proposed rule, 

to calculate a visit-weighted estimate of 

NRS costs per visit. We additionally 

weight these estimates to be nationally 

representative based on the same factors 

described in section III.D.1. of this 

proposed rule (that is, facility type, 

urban/rural status, and facility size). 

The 2011 average NRS cost per visit was 

calculated to be $2.26. 

To calculate, a 2011 estimated average 

NRS cost per episode we multiplied the 

average NRS costs per visit of $2.26 by 

the average number of visits per episode 

of 18.59 from 2011 claims data for a 

2011 estimated average NRS cost per 

episode of $42.01. This amount was 

then adjusted to reflect the change in 

the average number of visits from 18.59, 

using 2011 claims data, to 18.41, using 

preliminary 2012 claims data 

((1+((18.41–18.59)/18.59))= 0.9903). We 

inflated the result by the 2012 and 2013 

HH market basket updates for a 2013 

estimated average NRS cost per episode 

of $43.59 as shown in Table 14. 

TABLE 14—2013 ESTIMATED AVERAGE NRS COST PER EPISODE

2011 Estimated average NRS cost per episode 

Adjustment for 

change in 

average 

episode visits 

(2011 to 2012) 

2012 Market 

basket update 

(2.4%) 

2013 Market 

basket update 

(2.3%) 

2013 

Estimated 

average NRS 

cost per 

episode 

$42.01 .............................................................................................................. × 0.9903 ×1.024 × 1.023 $43.58 

To compare the 2013 estimated 

average NRS cost per episode to 2013 

estimated average NRS payment per 

episode; we used preliminary 2012 

claims data for non-LUPA episodes and 

the CY 2013 NRS conversion factor of 

$53.97 to determine the estimated 2013 

average NRS payment per episode. The 

preliminary 2012 claims data shows that 

the distribution of episodes amongst the 

six severity levels differs from the 

distribution used when the NRS 

conversion factor and relative weights 

were established in CY 2008 as shown 

in Table 15. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40290 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

TABLE 15—PERCENTAGE OF EPISODES BY NRS SEVERITY LEVEL

Severity level Relative 

weight 

Percent of 

episodes, 

CY 2008 

Percent of 

episodes, 

CY 2012 

(percent) 

1 ............................................................................................................................................................... 0.2698 63.7 69.5 

2 ............................................................................................................................................................... 0.9742 20.6 16.8 

3 ............................................................................................................................................................... 2.6712 6.7 6.2 

4 ............................................................................................................................................................... 3.9686 5.4 4.3 

5 ............................................................................................................................................................... 6.1198 3.2 2.9 

6 ............................................................................................................................................................... 10.5254 0.3 0.3 

Source: The CY 2008 HH PPS Final Rule (72 FR 49852, August 29, 2007) and CY 2012 Medicare claims data for non-LUPA HH episodes beginning on or before May, 31, 2012, as of December 31, 2012. 

Note(s): The distribution of episodes used to establish the CY 2008 relative weights was based on CY 2004 and CY 2005 claims data and a 

sample consisting of all agencies whose total charges reported on their 2001 claims matched their total charges reported in their 2001 cost reports (72 FR 49852). 

Using the distribution of 2012 claims 

by severity level (Table 15), the relative 

weights, and the CY 2013 conversion 

factor of $53.97, the CY 2013 estimated 

average NRS payment per episode is 

$48.38. Comparing the 2013 estimated 

average NRS cost per episode to the 

2013 estimated average NRS payment 

per episode, we obtain a difference of 

¥9.92 percent (($43.58¥$48.38)/ 

$48.38). Phasing-in the ¥9.92 percent 

reduction over 4 years in equal 

increments would result in an annual 

reduction of 2.58 percent. Therefore, we 

propose to reduce the NRS conversion 

factor in each year from 2014 to 2017 by 

2.58 percent. We note that during our 

analysis of NRS costs and payments, we 

found that a significant number of 

providers listed charges for NRS on the 

home health claim, but those same 

providers did not list any NRS costs on 

their cost reports. Specifically, out of 

the 6,252 cost reports from FY 2011, as 

described in section III.D.1. of this 

proposed rule, 1,756 cost reports (28.1 

percent) reported NRS charges in their 

claims, but listed $0 NRS costs on their 

cost reports. Given the need for 

extensive trimming of the cost reports as 

well as the findings from the audits and 

our analysis of NRS payments and costs, 

we are exploring possible additional 

edits to the cost report and quality 

checks at the time of submission to 

improve future cost reporting accuracy. 

We plan to update the 2012 distribution 

of episodes amongst the six severity 

levels as more data become available, 

and therefore, the estimated NRS cost 

per episode may change slightly for the 

final rule. For more information on the 

rebasing analyses performed, refer to the 

technical report titled ‘‘Analyses in 

Support of Rebasing & Updating the 

Medicare Home Health Payment Rates’’ 

available on the CMS Home Health 

Agency (HHA) Center Web site at: 

http://www.cms.gov/Center/ProviderType/Home-Health-Agency-HHACenter.html?redirect=/center/hha.asp. 

E. Proposed CY 2014 Rate Update 

1. Proposed CY 2014 Home Health 

Market Basket Update 

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

amended by section 3401(e) of the 

Affordable Care Act, adds 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, as 

mandated by the Affordable Care Act, 

for CYs 2011, 2012, and 2013, the HH 

market basket update was reduced by 1 

percentage point. For CY 2014, there is 

no such percentage reduction. 

Therefore, the CY 2014 payment rates 

will be increased by the full HH market 

basket update. 

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

requires that the standard prospective 

payment amounts for CY 2014 be 

increased by a factor equal to the 

applicable HH market basket update for 

those HHAs that submit quality data as 

required by the Secretary. The proposed 

HH PPS market basket update for CY 

2014 is 2.4 percent. This is based on 

Global Insight Inc.’s second quarter 

2013 forecast, utilizing historical data 

through the first quarter of 2013. The 

HH market basket was rebased and 

revised in CY 2013. A detailed 

description of how we derive the HHA 

market basket is available in the CY 

2013 HH PPS final rule (77 FR 67080, 

67090). 

2. Home Health Quality Reporting 

Program (HHQRP) 

a. General Considerations Used for 

Selection of Quality Measures for the 

HHQRP 

The successful development of the 

HH Quality Reporting Program 

(HHQRP) that promotes the delivery of 

high quality healthcare services is our 

paramount concern. We seek to adopt 

measures for the HHQRP that promote 

efficient and safer care. Our measure 

selection activities for the HHQRP takes 

into consideration input we receive 

from the Measure Applications 

Partnership (MAP), convened by the 

National Quality Forum (NQF), as part 

of a pre-rulemaking process that we 

have established and are required to 

follow under section 1890A of the Act. 

The MAP is a public-private partnership 

comprised of multi-stakeholder groups 

convened by the NQF for the primary 

purpose of providing input to CMS on 

the selection of certain categories of 

quality and efficiency measures, as 

required by section 1890A(a)(3) of the 

Act. By February 1st of each year, the 

NQF must provide that input to CMS. 

Input from the MAP is located at http:// 

www.qualityforum.org/Setting_

Priorities/Partnership/Measure_

Applications_Partnership.aspx. For 

more details about the pre-rulemaking 

process, see the FY 2013 IPPS/LTCH 

PPS final rule at 77 FR 53376 (August 

31, 2012). 

We also take into account national 

priorities, such as those established by 

the National Priorities Partnership at 

http://www.qualityforum.org/npp/, the 

HHS Strategic Plan http://www.hhs.gov/ 

secretary/about/priorities/priorities.

html, and the National Strategy for 

Quality Improvement in Healthcare 

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

news/reports/nationalqualitystrategy

032011.pdf. 

To the extent practicable, we have 

sought to adopt measures that have been 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40291 

endorsed by the national consensus 

organization, under contract to endorse 

standardized healthcare quality 

measures pursuant to section 1890 of 

the Act, recommended by multistakeholder organizations, and 

developed with the input of providers, 

purchasers/payers, and other 

stakeholders. 

b. Background and Quality Reporting 

Requirements 

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

states that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ 

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

of the Act states that ‘‘for 2007 and each 

subsequent year, in the case of a HHA 

that does not submit data to the 

Secretary in accordance with subclause 

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

market basket percentage increase 

applicable under such clause for such 

year shall be reduced by 2 percentage 

points.’’ This requirement has been 

codified in regulations at § 484.225(i). 

HHAs that meet the quality data 

reporting requirements are eligible for 

the full HH market basket percentage 

increase. HHAs that do not meet the 

reporting requirements are subject to a 

2 percentage point reduction to the HH 

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 HHA has the opportunity 

to review the data that is to be made 

public with respect to the agency prior 

to such data being made public.’’ 

As codified at § 484.250(a), we 

established that the quality reporting 

requirements could be met by the 

submission of OASIS assessments and 

HH Care Consumer Assessment of 

Healthcare Providers and Systems 

Survey (HHCAHPS®). CMS has 

provided quality measures to HHAs via 

the Certification and Survey Provider 

Enhanced Reports (CASPER) reports 

available on the CMS Health Care 

Quality Improvement System (QIES) 

since 2002. A subset of the HH quality 

measures has been publicly reported on 

the HH Compare Web site since 2003. 

The CY 2012 HH PPS final rule (76 FR 

68576), identifies the current HH QRP 

measures. The selected measures that 

are made available to the public can be 

viewed on the HH Compare Web site 

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

HHCompare/Home.asp. 

As stated in the CY 2012 and CY 2013 

HH PPS final rules (76 FR68575 and 77 

FR67093, respectively), we finalized 

that we would also use measures 

derived from Medicare claims data to 

measure HH quality. 

c. OASIS Data Submission and OASIS 

Data for Annual Payment Update 

The HH conditions of participation 

(CoPs) at § 484.55(d) require that the 

comprehensive assessment must be 

updated and revised (including the 

administration of the OASIS) no less 

frequently than: (1) The last 5 days of 

every 60 days beginning with the startof-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 (initial assessment) 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, is failure to 

comply with the CoPs. 

HHAs do not need to submit OASIS 

data for those patients who are excluded 

from the OASIS submission 

requirements under the HH CoPs § 484.1 

through § 484.265. As described in the 

December 23, 2005 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), we define the exclusion as 

those patients: 

• Receiving only nonskilled services; 

• For whom neither Medicare nor 

Medicaid is paying for HH care (patients 

receiving care under a Medicare or 

Medicaid Managed Care Plan are not 

excluded from the OASIS reporting 

requirement); 

• Receiving pre- or post-partum 

services; or 

• Under the age of 18 years. 

As set forth in the CY 2008 HH PPS 

final rule (72 FR 49863), HHAs that 

become Medicare-certified on or after 

May 31 of the preceding year are not 

subject to the OASIS quality reporting 

requirement nor any payment penalty 

for quality reporting purposes for the 

following year. For example, HHAs 

certified on or after May 31, 2013 are 

not subject to the 2 percentage point 

reduction to their market basket update 

for CY 2014. These exclusions only 

affect quality reporting requirements 

and do not affect the HHA’s reporting 

responsibilities as announced in the 

December 23,2005 final rule, ‘‘Medicare 

and Medicaid Programs; Reporting 

Outcome and Assessment Information 

Set Data as Part of the Conditions of 

Participation for Home Health 

Agencies’’ (70 FR 76202). 

d. Home Health Care Quality Reporting 

Program Requirements for CY 2014 

Payment and Subsequent Years 

(1) Submission of OASIS Data 

For CY 2014, we propose to consider 

OASIS assessments submitted by HHAs 

to CMS in compliance with HH CoPs 

and Conditions for Payment for 

episodes beginning on or after July 1, 

2012, and before July 1, 2013 as 

fulfilling one portion of the quality 

reporting requirement for CY 2014. This 

time period would 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 2014. We propose to 

continue this pattern for each 

subsequent year beyond CY 2014, 

considering OASIS assessments 

submitted in the time frame between 

July 1 of the calendar year 2 years prior 

to the calendar year of the Annual 

Payment Update (APU) effective date 

and July 1 of the calendar year 1 year 

prior to the calendar year of the APU 

effective date as fulfilling the OASIS 

portion of the quality reporting 

requirement for the subsequent APU. 

(2) Home Health Rehospitalization and 

Emergency Department Use Without 

Readmission Claims-Based Measures 

We propose to adopt two claimsbased measures: (1) Rehospitalization 

during the first 30 days of HH; and (2) 

Emergency Department Use without 

Hospital Readmission during the first 30 

days of HH. These measures were 

included on the Measures Under 

Consideration list reviewed by the MAP 

in December 2012 and the MAP 

supported the direction of both 

measures. The Rehospitalization during 

the first 30 days of HH measure 

estimates the risk-standardized rate of 

unplanned, all-cause hospital 

readmissions for cases in which patients 

who had an acute inpatient 

hospitalization in the 5 days before the 

start of their HH stay were admitted to 

an acute care hospital during the 30 

days following the start of the HH stay. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40292 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

The Emergency Department Use without 

Readmission measure estimates the riskstandardized rate of unplanned, allcause hospital readmissions for cases in 

which patients who had an acute 

inpatient hospitalization in the 5 days 

before the start of a HH stay used an 

emergency department but were not 

admitted to an acute care hospital 

during the 30 days following the start of 

a HH stay. 

We seek to develop a set of quality 

measures to report on HH patients who 

are recently hospitalized as these 

patients are at an increased risk of acute 

care hospital use, either through 

inpatient admission or emergency 

department use without inpatient 

admission. Addressing unplanned 

hospital readmissions is a high priority 

for HHS as our focus continues on 

promoting patient safety, eliminating 

healthcare associated infections, 

improving care transitions, and 

reducing the cost of healthcare. 

Readmissions are costly to the Medicare 

program and have been cited as 

sensitive to improvements in 

coordination of care and discharge 

planning for patients. Rates of 

rehospitalization remain substantial 

with 14.4 percent of HH patients 

experiencing an unplanned 

rehospitalization in the first 30 days of 

care. Currently, HHAs focus on 

measures of acute care hospitalization 

(applied to all HH patients) as a measure 

of their effectiveness. We will continue 

to publicly report the Acute Care 

Hospitalization and Emergency 

Department Use without Hospitalization 

measures, as these measures apply to all 

home health patients and will continue 

to be useful in selecting a home health 

agency. The proposed rehospitalization 

measures will allow HHAs to further 

target patients who entered HH after a 

hospitalization. 

The proposed measures of acute care 

utilization by previously hospitalized 

patients are developed out of the NQF 

endorsed claims-based measures: (1) 

Acute Care Hospitalization (NQF 

#0171); and (2) Emergency Department 

Use without Hospitalization (NQF 

#0173) to better capture acute care 

hospitalizations and use of an 

emergency department for patients who 

are recently discharged from the 

hospital. These rehospitalization 

measures are harmonized with NQFendorsed Hospital-Wide Risk-Adjusted 

All-Cause Unplanned Readmission 

Measure (NQF #1789) (see http://www.

qualityforum.org/Publications/2012/07/

Patient_Outcomes_All-Cause_

Readmissions_Expedited_Review_2011.

aspx) finalized for the Hospital IQR 

Program in the FY 2013 IPPS/LTCH PPS 

Final Rule (77 FR 53521 through 53528). 

Further, to the extent appropriate, the 

proposed HH rehospitalization 

measures are being harmonized with 

this measure and other measures of 

readmission rates developed for postacute care (PAC) settings. 

We intend to seek NQF endorsement 

of the: (1) Rehospitalization during the 

first 30 days of HH; and (2) Emergency 

Department Use without Readmission 

during the first 30 days of HH measures. 

We are proposing to begin reporting 

feedback to HHAs on performance on 

these measures in CY 2014. These 

measures will be added to Home Health 

Compare for public reporting in 

CY2015. Additional details pertaining to 

these measures, including technical 

specifications, can be found at the HH 

Quality Initiative Web page located at 

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

HHQIQualityMeasures.html. 

We seek public comment on our 

proposed quality measures: (1) 

Rehospitalization during the first 30 

days of HH; and (2) Emergency 

Department Use without Hospital 

Readmission during the first 30 days of 

HH. 

(3) Elimination of Stratification by 

Episode Length Process Measures 

We are exploring ways to reduce the 

number of HH quality measures 

reported to HHAs on confidential 

CASPER reports. We propose to reduce 

the total number of measures on the 

CASPER reports by beginning to report 

only all-episodes measures for 9 process 

measures currently also stratified by 

episode length. We seek comments on 

this proposal to simplify reporting of 

process measures, which is based on the 

recommendation from the MAP to seek 

greater parsimony in these measures. 

Currently there are 97 quality measures 

included on the CASPER reports, of 

which 45 are process measures. This 

proposed reduction would decrease the 

total number of HH quality measures to 

79 and reduce the number of process 

measures from 45 to 27. This change 

will enable HHAs to obtain the 

information they require for quality 

improvement activities related to the 

process measures in a less burdensome 

manner. Reducing the number of 

measures also facilitates the future 

development and implementation of 

other superior HH measures. 

Nine measures currently stratified by 

episode length on CASPER reports 

include: 

• Depression Interventions 

Implemented. 

• Diabetic Foot Care and Patient/ 

Caregiver Education Implemented. 

• Heart Failure Symptoms Addressed. 

• Pain Interventions Implemented. 

• Treatment of Pressure Ulcers Based 

on Principles of Moist Wound Healing 

Implemented. 

• Pressure Ulcer Prevention 

Implemented. 

• Drug Education on All Medications 

Provided to Patient/Caregiver. 

• Potential Medication Issues 

Identified and Timely Physician 

Contact. 

• Falls Prevention Steps 

Implemented. 

For each of these nine measures, three 

versions of each measure are currently 

included on CASPER reports. The three 

versions are: (1) Short term episodes of 

care; (2) long term episodes of care; and 

(3) all episodes of care. We propose to 

eliminate the stratification by episode 

length, so that these measures are 

reported only for ‘‘all episodes of care’’. 

Thus, we propose to eliminate the 

‘‘short term’’ and ‘‘long term episodes of 

care’’ measures from CASPER reports. 

This would remove 18 process measures 

from the current CASPER reports. Of 

note, only the ‘‘short term episodes of 

care’’ measures are currently reported 

on HH Compare. These would be 

replaced with the analogous ‘‘all 

episodes of care’’ measures. 

No data will be lost in the elimination 

of the ‘‘short and long term episodes of 

care’’ measures as the ‘‘all episodes of 

care’’ measures capture all care 

interventions, regardless of episode 

length. Using only the ‘‘all episodes of 

care’’ measures would substantially 

increase the number of HHAs eligible 

for public reporting of these measures. 

To summarize, for the CY 2014 

payment update and for subsequent 

annual payment updates, we propose 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 HH care quality. We propose to 

adopt two claims-based measures: (1) 

rehospitalization during the first 30 

days of HH; and (2) Emergency 

Department Use without Hospital 

Readmission during the first 30 days of 

HH. We propose to reduce the number 

of process measures by eliminating the 

stratification by episode length, only 

reporting on the ‘‘all episodes of care’’ 

measures. By eliminating the 

stratification of the short and long term 

episodes of care measures, there will be 

a reduction in the number of HH quality 

measures reported to HHAs on 

confidential CASPER reports. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40293 

e. Home Health Care CAHPS® Survey 

(HHCAHPS) ®

In the CY 2013 HH PPS final rule (77 

FR 67094), we stated that the HH quality 

measures reporting requirements for 

Medicare-certified agencies includes the 

CAHPS® HH Care (HHCAHPS®) Survey 

for the CY 2013 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 maintained the 

stated HHCAHPS data requirements for 

CY 2013 that were set out in the CY 

2012 HH PPS final rule, and in the CY 

2013 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 HHS’ Transparency 

Initiative, we have implemented a 

process to measure and publicly report 

patient experiences with HH care, using 

a survey developed by the Agency for 

Healthcare Research and Quality’s 

(AHRQ’s) Consumer Assessment of 

Healthcare Providers and Systems 

(CAHPS®) program and endorsed by the 

NQF in March 2009 (NQF Number 

0517). The HHCAHPS® survey is part of 

a family of CAHPS® surveys that asks 

patients to report on and rate their 

experiences with health care. The HH 

Care CAHPS® (HHCAHPS®) survey 

presents HH patients with a set of 

standardized questions about their HH 

care providers and about the quality of 

their HH care. 

Prior to this survey, there was no 

national standard for collecting 

information about patient experiences 

that would enable valid comparisons 

across all HHAs. The history and 

development process for HHCAHPS®

has been described in previous rules 

and it also available on the official 

HHCAHPS® Web site at https:// 

homehealthcahps.org and in the 

annually-updated HHCAHPS® Protocols 

and Guidelines Manual, which is 

downloadable from https:// 

homehealthcahps.org. 

For public reporting purposes, we 

required HHAs to report five 

measures—three composite measures 

and two global ratings of care that are 

derived from the questions on the 

HHCAHPS® survey. The publicly 

reported data are adjusted for 

differences in patient mix across HHAs. 

We update the HHCAHPS® data on HH 

Compare on www.medicare.gov 

quarterly. Each HHCAHPS® composite 

measure consists of four or more 

individual survey items regarding 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 focuses on 

areas where the HH patient is the best 

or only source for the information. The 

developmental work for the HHCAHPS®

survey began in mid-2006, and the first 

HHCAHPS® survey was field-tested (to 

validate the length and content of the 

survey) in 2008 by the AHRQ and the 

CAHPS® grantees, and the final 

HHCAHPS® survey was used in a 

national randomized mode experiment 

in 2009 through 2010. 

The HHCAHPS® survey is currently 

available in English, Spanish, Chinese, 

Russian, and Vietnamese. The OMB 

Number on these surveys is the same 

(0938–1066). All of these surveys are on 

the Home Health Care CAHPS® Web 

site, https://homehealthcahps.org. We 

will continue to consider additional 

language translations of the HHCAHPS®

in response to the needs of the HH 

patient population. 

All of the requirements about HH 

patient eligibility for the HHCAHPS®

survey and conversely, which HH 

patients are ineligible for the 

HHCAHPS® survey are delineated and 

detailed in the HHCAHPS® Protocols 

and Guidelines Manual, which is 

downloadable at https:// 

homehealthcahps.org. HH patients are 

eligible for HHCAHPS® if they received 

at least two skilled HH visits in the past 

2 months, which are paid for by 

Medicare or Medicaid. 

HH 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 the date the 

sample is pulled; 

• Receive hospice care; 

• Receive 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 

• No Publicity patients, defined as 

patients who on their own initiative at 

their first encounter with the HHAs 

make it very clear that no one outside 

of the agencies can be advised of their 

patient status, and no one outside of the 

HHAs can contact them for any reason. 

We stated in previous rules that 

Medicare-certified HHAs are required to 

contract with an approved HHCAHPS®

survey vendor. Medicare-certified 

agencies also must provide on a 

monthly basis a list of their patients 

served to their respective HHCAHPS®

survey vendors. Agencies are not 

allowed to influence at all how their 

patients respond to the HHCAHPS®

survey. 

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 30 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 all 

approved HHCAHPS survey vendors are 

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 HHCAHPS®

survey vendors follow the HHCAHPS®

Protocols and Guidelines Manual. As 

stated previously in the CY 2010, CY 

2011, CY 2012, and CY 2013 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 must 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 all approved 

HHCAHPS® survey vendors. The 

purpose of the site visits is to allow the 

HHCAHPS® Coordination Team to 

observe the entire HH Care CAHPS®

Survey implementation process, from 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40294 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

the sampling stage through file 

preparation and submission, as well as 

to assess data security and storage. The 

HHCAHPS® Survey Coordination Team 

reviews the HHCAHPS® 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 site visit 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®

survey 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 asneeded basis. 

In the CY 2013 HH PPS final rule (77 

FR 67094), we codified the current 

guideline that all approved HHCAHPS®

survey vendors fully comply with all 

HHCAHPS® oversight activities. We 

included this survey requirement at 

§ 484.250(c). 

(3) HHCAHPS® Requirements for the CY 

2014 APU 

In the CY 2013 HH PPS final rule (77 

FR 67094), we stated that we would 

require continued monthly HHCAHPS®

data collection and reporting for 4 

quarters for the HHCAHPS®

requirements for CY 2014 APU. The 

data collection period for the CY 2014 

APU includes the second quarter 2012 

through first quarter 2013 (the months 

of April 2012 through March 2013). 

HHAs were required to submit their 

HHCAHPS® data files to the HH 

CAHPS® Data Center for the second 

quarter 2012 by 11:59 p.m., Eastern 

daylight time (e.d.t.) on October 18, 

2012; for the third quarter 2012 by 11:59 

p.m., Eastern standard time (e.s.t.) on 

January 17, 2013; for the fourth quarter 

2012 by 11:59 p.m., e.d.t. on April 18, 

2013; and for the first quarter 2013 by 

11:59 p.m., e.d.t. on July 18, 2013. These 

deadlines are firm; no exceptions are 

permitted. 

We stated that we 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 HHCAHPS® Participation 

Exemption Request form for the CY 

2014 APU. The Participation Exemption 

Form is discussed in the Collection of 

Information section of this rule. The 

form was used since CY 2012, and it 

was cited in the PRA package in 2010, 

but it did not have its own OMB 

number. We have submitted a revised 

PRA package about the HHCAHPS®

survey (the package expires in March 

2014) that also includes more 

information regarding the Participation 

Exemption Form. 

As noted in the CY 2013 HH PPS final 

rule (77 FR 67094), HHAs that had 

fewer than 60 HHCAHPS®-eligible 

unduplicated or unique patients in the 

period of April 1, 2011, through March 

31, 2012, are exempt from the 

HHCAHPS® data collection and 

submission requirements for the CY 

2014 APU. Such HHAs were required to 

submit their patient counts for the 

period of April 1, 2011, through March 

31, 2012, on the HHCAHPS®

Participation Exemption Request form 

for the CY 2014 APU posted on 

https://homehealthcahps.org beginning 

April 1, 2012, by 11:59 p.m., e.d.t. on 

January 17, 2013. This deadline is firm, 

as are all of the quarterly data 

submission deadlines. 

(4) HHCAHPS® Requirements for the CY 

2015 APU 

In the CY 2013 HH PPS final rule (77 

FR 67094), we stated that for the CY 

2015 APU, we would require continued 

monthly HHCAHPS® data collection 

and reporting for 4 quarters. The data 

collection period for CY 2015 APU 

includes the second quarter 2013 

through the first quarter 2014 (the 

months of April 2013, through March 

2014). HHAs are required to submit 

their HHCAHPS® data files to the HH 

CAHPS® Data Center for the second 

quarter 2013 by 11:59 p.m., e.d.t. on 

October 17, 2013; for the third quarter 

2013 by 11:59 p.m., e.s.t. on January 16, 

2014; for the fourth quarter 2013 by 

11:59 p.m., e.d.t. on April 17, 2014; and 

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

e.d.t. on July 17, 2014. These deadlines 

are firm; no exceptions are permitted. 

We will continue to exempt HHAs 

receiving Medicare certification on or 

after April 1, 2013, from the full 

HHCAHPS® reporting requirement for 

the CY 2015 APU because these HHAs 

would not have been Medicare-certified 

throughout the period of April 1, 2012 

through March 31, 2013. These HHAs 

do not need to complete a HHCAHPS®

Participation Exemption Request form 

for the CY 2015 APU. 

We require that all HHAs that had 

fewer than 60 HHCAHPS®-eligible 

unduplicated or unique patients in the 

period of April 1, 2012, through March 

31, 2013 are 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 are 

required to submit their patient counts 

on the HHCAHPS® Participation 

Exemption Request form for the CY 

2015 APU, posted on https:// 

homehealthcahps.org on April 1, 2013, 

by 11:59 p.m., e.d.t. on January 16, 

2014. This deadline is firm, as is true of 

all quarterly data submission deadlines. 

(5) HHCAHPS® Requirements for the CY 

2016 APU 

For the CY 2016 APU, we propose to 

require continued monthly HHCAHPS®

data collection and reporting for 4 

quarters. The data collection period for 

the CY 2016 APU is proposed to include 

the second quarter 2014 through the 

first quarter 2015 (the months of April 

2014 through March 2015). We propose 

that HHAs would be required to submit 

their HHCAHPS® data files to the HH 

CAHPS® Data Center for the second 

quarter 2014 by 11:59 p.m., e.d.t. on 

October 16, 2014; for the third quarter 

2014 by 11:59 p.m., e.s.t. on January 15, 

2015; for the fourth quarter 2014 by 

11:59 p.m., e.d.t. on April 16, 2015; and 

for the first quarter 2015 by 11:59 p.m., 

e.d.t. on July 16, 2015. We propose that 

these deadlines be firm; no exceptions 

would be permitted. 

We propose to continue to exempt 

HHAs receiving Medicare certification 

after the period in which HHAs do their 

patient count (April 1, 2013 through 

March 31, 2014) on or after April 1, 

2014, from the full HHCAHPS®

reporting requirement for the CY 2016 

APU, because these HHAs would not 

have been Medicare-certified 

throughout the period of April 1, 2013, 

through March 31, 2014. These HHAs 

would not need to complete a 

HHCAHPS® Participation Exemption 

Request form for the CY 2016 APU. 

We propose to state that all HHAs that 

had fewer than 60 HHCAHPS®-eligible 

unduplicated or unique patients in the 

period of April 1, 2013, through March 

31, 2014 would be exempt from the 

HHCAHPS® data collection and 

submission requirements for the CY 

2016 APU. Agencies with fewer than 60 

HHCAHPS-eligible, unduplicated or 

unique patients in the period of April 1, 

2013, through March 31, 2014, would be 

required to submit their patient counts 

on the HHCAHPS® Participation 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40295 

Exemption Request form for the CY 

2016 APU posted on https:// 

homehealthcahps.org on April 1, 2014, 

by 11:59 p.m., e.s.t. on January 15, 2015. 

This deadline would be firm, as would 

be all of the quarterly data submission 

deadlines. 

(6) HHCAHPS® Reconsiderations and 

Appeals Process 

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 propose to continue the 

HHCAHPS® reconsiderations and 

appeals process that we have finalized 

and that we have used for the CY 2012 

APU and for the CY 2013 APU. We have 

described the HHCAHPS®

reconsiderations process requirements 

in the notification memorandum that 

the Regional Home Health 

Intermediaries (RHHI)/MACs send to 

the affected HHAs, on behalf of CMS. 

HHAs have 30 days to send their 

documentation to support their request 

for reconsideration to CMS. It is 

important that the affected HHAs send 

in comprehensive information in their 

reconsideration letter/package because 

CMS will not contact the affected HHAs 

to request additional information or to 

clarify incomplete or inconclusive 

information. If clear evidence to support 

a finding of compliance is not present, 

the 2 percent reduction in the APU will 

be upheld. If clear evidence of 

compliance is present, the 2 percent 

reduction for the APU will be reversed. 

We will notify affected HHAS by about 

mid-December. If we determine to 

uphold the 2 percent reduction, the 

HHA may further appeal the 2 percent 

reduction via the Provider 

Reimbursement Review Board (PRRB) 

appeals process. 

f. Summary of Proposed Changes in CY 

2014 

We are not proposing any changes to 

the HHCAHPS® Survey in CY 2014. 

g. 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. HHAs can 

also send an email to the HHCAHPS®

Survey Coordination Team at 

HHCAHPS@rti.org, or telephone tollfree (1–866–354–0985) for more 

information about HHCAHPS®. 

3. 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 HH services. For CY 

2014, as in previous years, we are 

proposing to base the wage index 

adjustment to the labor portion of the 

HH PPS rates on the most recent prefloor 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 OMB. We have 

consistently used the pre-floor, prereclassified hospital wage index data to 

adjust the labor portion of the HH PPS 

rates. We believe the use of the prefloor, 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 for 

(70 FR 68132), we began adopting 

revised labor market area definitions as 

discussed in the OMB Bulletin No. 03– 

04 (June 6, 2003). This bulletin 

announced revised definitions for 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. 

The OMB bulletins are available at 

http://www.whitehouse.gov/omb/ 

bulletins/index.html. 

For CY 2014, as in previous years, we 

are proposing to use the most recent 

pre-floor, pre-reclassified hospital wage 

index as the base for the wage index 

adjustment to the labor portion of the 

HH PPS rates. However, the FY 2014 

pre-floor, pre-reclassified hospital wage 

index does not reflect OMB’s new area 

delineations, based on the 2010 Census 

(outlined in OMB Bulletin 13–01, 

released on February 28, 2013), as those 

changes were not published until the 

Hospital Inpatient Prospective Payment 

System (IPPS) proposed rule (78 FR 

27553) was in advanced stages of 

development. We intend to propose 

changes to the FY 2015 hospital wage 

index based on the newest CBSA 

changes in the FY 2015 IPPS proposed 

rule. Therefore, if CMS incorporates 

OMB’s new area delineations, based on 

the 2010 Census, in the FY 2015 

hospital wage index, those changes 

would also be reflected in the FY 2015 

HH wage index. 

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 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 are available 

on the CMS Web site at http:// 

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

Home-Health-Prospective-PaymentSystem-Regulations-and-Notices.html. 

4. Proposed CY 2014 Payment Update 

a. National, Standardized 60-Day 

Episode Payment 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 payment 

rate. As set forth in § 484.220, we adjust 

the national, standardized 60-day 

episode payment rate by a case-mix 

relative weight and a wage index value 

based on the site of service for the 

beneficiary. 

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. The 

labor-related share of the case-mix 

adjusted 60-day episode rate would 

continue to be 78.535 percent and the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40296 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

non-labor-related share would continue 

to be 21.465 percent as set out in the CY 

2013 HH PPS final rule (77 FR 67068). 

The proposed CY 2014 HH PPS rates 

use the same case-mix methodology as 

set forth in the CY 2008 HH PPS final 

rule with comment period (72 FR 

49762) and adjusted as described in 

section III.C. of this proposed rule. The 

following are the steps we take to 

compute the case-mix and wageadjusted 60-day episode rate: 

(1) Multiply the national 60-day 

episode rate by the patient’s applicable 

case-mix weight. 

(2) Divide the case-mix adjusted 

amount into a labor (78.535 percent) 

and a non-labor portion (21.465 

percent). 

(3) Multiply the labor portion by the 

applicable wage index based on the site 

of service of the beneficiary. 

(4) Add the wage-adjusted portion to 

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

rate, subject to any additional applicable 

adjustments. 

In accordance with section 

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

constitutes the annual update of the HH 

PPS rates. Section 484.225 sets forth the 

specific annual percentage update 

methodology. In accordance with 

§ 484.225(i), for a HHA that does not 

submit HH 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 HH 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. 

Medicare pays the national, 

standardized 60-day case-mix and wageadjusted episode payment on a split 

percentage payment approach. The split 

percentage payment approach includes 

an initial percentage payment and a 

final percentage payment as set forth in 

§ 484.205(b)(1) and § 484.205(b)(2). We 

may base the initial percentage payment 

on the submission of a request for 

anticipated payment (RAP) and the final 

percentage payment on the submission 

of the claim for the episode, as 

discussed in § 409.43. The claim for the 

episode that the HHA submits for the 

final percentage payment determines 

the total payment amount for the 

episode and whether we make an 

applicable adjustment to the 60-day 

case-mix and wage-adjusted episode 

payment. The end date of the 60-day 

episode as reported on the claim 

determines which calendar year rates 

Medicare would use to pay the claim. 

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

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A partial episode payment 

adjustment as set forth in § 484.205(d) 

and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

b. Proposed CY 2014 National, 

Standardized 60-Day Episode Payment 

Rate 

The proposed CY 2014 national, 

standardized 60-day episode payment 

rate would be $2,862.99 as calculated in 

Table 16. To determine the CY 2014 

proposed national, standardized 60-day 

episode payment rate, we start with the 

2013 average payment per episode 

($2,963.65) calculated in section III.D.1. 

of this proposed rule. We then apply the 

3.50 percent rebasing reduction 

(1¥0.0350 = 0.9650) and remove the 2.5 

percent for outlier payments that we put 

back in the rates as described in section 

III.D.1. of this proposed rule. We 

subsequently apply a standardization 

factor (1.0017) to ensure budget 

neutrality in episode payments using 

the 2014 wage index. The application of 

a standardization factor was also done 

when setting the original national, 

standardized 60-day episode payment 

rate for the HH PPS in 2000 per section 

1895(3)(A)(i) of the Act. The Act 

required that the 60-day episode base 

rate and other applicable amounts be 

standardized in a manner that 

eliminates the effects of variations in 

relative case mix and area wage 

adjustments among different home 

health agencies in a budget neutral 

manner. To calculate the 

standardization factor, we simulated 

total payments for non-LUPA episodes 

using the 2014 wage index and 

compared it to our simulation of total 

payments for non-LUPA episodes using 

the 2013 wage index. By dividing the 

total payments using the 2014 wage 

index by the total payments using the 

2013 wage index, we obtain a 

standardization factor of 1.0017. We 

note that since we are implementing the 

adjustment to the case-mix weights in a 

budget neutral manner, there is no 

standardization factor needed to ensure 

budget neutrality in episode payments 

using the 2014 case-mix relative values. 

Lastly, we update payments by the CY 

2014 market basket update (2.4 percent). 

TABLE 16—CY 2014 PROPOSED 60-DAY NATIONAL, STANDARDIZED 60-DAY EPISODE PAYMENT AMOUNT

2013 Estimated average payment per episode 2014rebasing 

adjustment 

Outlier 

adjustment 

factor 

Standardization 

factor 

2014 HH 

market basket 

CY 2014 

proposed 

national, 

standardized 

60-day episode 

payment 

$2,963.65 ..................................................... × 0.9650 × 0.975 × 1.0017 × 1.024 = $2,860.20 

The proposed CY 2014 national, 

standardized 60-day episode payment 

rate for an HHA that does not submit the 

required quality data is updated by the 

proposed CY 2014 HH market basket 

update (2.4 percent) minus 2 percentage 

points and is shown in Table 17. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40297 

TABLE 17—FOR HHAS THAT DO NOT SUBMIT THE QUALITY DATA—PROPOSED CY 2014 NATIONAL, STANDARDIZED 60- 

DAY EPISODE PAYMENT AMOUNT

2013 estimated average payment per episode 2014 rebasing 

adjustment 

Outlier 

adjustment 

factor 

Standardization 

factor 

2014 HH 

market basket 

minus 2 

percentage points 

CY 2014 

proposed 

national, 

standardized 

60-day episode 

payment 

$2,963.65 ..................................................... × 0.9650 × 0.975 × 1.0017 × 1.004 = $2,804.34 

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 HH discipline. The 

six HH 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 (SLP). 

To calculate the CY 2014 national pervisit rates, we used the 2013 national 

per-visit rates adjusted to include the 

dollars from the 2.5 percent outlier pool 

as described in section III.D.2. of this 

proposed rule. We then apply the 3.5 

percent rebasing increase to the 2013 

outlier adjusted per-visit rates (1 + 0.035 

= 1.035), remove the outlier payment 

adjustment that we used to inflate the 

rates for comparison purposes (to 

compare the rates to the estimated per 

visit costs) in section III.D.2. of this 

proposed rule, and apply a wage index 

budget neutrality factor of 1.0003 to 

ensure budget neutrality for LUPA pervisit payments after applying the 2014 

wage index. We calculated the wage 

index budget neutrality factor by 

simulating total payments for LUPA 

episodes using the 2014 wage index and 

comparing it to simulated total 

payments for LUPA episodes using the 

2013 wage index. We note that the 

LUPA per-visit payments are not 

calculated using case-mix weights and 

therefore, there is no case-mix 

standardization factor needed to ensure 

budget neutrality in LUPA payments. 

The per-visit rates for each discipline 

are then updated by the proposed CY 

2014 HH market basket update of 2.4 

percent. The national per-visit rates are 

adjusted by the wage index based on the 

site of service of the beneficiary. The 

per-visit payment amounts for LUPAs 

are separate from the LUPA add-on 

payment amount, which is paid for 

episodes that occur as the only episode 

or initial episode in a sequence of 

adjacent episodes. The proposed CY 

2014 national per-visit rates are shown 

in Tables 18 and 19. 

TABLE 18—PROPOSED CY 2014 NATIONAL PER-VISIT PAYMENT AMOUNTS

HH discipline type 

CY 2013 

per-visit rates 

including 

outliers 

CY 2014 

rebasing 

adjustment 

Outlier 

adjustment 

Wage index 

budget 

neutrality 

factor 

2014 HH 

market 

basket 

Proposed 

CY 2014 

per-visit rates 

Home Health Aide .................................... $53.12 × 1.035 × 0.975 × 1.0003 × 1.024 $54.91 

Medical Social Services ........................... 188.01 × 1.035 × 0.975 × 1.0003 × 1.024 194.34 

Occupational Therapy .............................. 129.11 × 1.035 × 0.975 × 1.0003 × 1.024 133.46 

Physical Therapy ..................................... 128.24 × 1.035 × 0.975 × 1.0003 × 1.024 132.56 

Skilled Nursing ......................................... 117.28 × 1.035 × 0.975 × 1.0003 × 1.024 121.23 

Speech-Language Pathology ................... 139.34 × 1.035 × 0.975 × 1.0003 × 1.024 144.03 

The proposed CY 2014 per-visit 

payment rates for an HHA that does not 

submit the required quality data is 

updated by the proposed CY 2014 HH 

market basket update (2.4 percent) 

minus 2 percentage points and is shown 

in Table 19. 

TABLE 19—PROPOSED CY 2014 NATIONAL PER-VISIT PAYMENT AMOUNTS FOR HHAS THAT DO NOT SUBMIT THE

REQUIRED QUALITY DATA

HH discipline type 

CY 2013 

per-visit rates 

including 

outliers 

CY 2014 

rebasing 

adjustment 

Outlier 

adjustment 

Wage index 

budget 

neutrality 

factor 

2014 

HH market 

basket minus 

2 percentage 

points 

Proposed 

CY 2014 

per-visit rates 

Home Health Aide .................................... $53.12 × 1.035 × 0.975 × 1.0003 × 1.004 $53.84 

Medical Social Services ........................... 188.01 × 1.035 × 0.975 × 1.0003 × 1.004 190.54 

Occupational Therapy .............................. 129.11 × 1.035 × 0.975 × 1.0003 × 1.004 130.85 

Physical Therapy ..................................... 128.24 × 1.035 × 0.975 × 1.0003 × 1.004 129.97 

Skilled Nursing ......................................... 117.28 × 1.035 × 0.975 × 1.0003 × 1.004 118.86 

Speech-Language Pathology ................... 139.34 × 1.035 × 0.975 × 1.0003 × 1.004 141.22 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40298 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

d. Proposed Low-Utilization Payment 

Adjustment (LUPA) Add-On Factor 

For episodes with four or fewer visits, 

Medicare pays on the basis of a national 

per-visit amount by discipline, referred 

to as a LUPA. As stated in our CY 2008 

HH PPS proposed rule, after the HH PPS 

went into effect we received comments 

and correspondence suggesting that the 

LUPA payment rates do not adequately 

account for the front-loading of costs in 

an episode. Commenters suggested that 

because of the small number of visits in 

a LUPA episode, HHAs have little 

opportunity to spread the costs of 

lengthy initial visits over a full episode 

(72 FR 25424). In response to comments 

received, we conducted an initial 

descriptive analysis of visit log data 

from prior to the establishment of the 

HH PPS, showing that initial visits were 

25 to 50 percent longer than subsequent 

visits in LUPA episodes that occur as 

the only or initial episode. These results 

indicated that payment for LUPA 

episodes may not offset the full cost of 

initial visits. Therefore, as specified in 

the CY 2008 HH PPS final rule, LUPA 

episodes that occur as the only episode 

or an initial episode in a sequence of 

adjacent episodes are adjusted by 

applying an additional amount to the 

LUPA payment before adjusting for area 

wage differences (72 FR 49849). 

The CY 2008 LUPA add-on amount 

was calculated using a large 

representative sample of claims from 

2005 (72 FR 49848). The analysis 

examined minute data for skilled 

nursing, physical therapy, and speechlanguage pathology (SLP) as, per the 

Medicare CoPs at § 484.55(a)(1) and 

(a)(2), only these three disciplines are 

allowed to conduct the initial 

assessment visit. The analysis showed 

that the average excess of minutes for 

the first visit in LUPA episodes that 

were the only episode or an initial 

LUPA in a sequence of adjacent 

episodes was 38.5 minutes for the first 

visit if SN, 25.1 minutes for the first 

visit if PT, and 22.6 minutes for the first 

visit if SLP. Those excess minutes were 

then expressed as a proportion of the 

average number of minutes for all nonfirst visits in non-LUPA episodes (42.5 

minutes, 45.6 minutes, and 48.6 

minutes for SN, PT, and SLP, 

respectively). These proportions (90.6 

percent, 55.0 percent, and 46.5 percent 

for SN, PT, and SLP, respectively) were 

used to inflate the LUPA per-visit 

payment rates. Finally, using an 

appropriate set of weights representing 

the share of LUPA first visits for SN 

(77.8 percent), PT (21.7 percent) and 

SLP (0.5 percent), we calculated a LUPA 

add-on payment amount of $87.93 for 

LUPA episodes that occur as the only 

episode or an initial episode in a 

sequence of adjacent episodes (Table 

20). When the LUPA add-on payment 

amount was implemented in CY 2008, 

to account for the additional payment to 

LUPA episodes and maintain budget 

neutrality, a reduction was made to the 

national, standardized 60-day episode 

payment rate (72 FR 49849). 

TABLE 20—CALCULATION OF THE LUPA ADD-ON AMOUNT, CY 2008 

Skilled nursing Physical 

therapy 

Speechlanguage 

pathology 

(1) Proportional increase in minutes for an initial visit over non-initial visits .............................. 90.59% 55.04% 46.50% 

(2) CY 2008 Per-Visit Amounts ................................................................................................... $104.91 $114.71 $124.54 

(3) Excess cost for initial visits (1*2) ........................................................................................... $95.04 $63.14 $57.91 

(4) Percent of initial assessment visits provided by this discipline ............................................. 77.8% 21.7% 0.5% 

(5) Add-on amount per discipline (3*4) ....................................................................................... $73.94 $13.70 $0.29 

(6) Total LUPA add-on Amount (Sum of row 5) ......................................................................... $87.93 

For this proposed rule we are using 

the same methodology used to establish 

the LUPA add-on amount for CY 2008. 

Specifically, we updated the analysis 

using 100 percent of LUPA episodes and 

a 20 percent sample of non-LUPA first 

episodes from preliminary CY 2012 

claims data for episodes starting on or 

before May 31, 2012. The analysis 

showed that the average excess of 

minutes for the first visit in LUPA 

episodes that were the only episode or 

an initial LUPA in a sequence of 

adjacent episodes was 38.88 minutes for 

the first visit if SN, 32.75 minutes for 

the first visit if PT, and 32.28 minutes 

for the first visit if SLP. The average 

minutes for all non-first visits in nonLUPA episodes was 44.62 minutes for 

SN, 47.88 minutes for PT, and 51.31 

minutes for SLP. Those excess minutes 

expressed as a proportion of the average 

minutes for all non-first visits in nonLUPA episodes are 87.14 percent for 

SN, 68.40 percent for PT, and 62.91 

percent for SLP. We used these 

proportions to inflate the proposed 

LUPA per-visit payment rates in Table 

18 of $121.23 for SN, $132.56 for PT, 

and $144.03 for SLP. We then calculated 

a set of weights representing the share 

of LUPA first visits for SN (81.74 

percent), PT (17.87 percent) and SLP 

(0.39 percent) and using these weights, 

we calculated a LUPA add-on payment 

amount of $102.91 for LUPA episodes 

that occur as the only episode or an 

initial episode in a sequence of adjacent 

episodes. 

In lieu of a single LUPA add-on 

payment amount of $102.91, to ensure 

that the LUPA add-on amount equitably 

reflects the excess cost for an initial visit 

for each of the three disciplines (SN, PT, 

and SLP), we propose to multiply the 

per-visit payment amount for the first 

SN, PT, or SLP visit in LUPA episodes 

that occur as the only episode or an 

initial episode in a sequence of adjacent 

episodes by 1 + the proportional 

increase in minutes for an initial visit 

over non-initial visits. The proposed 

LUPA add-on factors are: 1.8714 for SN; 

1.6841 for PT; and 1.6293 for SLP. For 

example, for LUPA episodes that occur 

as the only episode or an initial episode 

in a sequence of adjacent episodes, if 

the first skilled visit is SN, the payment 

for that visit would be $ $226.87 (1.8714 

multiplied by $121.23). For more 

information on the analyses performed 

to update the LUPA add-on amount, 

please refer to the technical report titled 

‘‘Analyses in Support of Rebasing & 

Updating the Medicare Home Health 

Payment Rates’’ available on the CMS 

Home Health Agency (HHA) Center Web 

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

Provider-Type/Home-Health-AgencyHHA-Center.html?redirect=/center/ 

hha.asp. 

e. Nonroutine Medical Supply 

Conversion Factor Update 

Payments for NRS are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. To determine the CY 

2014 proposed NRS conversion factor, 

we start with the 2013 NRS conversion 

factor ($53.97) and apply the 2.58 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40299 

percent rebasing adjustment calculated 

in section II.D.3. of this proposed rule 

(1–0.0258 = 0.9742). We then update the 

conversion factor by the proposed CY 

2014 HH market basket update (2.4 

percent). We do not apply a 

standardization factor as the NRS 

payment amount calculated from the 

conversion factor is not wage or casemix adjusted when the final claim 

payment amount is computed. The 

proposed NRS conversion factor for CY 

2014 is $53.84, as shown in Table 21. 

TABLE 21—PROPOSED CY 2014 NRS CONVERSION FACTOR

CY 2013 NRS conversion factor 

2014 

rebasing 

adjustment 

2014 

HH market 

basket 

Proposed CY 

2014 NRS 

conversion 

factor 

$53.97 .......................................................................................................................................... × 0.9742 × 1.024 = $53.84 

Using the proposed CY 2014 NRS 

conversion factor ($53.84), the payment 

amounts for the six severity levels are 

shown in Table 22. 

TABLE 22—PROPOSED CY 2014 NRS PAYMENT AMOUNTS FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY DATA

Severity level Points 

(scoring) 

Relative 

weight 

Proposed 

NRS payment 

amount 

1 ................................................................................................................................................... 0 0.2698 $14.53 

2 ................................................................................................................................................... 1 to 14 0.9742 52.45 

3 ................................................................................................................................................... 15 to 27 2.6712 143.82 

4 ................................................................................................................................................... 28 to 48 3.9686 213.67 

5 ................................................................................................................................................... 49 to 98 6.1198 329.49 

6 ................................................................................................................................................... 99+ 10.5254 566.69 

For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2013 NRS conversion factor 

($53.97) and apply the 2.58 percent 

rebasing adjustment calculated in 

section II.D.3. of this proposed rule (1 ¥ 

0.0258 = 0.9742). We then update the 

NRS conversion factor by the proposed 

CY 2014 HH market basket update of 2.4 

percent, minus 2 percentage points. The 

CY 2014 NRS conversion factor for 

HHAs that do not submit quality data is 

shown in Table 23. 

TABLE 23—PROPOSED CY 2014 NRS CONVERSION FACTOR FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY

DATA

CY 2013 NRS conversion factor 

2014 

rebasing 

adjustment 

CY 2014 

HH market 

basket minus 

2 percentage 

points 

Proposed CY 

2014 NRS 

conversion 

factor 

$53.97 .......................................................................................................................................... × 0.9742 × 1.004 $52.79 

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 24. 

TABLE 24—PROPOSED CY 2014 NRS PAYMENT AMOUNTS FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY

DATA

Severity level Points 

(scoring) 

Relative 

weight 

Proposed 

NRS payment 

amount 

1 ................................................................................................................................................... 0 0.2698 $14.24 

2 ................................................................................................................................................... 1 to 14 0.9742 51.43 

3 ................................................................................................................................................... 15 to 27 2.6712 141.01 

4 ................................................................................................................................................... 28 to 48 3.9686 209.50 

5 ................................................................................................................................................... 49 to 98 6.1198 323.06 

6 ................................................................................................................................................... 99+ 10.5254 555.64 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40300 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

5. Rural Add-On 

Section 421(a) of the MMA required, 

for HH services furnished in a rural 

areas (as defined in section 

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

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. 

Section 421 of the MMA, as amended, 

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 HH 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 payment rate, national per-visit 

rates, LUPA add-on payment, and NRS 

conversion factor when HH services are 

provided in rural (non-CBSA) areas. 

Refer to Tables 25 through 28 for these 

payment rates. 

TABLE 25—PROPOSED CY 2014 PAYMENT AMOUNTS FOR 60-DAY EPISODES FOR SERVICES PROVIDED IN A RURAL AREA

For HHAs that DO submit quality data For HHAs that DO NOT submit quality data 

Proposed national standardized 60- 

day episode payment rate 

Multiply by the 

3 percent rural 

add-on 

Proposed rural 

national standardized 60-day 

episode payment rate 

Proposed national standardized 60- 

day episode payment rate 

Multiply by the 

3 percent rural 

add-on 

Proposed rural 

national standardized 60-day 

episode payment Rate 

$2,860.20 .......................................... × 1.03 $2,946.01 $2,804.34 .......................................... × 1.03 $2,888.47 

TABLE 26—PROPOSED CY 2014 PER-VISIT AMOUNTS FOR SERVICES PROVIDED IN A RURAL AREA

HH discipline type 

For HHAs that DO submit quality data For HHAs that DO NOT submit quality data 

Proposed pervisit rate 

Multiply by the 

3 percent rural 

add-on 

Proposed rural 

per-visit rate 

Proposed pervisit rate 

Multiply by the 

3 percent rural 

add-on 

Proposed rural 

per-visit rate 

HH Aide .................................................... $54.91 × 1.03 $56.56 $53.84 × 1.03 $55.46 

MSS ......................................................... 194.34 × 1.03 200.17 190.54 × 1.03 196.26 

OT ............................................................ 133.46 × 1.03 137.46 130.85 × 1.03 134.78 

PT ............................................................. 132.56 × 1.03 136.54 129.97 × 1.03 133.87 

SN ............................................................ 121.23 × 1.03 124.87 118.86 × 1.03 122.43 

SLP .......................................................... 144.03 × 1.03 148.35 141.22 × 1.03 145.46 

TABLE 27—PROPOSED CY 2014 NRS CONVERSION FACTOR FOR SERVICES PROVIDED IN RURAL AREAS

For HHAs that DO submit quality data For HHAs that DO NOT submit quality data 

Proposed conversion factor 

Multiply by the 

3 percent rural 

add-on 

Proposed rural 

conversion 

factor 

Proposed conversion factor 

Multiply by the 

3 percent rural 

add-on 

Proposed rural 

conversion 

factor 

$53.84 ............................................... × 1.03 $55.46 $52.79 ............................................... × 1.03 $54.37 

TABLE 28—PROPOSED CY 2014 NRS PAYMENT AMOUNTS FOR SERVICES PROVIDED IN RURAL AREAS

Severity level Points 

(scoring) 

For HHAs that DO submit quality data (NRS conversion factor 

= $55.46) 

For HHAs that DO NOT submit 

quality data (NRS conversion 

factor = $54.37) 

Relative 

weight 

Total NRS 

payment 

amount for 

rural areas 

Relative 

weight 

Total NRS 

payment 

amount for 

rural areas 

1 ........................................................................................... 0 0.2698 $14.96 0.2698 $14.67 

2 ........................................................................................... 1 to 14 0.9742 54.03 0.9742 52.97 

3 ........................................................................................... 15 to 27 2.6712 148.14 2.6712 145.23 

4 ........................................................................................... 28 to 48 3.9686 220.10 3.9686 215.77 

5 ........................................................................................... 49 to 98 6.1198 339.40 6.1198 332.73 

6 ........................................................................................... 99+ 10.5254 583.74 10.5254 572.27 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40301 

F. 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 care needs. Prior to the 

enactment of the Affordable Care Act, 

section 1895(b)(5)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 Medicare Program; 

Prospective Payment System for Home 

Health Agencies 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 HH 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 PEP adjustment is defined as 

the 60-day episode payment or PEP 

adjustment for that group plus a fixeddollar 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 FDL 

amount. The proportion of additional 

costs over the outlier threshold amount 

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 continue 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 

payment rates, the national per-visit 

rates, the LUPA add-on payment 

amount, and the 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 amended, ‘‘Adjustment for 

outliers,’’ states that ‘‘The Secretary 

shall reduce the standard prospective 

payment amount (or amounts) under 

this paragraph applicable to HH 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 payment rates, the national per 

visit rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

for CY 2010. We then reduced the rates 

by 5 percent as required by section 

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

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

Act. For CY 2011 and subsequent 

calendar years we target up to 2.5 

percent of estimated total payments to 

be paid as outlier payments, and apply 

a 10 percent agency-level outlier cap. 

4. Loss-Sharing Ratio and Fixed Dollar 

Loss (FDL) Ratio 

For a given level of outlier payments, 

there is a trade-off between the values 

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

the number of episodes that can receive 

outlier payments, but makes it possible 

to select a higher loss-sharing ratio, and 

therefore, increase outlier payments for 

outlier episodes. Alternatively, a lower 

FDL ratio means that more episodes can 

qualify for outlier payments, but outlier 

payments per episode must then be 

lower. 

The FDL ratio and the loss-sharing 

ratio must be selected so that the 

estimated total outlier payments do not 

exceed the 2.5 percent aggregate level 

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

the Act). Historically, we have used a 

value of 0.80 for the loss-sharing ratio 

which, we believe, preserves incentives 

for agencies to attempt to provide care 

efficiently for outlier cases. With a losssharing ratio of 0.80, Medicare pays 80 

percent of the additional estimated costs 

above the outlier threshold amount. We 

are not proposing a change to the losssharing ratio in this proposed rule. 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. Simulations based on 

CY 2010 claims data completed for the 

CY 2013 HH PPS final rule showed that 

outlier payments were estimated to 

comprise approximately 2.18 percent of 

total HH PPS payments in CY 2013, and 

as such, we lowered the FDL ratio from 

0.67 to 0.45. We stated that lowering the 

FDL ratio to 0.45, while maintaining a 

loss-sharing ratio of 0.80, struck an 

effective balance of compensating for 

high-cost episodes while allowing more 

episodes to qualify as outlier payments 

(77 FR 67080). 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 amount, which 

is added to the case-mix and wageadjusted 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. 

Based on simulations using 

preliminary CY 2012 claims data, the 

proposed CY 2014 payments rates in 

section III.E. in this proposed rule, and 

the FDL ratio of 0.45; we estimate that 

outlier payments would comprise 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40302 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

approximately 1.82 percent of total HH 

PPS payments in CY 2014. Simulating 

payments using preliminary CY 2012 

claims data and the CY 2013 payment 

rates (77 FR 67100 through 67105); we 

estimate that outlier payments would 

comprise 1.78 percent of total payments. 

Given the proposed increases to the CY 

2014 national per-visit payment rates, 

our analysis estimates a 0.04 percentage 

point increase in estimated outlier 

payments as a percent of total HH PPS 

payment. We further estimate that by 

the end of the 4-year phase-in period 

required by the Affordable Care Act, 

estimated outlier payments as a percent 

of total HH PPS payments would be 

approximately 1.94 percent. We note, 

however, that these estimates do not 

take in to account any changes in 

utilization that may have occurred in 

CY 2013, and would continue to occur 

in CY 2014, due to decreasing the FDL 

ratio from 0.67 percent to 0.45 percent. 

Therefore, we not proposing a change to 

the FDL ratio for CY 2014 as the claims 

data showing any utilization changes 

that may have resulted from an FDL of 

0.45 will not be available for analysis 

until next year. In the final rule, we will 

update our estimate of outlier payments 

as a percent of total HH PPS payments 

using the best analysis the most current 

and complete year of HH PPS data and 

will continue to monitor the percent of 

total HH PPS payments paid as outlier 

payments. 

5. Outlier Relationship to the HH 

Payment Study 

As we discuss in section III.G. of this 

proposed rule, section 3131(d) of the 

Affordable Care Act requires CMS to 

conduct a study and report on 

developing HH PPS payment revisions 

that will ensure access to care and 

payment for patients with high severity 

of illness. Our Report to Congress 

containing this study’s 

recommendations is due no later than 

March 1, 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. 

G. Payment Reform: Home Health Study 

and Report 

To address concerns that some 

beneficiaries are at risk of not having 

access to Medicare HH 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 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 (specifically, 

beneficiaries with ‘‘high levels of 

severity of illness’’). Section 3131(d) of 

the Affordable Care Act also gives the 

Secretary the authority to explore 

methods to revise the HH PPS to 

account for costs related to patient 

severity of illness or to improving 

beneficiary access to care and examine 

the potential impacts of any potential 

revisions to the payment system. 

As we stated in the CY 2013 HH PPS 

proposed rule (77 FR 41572), we 

awarded a contract to L&M Policy 

Research in the fall of 2010 to perform 

exploratory work for the study on the 

vulnerable patient populations (that is, 

low-income Medicare beneficiaries, 

beneficiaries in medically underserved 

areas, and beneficiaries with high levels 

of severity of illness). The contractor 

performed a literature review of 

potential HH PPS payment 

vulnerabilities and access issues, 

established and convened technical 

expert panel (TEP) meetings and open 

door forums to help define the 

vulnerable patient populations and to 

gain insight on access issues these 

populations may face, and performed 

preliminary analysis looking at resource 

costs versus Medicare reimbursement. 

In September 2011, we awarded a 

study contract to L&M Policy Research, 

along with subcontractors Avalere 

Health, Mathematica Policy Research, 

and Social & Scientific Systems, to 

develop an analytic plan, perform 

detailed analysis, and if necessary, 

develop recommendations for changes 

to the HH PPS. In 2012, we completed 

preliminary analyses on HHA costs 

associated with providing care for 

vulnerable patient populations. We 

presented our findings at a TEP meeting 

in December 2012 and received 

extensive feedback on our analyses. We 

refined our analytic approach based on 

feedback from the TEP meeting and we 

are in the process of performing the 

refined analyses. In addition to 

examining the costs of providing care to 

vulnerable patient populations, we are 

assessing whether the vulnerable patient 

populations experience access issues 

and potential factors that may prevent 

access to care. To do so, we mailed out 

HHA and physician surveys on access to 

care for vulnerable populations in 

February 2013. We are in the process of 

collecting and analyzing the data from 

the surveys. 

The findings from our analysis of 

HHA costs and the survey on access to 

care for vulnerable patient populations 

may be used to develop 

recommendations on how to revise the 

current HH PPS to better account for 

costs and ensure access to care for these 

beneficiaries. Methods to revise the 

current HH PPS could include payment 

adjustments for services that involve 

either more or fewer resources, changes 

to reflect resources involved with 

providing HH services to low-income 

Medicare beneficiaries or Medicare 

beneficiaries residing in medically 

underserved area, and ways outlier 

payments could be revised to reflect 

costs of treating Medicare beneficiaries 

with high severity of illness. In 

addition, as part of the study, we may 

analyze operational issues involved 

with potential implementation of 

potential revisions to the HH payment 

system. 

The Affordable Care Act requires that 

the Secretary submit a Report to 

Congress regarding the study no later 

than March 1, 2014. The report may 

contain recommendations for revisions 

to the HH PPS, recommendations for 

legislation and administrative action, 

and recommendations for whether 

further research is needed. The Congress 

also provided CMS with the authority to 

conduct a separate demonstration 

project to perform additional research 

and further explore recommendations 

from the study. We plan to provide 

updates regarding our progress on the 

HH study in future rulemaking and 

open door forums. 

H. Cost Allocation of Survey Expenses 

In the CY 2013 HH PPS proposed rule 

(77 FR 41548), we proposed to amend 

§ 431.610(g), Relations with standardsetting and survey agencies, to require 

that Medicaid state plans explicitly 

include Medicaid’s appropriate 

contribution to the cost of HH surveys. 

We proposed to add a reference to 

HHAs, along with NFs and ICFs/IIDs at 

§ 431.610(g). 

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, Medicaid and 

state-only programs in proportion to the 

benefits received. However, to provide 

more time for dialogue with states and 

for any necessary adjustments to state 

Medicaid Plans, we removed the 

proposed provision at § 431.610(g) in 

the for CY 2013 HH PPS final rule (77 

FR 67068). We are now proposing to 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40303 

proceed to amend § 431.610(g) with 

additional explanation of our proposal, 

updated cost information, and request 

for comment on our proposed 

methodologies. 

This proposed rule would clarify that 

a state Medicaid program must provide 

that, in certifying HHAs, the state’s 

designated survey agency must carry out 

certain other responsibilities that 

already apply to surveys of nursing 

facilities and Intermediate Care 

Facilities for Individuals with 

Intellectual Disabilities (ICF–IID), 

including sharing in the cost of HHA 

surveys. Section 431.610(g) provides for 

the availability of federal financial 

participation (FFP) in the cost of such 

surveys, except for expenditures that the 

survey agency makes that are 

attributable to the state’s overall 

responsibilities under state law and 

regulations. We believe that the 

principles articulated in OMB Circular 

A–87 require that HHA survey costs be 

allocated to Medicaid, Medicare and 

state-only programs in proportion to the 

benefits received. However, we also 

believe that the proposed amendment to 

§ 431.610(g) would add clarity, and that 

a proposed rule will offer states and the 

public additional opportunity to 

comment or pose questions that will 

further aid adherence to the appropriate 

cost allocation principles. We further 

invite public comment on our proposed 

methods to ensure compliance with 

these requirements. Specifically, we 

propose to review each state’s allocation 

of costs for HHA surveys for adherence 

to OMB Circular A–87 principles and 

the statutes with the goal of ensuring 

full adherence by each state no later 

than July 2014. For that portion of costs 

attributable to Medicare and Medicaid, 

we would assign 50 percent to Medicare 

and 50 percent to Medicaid. This is the 

standard 50/50 method that CMS and 

states have used effectively for many 

years in the allocation of expenses 

related to surveys of SNF/NF nursing 

homes, an approach we consider to be 

more straight-forward and economical 

compared with calculation of unique 

percentages that vary state-to-state and 

year-by-year. Most importantly, a 50/50 

method best reflects the reality that 

Medicare and Medicaid requirements 

for home health agencies are generally 

the same and each program benefits 

from the regulations. 

An alternative to the proposed 50/50 

method for allocating each state’s 

Medicare/Medicaid HHS survey costs 

would be to fix each state’s Medicaid 

share each year based on the proportion 

of Medicaid funding for HH services in 

the state compared to the combined 

Medicare and Medicaid total funding in 

the most recent years for which the data 

are reasonably complete. This is the 

method adopted for the disbursement of 

civil monetary penalties (CMPs) in the 

CY 2013 HH PPS proposed rule (77 FR 

41548). However, the effective date of 

HHA CMPs is not until July 1, 2014. Our 

preparations for imposing such CMPs in 

2014 indicate that the annual data 

collection and calculations necessary for 

that methodology are (a) More 

complicated and burdensome than 

necessary, (b) involve an inherent data 

lag that could create uncertainty for 

states and CMS in preparing state 

survey agency budgets, (c) sufficiently 

variable from year to year to create 

further uncertainty for states, (d) unable 

to anticipate the effects of substantial 

expansion of Medicaid under the 

Affordable Care Act (which could 

increasingly enlarge the state Medicaid 

share) and (e) would not recognize that 

both Medicare and Medicaid programs 

benefit from the regulations. Therefore, 

we believe that the more efficient and 

advantageous method, for both CMS and 

states, would be the 50/50 allocation 

method that has been used successfully 

for many years in the allocation of 

survey costs for SNF/NF nursing homes. 

We invite comment not only on the 50/ 

50 allocation method for the costs of 

HHA survey expenses, but on whether 

the method of distribution for CMP 

receipts back to states and to the U.S. 

Treasury should be changed to the same 

50/50 methodology. Based on such a 50/ 

50 ratio for each state, and based upon 

the projected national HHA survey 

budget for FY 2014 of $37.2 million, if 

implemented in the beginning of FY 

2014, the anticipated aggregate share for 

Medicaid would amount to $18.6 

million. The cost of surveys is treated as 

a Medicaid administrative cost, 

reimbursable at the professional staff 

rate of 75 percent. Therefore, the state 

Medicaid share will be approximately 

$4.65 million on an annualized basis. 

The $4.65 million cost is spread out 

over the 53 states/jurisdictions that 

currently conduct surveys under section 

1864 of the Act. However, the proposed 

adherence date of July FY 2014 would 

reduce the Medicaid aggregate share to 

approximately $4.65 million (for 3 

months of the annual $18.6 million 

aggregate cost) and the state Medicaid 

share to approximately $1.16 million 

(25 percent of expenses for the last 

quarter of FY 2014). 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

Unless otherwise noted, to derive 

average costs we used data from the U.S. 

Bureau of Labor Statistics for all salary 

estimates. The salary estimates include 

the cost of fringe benefits, calculated at 

35 percent of salary, which is based on 

the March 2011 Employer Costs for 

Employee Compensation report by the 

Bureau. 

We are soliciting public comment on 

each of the section 3506(c)(2)(A)- 

required issues for the following 

information collection requirements 

(ICRs): 

A. ICRs Regarding OASIS 

The information collection 

requirements and burden estimates 

associated with OASIS have been 

approved by OMB under OCN 0938– 

0760. While OASIS is discussed in 

preamble section III E.2a, this proposed 

rule does not revise any of its 

information collection requirements or 

burden estimates and, therefore, does 

not require additional OMB review 

under the authority of the Paperwork 

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

et seq.). 

B. ICRs Regarding Cost Allocation of 

Home Health Agency (HHA) Survey 

Expenses (§ 431.610) 

In § 431.610, HHAs would be added 

to the survey agency provision 

concerning Medicaid state plans. Since 

CMS already requires the state survey 

agencies to have qualified personnel 

perform onsite inspections as 

appropriate, we believe that the 

requirement to use qualified staff is met 

in the current state Medicaid plans. As 

explained in the preamble (section H, 

Cost Allocation of Survey Expenses), we 

also expect that the state Medicaid plans 

will provide for the appropriate 

Medicaid share of expenses for the 

conduct of HHA surveys. This is a 

budgeting task for which there may be 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40304 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

some incidental information collection 

burden. For some states we believe the 

information collection responsibility 

may be met within the context of their 

current state plan, while other states 

may need to make a simple amendment 

to their state Medicaid plan via use of 

the existing CMS–179 form (OCN 0938– 

0193). While CMS–179 would be the 

vehicle for transmitting the amendment 

to CMS, the amendment will be 

submitted to OMB for their review/ 

approval under CMS–10489 (OCN 

0938–NEW). 

Consistent with time estimates for 

similar tasks, the time required to 

complete this information collection is 

estimated to average 15 minutes per 

response, including the time to review 

instructions, search existing data 

resources, gather the data needed, and 

complete and review the information 

collection. If all states, DC, and 2 

territories needed to make such a state 

plan amendment, the aggregate hours 

would be 13.25 non-recurring hours (15/ 

60 * 53). Applying a national average 

professional surveyor cost per hour of 

approximately $50.23 (inclusive of 

salary and fringe benefits), we estimate 

that the maximum information 

collection cost would be approximately 

$667 ($50.23 * 13.25) if all states needed 

to file a state plan amendment. 

Apart from the SPA-related 

requirements, this proposed rule would 

not revise any budget-related 

recordkeeping or reporting requirements 

or estimates and, therefore, does not 

require additional OMB review under 

the authority of the Paperwork 

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

et seq.). 

C. ICRs Regarding Home Health Care 

CAHPS® (HHCAHPS®) Survey 

(§ 484.250) 

As part of the DHHS Transparency 

Initiative on Quality Reporting, CMS 

implements the HHCAHPS® Survey to 

measure and to publicly report patients’ 

experiences with home health care they 

receive from Medicare-certified 

agencies. Section 484.250, Patient 

Assessment Data, requires that HHAs 

submit to CMS, HHCAHPS® data in 

order to administer the payment rate 

methodologies described in §§ 484.215, 

484.230, and 484.235. The burden 

associated with this is the time and 

effort put forth by the HHAs to submit 

the HHCAHPS® data, the patients’ 

burden to respond to the HHCAHPS®

survey, and the cost to the HHAs to pay 

for the HHCAHPS® survey vendors to 

collect the data on their behalf. This 

burden is currently accounted for under 

OCN 0938–1066 (CMS–10275). 

CMS allows Medicare-certified home 

health agencies that serve 59 or fewer 

HHCAHPS® eligible patients, to request 

an exemption from participating in the 

HHCAHPS® survey. Currently, we have 

posted the HHCAHPS® Participation 

Exemption Request (PER) Form for the 

CY 2015 Annual Payment Update on 

https://homehealthcahps.org. This form 

is in use without an OMB control 

number (OCN). The form is only to be 

used if home health agencies have 59 or 

fewer HHCAHPS® eligible patients in 

the count period that is referenced for 

a given calendar year. For the CY 2015 

annual payment update, home health 

agencies with 59 or fewer HHCAHPS®

patients in the period of April 2012 

through March 2013 are exempt from 

participation in the HHCAHPS® Survey 

from April 2013 through March 2014, if 

they complete the HHCAHPS 

Participation Exemption Request Form 

for the CY 2015 Annual Payment 

Update, and the counts are verified in 

the CMS database for the same period. 

We are revising OCN 0938–1066 by 

adding the HHCAHPS® Participation 

Exemption Request Form for the CY 

Annual Payment Update and by adding 

our estimated burden that the form 

presents to Medicare-certified home 

health agencies. 

The HHCAHPS® PER Form for the CY 

2015 Annual Payment Update is a onepage form. We estimate that it would 

take 15 minutes to complete the form 

since it only has a few items to complete 

including one item concerning the 

count of HHCAHPS® eligible patients in 

an annual period. We believe that it 

would take an additional 20 minutes to 

count the patients and to verify the 

count. The annualized aggregated total 

burden to completion of the form would 

be 1,160 hr ((15 min + 20 min)/60 × 

2,000 Medicare-certified home health 

agencies) at a total estimated cost of 

$36,400 for 2,000 home health agencies. 

In deriving these figures, we used the 

following hourly labor rates and time to 

complete each task: $36.27/hr and 20 

min (.33 hr) for a home health care 

agency director to check the work on the 

Participation Exemption Request Form 

and $24.92/hr and 15 min (.25 hr) for an 

executive assistant to perform the 

patient count and to complete the form. 

This amounts to $18.20 per respondent 

($11.97 + $6.23) or $36,400 ($18.20 × 

2,000) total. 

D. Submission of PRA-Related 

Comments 

We have submitted a copy of this 

proposed rule to OMB for its review of 

the rule’s information collection and 

recordkeeping requirements. These 

requirements are not effective until they 

have been approved by the OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS’ Web site 

at www.cms.gov/Regulations-andGuidance/Legislation/ 

PaperworkReductionActof1995/, or call 

the Reports Clearance Office at 410– 

786–1326. 

We invite public comments on these 

potential information collection 

requirements. If you comment on these 

information collection and 

recordkeeping requirements, please do 

either of the following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

(CMS–1450–P) Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

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 (UMRA, March 22, 1995; 

Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40305 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This notice 

has been designated as economically 

significant rule, under section 3(f)(1)of 

Executive Order 12866. Accordingly, we 

have prepared a regulatory impact 

analysis (RIA) that to the best of our 

ability presents the costs and benefits of 

the rulemaking. Also, the rule has been 

reviewed by OMB. 

B. Statement of Need 

Section 1895(b)(1) of the Act requires 

the Secretary to establish a HH PPS for 

all costs of HH services paid under 

Medicare. In addition, section 

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

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary, and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage levels 

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

the Act addresses the annual update to 

the standard prospective payment 

amounts by the HH applicable 

percentage increase. Section 1895(b)(4) 

of the Act governs the payment 

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

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of appropriate casemix adjustment factors for significant 

variation in costs among different units 

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

of the Act requires the establishment of 

wage adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. 

Section 1895(b)(5) of the Act 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 1886(d)(2)(D) of the Act 

requires that HH services furnished in a 

rural area for episodes and visits ending 

on or after April 1, 2010, and before 

January 1, 2016, receive an increase of 

3 percent the payment amount 

otherwise made under section 1895 of 

the Act. 

Section 3131(a) of the Affordable Care 

Act mandates that starting in CY 2014, 

the Secretary must apply an adjustment 

to the national, standardized 60-day 

episode payment rate and other 

amounts applicable under section 

1895(b)(3)(A)(i)(III) of the Act to reflect 

factors such as changes in the number 

of visits in an episode, the mix of 

services in an episode, the level of 

intensity of services in an episode, the 

average cost of providing care per 

episode, and other relevant factors. In 

addition, section 3131(a) of the 

Affordable Care Act mandates that 

rebasing must be phased-in over a 4- 

year period in equal increments, not to 

exceed 3.5 percent of the amount (or 

amounts) in any given year, applicable 

under section 1895(b)(3)(A)(i)(III) of the 

Act and be fully implemented in CY 

2017. 

C. Overall Impact 

The update set forth in this proposed 

rule applies to Medicare payments 

under HH PPS in CY 2014. Accordingly, 

the following analysis describes the 

impact in CY 2014 only. We estimate 

that the net impact of the proposals in 

this rule is approximately $290 million 

in decreased payments to HHAs in CY 

2014. The impact of the wage index 

would be a decrease of $40 million. 

However, we applied a standardization 

factor to the rates as discussed earlier. 

Therefore, the net effect of the wage 

index impact is zero dollars. The $290 

million impact reflects the 

distributional effects of the 2.4 percent 

HH payment update percentage ($460 

million increase), the effects of the 

rebasing adjustments to the national, 

standardized 60-day episode payment 

rate, the national per-visit payment 

rates, and the NRS conversion factor 

($650 million decrease), and the effects 

of ICD–9 coding adjustments ($100 

million decrease). The $290 million in 

savings is reflected in the last column of 

the first row in Table 29 as a 1.5 percent 

decrease in expenditures when 

comparing the CY 2013 HH PPS to the 

proposed CY 2014 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. For the purposes 

of the RFA, we estimate that almost all 

HHAs are small entities as that term is 

used in the RFA. Individuals and states 

are not included in the definition of a 

small entity. The Secretary has 

determined that this proposed rule 

would not have a significant economic 

impact on a substantial number of small 

entities. 

A discussion on the alternatives 

considered is presented in section VI.E. 

of this proposed rule. The following 

analysis, with the rest of the preamble, 

constitutes our initial RFA analysis. We 

solicit comment on the RFA analysis 

provided. 

In addition, section 1102(b) of the Act 

requires us to prepare a RIA if a rule 

may have a significant impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 603 

of 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 

proposed rule applies to HHAs. 

Therefore, the Secretary has determined 

that this proposed rule would 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 2013, that 

threshold is approximately $141 

million. This proposed rule is not 

anticipated to have an effect on state, 

local, or tribal governments in the 

aggregate, or by the private sector, of 

$141 million or more. 

D. Detailed Economic Analysis 

This proposed rule sets forth updates 

to the HH PPS rates contained in the CY 

2013 HH PPS final rule. The impact 

analysis of this proposed rule presents 

the estimated expenditure effects of 

policy changes proposed in this rule. 

We use the latest data and best analysis 

available, but we do not make 

adjustments for future changes in such 

variables as number of visits or casemix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare HH 

benefit, based primarily on preliminary 

Medicare claims from 2012. 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 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40306 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

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. In addition, changes to the 

Medicare program may continue to be 

made as a result of the Affordable Care 

Act, or new statutory provisions. 

Although these changes may not be 

specific to the HH PPS, the nature of the 

Medicare program is such that the 

changes may interact, and the 

complexity of the interaction of these 

changes could make it difficult to 

predict accurately the full scope of the 

impact upon HHAs. 

Table 29 represents how HHA 

revenues are likely to be affected by the 

policy changes proposed in this rule. 

For this analysis, we used linked CY 

2012 HH claims and OASIS 

assessments; the claims are for dates of 

service that started on or before May 31, 

2012. The first column of Table 29 

classifies HHAs according to a number 

of characteristics including provider 

type, geographic region, and urban and 

rural locations. The third column shows 

the payment effects of the wage index 

only. The fourth column shows the 

effects of the standardization factor 

only. The fifth column shows the effects 

of the rebasing adjustments to the 

national, standardized 60-day episode 

payment rate, the national per-visit 

payment rates, and NRS conversion 

factor; the 2014 wage index; and 

standardization. The sixth column 

displays the effects of ICD–9 coding 

changes and the seventh column shows 

the effects of the market basket increase. 

The last column shows the payment 

effects of all the proposed policies. For 

CY 2014, the average impact for all 

HHAs due to the effects of rebasing is 

a 3.4 percent decrease in payments. The 

overall impact for all HHAs, in 

estimated total payments from CY 2013 

to CY 2014, is a decrease of 

approximately 1.5 percent. 

TABLE 29—PROPOSED HOME HEALTH AGENCY POLICY IMPACTS FOR CY 2014, BY FACILITY TYPE AND AREA OF THE

COUNTRY

Number of 

agencies 

Proposed 

CY 2014 

wage index 

(percent) 

Standardization 

(percent) 

Proposed 

rebasing, 

2014 wage 

index, and 

standardization 1

(percent) 

Proposed 

ICD–9 

coding 

changes 

(percent) 

CY 2014 

HH market 

basket 

(percent) 

Impact of all 

CY 2014 

policies 

(percent) 

All Agencies .............................................................................. 11,152 ¥0.2 0.2 ¥3.4 ¥0.5 2.4 ¥1.5 

Facility Type and Control: 

Free-Standing/Other Vol/NP .............................................. 1,042 0.2 0.3 ¥2.9 ¥0.3 2.4 ¥0.8 

Free-Standing/Other Proprietary ........................................ 8,511 ¥0.3 0.2 ¥3.5 ¥0.6 2.4 ¥1.7 

Free-Standing/Other Government ..................................... 420 ¥0.3 0.1 ¥3.6 ¥0.4 2.4 ¥1.6 

Facility-Based Vol/NP ........................................................ 810 0.0 0.2 ¥3.1 ¥0.3 2.4 ¥1.0 

Facility-Based Proprietary .................................................. 122 ¥0.1 0.1 ¥3.4 ¥0.4 2.4 ¥1.4 

Facility-Based Government ................................................ 247 ¥0.2 0.1 ¥3.5 ¥0.4 2.4 ¥1.5 

Subtotal: Freestanding ....................................................... 9,973 ¥0.2 0.2 ¥3.4 ¥0.5 2.4 ¥1.5 

Subtotal: Facility-based ...................................................... 1,179 0.0 0.2 ¥3.2 ¥0.3 2.4 ¥1.1 

Subtotal: Vol/NP ................................................................. 1,852 0.1 0.2 ¥3.0 ¥0.3 2.4 ¥0.9 

Subtotal: Proprietary .......................................................... 8,633 ¥0.3 0.2 ¥3.5 ¥0.6 2.4 ¥1.7 

Subtotal: Government ........................................................ 667 ¥0.3 0.1 ¥3.5 ¥0.4 2.4 ¥1.5 

Facility Type and Control: Rural: 

Free-Standing/Other Vol/NP .............................................. 222 0.2 0.1 ¥3.0 ¥0.3 2.4 ¥0.9 

Free-Standing/Other Proprietary ........................................ 159 ¥0.3 0.1 ¥3.6 ¥0.4 2.4 ¥1.6 

Free-Standing/Other Government ..................................... 513 ¥0.3 0.1 ¥3.6 ¥0.5 2.4 ¥1.7 

Facility-Based Vol/NP ........................................................ 279 0.1 0.1 ¥3.2 ¥0.3 2.4 ¥1.1 

Facility-Based Proprietary .................................................. 43 0.2 0.1 ¥3.1 ¥0.4 2.4 ¥1.1 

Facility-Based Government ................................................ 159 0.1 0.1 ¥3.2 ¥0.3 2.4 ¥1.1 

Facility Type and Control: Urban: 

Free-Standing/Other Vol/NP .............................................. 882 0.2 0.3 ¥2.9 ¥0.3 2.4 ¥0.8 

Free-Standing/Other Proprietary ........................................ 8,148 ¥0.3 0.2 ¥3.5 ¥0.6 2.4 ¥1.7 

Free-Standing/Other Government ..................................... 159 ¥0.4 0.1 ¥3.6 ¥0.4 2.4 ¥1.6 

Facility-Based Vol/NP ........................................................ 531 0.0 0.2 ¥3.1 ¥0.3 2.4 ¥1.0 

Facility-Based Proprietary .................................................. 79 ¥0.2 0.1 ¥3.5 ¥0.4 2.4 ¥1.5 

Facility-Based Government ................................................ 88 ¥0.5 0.2 ¥3.6 ¥0.4 2.4 ¥1.6 

Facility Location: Urban or Rural .............................................. .................... .................... .................... .................... .................... .................... 0.0 

Rural ................................................................................... 1,265 ¥0.1 0.1 ¥3.4 ¥0.4 2.4 ¥1.4 

Urban ................................................................................. 9,887 ¥0.2 0.2 ¥3.4 ¥0.5 2.4 ¥1.5 

Facility Location: Region of the Country: 

North .................................................................................. 837 0.6 0.4 ¥2.4 ¥0.3 2.4 ¥0.3 

Midwest .............................................................................. 2,950 ¥0.5 0.1 ¥3.7 ¥0.4 2.4 ¥1.7 

South .................................................................................. 5,544 ¥0.5 0.1 ¥3.7 ¥0.6 2.4 ¥1.9 

West ................................................................................... 1,772 0.4 0.3 ¥2.7 ¥0.4 2.4 ¥0.7 

Other .................................................................................. 49 0.8 0.1 ¥2.4 ¥0.2 2.4 ¥0.2 

Facility Location: Region of the Country (Census Region): 

New England ...................................................................... 320 0.4 0.3 ¥2.7 ¥0.3 2.4 ¥0.6 

Mid Atlantic ........................................................................ 517 0.8 0.4 ¥2.3 ¥0.3 2.4 ¥0.2 

East North Central ............................................................. 2,210 ¥0.6 0.1 ¥3.8 ¥0.4 2.4 ¥1.8 

West North Central ............................................................ 740 ¥0.2 0.1 ¥3.4 ¥0.4 2.4 ¥1.4 

South Atlantic ..................................................................... 2,046 ¥0.6 0.1 ¥3.8 ¥0.5 2.4 ¥1.9 

East South Central ............................................................. 436 ¥0.4 0.1 ¥3.7 ¥0.4 2.4 ¥1.7 

West South Central ............................................................ 3,062 ¥0.3 0.1 ¥3.6 ¥0.9 2.4 ¥2.1 

Mountain ............................................................................ 638 0.0 0.2 ¥3.2 ¥0.4 2.4 ¥1.2 

Pacific ................................................................................. 1,134 0.6 0.3 ¥2.5 ¥0.4 2.4 ¥0.5 

Facility Size (Number of 1st Episodes): 

< 100 episodes .................................................................. 3,385 ¥0.2 0.2 ¥3.5 ¥0.6 2.4 ¥1.7 

100 to 249 .......................................................................... 2,971 ¥0.4 0.2 ¥3.6 ¥0.6 2.4 ¥1.8 

250 to 499 .......................................................................... 2,237 ¥0.4 0.2 ¥3.6 ¥0.6 2.4 ¥1.8 

500 to 999 .......................................................................... 1,477 ¥0.2 0.2 ¥3.4 ¥0.5 2.4 ¥1.5 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 40307 

TABLE 29—PROPOSED HOME HEALTH AGENCY POLICY IMPACTS FOR CY 2014, BY FACILITY TYPE AND AREA OF THE

COUNTRY—Continued 

Number of 

agencies 

Proposed 

CY 2014 

wage index 

(percent) 

Standardization 

(percent) 

Proposed 

rebasing, 

2014 wage 

index, and 

standardization 1

(percent) 

Proposed 

ICD–9 

coding 

changes 

(percent) 

CY 2014 

HH market 

basket 

(percent) 

Impact of all 

CY 2014 

policies 

(percent) 

1,000 or More .................................................................... 1,082 ¥0.1 0.2 ¥3.2 ¥0.4 2.4 ¥1.2 

1The impact of rebasing includes the rebasing adjustments to the national, standardized 60-day episode payment rate, the national per-visit rates, and the NRS 

conversion factor and also includes the impact of the proposed LUPA add-on factors. The estimated impact of the NRS conversion factor rebasing adjustment, of ¥2.58 percent, is an overall ¥0.043 percent decrease in estimated payments to HHAs. The estimated impact of the proposed LUPA add-on factors is an overall 

0.007 percent increase in payments to HHAs. 

REGION KEY: New England=Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic=Pennsylvania, New Jersey, New York; 

South Atlantic=Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia; East North Central=Illinois, Indiana, 

Michigan, Ohio, Wisconsin; East South Central=Alabama, Kentucky, Mississippi, Tennessee; West North Central=Iowa, Kansas, Minnesota, Missouri, Nebraska, North 

Dakota, South Dakota; West South Central=Arkansas, Louisiana, Oklahoma, Texas; Mountain=Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; Pacific=Alaska, California, Hawaii, Oregon, Washington; Outlying=Guam, Puerto Rico, Virgin Islands. 

E. Alternatives Considered 

As described in section III.D. of this 

proposed rule, ‘‘Rebasing the National, 

Standardized 60-day Episode Payment 

Rate, LUPA Per-Visit Payment Amounts, 

and Nonroutine Medical Supply (NRS) 

Conversion Factor,’’ the Affordable Care 

Act mandates that we rebase payments 

starting in CY 2014. In that section, we 

described our methodology for 

calculating the adjustments to the 

national, standardized 60-day episode 

payment rate and per-visit rates. We 

note that additional factors were 

considered but not incorporated into the 

methodology for calculating the 

rebasing adjustments. One such factor is 

a downward adjustment to the costs pervisit as a result of the findings from the 

audits of 98 Medicare HH cost reports. 

The results of the audits showed that 

agencies over-reported costs by an 

average of about 8 percent. Given this 

finding, we considered downward 

adjusting the costs on the cost report in 

order to better align payment with the 

agencies’ true costs. We also considered 

updating costs by the HH payment 

update percentage (adjusted market 

basket) rather than the full HH market 

basket. In 2012 and 2013, HH payments 

were increased by the HH market basket 

minus one percentage point, as 

mandated by the Affordable Care Act. 

Furthermore, the Affordable Care Act 

mandates that CMS remove 5 percent of 

the national, standardized 60-day 

episode payment rate to fund the 2.5 

percent outlier pool. Given this 

mandate, we considered setting our 

target national, standardized 60-day 

episode payment rate for rebasing at 5 

percent below the estimated cost per 

episode that we derived from the 2011 

cost reports. We plan to continue to 

evaluate these alternative factors for 

rebasing and may consider 

incorporating these factors into the CY 

2014 HH PPS final rule. 

In addition to the rebasing 

adjustments, we considered 

implementing a prospective reduction 

for nominal case-mix growth for CY 

2014. In the past, various sources have 

suggested implementing a prospective 

nominal case-mix growth adjustment, 

which would attempt to predict the 

amount of nominal case-mix growth in 

future years and implement a reduction 

to prevent possible overpayments due to 

nominal case-mix growth. To date, we 

have implemented nominal case-mix 

growth adjustments retrospectively. 

That is, we use the most recent, 

complete data available—typically two 

to three years prior to the payment 

year—to identify nominal case-mix 

growth, and implement a payment 

reduction to account for the observed 

growth. The payment reductions for 

nominal case-mix growth do not attempt 

to re-coup overpayments made in 

previous years due to nominal case-mix 

growth. We plan to continue to monitor 

case-mix growth (both real and nominal 

case-mix growth) as more data become 

available and will consider 

implementing prospective reductions, 

as well as other possible approaches, to 

address nominal case-mix growth in 

future rulemaking. 

F. Cost Allocation of Survey Expenses 

We project that aggregate Medicare 

and Medicaid HH survey costs in FY 

2014 will be approximately $37.2 

million. As these costs would be 

assigned 50 percent to Medicare and 50 

percent to Medicaid for each state, the 

anticipated national Medicaid share 

would amount to $18.6 million, if 

implemented at the beginning of FY 

2014. However, the proposed adherence 

date of July FY 2014 would reduce the 

Medicaid aggregate share to 

approximately $4.65 million. The cost 

of surveys is treated as a Medicaid 

administrative cost, reimbursable at the 

professional staff rate of 75 percent. 

State costs for Medicaid HH surveys 

incurred in FY 2014, with an adherence 

date of July FY 2014, would be 

approximately $1.16 million (25 percent 

of the aggregate $4.65 million Medicaid 

cost for the last quarter of the FY), 

spread out across all states and two 

territories. While we regard Medicaid 

fair share of costs to reflect an existing 

cost allocation principle, the methods 

for making the appropriate 

determinations have not been clear. 

Therefore, in this rule we delineate 

those methods and provide that the 

Medicaid responsibility be reflected in 

the state Medicaid Plan. 

G. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http://www.whitehouse.

gov/omb/circulars_a004_a-4), in Tables 

30 and 31, we have prepared an 

accounting statement showing the 

classification of the transfers associated 

with the provisions of this proposed 

rule. Table 30 provides our best estimate 

of the decrease in Medicare payments 

under the HH PPS as a result of the 

changes presented in this proposed rule. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
40308 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Proposed Rules 

TABLE 30—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS, FROM THE CY 2013 HH PPS TO THE

CY 2014 HH PPS 

Category Transfers 

Annualized Monetized Transfers ....................................................................................... ¥$290 million. 

From Whom to Whom? ..................................................................................................... Federal Government to HH providers. 

Table 31 provides our best estimate of 

the proposed changes in the 

classification of the cost allocation of 

survey expenses. 

TABLE 31—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS RELATING TO THE MEDICARE AND

MEDICAID HOME HEALTH SURVEY AND CERTIFICATION COSTS, FYS 2013 TO 2014 

Category Transfers 

Federal Medicaid HH survey & certification costs: 

Annualized Monetized Transfers ....................................................................................... $17.44 Million. 

From Whom to Whom? ..................................................................................................... Federal Government to Medicaid HH Survey Agencies. 

State Medicaid HH survey & certification costs: 

Annualized Monetized Transfers ....................................................................................... $1.16 Million. 

From Whom to Whom? ..................................................................................................... State Governments to Medicaid HH Survey Agencies. 

Medicare HH survey & certification costs: 

Annualized Monetized Transfers ....................................................................................... ¥$18.6 Million. 

From Whom to Whom? ..................................................................................................... Federal Government to Medicare HH Survey Agencies. 

H. Conclusion 

In conclusion, we estimate that the 

net impact of the proposals in this rule 

is approximately $290 million in CY 

2014 savings. The $290 million reflects 

the distributional effects of an updated 

wage index ($40 million decrease), a 

standardization factor to ensure budget 

neutrality in episode payments using 

the 2014 wage index ($40 million 

increase), the 2.4 percent HH payment 

update percentage ($460 million 

increase), the ICD–9 grouper refinement 

($100 million decrease), and the 

rebasing adjustments required by 

section 3131(a) of the Affordable Care 

Act ($650 million decrease). This 

analysis, together with the remainder of 

this preamble, provides a RIA. 

VII. 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. This rule 

would have no substantial direct effect 

on state and local governments, preempt 

state law, or otherwise have Federalism 

implications. 

List of Subjects in 42 CFR Part 431 

Grant programs—health, Health 

facilities, Medicaid, Privacy, and 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services would amend 42 CFR 

chapter IV as set forth below: 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act, (42 U.S.C. 1302). 

■ 2. Section 431.610 is amended by 

revising paragraph (g) introductory text 

to read as follows: 

§ 431.610 Relations with standard-setting 

and survey agencies. 

* * * * * 

(g) Responsibilities of survey agency. 

The plan must provide that, in 

certifying NFs, HHAs, and ICF–IIDs, the 

survey agency designated under 

paragraph (e) of this section will— 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program). 

Dated: June 10, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: June 14, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–15766 Filed 6–27–13; 1:37 pm] 

BILLING CODE 4120–01–P 


tkelley on DSK3SPTVN1PROD with PROPOSALS2