47302 Federal Register / Vol. 76, No. 150 / Thursday, August 4, 2011 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 418 

[CMS–1355–F] 

RIN 0938–AQ31 

Medicare Program; Hospice Wage 

Index for Fiscal Year 2012 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule will set forth 

the hospice wage index for fiscal year 

(FY) 2012 and continue the phase-out of 

the wage index budget neutrality 

adjustment factor (BNAF), with an 

additional 15 percent BNAF reduction, 

for a total BNAF reduction in FY 2012 

of 40 percent. The BNAF phase-out will 

continue with successive 15 percent 

reductions from FY 2013 through FY 

2016. This final rule will change the 

hospice aggregate cap calculation 

methodology. This final rule will also 

revise the hospice requirement for a 

face-to-face encounter for recertification 

of a patient’s terminal illness. Finally, 

this final rule will begin 

implementation of a hospice quality 

reporting program. 

DATES: Effective Date: These regulations 

are effective on October 1, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Robin Dowell, (410) 786–0060 for 

questions regarding quality reporting 

for hospices and collection of 

information requirements. Anjana 

Patel, (410) 786–2120 for questions 

regarding hospice wage index and 

hospice face-to-face requirement. 

Katie Lucas, (410) 786–7723 for 

questions regarding all other sections. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. General 

1. Hospice Care 

2. Medicare Payment for Hospice Care 

B. Hospice Wage Index 

1. Raw Wage Index Values (Pre-Floor, PreReclassified, Hospital Wage Index) 

2. Changes to Core-Based Statistical Area 

(CBSA) Designations 

3. Definition of Rural and Urban Areas 

4. Areas Without Hospital Wage Data 

5. CBSA Nomenclature Changes 

6. Wage Data for Multi-Campus Hospitals 

7. Hospice Payment Rates 

II. Provisions of the Proposed Rule and 

Analysis of and Response to Public 

Comments 

A. FY 2012 Hospice Wage Index 

1. Background 

2. Areas without Hospital Wage Data 

3. FY 2012 Wage Index with an Additional 

15 Percent Reduced Budget Neutrality 

Adjustment Factor (BNAF) 

4. Effects of Phasing Out the BNAF 

B. Aggregate Cap Calculation Methodology 

1. Cap Determinations for Cap Years 

Ending on or Before October 31, 2011 

2. Cap Determinations for Cap Years 

Ending on or After October 31, 2012 

3. Patient-by-Patient Proportional 

Methodology 

4. Streamlined Methodology 

5. Changing Methodologies 

6. Other Issues 

C. Hospice Face-to-Face Requirement 

D. Technical Proposals and Clarification 

1. Hospice Local Coverage Determinations 

2. Definition of Hospice Employee 

3. Timeframe for Face-to-Face Encounters 

4. Hospice Aide and Homemaker Services 

E. Quality Reporting for Hospices 

1. Background and Statutory Authority 

2. Quality Measures for Hospice Quality 

Reporting Program for Payment Year FY 

2014 

a. Considerations in the Selection of the 

Proposed Quality Measures 

b. Proposed Quality Measures for the 

Quality Reporting Program for Hospices 

c. Proposed Timeline for Data Collection 

Under the Quality Reporting Program for 

Hospices 

d. Data Submission Requirements 

3. Public Availability of Data Submitted 

4. Additional Measures Under 

Consideration 

III. Provisions of the Final Regulations 

IV. Updates on Issues Not Proposed for FY 

2012 Rulemaking 

A. Update on Hospice Payment Reform and 

Value Based Purchasing 

B. Update on the Redesigned Provider 

Statistical & Reimbursement Report 

(PS&R) 

V. Collection of Information Requirements 

A. Structural Measure: Participation in 

Quality Assessment Performance 

Improvement Program That Includes at 

Least Three Indicators Related to Patient 

Care 

B. Outcome Measure: NQF Measure #0209, 

Percentage of Patients Who Were 

Uncomfortable Because of Pain on 

Admission to Hospice Whose Pain Was 

Brought Under Control Within 48 Hours 

VI. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impact 

4. Detailed Economic Analysis 

a. Effects on Hospices 

b. Hospice Size 

c. Geographic Location 

d. Type of Ownership 

e. Hospice Base 

f. Effects on Other Providers 

g. Effects on the Medicare and Medicaid 

Programs 

h. Accounting Statement 

i. Conclusion 

B. Regulatory Flexibility Act Analysis 

C. Unfunded Mandates Reform Act 

Analysis 

VII. Federalism Analysis 

Addendum A: FY 2012 Wage Index for Urban 

Areas 

Addendum B: FY 2012 Wage Index for Rural 

Areas 

I. Background 

A. General 

1. Hospice Care 

Hospice care is an approach to 

treatment that recognizes that the 

impending death of an individual 

warrants a change in the focus from 

curative to palliative care, for relief of 

pain and for symptom management. The 

goal of hospice care is to help terminally 

ill individuals continue life with 

minimal disruption to normal activities 

while remaining primarily in the home 

environment. A hospice uses an 

interdisciplinary approach to deliver 

medical, nursing, social, psychological, 

emotional, and spiritual services 

through use of a broad spectrum of 

professional and other caregivers, with 

the goal of making the individual as 

physically and emotionally comfortable 

as possible. Counseling services and 

inpatient respite services are available 

to the family of the hospice patient. 

Hospice programs consider both the 

patient and the family as a unit of care. 

Section 1861(dd) of the Social 

Security Act (the Act) provides for 

coverage of hospice care for terminally 

ill Medicare beneficiaries who elect to 

receive care from a participating 

hospice. Section 1814(i) of the Act 

provides payment for Medicare 

participating hospices. 

2. Medicare Payment for Hospice Care 

Sections 1812(d), 1813(a)(4), 

1814(a)(7), 1814(i) and 1861(dd) of the 

Act, and our regulations at 42 CFR part 

418, establish eligibility requirements, 

payment standards and procedures, 

define covered services, and delineate 

the conditions a hospice must meet to 

be approved for participation in the 

Medicare program. Part 418 subpart G 

provides for payment in one of four 

prospectively-determined rate categories 

(routine home care, continuous home 

care, inpatient respite care, and general 

inpatient care) to hospices, based on 

each day a qualified Medicare 

beneficiary is under a hospice election. 

B. Hospice Wage Index 

The hospice wage index is used to 

adjust payment rates for hospice 

agencies under the Medicare program to 

reflect local differences in area wage 

levels. Our regulations at § 418.306(c) 

require each hospice’s labor market to 

be established using the most current 

hospital wage data available, including 

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Federal Register / Vol. 76, No. 150 / Thursday, August 4, 2011 / Rules and Regulations 47303 

any changes by the Office of 

Management and Budget (OMB) to the 

Metropolitan Statistical Areas (MSAs) 

definitions. OMB revised the MSA 

definitions beginning in 2003 with new 

designations called the Core Based 

Statistical Areas (CBSAs). For the 

purposes of the hospice benefit, the 

term ‘‘MSA-based’’ refers to wage index 

values and designations based on the 

previous MSA designations before 2003. 

Conversely, the term ‘‘CBSA-based’’ 

refers to wage index values and 

designations based on the OMB revised 

MSA designations in 2003, which now 

include CBSAs. In the August 11, 2004 

Inpatient Prospective Payment System 

(IPPS) final rule (69 FR 48916, 49026), 

revised labor market area definitions 

were adopted at § 412.64(b), which were 

effective October 1, 2004 for acute care 

hospitals. We also revised the labor 

market areas for hospices using the new 

OMB standards that included CBSAs. In 

the FY 2006 hospice wage index final 

rule (70 FR 45130), we implemented a 

1-year transition policy using a 50/50 

blend of the CBSA-based wage index 

values and the Metropolitan Statistical 

Area (MSA)-based wage index values for 

FY 2006. The one-year transition policy 

ended on September 30, 2006. For fiscal 

years 2007 and beyond, we have used 

CBSAs exclusively to calculate wage 

index values. 

The original hospice wage index was 

based on the 1981 Bureau of Labor 

Statistics hospital data and had not been 

updated since 1983. In 1994, because of 

disparity in wages from one 

geographical location to another, a 

committee was formulated to negotiate 

a wage index methodology that could be 

accepted by the industry and the 

government. This committee, 

functioning under a process established 

by the Negotiated Rulemaking Act of 

1990, comprised representatives from 

national hospice associations; rural, 

urban, large and small hospices, and 

multi-site hospices; consumer groups; 

and a government representative. On 

April 13, 1995, the Hospice Wage Index 

Negotiated Rulemaking Committee (the 

Committee) signed an agreement for the 

methodology to be used for updating the 

hospice wage index. 

In the August 8, 1997 Federal 

Register (62 FR 42860), we published a 

final rule implementing a new 

methodology for calculating the hospice 

wage index based on the 

recommendations of the negotiated 

rulemaking committee. The Committee’s 

statement was included in the appendix 

of that final rule (62 FR 42883). 

The reduction in overall Medicare 

payments if a new wage index were 

adopted was noted in the November 29, 

1995 notice transmitting the 

recommendations of the Committee (60 

FR 61264). The Committee also decided 

that for each year in updating the 

hospice wage index, aggregate Medicare 

payments to hospices would remain 

budget neutral to payments as if the 

1983 wage index had been used. 

As suggested by the Committee, 

‘‘budget neutrality’’ would mean that, in 

a given year, estimated aggregate 

payments for Medicare hospice services 

using the updated hospice values would 

equal estimated payments that would 

have been made for these services if the 

1983 hospice wage index values had 

remained in effect. Although payments 

to individual hospice programs would 

change each year, the total payments 

each year to hospices would not be 

affected by using the updated hospice 

wage index because total payments 

would be budget neutral as if the 1983 

wage index had been used. To 

implement this policy, a Budget 

Neutrality Adjustment Factor (BNAF) 

would be computed and applied 

annually to the pre-floor, prereclassified hospital wage index when 

deriving the hospice wage index. 

The BNAF is calculated by computing 

estimated payments using the most 

recent, completed year of hospice 

claims data. The units (days or hours) 

from those claims are multiplied by the 

updated hospice payment rates to 

calculate estimated payments. For the 

FY 2011 Hospice Wage Index Notice 

with Comment Period, that meant 

estimating payments for FY 2011 using 

FY 2009 hospice claims data, and 

applying the FY 2011 hospice payment 

rates (updating the FY 2010 rates by the 

FY 2011 inpatient hospital market 

basket update). The FY 2011 hospice 

wage index values are then applied to 

the labor portion of the payment rates 

only. The procedure is repeated using 

the same claims data and payment rates, 

but using the 1983 Bureau of Labor 

Statistics (BLS)-based wage index 

instead of the updated raw pre-floor, 

pre-reclassified hospital wage index 

(note that both wage indices include 

their respective floor adjustments). The 

total payments are then compared, and 

the adjustment required to make total 

payments equal is computed; that 

adjustment factor is the BNAF. 

The FY 2010 Hospice Wage Index 

Final Rule (74 FR 39384) finalized a 

provision for a 7-year phase-out of the 

BNAF, which is applied to the wage 

index values. The BNAF was reduced 

by 10 percent in FY 2010, an additional 

15 percent in FY 2011, and will be 

reduced by an additional 15 percent in 

each of the next 5 years, for complete 

phase out in 2016. 

The hospice wage index is updated 

annually. Our most recent annual 

hospice wage index Notice with 

Comment Period, published in the 

Federal Register (75 FR 42944) on July 

22, 2010, set forth updates to the 

hospice wage index for FY 2011. As 

noted previously, that update included 

the second year of a 7-year phase-out of 

the BNAF, which was applied to the 

wage index values. The BNAF was 

reduced by 10 percent in FY 2010 and 

by additional 15 percent in 2011, for a 

total FY 2011 reduction of 25 percent. 

1. Raw Wage Index Values (Pre-Floor, 

Pre-Reclassified Hospital Wage Index) 

As described in the August 8, 1997 

hospice wage index final rule (62 FR 

42860), the pre-floor and prereclassified hospital wage index is used 

as the raw wage index for the hospice 

benefit. These raw wage index values 

are then subject to either a budget 

neutrality adjustment or application of 

the hospice floor to compute the 

hospice wage index used to determine 

payments to hospices. 

Pre-floor, pre-reclassified hospital 

wage index values of 0.8 or greater are 

currently adjusted by a reduced BNAF. 

As noted above, for FY 2011, the BNAF 

was reduced by a cumulative total of 25 

percent. Pre-floor, pre-reclassified 

hospital wage index values below 0.8 

are adjusted by the greater of: (1) The 

hospice BNAF, reduced by a total of 25 

percent for FY 2011; or (2) the hospice 

floor (which is a 15 percent increase) 

subject to a maximum wage index value 

of 0.8. For example, if in FY 2011, 

County A had a pre-floor, prereclassified hospital wage index (raw 

wage index) value of 0.3994, we would 

perform the following calculations using 

the budget-neutrality factor (which for 

this example is an unreduced BNAF of 

0.060562, less 25 percent, or 0.045422) 

and the hospice floor to determine 

County A’s hospice wage index: 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the 25 percent reduced BNAF: 

(0.3994 × 1.045422 = 0.4175). 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the hospice floor: (0.3994 × 1.15 = 

0.4593). 

Based on these calculations, County 

A’s hospice wage index would be 

0.4593. 

The BNAF has been computed and 

applied annually, in full or in reduced 

form, to the labor portion of the hospice 

payment. Currently, the labor portion of 

the payment rates is as follows: for 

Routine Home Care, 68.71 percent; for 

Continuous Home Care, 68.71 percent; 

for General Inpatient Care, 64.01 

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47304 Federal Register / Vol. 76, No. 150 / Thursday, August 4, 2011 / Rules and Regulations 

percent; and for Respite Care, 54.13 

percent. The non-labor portion is equal 

to 100 percent minus the labor portion 

for each level of care. Therefore the nonlabor portion of the payment rates is as 

follows: for Routine Home Care, 31.29 

percent; for Continuous Home Care, 

31.29 percent; for General Inpatient 

Care, 35.99 percent; and for Respite 

Care, 45.87 percent. 

2. Changes to Core Based Statistical 

Area (CBSA) Designations 

The annual update to the hospice 

wage index is published in the Federal 

Register and is based on the most 

current available hospital wage data, as 

well as any changes by the OMB to the 

definitions of MSAs, which now 

include CBSA designations. The August 

4, 2005 final rule (70 FR 45130) set forth 

the adoption of the changes discussed in 

the OMB Bulletin No. 03–04 (June 6, 

2003), which announced revised 

definitions for Micropolitan Statistical 

Areas and the creation of MSAs and 

Combined Statistical Areas. In adopting 

the OMB CBSA geographic 

designations, we provided for a 1-year 

transition with a blended hospice wage 

index for all hospices for FY 2006. For 

FY 2006, the hospice wage index 

consisted of a blend of 50 percent of the 

FY 2006 MSA-based hospice wage 

index and 50 percent of the FY 2006 

CBSA based hospice wage index. 

Subsequent fiscal years have used the 

full CBSA-based hospice wage index. 

3. Definition of Rural and Urban Areas 

Each hospice’s labor market is 

determined based on definitions of 

MSAs issued by OMB. In general, an 

urban area is defined as an MSA or New 

England County Metropolitan Area 

(NECMA), as defined by OMB. Under 

§ 412.64(b)(1)(ii)(C), a rural area is 

defined as any area outside of the urban 

area. The urban and rural area 

geographic classifications are defined in 

§ 412.64(b)(1)(ii)(A) through (C), and 

have been used for the Medicare 

hospice benefit since implementation. 

When the raw pre-floor, prereclassified hospital wage index was 

adopted for use in deriving the hospice 

wage index, it was decided not to take 

into account Inpatient Prospective 

Payment System (IPPS) geographic 

reclassifications. This policy of 

following OMB designations of rural or 

urban, rather than considering some 

Counties to be ‘‘deemed’’ urban, is 

consistent with our policy of not taking 

into account IPPS geographic 

reclassifications in determining 

payments under the hospice wage 

index. 

4. Areas Without Hospital Wage Data 

When adopting OMB’s new labor 

market designations in FY 2006, we 

identified some geographic areas where 

there were no hospitals, and thus, no 

hospital wage index data on which to 

base the calculation of the hospice wage 

index. Beginning in FY 2006, we 

adopted a policy to use the FY 2005 prefloor, pre-reclassified hospital wage 

index value for rural areas when no 

hospital wage data were available. We 

also adopted the policy that for urban 

labor markets without a hospital from 

which a hospital wage index data could 

be derived, all of the CBSAs within the 

State would be used to calculate a 

statewide urban average pre-floor, prereclassified hospital wage index value to 

use as a reasonable proxy for these 

areas. Consequently, in subsequent 

fiscal years, we applied the average prefloor, pre-reclassified hospital wage 

index data from all urban areas in that 

state, to urban areas without a hospital. 

In FY 2011, the only such CBSA was 

25980, Hinesville-Fort Stewart, Georgia. 

Under the CBSA labor market areas, 

there are no hospitals in rural locations 

in Massachusetts and Puerto Rico. Since 

there was no rural proxy for more recent 

rural data within those areas, in the FY 

2006 hospice wage index proposed rule 

(70 FR 22394, 22398), we proposed 

applying the FY 2005 pre-floor, prereclassified hospital wage index value to 

rural areas where no hospital wage data 

were available. In the FY 2006 final rule 

and in the FY 2007 update notice, we 

applied the FY 2005 pre-floor, prereclassified hospital wage index data for 

areas lacking hospital wage data in both 

FY 2006 and FY 2007 for rural 

Massachusetts and rural Puerto Rico. 

In the FY 2008 final rule (72 FR 

50214, 50217) we considered 

alternatives to our methodology to 

update the pre-floor, pre-reclassified 

hospital wage index for rural areas 

without hospital wage data. We 

indicated that we believed that the best 

imputed proxy for rural areas, would: 

(1) Use pre-floor, pre-reclassified 

hospital data; (2) use the most local data 

available to impute a rural pre-floor, 

pre-reclassified hospital wage index; (3) 

be easy to evaluate; and, (4) be easy to 

update from year to year. 

Therefore, in FY 2008 through FY 

2011, in cases where there was a rural 

area without rural hospital wage data, 

we used the average pre-floor, prereclassified hospital wage index data 

from all contiguous CBSAs to represent 

a reasonable proxy for the rural area. 

This approach does not use rural data; 

however, the approach, which uses prefloor, pre-reclassified hospital wage 

data, is easy to evaluate, is easy to 

update from year to year, and uses the 

most local data available. In the FY 2008 

rule (72 FR at 50217), we noted that in 

determining an imputed rural pre-floor, 

pre-reclassified hospital wage index, we 

interpret the term ‘‘contiguous’’ to mean 

sharing a border. For example, in the 

case of Massachusetts, the entire rural 

area consists of Dukes and Nantucket 

counties. We determined that the 

borders of Dukes and Nantucket 

counties are contiguous with Barnstable 

and Bristol counties. Under the adopted 

methodology, the pre-floor, prereclassified hospital wage index values 

for the counties of Barnstable (CBSA 

12700, Barnstable Town, MA) and 

Bristol (CBSA 39300, Providence-New 

Bedford-Fall River, RI–MA) would be 

averaged resulting in an imputed prefloor, pre-reclassified rural hospital 

wage index for FY 2008. We noted in 

the FY 2008 final hospice wage index 

rule that while we believe that this 

policy could be readily applied to other 

rural areas that lack hospital wage data 

(possibly due to hospitals converting to 

a different provider type, such as a 

Critical Access Hospital, that does not 

submit the appropriate wage data), if a 

similar situation arose in the future, we 

would re-examine this policy. 

We also noted that we do not believe 

that this policy would be appropriate for 

Puerto Rico, as there are sufficient 

economic differences between hospitals 

in the United States and those in Puerto 

Rico, including the payment of hospitals 

in Puerto Rico using blended Federal/ 

Commonwealth-specific rates. 

Therefore, we believe that a separate 

and distinct policy is necessary for 

Puerto Rico. Any alternative 

methodology for imputing a pre-floor, 

pre-reclassified hospital wage index for 

rural Puerto Rico would need to take 

into account the economic differences 

between hospitals in the United States 

and those in Puerto Rico. Our policy of 

imputing a rural pre-floor, prereclassified hospital wage index based 

on the pre-floor, pre-reclassified 

hospital wage index (or indices) of 

CBSAs contiguous to the rural area in 

question does not recognize the unique 

circumstances of Puerto Rico. While we 

have not yet identified an alternative 

methodology for imputing a pre-floor, 

pre-reclassified hospital wage index for 

rural Puerto Rico, we will continue to 

evaluate the feasibility of using existing 

hospital wage data and, possibly, wage 

data from other sources. For FY 2008 

through FY 2011, we have used the 

most recent pre-floor, pre-reclassified 

hospital wage index available for Puerto 

Rico, which is 0.4047. 

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5. CBSA Nomenclature Changes 

The OMB regularly publishes a 

bulletin that updates the titles of certain 

CBSAs. In the FY 2008 Final Rule (72 

FR 50218), we noted that the FY 2008 

rule and all subsequent hospice wage 

index rules and notices would 

incorporate CBSA changes from the 

most recent OMB bulletins. The OMB 

bulletins may be accessed at http:// 

www.whitehouse.gov/omb/bulletins/ 

index.html. 

6. Wage Data From Multi-Campus 

Hospitals 

Historically, under the Medicare 

hospice benefit, we have established 

hospice wage index values calculated 

from the raw pre-floor, pre-reclassified 

hospital wage data (also called the IPPS 

wage index) without taking into account 

geographic reclassification under 

sections 1886(d)(8) and (d)(10) of the 

Act. The wage adjustment established 

under the Medicare hospice benefit is 

based on the location where services are 

furnished without any reclassification. 

For FY 2011, the data collected from 

cost reports submitted by hospitals for 

cost reporting periods beginning during 

FY 2006 were used to compute the 2010 

raw pre-floor, pre-reclassified hospital 

wage index data, without taking into 

account geographic reclassification 

under sections 1886(d)(8) and (d)(10) of 

the Act. This 2010 raw pre-floor, prereclassified hospital wage index was 

used to derive the applicable wage 

index values for the hospice wage index 

because these data (FY 2006) were the 

most recent complete cost data. 

Beginning in FY 2008, the IPPS 

apportioned the wage data for multicampus hospitals located in different 

labor market areas (CBSAs) to each 

CBSA where the campuses were located 

(see the FY 2008 IPPS final rule with 

comment period (72 FR 47317 through 

47320)). We are continuing to use the 

raw pre-floor, pre-reclassified hospital 

wage data as a basis to determine the 

hospice wage index values because 

hospitals and hospices both compete in 

the same labor markets, and therefore, 

experience similar wage-related costs. 

We note that the use of raw pre-floor, 

pre-reclassified hospital (IPPS) wage 

data used to derive the FY 2012 hospice 

wage index values reflects the 

application of our policy to use those 

data to establish the hospice wage 

index. The FY 2012 hospice wage index 

values presented in this final rule were 

computed consistent with our raw prefloor, pre-reclassified hospital (IPPS) 

wage index policy (that is, our historical 

policy of not taking into account IPPS 

geographic reclassifications in 

determining payments for hospice). As 

implemented in the August 8, 2008 FY 

2009 Hospice Wage Index final rule, for 

the FY 2009 Medicare hospice benefit, 

the hospice wage index was computed 

from IPPS wage data (submitted by 

hospitals for cost reporting periods 

beginning in FY 2004 (as was the FY 

2008 IPPS wage index)), which 

allocated salaries and hours to the 

campuses of two multi-campus 

hospitals with campuses that are located 

in different labor areas, one in 

Massachusetts and another in Illinois. 

Thus, in FY 2009 and subsequent fiscal 

years, hospice wage index values for the 

following CBSAs have been affected by 

this policy: Boston-Quincy, MA (CBSA 

14484), Providence-New Bedford-Falls 

River, RI-MA (CBSA 39300), ChicagoNaperville-Joliet, IL (CBSA 16974), and 

Lake County-Kenosha County, IL-WI 

(CBSA 29404). 

7. Hospice Payment Rates 

Section 4441(a) of the Balanced 

Budget Act of 1997 (BBA) amended 

section 1814(i)(1)(C)(ii) of the Act to 

establish updates to hospice rates for 

FYs 1998 through 2002. Hospice rates 

were to be updated by a factor equal to 

the market basket index, minus 1 

percentage point. Payment rates for FYs 

since 2002 have been updated according 

to section 1814(i)(1)(C)(ii)(VII) of the 

Act, which states that the update to the 

payment rates for subsequent fiscal 

years will be the market basket 

percentage for the fiscal year. It has been 

longstanding practice to use the 

inpatient hospital market basket as a 

proxy for a hospice market basket. 

Historically, the rate update has been 

published through a separate 

administrative instruction issued 

annually in the summer to provide 

adequate time to implement system 

change requirements. Hospices 

determine their payments by applying 

the hospice wage index in this final rule 

to the labor portion of the published 

hospice rates. Section 3401(g) of the 

Affordable Care Act of 2010 requires 

that, in FY 2013 (and in subsequent 

fiscal years), the market basket 

percentage update under the hospice 

payment system as described in section 

1814(i)(1)(C)(ii)(VII) or section 

1814(i)(1)(C)(iii) be annually reduced by 

changes in economy-wide productivity 

as set out at section 1886(b)(3)(B)(xi)(II) 

of the Act. Additionally, section 3401(g) 

of the Affordable Care Act requires that 

in FY 2013 through FY 2019, the market 

basket percentage update under the 

hospice payment system be reduced by 

an additional 0.3 percentage point 

(although the potential reduction is 

subject to suspension under conditions 

set out under new section 

1814(i)(1)(C)(v) of the Act). Congress 

also required, in section 3004(c) of the 

Affordable Care Act, that hospices begin 

submitting quality data, based on 

measures to be specified by the 

Secretary, for FY 2014 and subsequent 

fiscal years. Beginning in FY 2014, 

hospices which fail to report quality 

data will have their market basket 

update reduced by 2 percentage points. 

II. Provisions of the Proposed Rule and 

Analysis of and Response to Public 

Comments 

A. FY 2012 Hospice Wage Index 

1. Background 

As previously noted, the hospice final 

rule published in the Federal Register 

on December 16, 1983 (48 FR 56008) 

provided for adjustment to hospice 

payment rates to reflect differences in 

area wage levels. We apply the 

appropriate hospice wage index value to 

the labor portion of the hospice 

payment rates based on the geographic 

area where hospice care was furnished. 

As noted earlier, each hospice’s labor 

market area is based on definitions of 

MSAs issued by the OMB. In the 

proposed rule, and in this final rule, we 

are using the pre-floor, pre-reclassified 

hospital wage index, based solely on the 

CBSA designations, as the basis for 

determining wage index values for the 

FY 2012 hospice wage index. 

As noted above, our hospice payment 

rules utilize the wage adjustment factors 

used by the Secretary for purposes of 

section 1886(d)(3)(E) of the Act for 

hospital wage adjustments. In the 

proposed rule, and in this final rule, we 

are again using the pre-floor and prereclassified hospital wage index data as 

the basis to determine the hospice wage 

index, which is then used to adjust the 

labor portion of the hospice payment 

rates based on the geographic area 

where the beneficiary receives hospice 

care. We believe the use of the pre-floor, 

pre-reclassified hospital wage index 

data, as a basis for the hospice wage 

index, results in the appropriate 

adjustment to the labor portion of the 

costs. For the FY 2012 update to the 

hospice wage index, we are continuing 

to use the most recent pre-floor, prereclassified hospital wage index 

available at the time of publication. 

We received three comments 

regarding the wage index. 

Comment: A commenter was 

concerned that the wage index 

continues to provide a significantly 

lower wage index to rural counties and 

indicated that cuts affect rural areas 

more than urban areas. The commenter 

asked that we move to a more accurate 

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and fair index as recommended by the 

Medicare Payment Advisory 

Commission (MedPAC). In addition, the 

commenter felt that the pre-floor, prereclassified hospital wage index with 

only the hospice floor is not a good 

policy. The same commenter suggested 

that we maintain the BNAF until a more 

equitable wage index can be developed. 

Two commenters wanted 

Montgomery County, Maryland to be 

moved from its current CBSA and 

placed into CBSA 47894 for number of 

reasons. One of the reasons a 

commenter described was that in FY 

2012, hospices in CBSA 47894 will be 

paid at a rate 4.0 percent greater than 

the payment given to hospices in 

Montgomery County’s current CBSA. 

The commenter indicated that this rate 

differential creates significant hardship 

and results in loss of revenue. The 

commenter also indicated that by not 

changing, CMS is discriminating against 

the Medicare beneficiaries living in 

Montgomery County because it is 

financially jeopardizing the hospices 

that serve them. 

Response: We thank the commenters. 

The pre-floor, pre-reclassified hospital 

wage index was adopted in 1998 as the 

wage index from which the hospice 

wage index is derived by a committee of 

CMS (then Health Care Financing 

Administration) and industry 

representatives as part of a negotiated 

rulemaking effort. The Negotiated 

Rulemaking Committee considered 

several wage index options: (1) 

Continuing with Bureau of Labor 

Statistics data; (2) using updated 

hospital wage data; (3) using hospicespecific data; and (4) using data from 

the physician payment system. The 

Committee determined that the prefloor, pre-reclassified hospital wage 

index was the best option for hospice. 

The pre-floor, pre-reclassified hospital 

wage index is updated annually, and 

reflects the wages of highly skilled 

hospital workers. 

We also note that section 3137(b) of 

the Affordable Care Act requires us to 

submit to Congress a report that 

includes a plan to reform the hospital 

wage index system. This provision was 

enacted in response to MedPAC’s 

suggestions, which included a 

suggestion that the hospital wage index 

minimize wage index adjustments 

between and within metropolitan 

statistical areas and statewide rural 

areas. The latest information on hospital 

wage index reform is discussed in the 

‘‘Proposed Changes to the Hospital 

Inpatient Prospective Payment Systems 

for Acute Care Hospitals and the LongTerm Care Hospital Prospective 

Payment System and Fiscal Year 2012 

Rates’’ proposed rule, published May 5, 

2011 in the Federal Register (76 FR 

25788). 

In the future, when reforming the 

hospice payment system, we will 

consider wage index alternatives if 

alternatives are available. 

Each hospice’s labor market area is 

based on definitions of MSAs issued by 

the Office of Management and Budget 

(OMB), not CMS. For this final rule, we 

are using the pre-floor, pre-reclassified 

hospital wage index, based solely on the 

CBSA designations, as the basis for 

determining wage index values for the 

FY 2012 hospice wage index. In 

summary, we continue to believe that 

the pre-floor, pre-reclassified hospital 

wage index, which is updated yearly 

and is used by many other CMS 

payment systems, is the most 

appropriate method available to account 

for geographic variances in labor costs 

for hospices for FY 2012. 

2. Areas Without Hospital Wage Data 

In adopting the CBSA designations, 

we identified some geographic areas 

where there are no hospitals, and no 

hospital wage data on which to base the 

calculation of the hospice wage index. 

These areas are described in section 

I.B.4 of this final rule. Beginning in FY 

2006, we adopted a policy that, for 

urban labor markets without an urban 

hospital from which a pre-floor, prereclassified hospital wage index can be 

derived, all of the urban CBSA pre-floor, 

pre-reclassified hospital wage index 

values within the State would be used 

to calculate a statewide urban average 

pre-floor, pre-reclassified hospital wage 

index to use as a reasonable proxy for 

these areas. Currently, the only CBSA 

that would be affected by this policy is 

CBSA 25980, Hinesville-Fort Stewart, 

Georgia. We proposed to continue this 

policy for FY 2012 and have applied 

this policy in this final rule. 

Currently, the only rural areas where 

there are no hospitals from which to 

calculate a pre-floor, pre-reclassified 

hospital wage index are Massachusetts 

and Puerto Rico. In August 2007 (72 FR 

50217), we adopted a methodology for 

imputing rural pre-floor, pre-reclassified 

hospital wage index values for areas 

where no hospital wage data are 

available as an acceptable proxy; that 

methodology is also described in section 

I.B.4 of this final rule. In FY 2012, 

Dukes and Nantucket Counties are the 

only areas for rural Massachusetts 

which are affected. We again proposed 

to apply this methodology for imputing 

a rural pre-floor, pre-reclassified 

hospital wage index for those rural areas 

without rural hospital wage data in FY 

2012, and we are implementing this 

policy in this final rule. 

However, as we noted section I.B.4 of 

this final rule, we do not believe that 

this policy is appropriate for Puerto 

Rico. For FY 2012, we again proposed 

to continue to use the most recent prefloor, pre-reclassified hospital wage 

index value available for Puerto Rico, 

which is 0.4047. This pre-floor, prereclassified hospital wage index value 

was then adjusted upward by the 

hospice 15 percent floor adjustment in 

the computing of the proposed FY 2012 

hospice wage index. We are continuing 

to follow this policy in this final rule. 

We received no comments regarding 

continuing this policy for areas without 

hospital wage data. 

3. FY 2012 Wage Index With an 

Additional 15 Percent Reduced Budget 

Neutrality Adjustment Factor (BNAF) 

The hospice wage index set forth in 

this final rule would be effective 

October 1, 2011 through September 30, 

2012. We did not propose and are not 

finalizing any modifications to the 

hospice wage index methodology. For 

this final rule, the FY 2011 hospital 

wage index was the most current 

hospital wage data available for 

calculating the FY 2012 hospice wage 

index values. We used the FY 2011 prefloor, pre-reclassified hospital wage 

index data for this calculation. 

As noted above, for this FY 2012 wage 

index final rule, the hospice wage index 

values are based solely on the adoption 

of the CBSA-based labor market 

definitions and the hospital wage index. 

We continue to use the most recent prefloor and pre-reclassified hospital wage 

index data available (based on FY 2007 

hospital cost report wage data). A 

detailed description of the methodology 

used to compute the hospice wage index 

is contained in the September 4, 1996 

hospice wage index proposed rule (61 

FR 46579), the August 8, 1997 hospice 

wage index final rule (62 FR 42860), and 

the August 6, 2009 FY 2010 Hospice 

Wage Index final rule (74 FR 39384). 

The August 6, 2009 FY 2010 Hospice 

Wage Index final rule finalized a 

provision to phase out the BNAF over 

seven years, with a 10 percent reduction 

in the BNAF in FY 2010, and an 

additional 15 percent reduction in FY 

2011, and additional 15 percent 

reductions in each of the next five years, 

with complete phase out in FY 2016. 

Therefore, in accordance with the 

August 6, 2009, FY 2010 Hospice Wage 

Index final rule, the BNAF for FY 2012 

was reduced by an additional 15 percent 

for a total BNAF reduction of 40 percent 

(10 percent from FY 2010, additional 15 

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percent from FY 2011, and additional 15 

percent for FY 2012). 

For this final rule, an unreduced 

BNAF for FY 2012 is computed to be 

0.058593 (or 5.8593 percent). A 40 

percent reduced BNAF, which is 

subsequently applied to the pre-floor, 

pre-reclassified hospital wage index 

values greater than or equal to 0.8, is 

computed to be 0.035156 (or 3.5156 

percent). Pre-floor, pre-reclassified 

hospital wage index values which are 

less than 0.8 are subject to the hospice 

floor calculation; that calculation is 

described in section I.B.1. The BNAF is 

updated compared to the proposed rule 

based on availability of more complete 

data. 

The final hospice wage index for FY 

2012 is shown in Addenda A and B; the 

wage index values shown already have 

the BNAF reduction applied. 

Specifically, Addendum A reflects the 

final FY 2012 wage index values for 

urban areas under the CBSA 

designations. Addendum B reflects the 

final FY 2012 wage index values for 

rural areas under the CBSA 

designations. 

We received five comments regarding 

the BNAF. 

Comment: A few commenters were 

pleased with overall increase in the 

hospice payments for fiscal year 2012. 

Some commenters continued to voice 

opposition to the BNAF reduction; 

several were concerned about the 

impact of the BNAF phase-out, coupled 

with the productivity adjustment which 

begins in FY 2013. One commenter 

provided analysis which suggested that 

estimated mean hospice profit margins 

would decrease, and noted that many 

hospices can’t absorb these reductions. 

Commenters were concerned that 

hospices would be forced to close, 

which could create access issues for 

patients, put at risk the quality of care, 

and ultimately increase Medicare costs. 

Several commenters noted that rate 

reductions disproportionately affect 

rural providers. One wrote that rural 

providers have higher costs of care than 

urban hospices, and yet also have a 

payment reduction due to lower rural 

wage index values. This commenter 

asked for a rural add-on, or at least 

parity. Another commenter asked that 

we create ‘‘critical access’’ hospices in 

rural areas to protect rural providers. 

Response: We thank the commenters. 

The BNAF phase-out was finalized in 

the August 6, 2009 final rule. Comments 

opposing the BNAF reductions are 

outside the scope of this rule because 

we finalized this policy in FY 2010. 

Comments surrounding the productivity 

adjustment, which the Affordable Care 

Act mandates be applied beginning in 

fiscal year 2013, are also outside the 

scope of this rule. We acknowledge that 

there was a single erroneous reference to 

the BNAF reduction as a proposal; 

however, as noted on page 26808 of the 

proposed rule, and in multiple other 

locations throughout the proposed rule, 

the BNAF phase-out was already settled 

for the remaining years of the phase-out, 

as described in the FY 2010 Hospice 

Wage Index final rule (74 FR 39384). 

However, we are sensitive to the 

issues raised by commenters, and to the 

possible effects of the BNAF reduction 

on access to care. We continue to 

monitor for unintended consequences 

associated with the BNAF phase-out. 

Our analysis reveals an overall growth 

in number of hospices since the start of 

the phase-out. Additionally, we see no 

data which would indicate that hospices 

in rural areas are closing. 

We also note that the hospice wage 

index includes a floor calculation which 

benefits many rural providers. We are 

sensitive to concerns from rural 

hospices that the additional time and 

distance required to visit a rural patient 

adds significantly to their costs. We do 

not have the authority to change the 

hospice rates beyond the limits set out 

in the statute. We will consider the 

situation of rural providers in the 

context of broader hospice payment 

system reform. We appreciate the 

analyses shared by the commenter. 

4. Effects of Phasing Out the BNAF 

The full (unreduced) BNAF calculated 

for the FY 2012 final rule is 5.8593 

percent. As implemented in the August 

6, 2009 FY 2010 Hospice Wage Index 

final rule (74 FR 39384), for FY 2012 we 

are reducing the BNAF by an additional 

15 percent, for a total BNAF reduction 

of 40 percent (a 10 percent reduction in 

FY 2010 plus a 15 percent reduction in 

FY 2011 plus a 15 percent reduction in 

FY 2012), with additional reductions of 

15 percent per year in each of the next 

4 years until the BNAF is phased out in 

FY 2016. 

For FY 2012, this is mathematically 

equivalent to taking 60 percent of the 

full BNAF value, or multiplying 0.58593 

by 0.60, which equals 0.035156 (3.5156 

percent). The BNAF of 3.5156 percent 

reflects a 40 percent reduction in the 

BNAF. The 40 percent reduced BNAF 

(3.5156 percent) was applied to the prefloor, pre-reclassified hospital wage 

index values of 0.8 or greater in the final 

FY 2012 hospice wage index. 

The hospice floor calculation still 

applies to any pre-floor, pre-reclassified 

hospital wage index values less than 

0.8. The hospice floor calculation is 

described in section I.B.1 of this final 

rule. We examined the effects of an 

additional 15 percent reduction in the 

BNAF, for a total BNAF reduction of 40 

percent, on the final FY 2012 hospice 

wage index compared to remaining with 

the total 25 percent reduced BNAF 

which was used for the FY 2011 hospice 

wage index. The additional 15 percent 

BNAF reduction applied to the final FY 

2012 wage index resulted in a (rounded) 

0.9 percent reduction in wage index 

values in 39.7 percent of CBSAs, a 0.8 

percent reduction in wage index values 

in 53.0 percent of CBSAs, a 0.6 or 0.7 

percent reduction in wage index values 

in 0.7 percent of CBSAs, and no 

reduction in wage index values in 6.5 

percent of CBSAs. Note that these are 

reductions in wage index values, not in 

payments. Please see Table 1 in section 

VI of this rule for the effects on 

payments. The wage index values in 

Addenda A and B already reflect the 

additional 15 percent BNAF reduction. 

Those CBSAs whose pre-floor, prereclassified hospital wage index values 

had the hospice 15 percent floor 

adjustment applied before the BNAF 

reduction would not be affected by this 

ongoing phase out of the BNAF. These 

CBSAs, which typically include rural 

areas, are protected by the hospice 15 

percent floor adjustment. We estimate 

that 29 CBSAs are already protected by 

the hospice 15 percent floor adjustment, 

and are therefore completely unaffected 

by the BNAF reduction. There are 325 

hospices in these 29 CBSAs. 

Additionally, some CBSAs with prefloor, pre-reclassified wage index values 

less than 0.8 will become newly eligible 

for the hospice 15 percent floor 

adjustment as a result of the additional 

15 percent reduction in the BNAF 

applied in FY 2012. Areas where the 

hospice floor calculation would have 

yielded a wage index value greater than 

0.8 if the 25 percent reduction in BNAF 

were maintained, but which will have a 

final wage index value less than 0.8 

after the additional 15 percent reduction 

in the BNAF (for a total BNAF reduction 

of 40 percent) is applied, will now be 

eligible for the hospice 15 percent floor 

adjustment. These CBSAs will see a 

smaller reduction in their hospice wage 

index values since the hospice 15 

percent floor adjustment will apply. We 

estimate that 3 CBSAs will have their 

pre-floor, pre-reclassified hospital wage 

index value become newly protected by 

the hospice 15 percent floor adjustment 

due to the additional 15 percent 

reduction in the BNAF applied in the 

final FY 2012 hospice wage index. 

Because of the protection given by the 

hospice 15 percent floor adjustment, 

these CBSAs will see smaller percentage 

decreases in their hospice wage index 

values than those CBSAs that are not 

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eligible for the hospice 15 percent floor 

adjustment. This will affect those 

hospices with lower hospice wage index 

values, which are typically in rural 

areas. There are 44 hospices located in 

these 3 CBSAs. 

Finally, the hospice wage index 

values only apply to the labor portion of 

the payment rates; the labor portion is 

described in section I.B.1 of this final 

rule. Therefore, the projected reduction 

in payments due solely to the additional 

15 percent reduction of the BNAF 

applied in FY 2012 is estimated to be 

0.6 percent, as calculated from the 

difference in column 3 and column 4 of 

Table 1 in section VI of this final rule. 

In addition, the estimated effects of the 

phase-out of the BNAF will be mitigated 

by any inpatient hospital market basket 

updates in payments. The final 

inpatient hospital market basket update 

for FY 2012 is 3.0 percent; this 3.0 

percent does not reflect the provision in 

the Affordable Care Act which reduces 

the inpatient hospital market basket 

update for FY 2012 by 0.1 percentage 

point, since that reduction does not 

apply to hospices. The final update is 

communicated through an 

administrative instruction. 

The combined estimated effects of the 

updated wage data, an additional 15 

percent reduction of the BNAF, and the 

final inpatient hospital market basket 

update are shown in Table 1 in section 

VI of this final rule. The updated wage 

data are estimated to increase payments 

by 0.1 percent (column 3 of Table 1). 

The additional 15 percent reduction in 

the BNAF, which has already been 

applied to the wage index values shown 

in this final rule, is estimated to reduce 

payments by 0.6 percent. Therefore, the 

changes in the wage data and the 

additional 15 percent BNAF reduction 

reduce estimated hospice payments by 

0.5 percent, when compared to FY 2011 

payments (column 4 of Table 1). 

However, so that hospices can fully 

understand the total estimated effects on 

their revenue, we have also accounted 

for the 3.0 percent final market basket 

update for FY 2012. The net effect of 

that 3.0 percent increase and the 0.5 

percent reduction due the updated wage 

data and the additional 15 percent 

BNAF reduction, is an estimated 

increase in payments to hospices in FY 

2012 of 2.5 percent (column 5 of Table 

1). 

We received two comments regarding 

the combined effect of the expected 

market basket update, BNAF reduction 

and wage data updates. 

Comment: Some commenters were 

confused about the language in the 

proposed rule concerning the market 

basket increase and the BNAF 

adjustment. They suggested revising the 

description of the BNAF reduction and 

the market basket increase to further 

describe the effect of each of the 

components which affect hospice rates 

in section II.A.4 of the final rule. 

Response: We have clarified the 

language about the BNAF reduction and 

the market basket increase in this 

section. 

B. Aggregate Cap Calculation 

Methodology 

The existing methodology for 

counting Medicare beneficiaries in 42 

CFR 418.309 has been the subject of 

substantial litigation. Specifically, the 

lawsuits challenge the way CMS 

apportions hospice patients with care 

spanning more than one year when 

calculating the cap. 

A number of district courts and two 

appellate courts have concluded that 

CMS’ current methodology used to 

determine the number of Medicare 

beneficiaries used in the aggregate cap 

calculation is not consistent with the 

statute. We continue to believe that the 

methodology set forth in § 418.309(b)(1) 

is consistent with the Medicare statute. 

Nonetheless, we have determined that it 

is in the best interest of CMS and the 

Medicare program to take action to 

prevent future litigation, and alleviate 

the litigation burden on providers, CMS, 

and the courts. On April 14, 2011, we 

issued a Ruling entitled ‘‘Medicare 

Program; Hospice Appeals for Review of 

an Overpayment Determination’’ (CMS– 

1355–R), and also published in the 

Federal Register as CMS–1355–NR (76 

FR 26731, May 9, 2011), related to the 

aggregate cap calculation for hospices 

which provided for application of a 

patient-by-patient proportional 

methodology, as defined in the Ruling, 

to hospices that have challenged the 

current methodology. Specifically, the 

Ruling provides that, for any hospice 

which has a timely-filed administrative 

appeal of the methodology set forth at 

§ 418.309(b)(1) used to determine the 

number of Medicare beneficiaries used 

in the aggregate cap calculation for a cap 

year ending on or before October 31, 

2011, the Medicare contractors will 

recalculate that year’s cap determination 

using the patient-by-patient 

proportional methodology as set forth in 

the Ruling. 

In the proposed rule, we also made 

several proposals regarding cap 

determinations from two time periods: 

• Cap determinations for cap years 

ending on or before October 31, 2011; 

and 

• Cap determinations for cap years 

ending on or after October 31, 2012. 

1. Cap Determinations for Cap Years 

Ending on or Before October 31, 2011 

By its terms, the relief provided in 

Ruling CMS–1355–R applies only to 

those cap years for which a hospice has 

received an overpayment determination 

and filed a timely qualifying appeal. For 

any hospice that receives relief pursuant 

to Ruling CMS–1355–R in the form of a 

recalculation of one or more of its cap 

determinations, or for any hospice that 

receives relief from a court after 

challenging the validity of the cap 

regulation, we proposed that the 

hospice’s cap determination for any 

subsequent cap year also be calculated 

using a patient-by-patient proportional 

methodology as opposed to the 

methodology set forth in 42 CFR 

418.309(b)(1). The patient-by-patient 

proportional methodology is defined 

below in section II.B.3. 

Additionally, there are hospices that 

have not filed an appeal of an 

overpayment determination challenging 

the validity of 42 CFR 418.309(b)(1) and 

which are awaiting for CMS to make a 

cap determination for cap years ending 

on or before October 31, 2011. We 

proposed to allow any such hospice 

provider, as of October 1, 2011, to elect 

to have its final cap determination for 

such cap year(s), and all subsequent cap 

years, calculated using the patient-bypatient proportional methodology. 

Finally, we recognize that most 

hospices have not challenged the 

methodology used for determining the 

number of beneficiaries used in the cap 

calculation. Therefore, we proposed that 

those hospices which would like to 

continue to have the existing 

methodology (hereafter called the 

streamlined methodology) used to 

determine the number of beneficiaries 

in a given cap year would not need to 

take any action, and would have their 

cap calculated using the streamlined 

methodology for cap years ending on or 

before October 31, 2011. The 

streamlined methodology is defined in 

section II.B.4 below. 

2. Cap Determinations for Cap Years 

Ending on or After October 31, 2012 

We continue to believe that the 

methodology set forth in § 418.309(b)(1) 

is consistent with the Medicare statute. 

We emphasized that nothing in our 

proposals in this section constitutes an 

admission as to any issue of law or fact. 

In light of the court decisions, however, 

we proposed to change the hospice 

aggregate cap calculation methodology 

policy for cap determinations ending on 

or after October 31, 2012 (the 2012 cap 

year). Specifically, for the cap year 

ending October 31, 2012 (the 2012 cap 

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year) and subsequent cap years, we 

proposed to revise the methodology set 

forth at § 418.309(b)(1) to adopt a 

patient-by-patient proportional 

methodology when computing hospices’ 

aggregate caps. We also proposed to 

‘‘grandfather’’ in the current streamlined 

methodology set forth in § 418.309(b)(1) 

for those hospices that elect to continue 

to have the current streamlined 

methodology used to determine the 

number of Medicare beneficiaries in a 

given cap year, for the following 

reasons. 

As described in section II of the 

proposed rule, we solicited comments 

on modernizing the cap calculation in 

our FY 2011 Hospice Wage Index Notice 

with Comment Period. We summarized 

those comments in section II of that 

proposed rule, and noted that many 

commenters, including the major 

hospice associations, were concerned 

about the burden to hospices of 

changing the cap calculation 

methodology, and urged us to defer 

across-the-board changes to the cap 

methodology until we analyzed the cap 

in the context of broader payment 

reform. Specifically, commenters urged 

us to retain the current methodology, as 

it resulted in a more streamlined and 

timely cap determination for providers, 

as compared to other options. In 

addition, commenters noted that once 

made, cap determinations usually 

remain final. Commenters were 

concerned that a proportional 

methodology could result in prior year 

cap determination revisions to account 

for situations in which the percentage of 

time a beneficiary received services in a 

prior cap year declined as his or her 

overall hospice stay continued into 

subsequent cap years, and these 

revisions could result in new 

overpayments for some providers. 

Commenters noted that the vast majority 

of providers don’t exceed the cap, so 

burdening these providers with an 

across-the-board change would not be 

justified. We also noted that on January 

18, 2011, President Obama issued an 

Executive Order (EO) entitled 

‘‘Improving Regulation and Regulatory 

Review’’ (EO 13563), which instructed 

federal agencies to consider regulatory 

approaches that reduced burdens and 

maintained flexibility and freedom of 

choice for the public. We believe that 

offering hospices the option to elect to 

continue to have the streamlined 

methodology used in calculating their 

caps is in keeping with this EO. 

For these reasons, for the cap year 

ending October 31, 2012 (the 2012 cap 

year) and subsequent cap years, we 

proposed that the hospice aggregate cap 

be calculated using the patient-bypatient proportional methodology, but 

also proposed to allow hospices the 

option of having their cap calculated via 

the current streamlined methodology, as 

discussed below. We stated in the 

proposed rule that we believe this twopronged approach is responsive to the 

commenters who do not want to be 

burdened with a change in the cap 

calculation methodology at this time, 

while also conforming with decisional 

law and meeting the needs of hospices 

that would prefer the patient-by-patient 

proportional methodology of counting 

beneficiaries. This grandfathering 

proposal to allow hospices the option of 

having their caps calculated based on 

application of the current streamlined 

methodology would apply only to 

currently existing hospices that have, or 

will have, had a cap determination 

calculated under the streamlined 

methodology. New hospices that have 

not had their cap determination 

calculated using the streamlined 

methodology did not fall under the 

proposed ‘‘grandfather’’ policy. 

Therefore, all new hospices that are 

Medicare-certified after the effective 

date of this final rule would have their 

cap determinations calculated using the 

patient-by-patient proportional 

methodology. 

3. Patient-by-Patient Proportional 

Methodology 

For the cap year ending October 31, 

2012 (the 2012 cap year), and for all 

subsequent cap years (unless changed 

by future rulemaking), we proposed that 

the Medicare contractors would apply 

the patient-by-patient proportional 

methodology (defined below) to a 

hospice’s aggregate cap calculations 

unless the hospice elected to have its 

cap determination for cap years 2012 

and beyond calculated using the 

current, streamlined methodology set 

forth in § 418.309(b)(1). 

Under the proposed patient-by-patient 

proportional methodology, for each 

hospice, CMS would include in its 

number of Medicare beneficiaries only 

that fraction which represents the 

portion of a patient’s total days of care 

in all hospices and all years that was 

spent in that hospice in that cap year, 

using the best data available at the time 

of the calculation. We proposed that the 

whole and fractional shares of Medicare 

beneficiaries’ time in a given cap year 

would then be summed to compute the 

total number of Medicare beneficiaries 

served by that hospice in that cap year. 

When a hospice’s cap is calculated 

using the patient-by-patient 

proportional methodology, and a 

beneficiary included in that calculation 

survives into another cap year, the 

contractor may need to make 

adjustments to prior cap determinations, 

subject to existing reopening 

regulations. 

4. Streamlined Methodology 

As we described above and in the 

proposed rule, comments received from 

hospices and the major hospice 

associations in previous years urged us 

to defer across-the-board changes to the 

cap calculation methodology until we 

reform hospice payments. Several of 

these commenters feared that an acrossthe-board change in methodology now 

could disadvantage them by potentially 

placing them at risk for incurring new 

cap overpayments. Additionally, 

approximately 90 percent of hospices do 

not exceed the cap and have not 

objected to the current methodology, 

and commenters expressed concern that 

adapting to a process change would be 

costly and burdensome. In response to 

these concerns, we proposed that a 

hospice could exercise a one-time 

election to have its cap determination 

for cap years 2012 and beyond 

calculated using the current, 

streamlined methodology set forth in 

§ 418.309(b). We proposed that the 

option to elect the continued use of the 

streamlined methodology for cap years 

2012 and beyond would be available 

only to hospices that have had their cap 

determinations calculated using the 

streamlined methodology for all cap 

years prior to cap year 2012. In section 

II.B.5 (‘‘Changing Methodologies’’) 

below, we described our detailed 

rationale for limiting the election. 

Allowing hospices which, prior to cap 

year 2012, have their cap 

determination(s) calculated pursuant to 

a patient-by-patient proportional 

methodology to elect the streamlined 

methodology for cap years 2012 and 

beyond could result in over-counting 

patients and introduce a program 

vulnerability. 

Our current policy set forth in the 

existing § 418.309(b)(2) states that when 

a beneficiary receives care from more 

than one hospice during a cap year or 

years, each hospice includes in its 

number of Medicare beneficiaries only 

that fraction which represents the 

portion of a patient’s total stay in all 

hospices that was spent in that hospice. 

We proposed to revise the regulatory 

text at § 418.309(b)(2) to clarify that for 

each hospice, CMS includes in its 

number of Medicare beneficiaries only 

that fraction which represents the 

portion of a patient’s total days of care 

in all hospices and all years that was 

spent in that hospice in that cap year, 

using the best data available at the time 

of the calculation. We also proposed to 

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add language to make clear that cap 

determinations are subject to reopening/ 

adjustment to account for updated data. 

5. Changing Methodologies 

We believe our proposed policies, 

described above, provide hospices with 

a reasonable amount of flexibility with 

regard to their cap calculation. 

However, we believe that if we allowed 

hospices to switch back and forth 

between methodologies, it would greatly 

complicate the cap determination 

calculation, would be difficult to 

administer, and might lead to 

inappropriate switching by hospices 

seeking merely to maximize Medicare 

payments. Additionally, in the year of a 

change in the calculation methodology, 

there is a potential for over-counting 

some beneficiaries. Allowing hospices 

to switch back and forth between 

methodologies would perpetuate the 

risk of over-counting beneficiaries. 

Therefore, we proposed that: 

(1) Those hospices that have their cap 

determination calculated using the 

patient-by-patient proportional 

methodology for any cap year prior to 

the 2012 cap year would continue to 

have their cap calculated using the 

patient-by-patient proportional 

methodology for the 2012 cap year and 

all subsequent cap years; and, 

(2) All other hospices would have 

their cap determinations for the 2012 

cap year and all subsequent cap years 

calculated using the patient-by-patient 

proportional methodology unless they 

make a one-time election to have their 

cap determinations for cap year 2012 

and beyond calculated using the 

streamlined methodology. 

(3) A hospice would be able to elect 

the streamlined methodology no later 

than 60 days following the receipt of its 

2012 cap determination. 

(4) Hospices which elected to have 

their cap determination calculated using 

the streamlined methodology could later 

elect to have their cap determinations 

calculated pursuant to the patient-bypatient proportional methodology by 

either: 

a. Electing to change to the patient-bypatient proportional methodology; or 

b. Appealing a cap determination 

calculated using the streamlined 

methodology to determine the number 

of Medicare beneficiaries. 

(5) If a hospice elected the 

streamlined methodology, and changed 

to the patient-by-patient proportional 

methodology for a subsequent cap year, 

the hospice’s aggregate cap 

determination for that cap year (i.e., the 

cap year of the change) and all 

subsequent cap years would be 

calculated using the patient-by-patient 

proportional methodology. As such, 

past cap year determinations could be 

adjusted to prevent the over-counting of 

beneficiaries, notwithstanding the 

ordinary limitations on reopening. 

6. Other Issues 

Contractors will provide hospices 

with instructions regarding the cap 

determination methodology election 

process. Regardless of which 

methodology is used, the contractor will 

continue to demand any additional 

overpayment amounts due to CMS at 

the time of the hospice cap 

determination. The contractor will 

continue to include the hospice cap 

determination in a letter which serves as 

a notice of program reimbursement 

under 42 CFR 405.1803(a)(3). Cap 

determinations are subject to the 

existing CMS reopening regulations. 

In that FY 2011 Hospice Wage Index 

Notice with Comment Period, we also 

discussed the timeframe used for 

counting beneficiaries under the 

streamlined methodology, which is 

September 28th to September 27th. This 

timeframe for counting beneficiaries 

was implemented because it allows 

those beneficiaries who elected hospice 

near the end of the cap year to be 

counted in the year when most of the 

services were provided. However, for 

those hospices whose cap 

determinations are calculated using a 

patient-by-patient proportional 

methodology for counting the number of 

beneficiaries, we proposed to count 

beneficiaries and their associated days 

of care from November 1st through 

October 31st, to match that of the cap 

year. This would ensure that the 

proportional share of each beneficiary’s 

days in that hospice during the cap year 

is accurately computed. 

Finally, we noted that the existing 

regulatory text at § 418.308(b)(1) refers 

to the timeframe for counting 

beneficiaries as ‘‘(1) * * * the period 

beginning on September 28 (35 days 

before the beginning of the cap period) 

and ending on September 27 (35 days 

before the end of the cap period).’’ The 

period beginning September 28 is 

actually 34 days before November 1 (the 

beginning of the cap year), rather than 

35 days. We proposed to correct this in 

the regulatory text, and to change 

references to the ‘‘cap period’’ to that of 

the ‘‘cap year’’ to correctly reference the 

time frame for cap determinations. We 

also proposed technical corrections to 

the regulatory text. 

The above summarizes the proposals 

made in our proposed rule. We are 

finalizing all the policies above as 

proposed, except as described in the 

following responses to comments. We 

received six comments related to these 

proposed changes. 

Comment: Most commenters were 

supportive of our providing hospices 

with options regarding their cap 

calculation methodology; however, one 

suggested that we abandon the patientby-patient proportional methodology 

due to the burden created by the need 

for adjustments to prior year cap 

determinations. This commenter was 

also concerned about the potential for 

increased confusion and complexity. 

Several commenters asked for details on 

how to elect a particular calculation 

methodology, with one commenter 

asking that we incorporate consistent, 

specific timeframes for making such an 

election. Another commenter suggested 

we send providers a form to use in 

making the choice. A number of 

commenters asked that CMS and its 

contractors educate providers about the 

election process and the cap calculation 

methodology options. Several also asked 

that all contractors use the same 

methodology when calculating the cap. 

A commenter asked that we align the 

cap year and the beneficiary counting 

year with the federal fiscal year, to 

simplify the cap calculation process. A 

few commenters asked that contractors 

mail cap determination letters in a more 

timely and consistent fashion, with one 

asking that we specify timelines for 

contractors to follow. One commenter 

suggested that timely notification of cap 

determination letters be a performance 

measure for the contractors. Several 

commenters asked for longer, more 

flexible repayment timeframes, 

suggesting three to five years for 

repayment of overpayments, or longer. 

One commenter wrote that the cap was 

an outdated cost containment provision, 

and was concerned that it would limit 

access. This commenter asked that we 

increase the cap amount to reflect a full 

six months of care and wage adjust it. 

The commenter added that this would 

require study to determine the relevant 

methodology that would support 

providers in caring for all hospice 

patients. 

Response: We appreciate commenters’ 

support of our proposal and of the 

options provided to hospices regarding 

their aggregate cap calculations. Having 

two cap calculation methodologies 

addresses the concerns of commenters 

who did not want to be burdened with 

a change given future payment reform; 

those comments were described in 

section II of our proposed rule. Earlier 

in this section we also noted that there 

had been substantial litigation 

challenging the way we apportion 

hospice patients with care spanning 

more than one year when calculating 

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the aggregate cap. We believe it is in the 

best interest of CMS and the Medicare 

program to take action to prevent future 

cap litigation, and to alleviate the 

litigation burden on providers, CMS, 

and the courts. Therefore, we do not 

believe that we should abandon the 

patient-by-patient proportional 

methodology. 

Regarding the timeframes for 

elections, our proposed rule addressed 

the issue based on two time periods: 

1. For cap years ending on or before 

October 31, 2011: 

We proposed that hospices that have 

not filed an appeal of an overpayment 

determination challenging the validity 

of 42 CFR 418.309(b)(1) and which are 

waiting for us to make a cap 

determination in a cap year ending on 

or before October 31, 2011 may, as of 

October 1, 2011, elect to have their final 

cap determinations for such cap year(s), 

and all subsequent cap years, calculated 

using the patient-by-patient 

proportional methodology. In other 

words, in this circumstance, the election 

must occur in the period beginning 

October 1, 2011 (the effective date of 

this final rule) but before receipt of the 

2011 (or prior) cap year determination. 

We are finalizing this policy as 

proposed. 

2. For cap years ending on or after 

October 31, 2012: 

(a) Electing to continue using the 

streamlined methodology: We proposed 

that for cap years ending on or after 

October 31, 2012, hospices would have 

their aggregate caps calculated using the 

patient-by-patient proportional 

methodology, unless a hospice exercises 

a one-time election to have its aggregate 

cap for cap years 2012 and beyond 

calculated using the streamlined 

methodology. Those hospices that make 

such an election will have their cap 

determinations for the 2012 cap year 

and subsequent cap years calculated 

using the streamlined methodology 

unless they subsequently elect to have 

the patient-by-patient proportional 

methodology used, appeal the 

streamlined methodology (please see 

section II.B.5, entitled ‘‘Changing 

Methodologies,’’ for more details), or we 

implement changes through future 

rulemaking. This option to elect to 

continue with the streamlined 

methodology only applies to existing 

hospices that have had, or will have 

had, a cap determination calculated 

under the streamlined methodology. 

Additionally, this option to elect to 

continue with the streamlined 

methodology is not available to a 

hospice when its 2011 or prior cap 

determination(s) was calculated using 

the patient-by-patient proportional 

methodology. 

The timeframe for electing to continue 

to have the aggregate cap calculated 

using the streamlined methodology is 

specified in the regulatory text at 42 

CFR 418.309(d)(2)(ii), and requires that 

the election be made no later than 60 

days after receipt of the 2012 cap 

determination. Therefore, the hospice 

could elect for CMS to continue using 

the streamlined methodology at any 

time between October 1, 2011 (the 

effective date of this final rule) and up 

to 60 days after receipt of its 2012 cap 

determination. This election to use the 

streamlined methodology would remain 

in effect unless the hospice 

subsequently submitted an election to 

change to the patient-by-patient 

proportional methodology or appealed 

the streamlined methodology used to 

determine the number of Medicare 

beneficiaries used in the aggregate cap 

calculation. We allow this 60 days after 

receipt of the 2012 cap determination 

because we are concerned that a hospice 

that intended to continue using the 

streamlined methodology might fail to 

elect it due to an oversight, and we do 

not want any provider to be forced to 

change methodologies due to such an 

error. We are finalizing this policy as 

proposed. 

(b) Electing to change from the 

streamlined methodology to the patientby-patient proportional methodology: 

We proposed that if a hospice elected to 

have its 2012 cap determination 

calculated using the streamlined 

methodology, it could later submit a 

written election to change to the patientby-patient proportional methodology. 

This election to change methodologies 

from streamlined to patient-by-patient 

proportional for a given cap year and all 

subsequent cap years must be submitted 

before receipt of the cap determination 

for that cap year. If the hospice has 

already received the cap determination 

for that cap year, and then decides it 

would like to change from the 

streamlined methodology to the patientby-patient proportional methodology, it 

must file an appeal of the methodology 

used to determine the number of 

Medicare beneficiaries used in the 

aggregate cap calculation. We are 

finalizing this policy as proposed. 

Contractors will provide hospices 

with instructions on how to elect a 

methodology in the coming months. In 

addition, we will revise the cap section 

of the hospice claims processing manual 

(Internet-only manual (IOM) 100–04, 

chapter 11, section 80) to reflect the 

policies implemented in this final rule. 

We will include examples to make sure 

the details of the calculation are clear to 

providers and to the contractors. There 

will also be a MedLearn Matters article, 

discussion on Open Door forums, and 

information on the hospice center 

webpage (http://www.cms.gov/center/ 

hospice.asp) to further educate the 

industry. Additional education will 

come from industry associations and 

from contractor Web sites, reminding 

hospices of the procedures for electing 

a methodology. 

In case a provider misses these 

educational efforts, we will also ask 

contractors to include language on the 

2012 cap determinations which explains 

that the provider has up to 60 days from 

the date of receipt of the determination 

to elect to continue using the 

streamlined methodology. Given these 

efforts, we do not believe it is necessary 

for us to create a form and send it to all 

providers for choosing to continue using 

the streamlined methodology. To 

address comments related to contractor 

consistency in applying the cap 

methodologies, we also believe that 

clearly written manual instructions 

which include examples will ensure 

consistent application of the cap 

calculation procedures by all 

contractors. 

As we noted in the proposed rule, we 

agree with commenters on our 2010 

Hospice Wage Index Notice with 

Comment who asked us not to change 

the cap year timeframe now, but to 

consider that change when we 

undertake broader payment reform. In 

the proposed rule, we also stated that 

for purposes of applying the patient-bypatient proportional methodology, we 

proposed to count beneficiaries and 

their associated days of care from 

November 1 to October 31, to match the 

cap year timeframe. We are finalizing 

this policy as proposed. 

Finally, several comments were 

outside the scope of this rule, including 

those related to requiring more timely 

and consistent mailing of cap 

determination letters, to extending 

repayment timeframes, to increasing the 

cap amount, and wage adjusting the cap 

amount. We will consider these issues, 

such as the wage adjustment of the cap 

and changing the cap amount, as we 

continue with hospice payment reform, 

to the extent that we have such 

authority. In its March 2010 Report to 

Congress (http://www.medpac.gov/ 

chapters/Mar10_Ch02E.pdf), MedPAC 

investigated claims that the cap was 

creating an access problem for noncancer patients or for racial or ethnic 

minorities. MedPAC found no evidence 

to support these claims. 

Comment: A majority of commenters 

asked that we define the reopening time 

period for making adjustments to prior 

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47312 Federal Register / Vol. 76, No. 150 / Thursday, August 4, 2011 / Rules and Regulations 

year cap determinations, citing a need 

for hospices to manage their finances 

with some certainty and administrative 

burden. Suggested reopening 

timeframes ranged from 3 to 5 years. 

One commenter asked that we provide 

a manual reference for ‘‘existing 

reopening regulations.’’ Another 

commenter wrote that hospices should 

be afforded parallel rights, at least on a 

one-time basis, to request reopening of 

demands issued not more than 3 years 

ago for recalculation under the 

proportional methodology. 

Response: Our regulations at 42 CFR 

405.1803 equate the hospice cap 

determination letter with a Notice of 

Program Reimbursement (NPR). The 

regulations governing NPRs, which are 

found at 42 CFR 405.1885, have a 3-year 

timeframe for reopening, except in 

instances of fraud, where reopening is 

unlimited. The regulations related to 

reopening are described in our PaperBased Manual 15–1, chapter 29, entitled 

‘‘Provider Payment Determination and 

Appeals’’, available on our Web site at 

http://www.cms.gov/Manuals/PBM/ 

list.asp. In response to concerns from 

multiple commenters, we are revising 

our proposal to make it clear that there 

is a 3-year timeframe for reopening, as 

described in 42 CFR 405.1885. We are 

also revising the regulatory text we 

proposed at 42 CFR 418.309(d)(3) to 

remove the language that reads 

‘‘notwithstanding the ordinary 

limitations on reopening’’ and replacing 

it with ‘‘subject to existing reopening 

requirements.’’ These changes should 

satisfy commenters’ concerns, and 

provide hospices with more certainty in 

managing their finances. 

We do not believe that allowing us to 

reopen prior year cap determinations in 

light of a provider’s decision to switch 

methodologies and allowing providers 

to request reopening of prior year cap 

determinations that were not timely 

appealed are parallel situations. If a 

hospice elects one methodology for 

determining the cap and then 

subsequently elects a different 

methodology, we believe that it might 

be appropriate to recalculate earlier 

payment/cap determinations (after the 

change in methodologies) in order to 

prevent providers from switching 

methodologies to gain an inappropriate 

benefit. This consideration does not 

apply in the situation where a provider 

did not timely appeal an earlier 

determination. Providers may appeal 

payment determinations, and we believe 

that, if a provider did not exercise its 

appeal rights in a timely manner, then 

subsequent developments do not 

warrant effectively extending the time 

period for appeal (unlike providers, the 

agency cannot ‘‘appeal’’ a payment 

determination for a provider reflecting 

that provider’s election of a cap 

methodology within 180 days after the 

date of the relevant determination). 

Comment: One commenter, who is 

counsel for a number of hospices that 

have brought litigation challenging the 

streamlined methodology, suggested 

that we advise hospices that ‘‘multiple 

spreadsheets offered in litigation by 

hospices (and HHS) tend to show’’ that 

there are ‘‘material reductions in 

hospice cap liability under the 

proportional method.’’ The commenter 

stated that, based on their experience, 

they strongly recommend that hospices 

opt for the proportional methodology 

and suggested that HHS should make 

the same recommendation to hospices. 

Response: We note the statements and 

recommendations of the commenter for 

providers to consider, but we do not 

believe it is appropriate for us to make 

a general recommendation to hospices 

as to which method hospices should 

choose. The commenter states that 

‘‘multiple spreadsheets offered in 

litigation by hospices (and HHS) tend to 

show’’ that there are ‘‘material 

reductions in hospice cap liability 

under the proportional method.’’ To the 

extent the commenter suggests that, as 

a general matter, hospices are generally 

likely to receive material reductions in 

hospice cap liability under the 

proportional method (relative to the 

streamlined method), we do not draw 

the same conclusions as the commenter 

from the spreadsheets offered in 

litigation by some plaintiff hospices. We 

acknowledge that a number of 

spreadsheets offered in litigation 

indicate that certain plaintiff hospices 

would likely experience a reduction 

(perhaps significant) in cap liability for 

a given year. At the same time, we 

believe that it is important to consider 

that numerous plaintiff hospices did not 

offer any spreadsheets in litigation 

indicating whether those plaintiff 

hospices would receive a significant 

reduction or any reduction in cap 

liability in a given year. Plaintiff 

hospices that did offer spreadsheets in 

litigation might be more likely to benefit 

from application of a patient-by-patient 

proportional methodology in a given 

year than other plaintiff hospices that 

did not offer such spreadsheets. 

Moreover, hospices that have brought 

litigation challenging the streamlined 

method might be more likely than other 

hospices to benefit from application of 

a patient-by-patient proportional 

methodology. We also note that 

spreadsheets offered by plaintiff 

hospices in litigation might have 

reflected incomplete data or reflected 

calculations that had not been verified 

by HHS. 

It is true that a given hospice for a 

given year might benefit (perhaps 

significantly) from application of a 

patient-by-patient proportional 

methodology (resulting in a higher cap 

and a lower cap liability), but that same 

hospice might have a higher cap 

liability (perhaps significantly) from 

application of the patient-by-patient 

proportional methodology in a different 

year. In fact, some evidence offered in 

litigation indicated that even some 

plaintiff hospices were likely to have a 

greater cap liability using the patient-bypatient proportional methodology in a 

given year. The effect on a particular 

hospice (in a given year or in the 

aggregate over all years) depends on a 

number of factors (for example, the flow 

of patients in and out of the hospice, the 

mix of patients’ lengths of stay). 

Therefore, while a reduction in cap 

liability for a hospice is certainly 

possible, it is not a given. Hospices that 

have brought litigation challenging the 

streamlined method and offered 

spreadsheets are not necessarily 

representative of the majority of 

hospices and their experience would 

not be generalizable to all hospices. 

In any event, we do not believe it is 

appropriate for us to make a general 

recommendation to hospices regarding 

which method hospices should choose. 

Nevertheless, we note the commenter’s 

statements and recommendations for 

providers to consider. 

Comment: A commenter was 

concerned that the proposed regulatory 

text at 42 CFR 418.309(b) needed to be 

clarified. The commenter asked that we 

clarify the differences in the streamlined 

methodology calculation when a 

beneficiary has been in only 1 hospice 

versus when a beneficiary has received 

care from more than one hospice. The 

commenter also asked that we clarify 42 

CFR 418.309(b)(2), which deals with 

applying the streamlined methodology 

when a beneficiary receives care from 

more than one hospice. The commenter 

wasn’t clear whether the calculation of 

the fraction of the total days of care 

applies to all years of hospice care, or 

just to the year of initial election. 

Response: The streamlined 

methodology requires that beneficiaries 

who have only been in one hospice be 

counted as 1 in their initial year of 

election, with the timeframe for 

counting beneficiaries running from 

September 28 to September 27. The 

beneficiary is not included in the count 

of beneficiaries ever again, even if he/ 

she survives past September 27th into 

another beneficiary counting year. This 

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calculation has not changed since the 

hospice benefit’s inception. 

Under the streamlined methodology, 

when a beneficiary has been served by 

more than 1 hospice, the current 

regulation at 42 CFR 418.309(b)(2) says 

that ‘‘In the case in which a beneficiary 

has elected to receive care from more 

than one hospice, each hospice includes 

in its number of Medicare beneficiaries 

only that fraction which represents the 

portion of a patient’s total stay in all 

hospices that was spent in that 

hospice.’’ The streamlined methodology 

used when a beneficiary has been 

served by more than one hospice is 

actually a patient-by-patient 

proportional allocation of the 

beneficiary’s time. 

In our proposed rule, we proposed 

changes to the regulatory text describing 

how the streamlined methodology 

accounts for beneficiaries who are 

served by more than one hospice. We 

are finalizing those proposed changes to 

the regulatory text, as it makes it clear 

that the calculation is to occur across all 

years of hospice care, and not just the 

initial year of election. It also matches 

the language describing the patient-bypatient proportional methodology, and 

‘‘requires each hospice include in its 

count of Medicare beneficiaries only 

that fraction which represents the 

portion of a patient’s total days of care 

in all hospices and all years that was 

spent in that hospice in that cap year, 

using the best data available at the time 

of the calculation.’’ When a beneficiary 

is served by more than one hospice, the 

calculation is a proportional one, even 

under the streamlined methodology. 

Because the regulation refers to 

counting days spent in a given hospice 

‘‘in that cap year’’, it also follows the 

same beneficiary counting timeframe 

that the patient-by-patient proportional 

methodology uses, which is the cap year 

timeframe (November 1 to October 31). 

In our proposed rule we explained that 

the September timeframe for counting 

beneficiaries was implemented in 1983 

because it allows those beneficiaries 

who elected hospice near the end of the 

cap year to be counted in the year when 

most of the services were expected to be 

provided. However, for a patient-bypatient proportional calculation, there is 

no need to make such an adjustment, 

and therefore we are using the cap year 

timeframe when counting beneficiaries. 

In other words, the streamlined 

methodology is identical to the patientby-patient proportional methodology 

when counting beneficiaries who have 

been served by more than one hospice. 

As such, the difference between the 

streamlined methodology and the 

patient-by-patient proportional 

methodology is only evident when a 

beneficiary receives hospice care from a 

single hospice. We are finalizing the 

regulatory text at 42 CFR 418.309(b) as 

proposed. 

Comment: Several commenters 

suggested that we allow calculation of a 

total cap across all provider numbers 

belonging to a common owner. One 

commenter suggested that in the 

situation where one hospice acquires 

another hospice, hospices operating 

under the proportional methodology 

should have the option of switching to 

the streamlined methodology for 

consistency. 

Response: There are several issues we 

must address to fully respond to this 

comment: (1) Whether the aggregate cap 

calculation can be consolidated for all 

providers of a common owner, such as 

for hospices that are part of a chain; (2) 

which calculation methodology to allow 

when there is a change of ownership 

with assignment of provider agreements; 

and (3) which calculation methodology 

to allow when there is an acquisition 

with rejection of assignment of provider 

agreements. All three issues hinge on 

the Medicare provider agreement for 

each participating hospice and its 

unique provider number. The unique 

provider number is the administrative 

method used by Medicare to track each 

Medicare provider agreement. A unique 

provider number is assigned to a 

hospice program which is certified as 

meeting the conditions to participate in 

the Medicare program defined in section 

1861(dd) of the Act. 

To address the first issue, 

longstanding policy has not permitted 

consolidation of separate Medicare 

certified hospice providers with a 

common owner when computing the 

aggregate cap; instead, a separate cap 

calculation occurs for each Medicare 

certified hospice program defined by its 

unique provider number. Our 

regulations at 42 CFR 418.308 and 42 

CFR 418.309 describe the aggregate cap 

calculation in terms of an individual 

hospice, rather than in terms of a 

hospice chain or a common owner. 

To address the second issue, when 

one hospice acquires another, one needs 

to consider the unique provider number 

of the hospice(s) which provided care to 

each patient. For example, hospice A, 

which has opted for CMS to use the 

streamlined methodology in its cap 

calculation, acquires hospice B, which 

has its cap calculated using the patientby-patient proportional methodology. 

When a change of ownership occurs 

with assignment of provider agreements, 

and the acquiring hospice chooses to 

consolidate the operations, the unique 

provider number of hospice B is retired, 

and hospice B comes under hospice A’s 

Medicare provider agreement and 

unique provider number. Hospice B is 

consolidated into hospice A. In this case 

the beneficiaries who were in hospice B 

are now in hospice A. From the 

standpoint of the cap, those 

beneficiaries are considered to have 

been served by more than one hospice. 

As noted previously in this section, the 

streamlined and patient-by-patient 

proportional methodologies are 

identical when a beneficiary is served 

by more than one hospice, following the 

patient-by-patient proportional 

methodology. Therefore hospice A’s use 

of the streamlined methodology does 

not create any inconsistency when 

accounting for hospice B’s beneficiaries 

in its aggregate cap. 

In another example, if hospice A 

acquires hospice B with rejection of 

assignment of provider agreements, but 

wants to operate hospice B as a separate 

entity, hospice B’s existing Medicare 

provider agreement and unique provider 

number would be terminated. Hospice B 

would have to meet all requirements to 

be certified to participate in the 

Medicare program, and would be given 

a new provider agreement and unique 

provider number upon approval. 

Therefore, hospice A and B continue to 

have separate unique provider numbers. 

As such, separate cap calculations are 

performed for hospice A and hospice B, 

since our longstanding policy is to 

calculate the cap by provider (defined as 

having a unique provider number), 

rather than by owner or by chain. 

Because hospice B has a new 

Medicare provider agreement (with a 

new unique provider number), it is 

considered a new provider for purposes 

of applying the aggregate cap. As such, 

all its cap calculations would be made 

using the patient-by-patient 

proportional methodology; new 

providers are not eligible for the 

grandfathering described in the 

proposed rule, which allows hospices to 

elect to continue using the streamlined 

methodology. 

We continue to believe that there 

would be a program vulnerability if we 

allowed providers to switch back and 

forth between cap calculation 

methodologies. As such, we proposed 

that a provider whose cap is calculated 

using the proportional methodology 

may not later decide to have its cap 

calculated using the streamlined 

methodology. We proposed an 

exception to this policy for the 2012 cap 

year, when all aggregate caps will be 

computed using the proportional 

methodology, unless an eligible 

provider makes a one-time election to 

continue using the streamlined 

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47314 Federal Register / Vol. 76, No. 150 / Thursday, August 4, 2011 / Rules and Regulations 

methodology. The exception allows 

eligible providers that intended to 

continue using the streamlined 

methodology but which failed to elect 

the streamlined methodology to make 

that one-time election during the 60-day 

period following receipt of the 2012 cap 

determination notice. 

The above examples regarding 

changes in ownership are consistent 

with our policy of defining hospices by 

their unique provider numbers and 

consistent with our proposal to preclude 

switching calculation methodologies. 

In summary, we are finalizing the 

proposals related to the aggregate cap as 

proposed, except to clarify that the 

timeframe for reopening cap 

determinations is 3 years (except in the 

case of fraud). 

C. Hospice Face-to-Face Requirement 

Section 3132(b) of the Affordable Care 

Act of 2010 (Pub. L. 111–148, enacted 

March 23, 2010) amended section 

1814(a)(7) of the Act by adding an 

additional certification requirement that 

beginning January 1, 2011, a hospice 

physician or nurse practitioner (NP) 

must have a face-to-face encounter with 

every hospice patient prior to the 180- 

day recertification of the patient’s 

terminal illness to determine continued 

eligibility. The statute also requires that 

the hospice physician or NP who 

performs the encounter attest that such 

a visit took place in accordance with 

procedures established by the Secretary. 

Although the provision allows an NP to 

perform the face-to-face encounter and 

attest to it, section 1814(a)(7)(A) of the 

Act continues to require that a hospice 

physician must certify and recertify the 

terminal illness. 

We implemented section 1814(a)(7), 

as amended by section 3132(b) of the 

Affordable Care Act in the November 

17, 2010 final rule (75 FR 70372), 

published in the Federal Register, 

entitled ‘‘Home Health Prospective 

Payment System Rate Update for CY 

2011; Changes in Certification 

Requirements for Home Health Agencies 

and Hospices’’, hereinafter referred to as 

the CY 2011 HH PPS Final Rule. The 

statute requires that for hospice 

recertifications occurring on or after 

January 1, 2011, a face-to-face encounter 

take place before the 180th-day 

recertification. We decided that the 

180th-day recertification and 

subsequent benefit periods 

corresponded to the recertification for a 

patient’s third or subsequent benefit 

period. 

These provisions at § 418.22(a) and 

(b), as set out in the CY 2011 HH PPS 

final rule (75 FR 70463) include the 

following requirements: 

• The encounter must occur no more 

than 30 calendar days prior to the start 

of the third benefit period and no more 

than 30 calendar days prior to every 

subsequent benefit period thereafter. 

• The hospice physician or NP who 

performs the encounter attests in 

writing that he or she had a face-to-face 

encounter with the patient and includes 

the date of the encounter. The 

attestation, which includes the 

physician’s signature and the date of the 

signature, must be a separate and 

distinct section of, or an addendum to, 

the recertification form, and must be 

clearly titled. 

• The physician narrative associated 

with recertifications for the third and 

subsequent benefit period 

recertifications includes an explanation 

of why the clinical findings of the faceto-face encounter support a prognosis 

that the patient has a life expectancy of 

6 months or less. 

• When an NP performs the 

encounter, the NP’s attestation must 

state that the clinical findings of that 

visit were provided to the certifying 

physician, for use in determining 

whether the patient continues to have a 

life expectancy of 6 months or less, 

should the illness run its normal course. 

• The hospice physician or the 

hospice NP can perform the encounter. 

We define a hospice physician as a 

physician who is employed by the 

hospice or working under contract with 

the hospice, and a hospice NP as an NP 

who is employed by the hospice. 

• The hospice physician who 

performs the face-to-face encounter and 

attests to it must be the same physician 

who certifies the patient’s terminal 

illness and composes the recertification 

narrative (75 FR 70445). 

As a result of stakeholders’ concerns 

regarding access risks resulting from the 

final rule policy, we proposed that any 

hospice physician can perform the faceto-face encounter regardless of whether 

that physician recertifies the patient’s 

terminal illness and composes the 

recertification narrative. Additionally, 

we also proposed to change the 

regulatory text at 42 CFR 418.22(b)(4) to 

state that the attestation of the nurse 

practitioner or a non-certifying hospice 

physician shall state that the clinical 

findings of that encounter were 

provided to the certifying physician, for 

use in determining continued eligibility 

for hospice. This proposal reflects the 

our commitment to the general 

principles of the President’s EO released 

January 18, 2011 entitled ‘‘Improving 

Regulation and Regulatory Review’’, as 

it would reduce burden to hospices and 

hospice physicians and increase 

flexibility in areas of physician 

shortages. 

We received 15 comments related to 

these proposed changes. 

Comment: Commenters expressed 

appreciation of CMS’ efforts to address 

concerns regarding implementation of 

the face-to-face encounter for hospice 

eligibility certification and 

recertification, including the threemonth enforcement delay provided for 

in early 2011. 

All 15 commenters supported the 

proposal to allow any hospice physician 

to perform the face-to-face encounter 

regardless of whether the physician 

recertifies the patient’s terminal illness 

and composes the recertification 

narrative. While commenters supported 

the less restrictive policy, they made 

suggestions to add additional 

practitioners such as Physician 

Assistants (PA) and Clinical Nurse 

Specialists (CNS) to the list of 

healthcare professionals that would be 

allowed to conduct the face-to-face 

encounter. These commenters described 

the shortage of nurse practitioners and 

physicians in some areas of the country, 

especially small and rural areas. 

Another commenter, also citing 

physician and NP shortages in rural 

areas, suggested that community 

physicians and nurse practitioners 

should be able to conduct the face-toface encounter and report their findings 

to a physician employed by the hospice. 

Another commenter strongly 

encouraged CMS to allow any physician 

to certify and recertify a patient for 

hospice. The commenter described the 

situation when caring for the 

imminently dying patient at an 

emergency department; a non-hospice 

physician cannot certify the patient for 

hospice services without a hospice 

physician certification. The commenter 

indicated that the patient should not 

have to wait for the hospice physician 

to certify the patient in a situation when 

the patient is imminently dying. The 

commenter supported efforts in 

Congress to change the statute about this 

change. 

Commenters were concerned that 

hospices are facing a large increase in 

administrative costs to provide care to 

hospice patients without getting 

additional reimbursement as a result of 

the new face-to-face requirement. 

Commenters indicated that 

unreimbursed face-to-face visits are 

costly in terms of time, travel and 

salaries, and the visits cause patients 

and families to be anxious that the 

patient may be discharged. 

Response: We thank the commenters 

for their support of our clarification in 

allowing any hospice physician to 

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perform face-to-face encounters 

regardless of whether that same 

physician recertifies the patient’s 

terminal illness and composes the 

recertification narrative and of the threemonth delay provided early in 2011. We 

are finalizing the policy to allow any 

hospice physician to perform the faceto-face encounter regardless of whether 

that same physician recertifies the 

patient’s terminal illness and composes 

the recertification narrative. 

The statutory language in section 

1814(a)(7) of the Act limits the 

disciplines of those who can provide a 

hospice face-to-face encounter. PAs and 

CNSs are not authorized by the 

Affordable Care Act to perform the faceto-face visit. Therefore, without a 

change in the law, we cannot adopt a 

policy to allow PAs and CNSs to 

perform the face-to-face encounter. In 

addition, a statutory change to section 

1814(a)(7) of the Act would also be 

required to change the requirements 

regarding the physicians who must 

certify and recertify a patient’s terminal 

illness. 

Similarly, allowing community 

physicians and NPs to conduct the faceto-face encounter and report their 

findings to a physician employed by the 

hospice would also require a statutory 

change. The Act requires that the 

physician or NP conducting the face-toface encounter must be a hospice 

physician or NP. A ‘‘hospice physician’’ 

is a physician either employed by or 

working under arrangement with a 

hospice (i.e., contracted). The complete 

definition of a hospice employee at 42 

CFR 418.3 is as follows: ‘‘Employee 

means a person who: (1) Works for the 

hospice and for whom the hospice is 

required to issue a W–2 form on his or 

her behalf; (2) if the hospice is a 

subdivision of an agency or 

organization, an employee of the agency 

or organization who is assigned to the 

hospice; or (3) is a volunteer under the 

jurisdiction of the hospice.’’ 

We appreciate the commenters 

concerns about the financial effects of 

the face-to-face requirements. We expect 

most face-to-face encounters would be 

satisfied in conjunction with a 

medically reasonable and necessary 

physician service. Hospices can bill for 

that portion of the visit where medically 

reasonable and necessary physician 

services were provided to the patient by 

the hospice physician or hospice 

attending NP in conjunction with a faceto-face encounter. We will continue to 

monitor for any unintended 

consequences associated with this 

provision. 

Comment: A commenter asked us to 

consider the concept of ‘‘advanced 

disease management.’’ A commenter 

noted that many patients are 

legitimately certified at admission but 

their condition actually improves with 

hospice care. The commenter also 

suggested that Medicare benefit be 

modified in ways that will encourage 

more comprehensive, continuing care 

management for those in the advanced 

stages of incurable illnesses. 

Response: We appreciate the 

comment; however, it is outside the 

scope of this rule. We may consider 

such suggestions in the future in the 

context of broader analysis surrounding 

palliative care. 

Comment: A commenter supported 

the change in regulatory text that states 

an NP or a non-certifying hospice 

physician may convey their clinical 

findings from the face-to-face visit to the 

certifying physician. 

Response: We thank the commenter 

for his or her support. 

Comment: A commenter requested 

that we make every effort to ensure that 

the clarification provided in the 

proposed rule about the face-to-face 

requirement is applied as if 

incorporated in the final rule issued 

November 17, 2010. 

Response: Thank you for your 

comment. We note that the effective 

date of the provisions in this final rule 

is October 1, 2011. We direct providers 

to the Hospice Benefit Policy Manual 

(IOM 100–02, chapter 9), section 20.1 

for up-to-date and comprehensive 

guidance on our face-to-face encounter 

policy. In summary, we are finalizing 

the proposed policy to allow any 

hospice physician to perform the faceto-face encounter regardless of whether 

that same physician recertifies the 

patient’s terminal illness and composes 

the recertification narrative. 

D. Technical Proposals and 

Clarification 

1. Hospice Local Coverage 

Determinations 

In section II.H of the November 17, 

2010 CY 2011 HH PPS Final Rule, we 

implemented new requirements for a 

hospice face-to-face encounter which 

were mandated by the Affordable Care 

Act of 2010. A commenter asked how 

the face-to-face encounter related to 

Local Coverage Determinations (LCDs), 

and if the expectation was that the 

physician would verify the patient’s 

condition based on the LCDs. Other 

commenters asked for guidance 

regarding what the encounter should 

include (that is, elements that make up 

an encounter) for purposes of satisfying 

the requirement. When describing how 

to assess patients for recertification, our 

response cited the LCDs of several 

contractors (see 75 FR 70447–70448). 

The response also included common 

text from those LCDs related to clinical 

findings to use in making the 

assessment and determining whether a 

patient was terminally ill. We stated 

that the clinical findings should include 

evidence from the three following 

categories: (1) Decline in clinical status 

guidelines (for example, decline in 

systolic blood pressure to below 90 or 

progressive postural hypotension); (2) 

Non disease-specific base guidelines 

(that is, decline in functional status) as 

demonstrated by Karnofsky Performance 

Status or Palliative Performance Score 

and dependence in two or more 

activities of daily living; and (3) Comorbidities. We noted that because the 

language was not mandatory, there was 

never any intention that this response 

have a legally binding effect on 

hospices. These are suggestions as to 

elements considered during certification 

or recertification which could be 

deemed to be indicative of a terminal 

condition. However, this was not meant 

to be an exhaustive or exclusive list. 

Because there has been some confusion 

about the extent to which these items 

exclude other possible scenarios, we 

proposed to clarify that the clinical 

findings included in the comment 

response were provided as an example 

of findings that can be used in 

determining continued medical 

eligibility for hospice care. The 

illustrative clinical findings mentioned 

above are not mandatory national 

policy. In this final rule we are 

clarifying that the clinical findings 

included in the comment response 

discussed above were provided as an 

example, and are not national policy. 

We reiterate that certification or 

recertification is based upon a 

physician’s clinical judgment, and is not 

an exact science. Congress made this 

clear in section 322 of the Benefits 

Improvement and Protection Act of 

2000, which says that the hospice 

certification of terminal illness ‘‘shall be 

based on the physician’s or medical 

director’s clinical judgment regarding 

the normal course of the individual’s 

illness.’’ We received four comments 

about this clarification. 

Comment: Commenters appreciated 

the clarification and our reiterating 

existing policy that the certification and 

recertification are based upon the 

clinical judgment of the physician. One 

commenter wrote that their hospice 

physician occasionally discharges a 

patient who is not longer eligible for the 

benefit, and asked how the hospice 

should handle a situation in which the 

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Quality Improvement Organization 

(QIO) later overrules the physician. 

Response: We appreciate the 

commenters’ support for our 

clarification and for the existing policy 

that certification and recertification are 

based upon the clinical judgment of the 

physician. We again note the response 

we gave to the same question in the CY 

2011 HH PPS final rule. We wrote ‘‘If a 

patient appeals a pending discharge to 

the QIO, the QIO decision is binding; a 

hospice could not discharge a patient as 

ineligible if the QIO deems that patient 

to be eligible. The provider is required 

to continue to provide services for the 

patient. In the QIO response, the QIO 

should advise the provider as to why it 

disagrees with the hospice, which 

should help the provider to re-evaluate 

the discharge decision. If at another 

point in time the hospice feels that the 

patient is no longer hospice eligible, the 

provider should give timely notice to 

the patient of its decision to discharge. 

The patient could again appeal to the 

QIO, and the hospice and patient would 

await a new determination from the QIO 

based on the situation at that time’’ (75 

FR 70448). 

2. Definition of Hospice Employee 

As noted above, in section II.H of the 

November 17, 2010 CY 2011 HH PPS 

Final Rule, we implemented new 

requirements for a hospice face-to-face 

encounter, which were mandated by the 

Affordable Care Act. As part of that 

implementation, we required that a 

hospice physician or nurse practitioner 

must perform the face-to-face 

encounters. Several commenters asked 

us to clarify who is considered a 

‘‘hospice physician or nurse 

practitioner’’ (see 75 FR 70443–70445). 

We stated that a hospice physician or 

nurse practitioner must be employed by 

the hospice, and that hospice physicians 

could also be working under 

arrangement with the hospice (i.e., 

contracted). We added that section 42 

CFR 418.3 defines a hospice employee 

as someone who is receiving a W–2 

form from the hospice or who is a 

volunteer. The complete definition of a 

hospice employee at 42 CFR § 418.3 is 

as follows: ‘‘Employee means a person 

who: (1) Works for the hospice and for 

whom the hospice is required to issue 

a W–2 form on his or her behalf; (2) if 

the hospice is a subdivision of an 

agency or organization, an employee of 

the agency or organization who is 

assigned to the hospice; or (3) is a 

volunteer under the jurisdiction of the 

hospice.’’ We received a number of 

questions from the industry about the 

definition of an employee and whether 

it included personnel who were 

employed by an agency or organization 

that has a hospice subdivision and who 

were assigned to that hospice. In the 

proposed rule, we clarified that entire 

definition of employee given at 42 CFR 

418.3 (shown above) applies. In this 

final rule, we continue to clarify that the 

entire definition of employee given at 42 

CFR 418.3 applies. Therefore, if the 

hospice is a subdivision of an agency or 

organization, an employee of the agency 

or organization who is assigned to the 

hospice is a hospice employee. We 

received seven comments on this 

section. 

Comment: Several commenters wrote 

that they appreciated our clarifying that 

the entire definition of employee given 

in the existing regulation at 42 CFR 

418.3 applies when considering who is 

a hospice employee. Two commenters 

sought further clarification. One asked if 

a hospice that issues W–2s for its direct 

employees is also part of a commonly 

controlled health system, could it use 

NPs employed by that health system 

and assigned to the hospice to perform 

face-to-face encounters. Another asked 

that we clarify further what it means to 

be ‘‘assigned to a hospice.’’ A third 

commenter felt that the clarification 

gives a competitive advantage to 

hospices that are part of a larger system, 

and noted the shortage of NPs. This 

commenter added that in rural areas, 

NPs are often working under contracts 

with exclusivity rights, which do not 

permit them to work for others. 

Response: We thank commenters for 

their support of our clarification. An NP 

employed by a health care system and 

assigned to the hospice would be 

considered a direct employee and could 

perform face-to-face encounters. 

‘‘Assigned to the hospice’’ means that 

the health care system has allotted a 

position for a specific employee to work 

at that specific hospice. This would be 

the employee’s regular place of 

employment. An NP can be assigned to 

more than one hospice, in which case 

the NP would have more than one 

regular place of employment. 

Our clarification did not change or 

add to existing policy regarding the 

definition of an employee, but simply 

noted the complete definition of 

employee given at 42 CFR 418.3. 

Hospices face different operational 

challenges depending on the specific 

business model their operators have 

chosen. We appreciate the difficulties 

created by a shortage of NPs in some 

areas; however, we do not have the 

authority to regulate the contractual 

provisions of an employer and an 

employee, and such contractual 

relationships are, therefore, not within 

the scope of this rule. 

3. Timeframe for Face-to-Face 

Encounters 

In section II.H of the November 17, 

2010 CY 2011 HH PPS Final Rule, we 

also implemented policies related to the 

timeframe for performing a hospice faceto-face encounter. We cited the statutory 

language from section 3132 of the 

Affordable Care Act, which says that on 

and after January 1, 2011, a hospice 

physician or nurse practitioner must 

have a face-to-face encounter with the 

beneficiary to determine continued 

eligibility of the beneficiary for hospice 

care prior to the 180th-day 

recertification and each subsequent 

recertification (see 75 FR 70435). We 

also defined the 180th-day 

recertification to be the recertification 

which occurs at the 3rd benefit period 

(see 75 FR 70436–70437). We 

implemented a requirement that the 

face-to-face encounter occur no more 

than 30 calendar days prior to the 3rd 

or later benefit periods, to allow 

hospices flexibility in scheduling the 

encounter (see 75 FR 70437–70439). We 

emphasized throughout the final rule 

that the encounter must occur ‘‘prior to’’ 

the 3rd benefit period recertification, 

and each subsequent recertification. The 

regulatory text associated with these 

changes is found at 42 CFR 418.22(a)(4), 

and reads, ‘‘As of January 1, 2011, a 

hospice physician or hospice nurse 

practitioner must have a face-to-face 

encounter with each hospice patient, 

whose total stay across all hospices is 

anticipated to reach the 3rd benefit 

period, no more than 30 calendar days 

prior to the 3rd benefit period 

recertification, and must have a face-toface encounter with that patient no 

more than 30 calendar days prior to 

every recertification thereafter, to gather 

clinical findings to determine continued 

eligibility for hospice care.’’ We believe 

our final policy states clearly that the 

face-to-face encounter must occur prior 

to, but no more than 30 calendar days 

prior to, the 3rd benefit period 

recertification and each subsequent 

recertification. However, we are 

concerned that our regulation text could 

lead a hospice to believe that the faceto-face encounter could occur in an 

open-ended fashion after the start of a 

benefit period in which it is required, 

and that the limitation on the timeframe was only on how far in advance 

of the start of the benefit period that the 

encounter could occur. Our policy, as 

stated in the final rule, is that a face-toface encounter is required prior to the 

3rd benefit period recertification and 

each recertification thereafter (75 FR 

70454). Therefore, we proposed to 

revise the regulation text to more clearly 

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state that the encounter is required 

‘‘prior to’’ the 3rd benefit period 

recertification, and each subsequent 

recertification. As such, we proposed to 

change the regulatory text to read ‘‘(4) 

Face-to-face encounter. As of January 1, 

2011, a hospice physician or hospice 

nurse practitioner must have a face-toface encounter with each hospice 

patient whose total stay across all 

hospices is anticipated to reach the 3rd 

benefit period. The face-to-face 

encounter must occur prior to but no 

more than 30 calendar days prior to the 

3rd benefit period recertification, and 

every benefit period recertification 

thereafter, to gather clinical findings to 

determine continued eligibility for 

hospice care.’’ Based on the comments 

received, we are implementing this 

change as proposed. We received 10 

comments related to these proposed 

changes. 

Comment: Commenters supported 

clarification regarding the timing of the 

face-to-face encounter; however, they 

asked for more flexibility in the 

timeframe that CMS mandated. A few 

commenters urged CMS to consider 

alternatives to discharging and 

readmitting patients when a face-to-face 

encounter is not timely. 

Commenters appreciated our effort to 

incorporate ‘‘exceptional 

circumstances’’ as part of the manual 

instructions governing the hospice faceto-face requirement. While commenters 

found these instructions helpful, they 

urged that we expand the current twoday grace period to seven days for all 

new 3rd benefit period and later 

readmissions and include transfer 

patients. Commenters believed that 

allowance of only two days is not 

sufficient and may still result in delayed 

delivery of needed services. A 

commenter also said that allowing seven 

days will avoid delays in admissions 

without creating staffing burdens where 

there is a shortage in MD/NPs. 

Commenters indicated that hospice 

physicians may have unavoidable 

circumstances such as becoming ill, 

taking vacations, and resigning 

suddenly, which the commenter 

indicated could potentially leave the 

hospice in the unforeseeable position of 

having to discharge a patient because 

the face-to-face encounter was not 

completed prior to the start of the 

benefit period. A commenter believed a 

seven-day window would allow for 

emergency patient admissions and 

address potential staffing issues. 

Another commenter recommended 

that we allow the encounter to occur up 

to five days after the start of the 3rd or 

later benefit period in exceptional 

circumstances, such as in a situation in 

which a transfer occurs immediately 

prior to a three-day weekend. Moreover, 

commenters requested that we include 

additional circumstances under which 

the grace period may be allowed, such 

as for providers in rural and large 

service areas and those in medically 

underserved areas. In addition, a 

commenter indicated that contractors 

should be instructed to use reasonable 

discretion when implementing 

application of ‘‘exceptional 

circumstances.’’ 

A commenter suggested a statutory 

change to require that the face-to-face 

encounter occur every six months 

instead of every new benefit period. A 

commenter stated that we should not 

require a hospice to discharge and 

readmit the patient if a face-to-face 

encounter does not occur prior to the 

3rd benefit period recertification as it 

imposes a needless complication on the 

process, and it is an unnecessary burden 

on the patient and family for a mistake 

made by the hospice. The same 

commenter suggested other alternatives 

to penalize the hospice for its mistake 

without causing any problems to the 

patient. The commenter indicated that 

prior to the face-to-face requirement, 

hospices could use occurrence code 77 

to represent the non-billable days if 

certification criteria were not 

documented in a timely fashion. The 

commenter asked to allow the use of the 

billing code subsequent to 

implementation of the face-to-face 

requirement. The commenter also 

suggested that hospices should not be 

able to submit claims until the 

certification is complete. 

The same commenter stated that the 

main goal of the face-to-face encounter 

requirement was to increase hospice 

accountability; this commenter felt that 

a financial consequence to the hospice 

for an untimely face-to-face encounter is 

a logical and justified way to meet this 

goal. The commenter stated that in stark 

contrast, there is no justifiable purpose 

for an overly strict implementation 

requirement when actively dying 

patients need to go through a formal 

discharge process and re-complete 

admission paperwork and assessments 

because of a technical error made by 

hospice. A commenter suggested that 

we act to prevent a negative impact on 

hospice patients and families by 

recognizing that human error can occur. 

In addition, the commenter suggested 

that we limit consequences such that 

they impact the hospice alone, rather 

than patients and their families. 

A commenter indicated that the 

existing regulations allow two days after 

the beginning of the certification period 

to get a Certification of Terminal Illness 

signed; therefore, this commenter urged 

us to permit this two-day extended 

period for the face-to-face encounter for 

all 3rd and later benefit periods, not just 

new admissions. 

A commenter suggested that we ‘‘hold 

harmless’’ those who miscalculate the 

correct date for the recertification when 

they demonstrate compliance in terms 

of submitting information. 

Response: We thank the commenters 

for their support of the clarification of 

the regulation text regarding the timing 

of the face-to-face encounter. Based on 

the comments we received, we are 

finalizing the policy as clarified in the 

proposed rule. 

The remaining comments described in 

the comment summary are beyond the 

scope of the clarification which we 

proposed, including the comment that 

suggested that we ‘‘hold harmless’’ 

those who miscalculate the correct date 

for the recertification when they 

demonstrate compliance in terms of 

submitting information. However, we 

will briefly address some of them to 

ensure that the policy is clear. We 

appreciate commenters support 

regarding the manual instructions. We 

note that the flexibility adopted in the 

manual instructions applies only to new 

admissions which occur at the 3rd or 

later benefit period. We allow this 

flexibility because we are convinced 

that in cases where a hospice newly 

admits a patient who is in the third or 

later benefit period, a face-to-face 

encounter prior to the start of the benefit 

period may not be possible. The manual 

provides some examples, but these 

examples are not intended to be allinclusive. We believe that any 

additional flexibility would require a 

statutory change. 

We also note that if the face-to-face 

encounter requirements are not met, the 

beneficiary is no longer certified as 

terminally ill, and consequently is not 

eligible for the Medicare hospice 

benefit. Therefore, the hospice must 

discharge the patient from the Medicare 

hospice benefit because he or she is not 

considered terminally ill for Medicare 

purposes. The hospice can re-admit the 

patient to the Medicare hospice benefit 

once the required encounter occurs, 

provided the patient signs a new 

election form and all other new election 

criteria are met. If they choose to do so, 

hospices can provide care to these 

patients in the interim at the hospice’s 

own expense until eligibility is reestablished, but that care must occur 

outside of the Medicare hospice benefit. 

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4. Hospice Aide and Homemaker 

Services 

The hospice Conditions of 

Participation (CoPs) were updated in 

2008, after being finalized on June 5, 

2008 in the Hospice Conditions of 

Participation Final Rule (73 FR 32088). 

Those revised CoPs included changing 

the term ‘‘home health aide’’ to 

‘‘hospice aide’’. In our FY 2010 Hospice 

Wage Index Final Rule (74 FR 39384), 

we updated language in several areas of 

our regulatory text to use this new 

terminology, including at 42 CFR 

418.202(g). The regulatory text at 42 

CFR 418.202(g) describes hospice aide 

and homemaker services. The last 

sentence of the regulatory text that was 

finalized is about homemaker services; 

however the word ‘‘homemaker’’ was 

inadvertently replaced with ‘‘aide.’’ The 

revised regulatory text also 

inadvertently deleted the sentence 

which read ‘‘Aide services must be 

provided under the supervision of a 

registered nurse.’’ Finally, the title of 

this section of the regulatory text 

continues to refer to 42 CFR 418.94 of 

the CoPs. However, 42 CFR 418.94 no 

longer exists, and it was updated in the 

2008 Hospice CoP Final Rule to 42 CFR 

418.76. We propose to correct the 

regulatory text at 42 CFR 418.202(g) to 

update the CoP reference to show 42 

CFR § 418.76, to add back the sentence 

about supervision which was deleted, 

and to correct the last sentence to refer 

to ‘‘homemakers’’ rather than ‘‘aides.’’ 

We received one comment on this 

section, and are implementing this 

change as proposed. 

Comment: A commenter wrote in 

support of this change. 

Response: We appreciate the 

commenter’s support. 

Comment: A commenter had concerns 

that hospice patients could not fully 

access occupational therapy services. 

The commenter asked us to provide 

education to providers, especially 

physicians, about the benefits and 

improved quality of life that 

occupational therapy services can 

provide to hospice patients. 

Response: We appreciate this 

comment, but it is outside the scope of 

this rule. 

E. Quality Reporting for Hospices 

1. Background and Statutory Authority 

The CMS seeks to promote higher 

quality and more efficient health care 

for Medicare beneficiaries. Our efforts 

are furthered by the quality reporting 

programs coupled with public reporting 

of that information. Such quality 

reporting programs exist for various 

settings such as the Hospital Inpatient 

Quality Reporting (Hospital IQR) 

Program. In addition, CMS has 

implemented quality reporting programs 

for hospital outpatient services, the 

Hospital Outpatient Quality Reporting 

Program (OQR), and for physicians and 

other eligible professionals, the 

Physician Quality Reporting System 

(PQRS). CMS has also implemented 

quality reporting programs for home 

health agencies and skilled nursing 

facilities that are based on conditions of 

participation, and an end stage renal 

disease quality improvement program 

that links payment to performance 

based on requirements in section 153(c) 

of the Medicare Improvement for 

Patients and Providers Act of 2008. 

Section 3004 of the Affordable Care 

Act amends the Act to authorize 

additional quality reporting programs, 

including one for hospices. Section 

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

beginning with FY 2014 and each 

subsequent FY, the Secretary shall 

reduce the market basket update by two 

percentage points for any hospice that 

does not comply with the quality data 

submission requirements with respect to 

that fiscal year. Depending on the 

amount of annual update for a particular 

year, a reduction of two percentage 

points may result in the annual market 

basket update being less than 0.0 

percent for a FY and may result in 

payment rates that are less than 

payment rates for the preceding FY. Any 

reduction based on failure to comply 

with the reporting requirements, as 

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

Act, would apply only with respect to 

the particular fiscal year involved. Any 

such reduction will not be cumulative 

and will not be taken into account in 

computing the payment amount for 

subsequent FYs. 

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

requires that each hospice submit data 

to the Secretary on quality measures 

specified by the Secretary. Such data 

must be submitted in a form and 

manner, and at a time specified by the 

Secretary. Any measures selected by the 

Secretary must have been endorsed by 

the consensus-based entity which holds 

a contract regarding performance 

measurement with the Secretary under 

section 1890(a) of the Act. This contract 

is currently held by the National Quality 

Forum (NQF). However, section 

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

in the case of a specified area or medical 

topic determined appropriate by the 

Secretary for which a feasible and 

practical measure has not been endorsed 

by the consensus-based entity, the 

Secretary may specify a measure(s) that 

is (are) not so endorsed as long as due 

consideration is given to measures that 

have been endorsed or adopted by a 

consensus-based organization identified 

by the Secretary. Under section 

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

Secretary must not later than October 1, 

2012 publish selected measures that 

will be applicable with respect to FY 

2014. 

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

requires the Secretary to establish 

procedures for making data submitted 

under the hospice quality reporting 

program available to the public. The 

Secretary must ensure that a hospice has 

the opportunity to review the data that 

are to be made public with respect to 

the hospice program prior to such data 

being made public. The Secretary must 

report quality measures that relate to 

hospice care provided by hospices on 

the CMS Internet Web site. 

2. Quality Measures for Hospice Quality 

Reporting Program for Payment Year FY 

2014 

a. Considerations in the Selection of the 

Proposed Quality Measures 

In implementing these quality 

reporting programs, we envision the 

comprehensive availability and 

widespread use of health care quality 

information for informed decision 

making and quality improvement. We 

seek to collect data in a manner that 

balances the need for information 

related to the full spectrum of quality 

performance and the need to minimize 

the burden of data collection and 

reporting. Our purpose is to help 

achieve better health care and improve 

health through the widespread 

dissemination and use of performance 

information. We seek to efficiently 

collect data using valid, reliable and 

relevant measures of quality and to 

share the information with 

organizations that use such performance 

information as well as with the public. 

We also seek to align new Affordable 

Care Act reporting requirements with 

current HHS high priority conditions, 

topics and National Quality Strategy 

(NQS) goals and to ultimately provide a 

comprehensive assessment of the 

quality of health care delivered. The 

hospice quality reporting program will 

align with the HHS National Quality 

Strategy, particularly with the goals of 

ensuring person and family centered 

care and promoting effective 

communication and coordination of 

care. One fundamental element of 

hospice care is adherence to patient 

choice regarding issues such as the 

desired level of treatment and the 

location of care. This closely aligns with 

the HHS NQS goal of ensuring person 

and family centered care. Another 

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fundamental element of hospice care is 

the use of a closely coordinated 

interdisciplinary team to provide the 

desired care. This characteristic is 

closely aligned with the goal of 

promoting effective communication and 

coordination of care. Patient/family 

preferences and coordination of care 

will be foci of future hospice quality 

measure selection. Arriving at such a 

comprehensive set of quality measures 

that reflect high priority conditions and 

goals of the HHS NQS will be a multiyear effort. 

Other considerations in selecting 

measures include: alignment with other 

Medicare and Medicaid quality 

reporting programs as well as other 

private sector initiatives; suggestions 

and input received on measures 

including, for example, those received 

during the Listening Session on the 

Hospice Quality Reporting Program held 

on November 15, 2010; seeking 

measures that have a low probability of 

causing unintended adverse 

consequences; and considering 

measures that are feasible (that is, 

measures that can be technically 

implemented within the capacity of our 

infrastructure for data collection, 

analyses, and calculation of reporting 

and performance rates as applicable). 

We also considered the burden to 

hospices when selecting measures to 

propose. We considered the January 18, 

2011 EO entitled ‘‘Improving Regulation 

and Regulatory Review’’ (E.O. 13563), 

which instructs federal agencies to 

consider regulatory approaches that 

reduce burdens and maintain flexibility 

and freedom of choice for the public. 

In our search for measures 

appropriate for the first year of the 

Hospice Quality Reporting Program, we 

considered the results of our 

environmental scan, literature search, 

technical expert panel and stakeholder 

listening sessions that detailed measures 

developed by multiple stewards. Of 

particular interest were measures from 

the National Hospice and Palliative Care 

Organization (NHPCO), the PEACE 

(Prepare. Embrace. Attend. 

Communicate. Empower.) Project 

conducted by The Carolinas Center for 

Medical Excellence 2006–2008 and the 

Assessment Intervention and 

Measurement (AIM) Project conducted 

by the New York QIO, IPRO 2009–2010. 

Measures from these three sources can 

be viewed at the following Web sites: 

http://www.nhpco.org/files/public/

Statistics_Research/NHPCO_research_

flier.pdf, http:// 

www.thecarolinascenter.org/

default.aspx?pageid=46 and http:// 

www.ipro.org/index/cms-filesystemaction/hospice/1_6.pdf. 

We are investigating expanding our 

proposed measures to adopt some of 

these measures in the future. However, 

evaluation of these measures revealed 

unique measurement concerns for 

hospice services generally. Two major 

issues were identified. First, all of the 

measures currently available for use in 

measuring hospice quality of care are 

retrospective and have to be collected 

using a chart abstraction approach. This 

creates a burden for hospice providers. 

Secondly, there is no standardized 

vehicle for data collection or centralized 

structure for hospice quality reporting. 

We believe these issues limit our 

options for measure reporting in the first 

year of the Hospice Quality Reporting 

Program. Our plans to require additional 

measure reporting are described below 

under section 4. ‘‘Additional Measures 

Under Consideration.’’ 

We considered measures currently 

endorsed by the NQF that are applicable 

to hospice care. Of the nine measures 

listed by the NQF as applicable to care 

provided at this stage of life, seven 

address patients who specifically died 

of cancer and various situations 

experienced by those patients in their 

last days of life regardless of whether 

they were cared for by a hospice. These 

seven measures do not address the 

provision of hospice care or the breadth 

of the hospice patient population. The 

remaining two NQF endorsed hospicerelated measures address the quality of 

care actually provided by hospices. One 

of the two hospice appropriate measures 

relates to pain control and is discussed 

below under section b. The other 

hospice appropriate measure, #0208: 

‘‘Percentage of family members of all 

patients enrolled in a hospice program 

who give satisfactory answers to the 

survey instrument,’’ requires the 

hospice to administer the Family 

Evaluation of Hospice Care (FEHC) 

survey to families of deceased hospice 

patients. The FEHC survey itself is 

available to all hospices and contains 54 

questions to be returned to the hospice 

and analyzed/scored in order to produce 

ratings for the measure. A composite 

score derived from 17 items on the 

survey and a global score based on the 

overall rating question on the survey are 

included in the measure. Although in 

the proposed rule we stated that we 

were uncertain of the number of 

hospices that currently use this survey 

or the number that analyze the 

responses to determine scoring for this 

NQF endorsed measure, we estimate 

that one-third of hospices participate in 

the NHPCO data collection effort (the 

NHPCO is the developer of the FEHC 

survey measure). Although we did not 

propose to include the FEHC survey 

measure in the 2014 hospice quality 

reporting program, we are now 

considering whether to propose to adopt 

this measure in next year’s rule. We are 

not aware of any other measures 

applicable to hospice care that have 

been endorsed or adopted by a 

consensus organization other than the 

NQF. 

The current Hospice CoPs at 42 CFR 

418.58 require that hospices develop, 

implement, and maintain an effective, 

ongoing, hospice-wide data-driven 

quality assessment and performance 

improvement (QAPI) program and that 

the hospice maintain documentary 

evidence of its quality assessment and 

performance improvement program and 

be able to demonstrate its operation to 

us. In addition, hospices must measure, 

analyze, and track quality indicators, 

including adverse patient events, and 

other aspects of performance that enable 

the hospice to assess processes of care, 

hospice services, and operations as part 

of their QAPI Program. 

Hospices have been required to have 

QAPI programs in place since December 

2008 in order to comply with the CoPs. 

As a part of the QAPI regulations, since 

February 2, 2009, hospices have been 

required to develop, implement, and 

evaluate performance improvement 

projects. The regulations require that: 

(1) The number and scope of distinct 

performance improvement projects 

conducted annually, based on the needs 

of the hospice’s population and internal 

organizational needs, reflect the scope, 

complexity, and past performance of the 

hospice’s services and operations; and 

(2) The hospice document what 

performance improvement projects are 

being conducted, the reasons for 

conducting these projects, and the 

measurable progress achieved on these 

projects. 

Comment: CMS appreciates 

comments received about the potential 

use of measures calculated using data 

from the Family Evaluation of Hospice 

Care (FEHC) Survey. The FEHC was 

recognized by commenters as a wellknown and widely used instrument and 

received support from some 

commenters. However, other 

commenters raised concerns about the 

use of the FEHC survey including the 

burden on providers and the potential 

for bias during data entry and analysis 

if the survey is not administered by a 

third party (rather than hospices 

themselves). 

Response: Measurement of patient/ 

family experience of hospice care is a 

high priority for CMS. The NQF Web 

site now contains updated information 

regarding the endorsed FEHC measure 

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#0208, which includes a composite 

score and a global score. Details on the 

measure can be found at: http:// 

www.qualityforum.org/

MeasureDetails.aspx?

actid=0&SubmissionId=456#k=0208&e=

1&st=&sd=&s=n&so=a&p=1&mt=&cs=. 

We recognize that many (approximately 

one-third) of all hospices do participate 

in the NHPCO sponsored data collection 

and analysis of the FEHC survey. We are 

also aware of limitations of the FEHC 

survey, some of which may be 

addressed in the near future through 

updates to the survey. Ensuring patient 

and family centered care continues to be 

a priority for CMS. Therefore, we are 

considering this measure for inclusion 

in next year’s rule for data collection 

beginning October 2012 for the FY 2014 

program, or for data collection 

beginning in January 2013 for the FY 

2015 program. We will also consider the 

comments received in making decisions 

about future measure development. 

b. Quality Measures for the Quality 

Reporting Program for Hospices 

To meet the quality reporting 

requirements for hospices for the FY 

2014 payment determination as set forth 

in section 1814(i)(5) of the Act, we 

proposed that hospices report the NQFendorsed measure that is related to pain 

management, NQF #0209: The 

percentage of patients who were 

uncomfortable because of pain on 

admission to hospice whose pain was 

brought to a comfortable level within 48 

hours. A primary goal of hospice care is 

to enable patients to be comfortable and 

free of pain, so that they may live each 

day as fully as possible. The provision 

of pain control to hospice patients is an 

essential function, a fundamental 

element of hospice care; therefore, we 

believe the pain control measure, NQF 

#0209, is an important and appropriate 

measure for the hospice quality 

reporting program. 

Additionally, to meet the quality 

reporting requirements for hospices for 

the FY 2014 payment determination as 

set forth in section 1814(i)(5) of the Act, 

we proposed that hospices also report 

one structural measure that is not 

endorsed by NQF. Structural measures 

assess the characteristics and capacity of 

the provider to deliver quality health 

care. The proposed structural measure 

is: Participation in a Quality Assessment 

and Performance Improvement (QAPI) 

Program that Includes at Least Three 

Quality Indicators Related to Patient 

Care. We believe that participation in 

QAPI programs that address at least 

three indicators related to patient care 

reflects a commitment not only to 

assessing the quality of care provided to 

patients but also to identifying 

opportunities for improvement that 

pertain to the care of patients. Examples 

of domains of indicators related to 

patient care include providing care in 

accordance with documented patient 

and family goals, effective and timely 

symptom management, care 

coordination, and patient safety. 

Section 1814(i)(5)(D)(ii) of the Act 

provides that ‘‘[i]n the case of a 

specified area or medical topic 

determined appropriate by the Secretary 

for which a feasible measure has not 

been endorsed by an entity with a 

contract under section 1890(a), the 

Secretary may specify a measure that is 

not so endorsed as long as due 

consideration is given to measures that 

have been endorsed or adopted by a 

consensus organization identified by the 

Secretary.’’ We proposed to adopt this 

structural measure because we believe it 

is appropriate for use in evaluating the 

quality of care provided by hospices. As 

discussed above, a majority of the NQFendorsed measures in this category are 

not hospice-specific or, in the case of 

the FEHC survey instrument, that 

measure may be too burdensome for 

hospices to implement for the FY 2014 

payment determination. We are also not 

aware of any other measures applicable 

to the hospice setting that have been 

adopted by another consensus 

organization. Accordingly, we proposed 

to adopt the structural measure under 

the authority in section 1814(i)(5)(D)(ii) 

of the Act. 

We proposed that each hospice 

submit data on the proposed structural 

measure, including the description of 

each of its patient-care focused quality 

indicators (if applicable) to us by 

January 31, 2013 on a spreadsheet 

template to be prepared by us. 

Specifically, hospice programs would be 

required to report whether or not they 

have a QAPI program that addresses at 

least three indicators related to patient 

care. In addition, hospices would be 

required to list all of their patient care 

indicators. Hospice programs would be 

evaluated for purposes of the quality 

reporting program based on whether or 

not they respond, not on how they 

respond. 

In addition, we proposed a voluntary 

submission of the proposed structural 

measure (not for purposes of a payment 

determination or public reporting), 

including the description of each of 

their patient-care focused quality 

indicators to us by January 31, 2012 on 

a spreadsheet template to be prepared 

by us. Voluntary reporting of the 

structural measure data with specific 

quality indicators related to patient care 

to us would allow us to learn what the 

important patient care quality issues are 

for hospices and would serve to provide 

useful information in the design and 

structure of the quality reporting 

program. Our intent is to require 

additional standardized and specific 

quality measures to be reported by 

hospices in subsequent years. 

The proposed collection and 

submission of data on the proposed 

NQF-endorsed measure will be a new 

requirement for hospices. However, 

since the development, implementation 

and maintenance of an effective, 

ongoing, hospice-wide data driven 

quality assessment and performance 

improvement program have been 

requirements in the Medicare CoPs 

since 2008, we do not believe that the 

collection of the proposed structural 

measure on QAPI indicators would be 

considered new work. There are 

numerous data collection tools and 

quality indicators that are available to 

hospices through hospice industry 

associations and private companies. In 

addition to these options, hospices may 

choose to use the CMS-sponsored 

Hospice Assessment Intervention and 

Measurement (AIM) Project data 

elements, data dictionary, data 

collection tool, and quality indicator 

formulas that are freely available to all 

hospices, found at http://www.ipro.org/ 

index/hospice-aim. 

We proposed that hospices report the 

structural measure by January 2013 and 

the NQF measure #0209 by April 2013 

in order to be used in the FY 2014 

payment determination. We are 

requiring two different reporting dates 

in order for details on the QAPI data to 

be useful in rulemaking that would 

impact FY 2014 and to allow hospices 

sufficient time to extract, calculate and 

report the pain measure data collected 

through December 31, 2012. In addition, 

we proposed that hospices voluntarily 

report the structural measure by January 

2012 for purposes of program 

development and design. It is important 

to note that the Affordable Care Act 

allows the Secretary until October 1, 

2012 to publish the measures required 

to meet the FY 2014 reporting 

requirement. As such, we have the 

opportunity to also consider 

commenters’ suggestions associated 

with this final rule in FY 2013 hospice 

rulemaking. 

Comment: Most commenters 

supported use of the NQF#0209 

measure overall, and pointed out that 

many hospices already track this 

measure, and that it is practical. 

However, some expressed concerns 

about complexities with respect to pain 

management in hospice, about the 

exclusion of non-verbal patients, and 

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about whether this measure would 

require risk adjustment. The 

commenters stated the need for a quality 

measure that would take these 

challenges into consideration, and 

provides very specific definitions and 

specifications in how to collect the data 

needed to calculate the measure. One 

commenter expressed concern that it is 

premature to collect an outcome pain 

management measure and suggested a 

process measure instead. 

Response: We appreciate the positive 

feedback. We are finalizing our proposal 

to require that hospices report the NQFendorsed measure that is related to pain 

management, NQF #0209: the 

percentage of patients who were 

uncomfortable because of pain on 

admission to hospice whose pain was 

brought to a comfortable level within 48 

hours. The data for this measure are 

collected at the patient level, but are 

reported in the aggregate for all patients 

cared for within the reporting period. 

The patient’s definition of ‘‘comfort’’ is 

used in this measure; there is no set 

numeric value on a standardized 

assessment that’s used to quantify 

‘‘comfort.’’ The measure is designed to 

capture information on each patient’s 

overall experience of pain. The measure 

is not limited to asking the patient about 

one specific pain site; rather it is a 

reflection of the patient’s overall 

experience of pain. There is no 

assumption that every patient’s pain 

will be managed to a ‘‘comfortable’’ 

level within 48 hours. The measure 

reflects the opinions of experienced 

hospice professionals that, in the 

aggregate, most patients admitted in 

pain can and should be more 

comfortable within 48 hours of 

admission. The measure allows for the 

fact that some patients will not achieve 

a comfortable level because of 

complications like those suggested by 

commenters. This measure was tested in 

two studies during its initial 

development, and it has been collected 

on a voluntary basis by hospices for 

many years. We will consider the use of 

process measures related to pain 

management and will consider all 

comments we receive as we continue to 

evaluate additional measures for use in 

the hospice quality reporting program. 

Comment: We received several 

comments in support of the requirement 

that hospices report the structural 

measure: Participation in a Quality 

Assessment and Performance 

Improvement (QAPI) Program that 

Includes at Least Three Quality 

Indicators Related to Patient Care. We 

also received a few comments indicating 

a need for clarification about this 

measure for both the voluntary and 

mandatory reporting periods. 

Response: We appreciate the 

supportive comments. In response to 

requests for clarification, we note that 

the description of the proposed measure 

was accurately described in section 

II.E.2.b. ‘‘Proposed Quality Measures’’ 

and that the proposed measure was 

subsequently inaccurately summarized 

in section II.E.2.d ‘‘Data Submission 

Requirements.’’ We are clarifying that 

the structural measure is designed to 

obtain two pieces of information from 

hospices during both the voluntary 

reporting period and the mandatory 

period. Hospices will indicate whether 

their QAPI program includes at least 

three patient care related indicators, and 

will also list all their patient related 

indicators along with specific 

information about those indicators. 

Information requested includes: name 

and description of indicator, domain of 

care the indicator addresses, description 

(not the numeric values) of the 

numerator and denominator if available, 

and data source (for example, electronic 

medical record, paper medical record, 

adverse events log). Hospices will not be 

asked to report their level of 

performance on these patient care 

related indicators at this time. The 

information being gathered will be used 

by CMS to ascertain the breadth and 

content of existing hospice QAPI 

programs. This stakeholder input will 

help inform future measure 

development. Based on the comments 

we received, we are therefore finalizing 

our adoption of the structural measure: 

Participation in a Quality Assessment 

and Performance Improvement (QAPI) 

Program that Includes at Least Three 

Quality Indicators Related to Patient 

Care. Hospices will be required to 

submit data on the structural measure, 

including the description of each of 

their patient-care focused quality 

indicators. 

Comment: Commenters expressed 

support of and pledged participation in 

the voluntary data reporting period. 

Some commenters questioned how the 

voluntary data collected about hospices’ 

QAPI programs would be used by CMS, 

and cautioned that the data would likely 

not be comprehensive or generalizable. 

In addition, commenters expressed 

concerns regarding the need for 

standardization of patient outcome 

definitions when soliciting data. 

Finally, a few commenters urged CMS 

to make available as soon as possible the 

standardized voluntary data collection 

form along with training and education 

to ensure a smooth process for the 

voluntary data submission period. 

Response: We are finalizing our 

proposed voluntary submission of the 

structural measure (not for purposes of 

a payment determination or public 

reporting), including the description of 

each hospice’s patient-care focused 

quality indicators to CMS by January 31, 

2012. We acknowledge and appreciate 

commenters’ support of, and their 

pledging participation in, the voluntary 

data reporting period. The voluntary 

data reporting we proposed is designed 

to obtain specific information about 

hospice organizations’ existing QAPI 

programs, including specifics about 

patient care related indicators the 

hospices monitor as part of their QAPI 

program. Hospices will be invited to 

provide us a list of their QAPI indicators 

along with specific information about 

each indicator. The information being 

gathered will be used by us to ascertain 

the breadth and content of existing 

hospice QAPI programs. This will help 

inform future measure development. We 

recognize that not all hospices will 

choose to participate in the voluntary 

data submission, and that information 

obtained will not necessarily be 

generalizable. We also recognize that 

information obtained during the 

voluntary period will not necessarily be 

representative of all hospices’ QAPI 

programs. 

The data collection form will be made 

available, along with education in the 

form of webinars, data dictionary, and 

other supporting documents, before the 

voluntary data submission date. 

Comment: Commenters supported the 

use of an electronic spreadsheet as a 

temporary approach to data submission 

for the voluntary and mandatory data 

reporting period, but urged the creation 

of a more user friendly and less labor 

intensive approach in the future, 

including approaches that use data from 

Electronic Health Records. Commenters 

also expressed an eagerness to see the 

data collection template as soon as 

possible. 

Response: We are finalizing our 

proposal to provide a spreadsheet 

template to hospices as a temporary 

means of data submission. To maximize 

the security of transmission of data from 

hospices to us, and to reduce data errors 

and streamline analysis, we are 

investigating the feasibility of a Web 

interface for the data collection. The 

spreadsheet template will be part of this 

web interface for the data entry. 

Hospices will be asked to provide 

identifying information, and then 

complete a Web based data entry that 

contains four questions. Hospices would 

report whether they have a QAPI 

program that includes at least three 

patient care related indicators and 

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hospices would be asked to enter 

information about all of their patient 

care related indicators including name 

of indicator, domain of care, description 

(not the numeric values) of the 

numerator and denominator if available, 

and data source (for example, electronic 

medical record, paper medical record, 

adverse events log) using a spreadsheet 

format. Training for use of this Web 

based data submission tool will be 

provided to hospices through webinars 

and other downloadable materials. A 

call-in help line will also be established 

and staffed, should hospices have 

specific questions requiring immediate 

assistance. For hospices that cannot 

complete the Web based data entry, a 

downloadable data entry form will be 

available. 

c. Proposed Timeline for Data Collection 

Under the Quality Reporting Program 

for Hospices 

To meet the quality reporting 

requirements for hospices for the FY 

2014 payment determination as set forth 

in section 1814(i)(5) of the Act, we 

proposed that the first hospice quality 

reporting cycle for the proposed NQFendorsed measure and the proposed 

structural measure would consist of data 

collected from October 1, 2012 through 

December 31, 2012. This timeframe 

would permit us to determine whether 

each hospice was eligible to receive the 

full market basket update for FY 2014 

based on a full quarter of data. This also 

provides sufficient time after the end of 

the data collection period to accurately 

determine each hospice’s market basket 

update for FY 2014. We proposed that 

all subsequent hospice quality reporting 

cycles be based on the calendar-year 

basis (for example, January 1, 2013 

through December 31, 2013 for 

determination of the hospice market 

basket update for each hospice in FY 

2015, etc.). 

To voluntarily submit the structural 

measure, we proposed that the hospice 

voluntary quality reporting cycle would 

consist of data collected from October 1, 

2011 through December 31, 2011. This 

timeframe would permit us to analyze 

the data to learn what the important 

patient care quality issues were for 

hospices as we enhance the quality 

reporting program design to require 

more standardized and specific quality 

measures to be reported by hospices in 

subsequent years. 

Comment: We received minimal yet 

supportive comments on the proposed 

data collection timeframes. One 

commenter questioned why data would 

be required so early for the FY 2014 

payment determination and requested 

further clarification. 

Response: We are finalizing our 

proposal that the first hospice quality 

mandatory reporting cycle for the 

proposed NQF-endorsed measure and 

the proposed structural measure consist 

of data collected from October 1, 2012 

through December 31, 2012. We are also 

finalizing our proposal that all 

subsequent hospice quality reporting 

cycles be based on a calendar-year (for 

example, January 1, 2013 through 

December 31, 2013 for determination of 

the hospice market basket update for 

each hospice in FY 2015, etc.). Hospices 

will report their data for the structural 

measure by January 2013 and data for 

NQF #0209 by April 2013 to allow 

ample time for analysis of data and 

subsequent impact on hospices’ annual 

payment updates in advance of the start 

of FY 2014 (10/1/2013–9/30/2014). This 

timeframe will also be necessary in 

future years where analysis will be 

required in advance of any public 

reporting of data. 

We are also finalizing our proposal 

that the hospice voluntary quality 

reporting cycle consist of data collected 

from October 1, 2011 through December 

31, 2011. 

d. Data Submission Requirements 

We generally proposed that hospices 

submit data in the fiscal year prior to 

the payment determination. For the 

fiscal year 2014 payment determination, 

we proposed that hospices submit data 

for the proposed NQF-endorsed measure 

based on the measure specifications for 

that measure, which can be found at 

http://www.qualityforum.org, no later 

than April 1, 2013. Data submission for 

the structural measure would include 

the hospices’ report of (1) Whether they 

have a QAPI program that addresses at 

least three indicators related to patient 

care, and (2) the subject matter of all of 

their patient care indicators for the 

period October 1, 2012 through 

December 31, 2012. Submission of these 

reports would be required by January 

31, 2013. 

We proposed that both measures’ data 

be submitted to us on a spreadsheet 

template to be prepared by us. We 

would announce operational details 

with respect to the data submission 

methods and format for the hospice 

quality data reporting program using 

this CMS Web site http://www.cms.gov/ 

LTCH-IRF-Hospice-Quality-Reporting by 

no later than December 31, 2011. 

For the voluntary submission, we 

proposed that hospices submit data for 

the proposed structural measure based 

on the spreadsheet template to be 

prepared by us, no later than January 31, 

2012. Voluntary data submission for the 

structural measure would include the 

hospices’ report of (1) Whether they 

have a QAPI program that addresses at 

least three indicators related to patient 

care, and (2) the subject matter of all of 

their patient care indicators for the 

period October 1, 2011 through 

December 31, 2011. Submission of these 

reports would be required by January 

31, 2012. 

Comment: Commenters supported the 

use of an electronic spreadsheet as a 

temporary approach to data submission 

for the voluntary and mandatory data 

reporting period, but urged the creation 

of a more user friendly and less labor 

intensive approach in the future, 

including approaches that use data from 

EHRs. Commenters also expressed an 

eagerness to see the data collection 

template as soon as possible. 

Response: We are finalizing our 

proposal that hospices submit data in 

the FY prior to the payment 

determination. For the FY 2014 

payment determination, hospices will 

be required to submit data for the NQFendorsed measure no later than April 1, 

2013. Data submission for the structural 

measure will include the hospices’ 

report of (1) Whether they have a QAPI 

program that addresses at least three 

indicators related to patient care, and (2) 

the subject matter of all of their patient 

care indicators for the period October 1, 

2012 through December 31, 2012. 

Submission of these reports will be 

required by January 31, 2013. 

The proposed rule stated that we 

would provide a spreadsheet template 

to hospices as a temporary means of 

data submission. To maximize the 

security of transmission of data from 

hospices to us, and to reduce data errors 

and streamline analysis, we are 

investigating the feasibility of a Web 

interface for the data collection. The 

spreadsheet template will be part of this 

Web interface for the data entry. 

Hospices will be asked to provide 

identifying information, and then 

complete a Web based data entry that 

contains four questions. Hospices would 

report they have a QAPI program that 

includes at least three patient carerelated indicators and all hospices 

would be asked to enter information 

about all of their patient care indicators 

including name of indicator, domain of 

care, description (not the numeric 

values) of the numerator and 

denominator if available, and data 

source (for example, electronic medical 

record, paper medical record, adverse 

events log) using a spreadsheet format. 

Training for use of this Web based data 

submission tool would be provided to 

hospices through webinars and other 

downloadable materials. A call-in help 

line would also be established and 

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staffed, should hospices have specific 

questions requiring immediate 

assistance. For hospices that cannot 

complete the Web based data entry, a 

downloadable data entry form would be 

available. We are finalizing all of these 

proposals. We would announce further 

operational details with respect to the 

data submission methods and format for 

the mandatory hospice quality data 

reporting program using the CMS Web 

site http://www.cms.gov/LTCH-IRFHospice-Quality-Reporting no later than 

December 31, 2011 and for the 

voluntary reporting cycle by November 

2011. 

3. Public Availability of Data Submitted 

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

the Secretary is required to establish 

procedures for making any quality data 

submitted by hospices available to the 

public. Such procedures will ensure 

that a hospice will have the opportunity 

to review the data regarding its program 

before it is made public. In addition, 

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

the Secretary is authorized to report 

quality measures that relate to services 

furnished by a hospice on the CMS 

internet Web site. At the time of the 

publication of this final rule, no date 

has been set for public reporting of data. 

We recognize that public reporting of 

quality data is a vital component of a 

robust quality reporting program and are 

fully committed to developing the 

necessary systems for public reporting 

of hospice quality data. 

Comment: Commenters supported our 

development of systems for future 

public reporting and provided input on 

that process. Commenters suggested we 

gain a clear understanding of what is 

important to consumers when 

discriminating between providers. A 

few commenters also urged us to 

involve broad representation from 

stakeholders in development of future 

public reporting. Commenters also 

indicated that some states already have 

public reporting, and that where 

possible, CMS-required reporting 

should not result in duplication of 

efforts. 

Response: We appreciate comments 

received indicating support for the 

development of systems for future 

public reporting, and willingness to 

provide input. We are taking into 

consideration the body of literature 

related to consumer perceptions of what 

is important to them during the measure 

development process. In addition, we 

are aware of state-based quality 

reporting initiatives, and plan to take 

these into consideration as well. Finally, 

the measure development process used 

includes a variety of ways in which we 

obtain stakeholder input, including 

Listening Sessions, Technical Expert 

Panels, and public comment periods. 

Stakeholder input is critical to the 

process, and we value it highly. 

4. Additional Measures Under 

Consideration 

As described above, we are 

considering expanding the proposed 

measures to include measures from the 

National Hospice and Palliative Care 

Organization (NHPCO), the PEACE 

Project and the AIM Project. While in 

this first year, we will build a 

foundation for quality reporting by 

requiring hospices to report one NQFendorsed measure and one structural 

measure, we seek to achieve a 

comprehensive set of quality measures 

to be available for widespread use for 

informed decision making and quality 

improvement. We expect to explore and 

expand the measures in various ways. 

Future topics under consideration for 

quality data reporting include patient 

safety, effective symptom management, 

patient and family experience of care, 

and alignment of care with patient 

preferences. For quality data reporting 

in FY2014 or FY2015, we are also 

particularly interested in the 

development of new measures related to 

these topics and in the further 

development of existing measures that 

can be found on the following Web 

sites: http://www.nhpco.org/files/ 

public/Statistics_Research/ 

NHPCO_research_flier.pdf, http:// 

www.thecarolinascenter.org/ 

default.aspx?pageid=46 and http:// 

www.ipro.org/index/cms-filesystemaction/hospice/1_6.pdf. 

We welcomed comments on whether 

all, some, any, or none of these 

measures should be considered for 

future rulemaking. We also solicited 

comments on ways by which we can 

adopt these measures in a standardized 

way that is not overly burdensome to 

hospice providers and reflects hospice 

patient input. 

To support the standardized 

collection and calculation of quality 

measures specifically focused on 

hospice services, we believe the 

required data elements would 

potentially require a standardized 

assessment instrument. 

We have developed an assessment 

instrument for the ‘‘Post-Acute Care 

Payment Reform Demonstration 

Program,’’ as required by section 5008 of 

the 2005 Deficit Reduction Act. This is 

a standardized assessment instrument 

that could be used across all post-acute 

care sites to measure functional status 

and other factors during treatment and 

at discharge from each provider and to 

test the usefulness of this standardized 

assessment instrument (now referred to 

as the Continuity Assessment Record & 

Evaluation, CARE). We believe such an 

assessment instrument would be 

beneficial in supporting the submission 

of data on quality measures by requiring 

standardized data with regard to 

hospice patients, similar to the current 

MDS 3.0 and OASIS–C that support a 

variety of quality measures for nursing 

homes and home health agencies, 

respectively. The CARE data set used by 

hospices would require editing to 

address the unique and specific 

assessment needs of the hospice patient 

population. We invited comments on 

the implementation of a standardized 

assessment instrument for hospices that 

would similarly support the calculation 

of quality measures. 

We invited public comment on 

considering modifications to the CARE 

data set to capture information 

specifically relevant to measuring the 

quality of care and services delivered by 

hospices such as patient/family 

preferences and the degree to which 

those preferences were met for care 

delivery, symptom management, 

spiritual needs and other aspects of care 

pertinent to the hospice patient 

population. The current version of the 

CARE data set can be found at http:// 

www.pacdemo.rti.org. 

Finally, we also solicited comments 

on ways which we could expand the 

structural reporting measure to also 

include hospice performance on each 

QAPI indicator reported in the 

performance period. 

Comment: We received many 

comments about the need for future 

measures to reflect the full range of 

hospice practice and approach to care. 

Commenters pointed out that measures 

need to include domains of care 

including psychosocial and spiritual to 

fully reflect hospice quality of care. In 

addition, commenters indicated that 

measures needed to reflect patient 

preference and refusal of treatment. 

Finally, commenters pointed out that 

measures needed to be very specific 

with regard to definitions, and easy to 

extract from medical records (paper or 

electronic). We received numerous and 

detailed comments related to the 

PEACE, AIM and NHPCO measures, 

including measures calculated from the 

collection of data using the Family 

Evaluation of Hospice Care (FEHC). 

While commenters were supportive of 

future measure development, a few 

commenters cautioned against 

implementing future measures for 

which evidence of validity is not fully 

established. 

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Response: We appreciate the specific 

and insightful analyses provided and 

will carefully consider this input as we 

continue to develop the hospice quality 

reporting program. Future measures will 

be proposed after being selected through 

our measure development process. This 

process is designed to prevent 

implementation of measures without 

sufficient evidence for use in care 

settings. We will consider the comments 

received in making decisions about 

future measure development. 

Comment: Comments were also 

received about the development of a 

standardized tool, such as the CARE 

tool, as an instrument to gather 

standardized data items. Commenters 

voiced general support of the idea of 

developing a data tool specifically for 

hospice and offered specific ideas on 

domains of hospice patient care that are 

missing from the current tool. Some 

commenters advised against adopting 

existing tools that were developed for 

other settings and other commenters 

offered suggestions for additions to the 

tool that would make it appropriate for 

hospice patients. 

Response: We appreciate the 

comments submitted about a future 

standardized data set for use in hospice. 

We recognize the tension between the 

desire for a tool to standardize data 

elements collected that would enable 

comparison of hospices ‘‘apples to 

apples’’ and the need for development 

of evidence for quality measures in 

certain domains of care. We also 

recognize that the CARE in its current 

form would not meet the needs of 

hospice patients or providers, and that 

revisions including the addition of care 

domains and items would be required to 

make CARE hospice-appropriate. 

Comment: We received one comment 

in response to our request for input 

about future expansion of the structural 

measure to include hospice performance 

on each QAPI indicator. The commenter 

did not support the expansion of the 

structural measure in the future, stating 

that the data would not be usable unless 

we know the definitions, specifications, 

and data dictionaries used by each 

hospice, or would have to standardize 

the measure. The commenter also was 

unsure what use the measure would be. 

Response: We appreciate the 

comment received, and understand the 

limitations of the QAPI program 

structural measure. We will consider 

this comment, along with data from the 

voluntary data collection period to 

inform future decisions. 

III. Provisions of the Final Regulations 

For the most part, this final rule 

incorporates the provisions of the 

proposed rule without changes. Those 

provisions of this final rule that differ 

from the proposed rule are as follows: 

• In section II.B, Aggregate Cap 

Calculation Methodology, we are 

clarifying that the reopening period is 

three years (except in cases of fraud, 

where it is unlimited), in accordance 

with existing regulations. We are 

changing proposed regulatory text at 

418.309(d)(3) to indicate that 

adjustment of prior year cap 

determinations is subject to existing 

reopening regulations. 

• In section II.E, Quality Reporting for 

Hospices, the proposed rule stated that 

CMS would provide a spreadsheet 

template to hospices as a temporary 

means of data submission. To maximize 

the security of transmission of data from 

hospices to CMS, and to reduce data 

errors and streamline analysis, CMS is 

investigating the feasibility of a Web 

interface for the data collection. The 

spreadsheet template will be part of this 

Web interface for the data entry. In 

response to comments, we have also 

clarified the description of the structural 

measure which is designed to obtain 

two pieces of information from hospices 

during both the voluntary reporting 

period and the mandatory period. 

Hospices will indicate whether their 

QAPI program includes at least three 

patient care related measures, and will 

also list all their patient related 

indicators along with specific 

information about those indicators. We 

are finalizing our adoption of this 

measure. 

We are implementing all other 

provisions in the proposed rule as 

proposed. 

IV. Updates on Issues Not Proposed for 

FY 2012 Rulemaking 

A. Update on Hospice Payment Reform 

and Value Based Purchasing 

Section 3132 of the Affordable Care 

Act of 2010 (Pub. L. 111–148) 

authorized the Secretary to collect 

additional data and information 

determined appropriate to revise 

payments for hospice care and for other 

purposes. The types of data and 

information described in the Affordable 

Care Act attempt to capture resource 

utilization, which can be collected on 

claims, cost reports, and possibly other 

mechanisms as we determine to be 

appropriate. The data collected would 

be used to revise hospice payment 

methodology for routine home care rates 

(in a budget-neutral manner in the first 

year), no earlier than October 1, 2013. In 

order to determine the revised hospice 

payment methodology, we will consult 

with hospice programs and MedPAC. 

According to MedPAC’s March 2011 

‘‘Report to Congress: Medicare Payment 

Policy’’ (available at http:// 

www.medpac.gov/chapters/ 

Mar11_Ch11.pdf), Medicare 

expenditures for hospice services 

exceeded $12 billion in 2009 and the 

aggregate Medicare margin in 2008 was 

5.1 percent. In addition, MedPAC found 

a 50-percent growth in the number of 

hospices from 2000 to 2009, of which a 

majority were for-profit hospices. 

Finally, MedPAC noted a change in 

patient case-mix from predominantly 

cancer diagnoses to non-cancer 

diagnoses. The growth in Medicare 

expenditures, margins, and number of 

new hospices, and the change in patient 

case-mix, raise concern that the current 

hospice payment methodology may 

have created unintended incentives and 

may not reflect the resource usage 

associated with the current mix of 

hospice patients. Over the past several 

years, MedPAC, the Government 

Accounting Office, and the Office of 

Inspector General all recommended that 

we collect more comprehensive data in 

order to better assess the utilization of 

the Medicare hospice benefit. MedPAC 

has also suggested an alternative 

payment model that they believe will 

address the vulnerabilities in the 

current payment system. 

We are in the early stages of reform 

analysis. We have conducted a literature 

review, are in the process of conducting 

initial data analysis, and our contractor 

convened a technical advisory panel in 

June of 2011. We are also working in 

collaboration with the Assistant 

Secretary of Planning and Evaluation to 

develop analysis that may be used to 

inform our reform efforts. We will 

continue to update stakeholders on our 

progress. 

Section 10326 of the Affordable Care 

Act directs the Secretary to conduct a 

pilot program to test a value-based 

purchasing program for hospices no 

later than January 1, 2016. As described 

in section II.E. ‘‘Quality Reporting for 

Hospices’’ above, we finalized two 

measures for hospices to report to us, 

with one measure (the QAPI measure) to 

be reported no later than January 2013 

and the other measure (the pain 

measure) to be reported by April 2013. 

We believe that these measures are a 

quality reporting foundation upon 

which we will expand. Over the course 

of the next few years, no later than 

beginning in FY 2015, we expect to 

require hospices to report an expanded 

and comprehensive set of quality 

measures from which we can select for 

pilot testing a value-based purchasing 

program. During the FY 2013, FY 2014 

and FY 2015 hospice rulemaking, we 

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plan to iteratively implement the 

expanded measures, and solicit industry 

comments regarding analysis and design 

options for a hospice value-based 

purchasing pilot which would improve 

the quality of care while reducing 

spending. We will also consult with 

stakeholders in developing the 

implementation plan, as well as 

considering the outcomes of any recent 

demonstration projects related to value 

based purchasing which we believe 

might be relevant to the hospice setting. 

We will provide further information on 

the progress of our efforts in future 

rulemaking. 

We did not solicit comments on this 

section, but we received three 

comments. 

Comment: Some commenters noted 

that the hospice payment system is 

based upon the benefit as it was in the 

early 1980’s, and that the benefit has 

changed considerably. While they agree 

that the payment system needs to be 

updated, they suggested that we not 

make piecemeal changes, and that we 

accumulate the necessary data to 

overhaul the system. A few commenters 

wrote that payment reform should not 

be undertaken without compelling 

reasons, and that the changes made 

must reflect the cost of services 

provided. One commenter urged us to 

work with a national industry 

association in reforming the payment 

system. Commenters suggested that we 

pilot any payment system changes 

through a demonstration project, which 

would help overcome a lack of reliable 

data to evaluate payment 

methodologies, would allow for testing 

to assess the impact of the reformed 

model on beneficiary access, and would 

help ensure a smoother transition. 

Response: We appreciate the 

commenters’ input, and will consider 

these suggestions as we move forward 

with payment reform. We reiterate that 

the Affordable Care Act calls for us to 

work with MedPAC and the industry in 

reforming the payment system. 

B. Update on the Redesigned Provider 

Statistical & Reimbursement Report 

(PS&R) 

In our FY 2011 Hospice Wage Index 

Notice with Comment Period, we 

solicited comments on a redesigned 

PS&R system, which would allow 

hospices easy access to national hospice 

utilization data on their Medicare 

hospice beneficiaries. As described in 

section II of the proposed rule, some 

commenters were supportive of the 

idea, and said they needed access to 

each beneficiary’s full utilization history 

to better manage their caps and to meet 

the new face-to-face requirements. 

We are moving forward with this 

project, and expect the redesigned PS&R 

system to be able to provide complete 

utilization data needed for calculating 

hospice caps. We believe that the 

redesigned PS&R system will provide 

hospices with a greater ability to 

monitor their caps by providing readily 

accessible information on beneficiary 

utilization. We expect it to be available 

to hospices before year’s end. We 

encourage all hospices to become 

familiar with the redesigned PS&R and 

to use the information it will make 

available in managing their respective 

caps. In the future, we may consider 

requiring hospices to self-report their 

caps, using PS&R data. 

While we did not solicit comments on 

this section, we received 1 comment. 

Comment: A commenter looks 

forward to the redesigned PS&R, and 

asked to give input before the newly 

designed PS&R report is finalized. 

Response: We appreciate the 

commenter’s support for the PS&R 

redesign; the PS&R redesign was 

undertaken in consultation with 

contractors, and with input previously 

solicited from the industry in prior 

rulemaking (see our FY 2011 Hospice 

Wage Index Notice with Comment, 75 

FR 42950, dated July 22, 2010). We 

expect more information on the PS&R 

redesign to be forthcoming, and will 

keep the industry up-to-date through 

Open Door Forums, list-serves, and the 

hospice center webpage (http:// 

www.cms.gov/center/hospice.asp). 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995(PRA), we are required to 

provide 60-day notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. In order to fairly 

evaluate whether an information 

collection should be approved by OMB, 

section 3506(c)(2)(A) of the PRA 

requires that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We solicited public comment on each 

of these issues in the proposed rule. 

Quality Measures for the Quality 

Reporting Program for Hospices 

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

requires that each hospice must submit 

data to the Secretary on quality 

measures specified by the Secretary. 

Such data must be submitted in a form 

and manner, and at a time specified by 

the Secretary. Under section 

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

Secretary must not later than October 1, 

2012 publish selected measures that 

will be applicable with respect to FY 

2014. 

In implementing the Hospice quality 

reporting program, we seek to collect 

measure information with as little 

burden to the providers as possible and 

which reflects the full spectrum of 

quality performance. Our purpose in 

collecting these data is to help achieve 

better health care and improve health 

through the widespread dissemination 

and use of performance information. 

A. Structural Measure: Participation in 

a Quality Assessment Performance 

Improvement Program That Includes at 

Least Three Indicators Related to Patient 

Care 

Consistent with this final rule, 

hospices will voluntarily report to us by 

January 31, 2012 their participation in a 

QAPI program that includes the 

hospices’ report of whether they have a 

QAPI program that addresses at least 

three indicators related to patient care, 

and if so, the subject matter of all of 

their patient care indicators during the 

time frame October 1 through December 

31, 2011. Data submitted for the last 

quarter of calendar year 2011 shall be 

voluntary on the part of hospice 

providers and shall not impact their 

fiscal year 2014 payment determination. 

The information that hospices will be 

required to report, in both the voluntary 

and mandatory phases of reporting, 

consists of stating (1) Whether or not 

they participate in a QAPI program that 

includes at least three indicators related 

to patient care and (2) the subject matter 

of all of their patient care indicators. 

Expectations of the QAPI programs are 

set forth in the Hospice Conditions of 

Participation (CoPs) at 42 CFR 418.58(a) 

through 418.58(e). These conditions of 

participation require that hospices must 

develop, implement, and maintain an 

effective, ongoing, hospice-wide, datadriven QAPI program and that the 

hospice must maintain documentary 

evidence of its QAPI programs. 

Hospices have been required to meet all 

of the standards set forth in 42 CFR 

418.58(a) through 418.58(e) as a 

condition of participation in the 

Medicare and Medicaid programs since 

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2008. Therefore, the identification of 

quality indicators related to patient care 

will not be considered new or 

additional work. 

Under the quality reporting program, 

hospices will voluntarily report to us by 

no later than January 31, 2012, data that 

would include (1) Whether they have a 

QAPI program that addresses at least 

three indicators related to patient care, 

and (2) the subject matter of all of their 

patient care indicators during the time 

frame via a CMS-prepared spreadsheet 

template. We anticipate that this 

reporting will take no more than 15 

minutes of time to prepare the structural 

measure report. 

Thereafter, each of the 3,531 hospices 

in the United States will be required to 

submit this structural measure 

information to us one time per year. We 

estimate that it will take approximately 

15 minutes to prepare and complete the 

submission of this structural measure 

report. Therefore, the estimated number 

of hours spent by all hospices in the 

U.S. preparing and submitting such data 

totals 883 hours. We believe that the 

compilation and transmission of the 

data can be completed by data entry 

personnel. We have estimated a total 

cost impact of $18,163 to all hospices 

for the implementation of the hospice 

structural measure quality reporting 

program, based on 883 total hours for a 

billing clerk at $20.57/hour (which 

includes 30 percent overhead and fringe 

benefits, using most recent BLS wage 

data). We have developed an 

information collection request for OMB 

review and approval. 

B. Outcome Measure: NQF Measure 

#0209, Percentage of Patients Who Were 

Uncomfortable Because of Pain on 

Admission to Hospice Whose Pain Was 

Brought Under Control Within 48 Hours 

At this time, we have not completed 

development of the information 

collection instrument that hospices 

would have to submit in order to 

comply with the NQF measure #0209 

reporting requirements as discussed 

earlier in this final rule. Because the 

instrument for the reporting of this 

measure is still under development, we 

cannot assign a complete burden 

estimate at this time. Once the 

instrument is available, we will publish 

the required 60-day and 30-day Federal 

Register notices to solicit public 

comments on the data submission form 

and to announce the submission of the 

information collection request to OMB 

for its review and approval. The data 

collection of the NQF measure #0209 for 

the FY 2014 payment determination is 

for the time period from October 1, 2012 

to December 31, 2012. 

We did not receive any public 

comments on this collection of 

information section. 

VI. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We have examined the impacts of this 

proposed rule as required by EO 12866 

(September 30, 1993, Regulatory 

Planning and Review), EO 13563 on 

Improving Regulation and Regulatory 

Review (January 18, 2011), the 

Regulatory Flexibility Act (September 

19, 1980; Pub. L. 96–354) (RFA), section 

1102(b) of the Social Security Act, 

section 202 of the Unfunded Mandates 

Reform Act of 1995 (March 22, 1995; 

Pub. L. 104–4), EO 13132 on Federalism 

(August 4, 1999), and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has not been designated an 

‘‘economically’’ significant rule, under 

section 3(f)(1) of EO 12866. However, 

we have voluntarily prepared a 

Regulatory Impact Analysis that to the 

best of our ability presents the costs and 

benefits of this proposed rule. 

2. Statement of Need 

This final rule follows 42 CFR 

418.306(c) which requires annual 

publication, in the Federal Register, of 

the hospice wage index based on the 

most current available CMS hospital 

wage data, including any changes to the 

definitions of MSAs. In addition, it 

implements section 3004 of the 

Affordable Care Act of 2010, which 

directs the Secretary to specify quality 

measures for the hospice program. 

Lastly, this final rule implements 

changes to the aggregate cap calculation, 

to requirements related to physicians 

who perform face-to-face encounters, 

and offers several clarifying technical 

corrections. 

3. Overall Impacts 

The overall impact of this final rule is 

an estimated net decrease in Federal 

payments to hospices of $80 million for 

FY 2012. We estimated the impact on 

hospices, as a result of the changes to 

the FY 2012 hospice wage index and of 

reducing the BNAF by an additional 15 

percent, for a total BNAF reduction of 

40 percent (10 percent in FY 2010, 15 

percent in FY 2011, and 15 percent in 

FY 2012). The BNAF reduction is part 

of a 7-year BNAF phase-out that was 

finalized in previous rulemaking (74 FR 

39384 (August 6, 2009)), and is not a 

policy change. 

As discussed previously, the 

methodology for computing the hospice 

wage index was determined through a 

negotiated rulemaking committee and 

promulgated in the August 8, 1997 

hospice wage index final rule (62 FR 

42860). The BNAF, which was 

promulgated in the August 8, 1997 rule, 

is being phased out. This rule updates 

the hospice wage index in accordance 

with the 2010 Hospice Wage Index final 

rule, which finalized a 10 percent 

reduced BNAF for FY 2010 as the first 

year of a 7-year phase-out of the BNAF, 

to be followed by an additional 15 

percent per year reduction in the BNAF 

in each of the next six years. Total 

phase-out will be complete by FY 2016. 

4. Detailed Economic Analysis 

Column 4 of Table 1 shows the 

combined effects of the updated wage 

data (the 2011 pre-floor, pre-reclassified 

hospital wage index) and of the 

additional 15 percent reduction in the 

BNAF (for a total BNAF reduction of 40 

percent), comparing estimated payments 

for FY 2012 to estimated payments for 

FY 2011. The FY 2011 payments used 

for comparison have a 25 percent 

reduced BNAF applied. We estimate 

that the total hospice payments for FY 

2012 will decrease by $80 million as a 

result of the application of the updated 

wage data ($+10 million) and the 

additional 15 percent reduction in the 

BNAF ($¥90 million). This estimate 

does not take into account any inpatient 

hospital market basket update, which is 

3.0 percent for FY 2012. This 3.0 

percent does not reflect the provision in 

the Affordable Care Act which reduces 

the inpatient hospital market basket 

update for FY 2012 by 0.1 percentage 

point, since that reduction does not 

apply to hospices. The final inpatient 

hospital market basket update and 

associated payment rates are 

communicated through an 

administrative instruction in the 

summer. The estimated effect of 3.0 

percent inpatient hospital market basket 

update on payments to hospices is 

approximately $420 million. Taking into 

account 3.0 percent inpatient hospital 

market basket update (+$420 million), 

in addition to the updated wage data 

($+10 million) and the additional 15 

percent reduction in the BNAF ($¥90 

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million), it is estimated that hospice 

payments would increase by $340 

million in FY 2012 ($420 million + $10 

million ¥$90 million = $340 million). 

The percent change in estimated 

payments to hospices due to the 

combined effects of the updated wage 

data, the additional 15 percent 

reduction in the BNAF (for a total BNAF 

reduction of 40 percent), and the 

inpatient hospital market basket update 

of 3.0 percent is reflected in column 5 

of the impact table (Table 1). 

a. Effects on Hospices 

This section discusses the impact of 

the projected effects of the hospice wage 

index, including the effects of a 3.0 

percent inpatient hospital market basket 

update for FY 2012 that is 

communicated separately through an 

administrative instruction. This final 

rule continues to use the CBSA-based 

pre-floor, pre-reclassified hospital wage 

index as a basis for the hospice wage 

index and continues to use the same 

policies for treatment of areas (rural and 

urban) without hospital wage data. The 

final FY 2012 hospice wage index is 

based upon the 2011 pre-floor, prereclassified hospital wage index and the 

most complete claims data available (FY 

2010) with an additional 15 percent 

reduction in the BNAF (combined with 

the 10 percent reduction in the BNAF 

taken in FY 2010, and the additional 15 

percent taken in 2011, for a total BNAF 

reduction of 40 percent in FY 2012). 

The BNAF reduction is part of a 7-year 

BNAF phase-out that was finalized in 

previous rulemaking, and is not a policy 

change. 

For the purposes of our impacts, our 

baseline is estimated FY 2011 payments 

with a 25 percent BNAF reduction, 

using the 2010 pre-floor, pre-reclassified 

hospital wage index. Our first 

comparison (column 3, Table 1) 

compares our baseline to estimated FY 

2012 payments (holding payment rates 

constant) using the updated wage data 

(2011 pre-floor, pre-reclassified hospital 

wage index). Consequently, the 

estimated effects illustrated in column 3 

of Table 1 show the distributional 

effects of the updated wage data only. 

The effects of using the updated wage 

data combined with the additional 15 

percent reduction in the BNAF are 

illustrated in column 4 of Table 1. 

We have included a comparison of the 

combined effects of the additional 15 

percent BNAF reduction, the updated 

wage data, and a 3.0 percent inpatient 

hospital market basket update for FY 

2012 (Table 1, column 5). Presenting 

these data gives the hospice industry a 

more complete picture of the effects on 

their total revenue of the hospice wage 

index discussed in this proposed rule, 

the BNAF phase-out, and the final FY 

2012 inpatient hospital market basket 

update. Certain events may limit the 

scope or accuracy of our impact 

analysis, because such an analysis is 

susceptible to forecasting errors due to 

other changes in the forecasted impact 

time period. The nature of the Medicare 

program is such that the changes may 

interact, and the complexity of the 

interaction of these changes could make 

it difficult to predict accurately the full 

scope of the impact upon hospices. 

TABLE 1—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

HOSPITAL WAGE INDEX DATA, REDUCING THE BUDGET NEUTRALITY ADJUSTMENT FACTOR (BNAF) BY AN ADDITIONAL

15 PERCENT (FOR A TOTAL BNAF REDUCTION OF 40 PERCENT) AND APPLYING A 3.0 PERCENT† INPATIENT HOSPITAL MARKET BASKET UPDATE TO THE FY 2012 HOSPICE WAGE INDEX, COMPARED TO THE FY 2011 HOSPICE

WAGE INDEX WITH A 25 PERCENT BNAF REDUCTION

Number of 

hospices * 

Number of 

routine home 

care days in 

thousands 

Percent 

change in 

hospice 

payments due 

to FY 2012 

wage index 

change 

Percent 

change in 

hospice 

payments due 

to wage index 

change, additional 

15% reduction 

in BNAF 

Percent 

change in 

hospice 

payments due 

to wage index 

change, 

additional 15% 

reduction 

in BNAF, and 

market basket 

update† 

(1) (2) (3) (4) (5) 

ALL HOSPICES ................................................................... 3,552 79,509 0.1% (0.5%) 2.5% 

URBAN HOSPICES ............................................................. 2,494 69,238 0.1% (0.5%) 2.5% 

RURAL HOSPICES ............................................................. 1,058 10,272 (0.2%) (0.6%) 2.3% 

BY REGION—URBAN: 

NEW ENGLAND ........................................................... 134 2,527 (0.7%) (1.3%) 1.7% 

MIDDLE ATLANTIC ...................................................... 244 7,488 (0.4%) (0.9%) 2.0% 

SOUTH ATLANTIC ....................................................... 359 15,713 0.3% (0.3%) 2.7% 

EAST NORTH CENTRAL ............................................. 336 10,058 0.2% (0.4%) 2.6% 

EAST SOUTH CENTRAL ............................................. 177 4,456 (0.1%) (0.6%) 2.4% 

WEST NORTH CENTRAL ............................................ 189 4,482 (0.3%) (0.9%) 2.1% 

WEST SOUTH CENTRAL ............................................ 485 9,249 0.1% (0.4%) 2.6% 

MOUNTAIN ................................................................... 234 5,818 (0.0%) (0.6%) 2.4% 

PACIFIC ........................................................................ 299 8,070 0.6% (0.0%) 3.0% 

OUTLYING .................................................................... 37 1,377 (0.4%) (0.4%) 2.6% 

BY REGION—RURAL: 

NEW ENGLAND ........................................................... 26 200 (0.1%) (0.7%) 2.3% 

MIDDLE ATLANTIC ...................................................... 45 517 0.4% (0.2%) 2.8% 

SOUTH ATLANTIC ....................................................... 139 2,176 (0.8%) (1.2%) 1.8% 

EAST NORTH CENTRAL ............................................. 147 1,779 (0.6%) (1.1%) 1.8% 

EAST SOUTH CENTRAL ............................................. 154 1,794 0.1% (0.1%) 2.9% 

WEST NORTH CENTRAL ............................................ 196 1,122 (0.5%) (0.9%) 2.0% 

WEST SOUTH CENTRAL ............................................ 189 1,574 0.8% 0.3% 3.3% 

MOUNTAIN ................................................................... 109 648 0.3% (0.1%) 2.9% 

PACIFIC ........................................................................ 52 450 (0.7%) (1.3%) 1.6% 

OUTLYING .................................................................... 1 13 0.0% 0.0% 3.0% 

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TABLE 1—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

HOSPITAL WAGE INDEX DATA, REDUCING THE BUDGET NEUTRALITY ADJUSTMENT FACTOR (BNAF) BY AN ADDITIONAL

15 PERCENT (FOR A TOTAL BNAF REDUCTION OF 40 PERCENT) AND APPLYING A 3.0 PERCENT† INPATIENT HOSPITAL MARKET BASKET UPDATE TO THE FY 2012 HOSPICE WAGE INDEX, COMPARED TO THE FY 2011 HOSPICE

WAGE INDEX WITH A 25 PERCENT BNAF REDUCTION—Continued 

Number of 

hospices * 

Number of 

routine home 

care days in 

thousands 

Percent 

change in 

hospice 

payments due 

to FY 2012 

wage index 

change 

Percent 

change in 

hospice 

payments due 

to wage index 

change, additional 

15% reduction 

in BNAF 

Percent 

change in 

hospice 

payments due 

to wage index 

change, 

additional 15% 

reduction 

in BNAF, and 

market basket 

update† 

(1) (2) (3) (4) (5) 

BY SIZE/DAYS: 

0–3,499 DAYS (small) .................................................. 649 1,083 (0.0%) (0.5%) 2.4% 

3,500–19,999 DAYS (medium) ..................................... 1,767 17,897 (0.1%) (0.6%) 2.4% 

20,000+ DAYS (large) .................................................. 1,136 60,530 0.1% (0.5%) 2.5% 

TYPE OF OWNERSHIP: 

VOLUNTARY ................................................................ 1,170 31,470 0.0% (0.5%) 2.5% 

PROPRIETARY ............................................................ 1,895 40,587 0.1% (0.4%) 2.6% 

GOVERNMENT ** ......................................................... 487 7,452 (0.1%) (0.7%) 2.3% 

HOSPICE BASE: 

FREESTANDING HOME HEALTH .............................. 2,448 62,588 0.1% (0.5%) 2.5% 

AGENCY ....................................................................... 571 10,441 0.1% (0.5%) 2.5% 

HOSPITAL .................................................................... 513 6,274 (0.1%) (0.6%) 2.3% 

SKILLED NURSING FACILITY .................................... 20 206 0.3% (0.3%) 2.7% 

BNAF = Budget Neutrality Adjustment Factor. Comparison is to FY 2011 data with a 25 percent BNAF reduction. 

* OSCAR data as of January 6, 2011 for hospices with claims filed in FY 2010. 

** In previous years, there was also a category labeled ‘‘Other’’; these were Other Government hospices, and have been combined with the 

‘‘Government’’ category. 

† The 3.0 percent inpatient hospital market basket update for FY 2012 does not reflect the provision in the Affordable Care Act which reduces 

the inpatient hospital market basket update by 0.1 percentage point since that reduction does not apply to hospices. 

Region Key: 

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

New York; South Atlantic = Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia; 

East North Central = Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central = Alabama, Kentucky, Mississippi, Tennessee; West North 

Central = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central = Arkansas, Louisiana, Oklahoma, 

Texas; Mountain = Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; Pacific = Alaska, California, Hawaii, Oregon, 

Washington; Outlying = Guam, Puerto Rico, Virgin Islands. 

Table 1 shows the results of our 

analysis. In column 1, we indicate the 

number of hospices included in our 

analysis as of January 6, 2011 which had 

also filed claims in FY 2010. In column 

2, we indicate the number of routine 

home care days that were included in 

our analysis, although the analysis was 

performed on all types of hospice care. 

Columns 3, 4, and 5 compare FY 2012 

estimated payments with those 

estimated for FY 2011. The estimated 

FY 2011 payments incorporate a BNAF 

which has been reduced by 25 percent. 

Column 3 shows the percentage change 

in estimated Medicare payments for FY 

2012 due to the effects of the updated 

wage data only, compared with 

estimated FY 2011 payments. The effect 

of the updated wage data can vary from 

region to region depending on the 

fluctuations in the wage index values of 

the pre-floor, pre-reclassified hospital 

wage index. Column 4 shows the 

percentage change in estimated hospice 

payments from FY 2011 to FY 2012 due 

to the combined effects of using the 

updated wage data and reducing the 

BNAF by an additional 15 percent. 

Column 5 shows the percentage change 

in estimated hospice payments from FY 

2011 to FY 2012 due to the combined 

effects of using updated wage data, an 

additional 15 percent BNAF reduction, 

and a 3.0 percent inpatient hospital 

market basket update. 

Table 1 also categorizes hospices by 

various geographic and hospice 

characteristics. The first row of data 

displays the aggregate result of the 

impact for all Medicare-certified 

hospices. The second and third rows of 

the table categorize hospices according 

to their geographic location (urban and 

rural). Our analysis indicated that there 

are 2,494 hospices located in urban 

areas and 1,058 hospices located in 

rural areas. The next two row groupings 

in the table indicate the number of 

hospices by census region, also broken 

down by urban and rural hospices. The 

next grouping shows the impact on 

hospices based on the size of the 

hospice’s program. We determined that 

the majority of hospice payments are 

made at the routine home care rate. 

Therefore, we based the size of each 

individual hospice’s program on the 

number of routine home care days 

provided in FY 2009. The next grouping 

shows the impact on hospices by type 

of ownership. The final grouping shows 

the impact on hospices defined by 

whether they are provider-based or 

freestanding. 

As indicated in Table 1, there are 

3,552 hospices. Approximately 47 

percent of Medicare-certified hospices 

are identified as voluntary (non-profit) 

or government agencies. Because the 

National Hospice and Palliative Care 

Organization estimates that 

approximately 83 percent of hospice 

patients in 2009 were Medicare 

beneficiaries, we have not considered 

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other sources of revenue in this 

analysis. 

As stated previously, the following 

discussions are limited to demonstrating 

trends rather than projected dollars. We 

used the pre-floor, pre-reclassified 

hospital wage indexes as well as the 

most complete claims data available (FY 

2010) in developing the impact analysis. 

The FY 2012 payment rates will be 

adjusted to reflect the full inpatient 

hospital market basket update, as 

required by section 1814(i)(1)(C)(ii)(VII) 

of the Act. As previously noted, we 

publish these rates through 

administrative instructions rather than 

in a proposed rule. The FY 2012 final 

inpatient hospital market basket update 

is 3.0 percent. This 3.0 percent does not 

reflect the provision in the Affordable 

Care Act which reduces the inpatient 

hospital market basket update by 0.1 

percentage point since that reduction 

does not apply to hospices. Since the 

inclusion of the effect of an inpatient 

hospital market basket increase provides 

a more complete picture of projected 

total hospice payments for FY 2012, the 

last column of Table 1 shows the 

combined impacts of the updated wage 

data, the additional 15 percent BNAF 

reduction, and the 3.0 percent inpatient 

hospital market basket update. As 

discussed in the FY 2006 hospice wage 

index final rule (70 FR 45129), hospice 

agencies may use multiple hospice wage 

index values to compute their payments 

based on potentially different 

geographic locations. Before January 1, 

2008, the location of the beneficiary was 

used to determine the CBSA for routine 

and continuous home care, and the 

location of the hospice agency was used 

to determine the CBSA for respite and 

general inpatient care. Beginning 

January 1, 2008, the hospice wage index 

CBSA utilized is based on the location 

of the site of service. As the location of 

the beneficiary’s home and the location 

of the hospice may vary, there will still 

be variability in geographic location for 

an individual hospice. We anticipate 

that the CBSA of the various sites of 

service will usually correspond with the 

CBSA of the geographic location of the 

hospice, and thus we will continue to 

use the location of the hospice for our 

analyses of the impact of the changes to 

the hospice wage index in this rule. For 

this analysis, we use payments to the 

hospice in the aggregate based on the 

location of the hospice. 

The impact of hospice wage index 

changes has been analyzed according to 

the type of hospice, geographic location, 

type of ownership, hospice base, and 

size. Our analysis shows that most 

hospices are in urban areas and provide 

the vast majority of routine home care 

days. Most hospices are medium-sized 

followed by large hospices. Hospices are 

almost equal in numbers by ownership 

with 1,657 designated as non-profit or 

government hospices and 1,895 as 

proprietary. The vast majority of 

hospices are freestanding. 

b. Hospice Size 

Under the Medicare hospice benefit, 

hospices can provide four different 

levels of care days. The majority of the 

days provided by a hospice are routine 

home care (RHC) days, representing 

about 97 percent of the services 

provided by a hospice. Therefore, the 

number of RHC days can be used as a 

proxy for the size of the hospice, that is, 

the more days of care provided, the 

larger the hospice. As discussed in the 

August 4, 2005 final rule, we currently 

use three size designations to present 

the impact analyses. The three 

categories are: (1) Small agencies having 

0 to 3,499 RHC days; (2) medium 

agencies having 3,500 to 19,999 RHC 

days; and (3) large agencies having 

20,000 or more RHC days. The FY 2012 

updated wage data without any BNAF 

reduction are anticipated to decrease 

payments to medium hospices by 0.1 

percent and increase payments to large 

hospices by 0.1 percent; small hospices 

are anticipated to be unchanged 

(column 3); the updated wage data and 

the additional 15 percent BNAF 

reduction (for a total BNAF reduction of 

40 percent) are anticipated to decrease 

estimated payments to small and large 

hospices by 0.5 percent, and to medium 

hospices by 0.6 percent (column 4); and 

finally, the updated wage data, the 

additional 15 percent BNAF reduction 

(for a total BNAF reduction of 40 

percent), and the final 3.0 percent 

inpatient hospital market basket update 

are projected to increase estimated 

payments by 2.4 percent for small and 

medium hospices, and by 2.5 percent 

for large hospices (column 5). 

c. Geographic Location 

Column 3 of Table 1 shows updated 

wage data without the BNAF reduction. 

Urban hospices are anticipated to 

experience an increase of 0.1 percent, 

while rural hospices are anticipated to 

experience a decrease of 0.2 percent. 

Urban hospices can anticipate a 

decrease in payments in five regions; 

ranging from 0.7 percent in the New 

England region to 0.1 percent in the East 

South Central region. Payments in the 

Mountain region are estimated to stay 

stable. Urban hospices are anticipated to 

see an increase in payments in four 

regions, ranging from 0.1 percent in the 

West South Central region to 0.6 percent 

in the Pacific region. 

Column 3 shows estimated 

percentages for rural hospices. Rural 

hospices are estimated to see a decrease 

in payments in five regions, ranging 

from 0.8 percent in the South Atlantic 

to 0.1 percent in the New England 

region. Rural hospices can anticipate an 

increase in payments in four regions, 

ranging from 0.1 percent in the East 

South Central region to 0.8 percent in 

the West South Central region. There is 

no anticipated change in payments for 

Outlying regions due to FY 2012 Wage 

Index change. 

Column 4 shows the combined effect 

of the updated wage data and the 

additional 15 percent BNAF reduction 

on estimated payments, as compared to 

the FY 2011 estimated payments using 

a BNAF with a 25 percent reduction. 

Overall, urban hospices are anticipated 

to experience a 0.5 percent decrease in 

payments while rural hospices are 

anticipated to experience a 0.6 percent 

decrease in payments. Nine regions in 

urban areas are estimated to see 

decreases in payments, ranging from 1.3 

percent in the New England region to 

0.3 percent in the South Atlantic region. 

Payments for the Pacific region are 

estimated to be relatively stable. 

Rural hospices are estimated to 

experience a decrease in payments in 

eight regions, ranging from 1.3 percent 

in the Pacific region to 0.1 percent in 

the East South Central and Mountain 

regions. While the estimated effect of 

the additional 15 percent BNAF 

reduction decreased payments to rural 

hospices in the West South Central 

region, hospices in this region are still 

anticipated to experience an estimated 

increase in payments of 0.3 percent due 

to the net effect of the reduced BNAF 

and the updated wage index data. 

Payments to rural outlying regions are 

anticipated to remain relatively stable. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction, and the 

final 3.0 percent inpatient hospital 

market basket update on estimated FY 

2012 payments as compared to the 

estimated FY 2011 payments. Note that 

the FY 2011 payments had a 25 percent 

BNAF reduction applied to them. 

Overall, urban hospices are anticipated 

to experience a 2.5 percent increase in 

payments and rural hospices are 

anticipated to experience a 2.3 percent 

increase in payments. Urban hospices 

are anticipated to experience an 

increase in estimated payments in every 

region, ranging from 1.7 percent in the 

New England region to 3.0 percent in 

the Pacific region. Rural hospices in 

every region are estimated to see an 

increase in payments, ranging from 1.6 

percent in the Pacific region to 3.3 

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47330 Federal Register / Vol. 76, No. 150 / Thursday, August 4, 2011 / Rules and Regulations 

percent in the West South Central 

region. 

d. Type of Ownership 

Column 3 demonstrates the effect of 

the updated wage data on FY 2012 

estimated payments, versus FY 2011 

estimated payments. We anticipate that 

using the updated wage data would 

decrease estimated payments to 

government hospices by 0.1 percent and 

payments to voluntary (non-profit) 

hospices would remain relatively 

unchanged. We estimate an increase in 

payments for proprietary (for-profit) 

hospices of 0.1 percent. 

Column 4 demonstrates the combined 

effects of the updated wage data and of 

the additional 15 percent BNAF 

reduction. Estimated payments to 

voluntary (non-profit) hospices are 

anticipated to decrease by 0.5 percent, 

while government hospices are 

anticipated to experience a decrease of 

0.7 percent. Estimated payments to 

proprietary (for-profit) hospices are 

anticipated to decrease by 0.4 percent. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 40 percent), and a 

final 3.0 percent inpatient hospital 

market basket update on estimated 

payments, comparing FY 2012 to FY 

2011 (using a BNAF with a 25 percent 

reduction). Estimated FY 2012 

payments are anticipated to increase 2.5 

percent for voluntary (non-profit), 2.3 

percent for government hospices, and 

2.6 percent for proprietary (for-profit) 

hospices. 

e. Hospice Base 

Column 3 demonstrates the effect of 

using the updated wage data, comparing 

estimated payments for FY 2012 to FY 

2011. Estimated payments are 

anticipated to increase by 0.1 percent 

for freestanding hospices and home 

health agency based hospices, and 0.3 

percent for hospices based out of a 

skilled nursing facility. Payments to 

hospital based hospices are estimated to 

decrease by 0.1 percent. 

Column 4 shows the combined effects 

of the updated wage data and reducing 

the BNAF by an additional 15 percent, 

comparing estimated payments for FY 

2012 to FY 2011. All hospice facilities 

are anticipated to experience decrease 

in payments ranging from 0.3 percent 

for skilled nursing facility based 

hospices, to 0.6 percent for hospital 

based hospices. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction, and a final 

3.0 percent inpatient hospital market 

basket update on estimated payments, 

comparing FY 2012 to FY 2011. 

Estimated payments are anticipated to 

increase for all hospices, ranging from 

2.3 percent for hospital based hospices 

to 2.7 percent for skilled nursing facility 

based hospices. 

f. Effects on Other Providers 

This proposed rule only affects 

Medicare hospices, and therefore has no 

effect on other provider types. 

g. Effects on the Medicare and Medicaid 

Programs 

This proposed rule only affects 

Medicare hospices, and therefore has no 

effect on Medicaid programs. As 

described previously, estimated 

Medicare payments to hospices in FY 

2012 are anticipated to increase by $10 

million due to the update in the wage 

index data, and to decrease by $90 

million due to the additional 15 percent 

reduction in the BNAF (for a of total 40 

percent reduction in the BNAF). 

However, the final market basket update 

of 3.0 percent is anticipated to increase 

Medicare payments by $420 million. 

Therefore, the total effect on Medicare 

hospice payments is estimated to be a 

$340 million increase. Note that the 

final market basket update and 

associated FY 2012 payment rates is 

officially communicated this summer 

through an administrative instruction. 

h. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/

a004/a-4.pdf), in Table 2 below, we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with this final 

rule. This table provides our best 

estimate of the decrease in Medicare 

payments under the hospice benefit as 

a result of the changes presented in this 

proposed rule using data for 3,552 

hospices in our database. 

TABLE 2—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2011 TO FY 

2012 

[In $millions] 

Category Transfers 

Annualized Monetized 

Transfers.

$¥80.* 

TABLE 2—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2011 TO FY 

2012—Continued 

[In $millions] 

Category Transfers 

From Whom to Whom Federal Government 

to Hospices. 

* The $80 million estimated reduction in 

transfers includes the additional 15 percent reduction in the BNAF and the updated wage 

data. It does not include the final hospital market basket update, which is 3.0 percent for FY 

2012. This final 3.0 percent does not reflect 

the provision in the Affordable Care Act which 

reduced the hospital market basket update by 

0.1 percentage point since that reduction does 

not apply to hospices. 

i. Conclusion 

In conclusion, the overall effect of this 

final rule is estimated to be the $80 

million reduction in Federal payments 

due to the wage index changes 

(including the additional 15 percent 

reduction in the BNAF). Furthermore, 

the Secretary has determined that this 

will not have a significant impact on a 

substantial number of small entities, or 

have a significant effect relative to 

section 1102(b) of the Act. 

B. Regulatory Flexibility Act Analysis 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, we 

estimate that almost all hospices are 

small entities as that term is used in the 

RFA. The great majority of hospitals and 

most other health care providers and 

suppliers are small entities by meeting 

the Small Business Administration 

(SBA) definition of a small business 

(having revenues of less than $7.0 

million to $34.5 million in any 1 year). 

While the SBA does not define a size 

threshold in terms of annual revenues 

for hospices, it does define one for home 

health agencies ($13.5 million; see 

http://ecfr.gpoaccess.gov/cgi/t/text/textidx?c=ecfr&sid=2465b064ba6965cc1

fbd2eae60854b11&rgn=div8&

view=text&

node=13:1.0.1.1.16.1.266.9&idno=13). 

For the purposes of this final rule, 

because the hospice benefit is a homebased benefit, we are applying the SBA 

definition of ‘‘small’’ for home health 

agencies to hospices; we will use this 

definition of ‘‘small’’ in determining if 

this final rule has a significant impact 

on a substantial number of small entities 

(for example, hospices). Using CY 2009 

Medicare hospice data from the Health 

Care Information System (HCIS), we 

estimate that 96 percent of hospices 

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have Medicare revenues below $13.5 

million and therefore are considered 

small entities. 

The effects of this rule on hospices are 

shown in Table 1. Overall, Medicare 

payments to all hospices would 

decrease by an estimated 0.5 percent 

over last year’s payments in response to 

the policies that we are finalizing in this 

final rule, reflecting the combined 

effects of the updated wage data and the 

additional 15 percent reduction in the 

BNAF. The combined effects of the 

updated wage data and additional 15 

percent reduction in the BNAF on small 

and large sized hospices (as defined by 

routine home care days rather than by 

the SBA definition), is an estimated 

reduction of 0.5 percent. Medium sized 

hospices are anticipated to experience 

an estimated reduction in payments of 

0.6 percent as a result of the updated 

wage data and the additional 15 percent 

reduction in the BNAF. Furthermore, 

when examining the distributional 

effects of the updated wage data 

combined with the additional 15 

percent BNAF reduction, the highest 

estimated reductions in payments are 

experienced by the urban New England 

and rural Pacific areas with each 

reflecting a 1.3 percent reduction. 

HHS’s practice in interpreting the 

RFA is to consider effects economically 

‘‘significant’’ only if they reach a 

threshold of 3 to 5 percent or more of 

total revenue or total costs. As noted 

above, the combined effect of only the 

updated wage data and the additional 

15 percent reduced BNAF (for a total 

BNAF reduction of 40 percent) for all 

hospices is an estimated reduction of 

0.5 percent. Furthermore, since HHS’s 

practice in determining ‘‘significant 

economic impact’’ considers either total 

revenue or total costs, it is necessary for 

total hospice revenues to include the 

effect of the market basket update of 3.0 

percent. As a result, we consider the 

combined effect of the updated wage 

data, the additional 15 percent BNAF 

reduction, and the final 3.0 percent FY 

2012 inpatient hospital market basket 

update inclusive of the overall impact, 

thereby reflecting an aggregate increase 

in estimated hospice payments of 2.5 

percent for FY 2012. For small and 

medium hospices (as defined by routine 

home care days), the estimated effects 

on revenue when accounting for the 

updated wage data, the additional 15 

percent BNAF reduction, and the final 

inpatient hospital market basket update 

reflect increases in payments of 2.4 

percent. Overall average hospice 

revenue effects will be slightly less than 

these estimates since according the 

National Hospice and Palliative Care 

Organization, about 17 percent of 

hospice patients are non-Medicare. 

Therefore, the Secretary has determined 

that this final rule would not create a 

significant economic impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. This final rule only 

affects hospices. Therefore, the 

Secretary has determined that this final 

rule would not have a significant impact 

on the operations of a substantial 

number of small rural hospitals. 

C. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2011, that threshold is approximately 

$136 million. This final rule is not 

anticipated to have an effect on State, 

local, or tribal governments, in the 

aggregate, or on the private sector of 

$136 million or more. 

VII. Federalism Analysis 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We have reviewed this final rule under 

the threshold criteria of EO 13132, 

Federalism, and have determined that it 

would not have an impact on the rights, 

roles, and responsibilities of State, local, 

or tribal governments. 

List of Subjects in 42 CFR Part 418 

Health facilities, Hospice care, 

Medicare, Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 418—HOSPICE CARE 

■ 1. The authority citation for part 418 

continues to read as follows: 

Authority: Secs 1102 and 1871 of the 

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

1395hh). 

Subpart B—Eligibility, Election and 

Duration of Benefits 

■ 2. In § 418.22, paragraphs (a)(4) and 

(b)(4) are revised to read as follows: 

§ 418.22 Certification of terminal illness. 

(a) * * * 

(4) Face-to-face encounter. As of 

January 1, 2011, a hospice physician or 

hospice nurse practitioner must have a 

face-to-face encounter with each 

hospice patient whose total stay across 

all hospices is anticipated to reach the 

3rd benefit period. The face-to-face 

encounter must occur prior to, but no 

more than 30 calendar days prior to, the 

3rd benefit period recertification, and 

every benefit period recertification 

thereafter, to gather clinical findings to 

determine continued eligibility for 

hospice care. 

(b) * * * 

(4) The physician or nurse 

practitioner who performs the face-toface encounter with the patient 

described in paragraph (a)(4) of this 

section must attest in writing that he or 

she had a face-to-face encounter with 

the patient, including the date of that 

visit. The attestation of the nurse 

practitioner or a non-certifying hospice 

physician shall state that the clinical 

findings of that visit were provided to 

the certifying physician for use in 

determining continued eligibility for 

hospice care. 

* * * * * 

Subpart F—Covered Services 

■ 3. Section 418.202 (g) is revised to 

read: 

§ 418.202 Covered services. 

* * * * * 

(g) Home health or hospice aide 

services furnished by qualified aides as 

designated in § 418.76 and homemaker 

services. Home health aides (also known 

as hospice aides) may provide personal 

care services as defined in § 409.45(b) of 

this chapter. Aides may perform 

household services to maintain a safe 

and sanitary environment in areas of the 

home used by the patient, such as 

changing bed linens or light cleaning 

and laundering essential to the comfort 

and cleanliness of the patient. Aide 

services must be provided under the 

general supervision of a registered 

nurse. Homemaker services may include 

assistance in maintenance of a safe and 

healthy environment and services to 

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enable the individual to carry out the 

treatment plan. 

* * * * * 

Subpart G—Payment for Hospice Care 

■ 4. In § 418.309, the section heading, 

introductory text and paragraph (b) are 

revised, and new paragraphs (c) and (d) 

are added, to read: 

§ 418.309 Hospice aggregate cap. 

A hospice’s aggregate cap is 

calculated by multiplying the adjusted 

cap amount (determined in paragraph 

(a) of this section) by the number of 

Medicare beneficiaries, as determined 

by one of two methodologies for 

determining the number of Medicare 

beneficiaries for a given cap year 

described in paragraphs (b) and (c) of 

this section: 

* * * * * 

(b) Streamlined methodology defined. 

A hospice’s aggregate cap is calculated 

by multiplying the adjusted cap amount 

determined in paragraph (a) of this 

section by the number of Medicare 

beneficiaries as determined in 

paragraphs (b)(1) and (2) of this section. 

For purposes of the streamlined 

methodology calculation— 

(1) In the case in which a beneficiary 

received care from only one hospice, the 

hospice includes in its number of 

Medicare beneficiaries those Medicare 

beneficiaries who have not previously 

been included in the calculation of any 

hospice cap, and who have filed an 

election to receive hospice care in 

accordance with § 418.24 during the 

period beginning on September 28 (34 

days before the beginning of the cap 

year) and ending on September 27 (35 

days before the end of the cap year), 

using the best data available at the time 

of the calculation. 

(2) In the case in which a beneficiary 

received care from more than one 

hospice, each hospice includes in its 

number of Medicare beneficiaries only 

that fraction which represents the 

portion of a patient’s total days of care 

in all hospices and all years that was 

spent in that hospice in that cap year, 

using the best data available at the time 

of the calculation. The aggregate cap 

calculation for a given cap year may be 

adjusted after the calculation for that 

year based on updated data. 

(c) Patient-by-patient proportional 

methodology defined. A hospice’s 

aggregate cap is calculated by 

multiplying the adjusted cap amount 

determined in paragraph (a) of this 

section by the number of Medicare 

beneficiaries as described in paragraphs 

(c)(1) and (2) of this section. For the 

purposes of the patient-by-patient 

proportional methodology— 

(1) A hospice includes in its number 

of Medicare beneficiaries only that 

fraction which represents the portion of 

a patient’s total days of care in all 

hospices and all years that was spent in 

that hospice in that cap year, using the 

best data available at the time of the 

calculation. The total number of 

Medicare beneficiaries for a given 

hospice’s cap year is determined by 

summing the whole or fractional share 

of each Medicare beneficiary that 

received hospice care during the cap 

year, from that hospice. 

(2) The aggregate cap calculation for 

a given cap year may be adjusted after 

the calculation for that year based on 

updated data. 

(d) Application of methodologies. (1) 

For cap years ending October 31, 2011 

and for prior cap years, a hospice’s 

aggregate cap is calculated using the 

streamlined methodology described in 

paragraph (b) of this section, subject to 

the following: 

(i) A hospice that has not received a 

cap determination for a cap year ending 

on or before October 31, 2011 as of 

October 1, 2011, may elect to have its 

final cap determination for such cap 

years calculated using the patient-bypatient proportional methodology 

described in paragraph (c) of this 

section; or 

(ii) A hospice that has filed a timely 

appeal regarding the methodology used 

for determining the number of Medicare 

beneficiaries in its cap calculation for 

any cap year is deemed to have elected 

that its cap determination for the 

challenged year, and all subsequent cap 

years, be calculated using the patientby-patient proportional methodology 

described in paragraph (c) of this 

section. 

(2) For cap years ending October 31, 

2012, and all subsequent cap years, a 

hospice’s aggregate cap is calculated 

using the patient-by-patient 

proportional methodology described in 

paragraph (c) of this section, subject to 

the following: 

(i) A hospice that has had its cap 

calculated using the patient-by-patient 

proportional methodology for any cap 

year(s) prior to the 2012 cap year is not 

eligible to elect the streamlined 

methodology, and must continue to 

have the patient-by-patient proportional 

methodology used to determine the 

number of Medicare beneficiaries in a 

given cap year. 

(ii) A hospice that is eligible to make 

a one-time election to have its cap 

calculated using the streamlined 

methodology must make that election 

no later than 60 days after receipt of its 

2012 cap determination. A hospice’s 

election to have its cap calculated using 

the streamlined methodology would 

remain in effect unless: 

(A) The hospice subsequently submits 

a written election to change the 

methodology used in its cap 

determination to the patient-by-patient 

proportional methodology; or 

(B) The hospice appeals the 

streamlined methodology used to 

determine the number of Medicare 

beneficiaries used in the aggregate cap 

calculation. 

(3) If a hospice that elected to have its 

aggregate cap calculated using the 

streamlined methodology under 

paragraph (d)(2)(ii) of this section 

subsequently elects the patient-bypatient proportional methodology or 

appeals the streamlined methodology, 

under paragraph (d)(2)(ii)(A) or (B) of 

this section, the hospice’s aggregate cap 

determination for that cap year and all 

subsequent cap years is to be calculated 

using the patient-by-patient 

proportional methodology. As such, 

past cap year determinations may be 

adjusted to prevent the over-counting of 

beneficiaries, subject to existing 

reopening regulations. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: July 21, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: July 27, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

Note: The following Addendums will not 

be published in the Code of Federal 

Regulations. 

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[FR Doc. 2011–19488 Filed 7–29–11; 4:15 pm] 

BILLING CODE 4920–01–P 


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