Vol. 78 Monday, 

No. 231 December 2, 2013 

Part III 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Part 431 

Medicare and Medicaid Programs; Home Health Prospective Payment 

System Rate Update for CY 2014, Home Health Quality Reporting 

Requirements, and Cost Allocation of Home Health Survey Expenses; Final 

Rule 


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72256 Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 431 

[CMS–1450–F] 

RIN 0938–AR52 

Medicare and Medicaid Programs; 

Home Health Prospective Payment 

System Rate Update for CY 2014, 

Home Health Quality Reporting 

Requirements, and Cost Allocation of 

Home Health Survey Expenses 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule will update the 

Home Health Prospective Payment 

System (HH PPS) rates, including the 

national, standardized 60-day episode 

payment rates, the national per-visit 

rates, the low-utilization payment 

adjustment (LUPA) add-on, and the 

non-routine medical supply (NRS) 

conversion factor under the Medicare 

prospective payment system for home 

health agencies (HHAs), effective 

January 1, 2014. As required by the 

Affordable Care Act, this rule 

establishes rebasing adjustments, with a 

4-year phase-in, to the national, 

standardized 60-day episode payment 

rates; the national per-visit rates; and 

the NRS conversion factor. In addition, 

this final rule will remove 170 diagnosis 

codes from assignment to diagnosis 

groups within the HH PPS Grouper, 

effective January 1, 2014. Finally, this 

rule will establish home health quality 

reporting requirements for CY 2014 

payment and subsequent years and will 

clarify that a state Medicaid program 

must provide that, in certifying HHAs, 

the state’s designated survey agency 

carry out certain other responsibilities 

that already apply to surveys of nursing 

facilities and Intermediate Care 

Facilities for Individuals with 

Intellectual Disabilities (ICF–IID), 

including sharing in the cost of HHA 

surveys. For that portion of costs 

attributable to Medicare and Medicaid, 

we will assign 50 percent to Medicare 

and 50 percent to Medicaid, the 

standard method that CMS and states 

use in the allocation of expenses related 

to surveys of nursing homes. 

DATES: These regulations are effective 

on January 1, 2014. 

FOR FURTHER INFORMATION CONTACT: 

Hillary Loeffler, (410)786–0456, for 

general information about the HH PPS. 

Joan Proctor, (410) 786–0949, for 

information about the HH PPS Grouper 

and ICD–10 Conversion. 

Kristine Chu, (410) 786–8953, for 

information about rebasing and the HH 

payment reform study and report. 

Mollie Knight, (410) 786–7948, for 

information about the HH market 

basket. 

Kim Roche, (410) 786–3524, for 

information about the HH quality 

reporting program. 

Lori Teichman, (410) 786–6684, for 

information about HH CAHPS®. 

Jenny Filipovits, (410) 786–8141, for 

information about cost allocation of 

survey expenses. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Executive Summary 

A. Purpose 

B. Summary of the Major Provisions 

C. Summary of Costs and Benefits 

II. Background 

A. Statutory Background 

B. System for Payment of Home Health 

Services 

C. Updates to the HH PPS 

III. Summary of the Provisions of the 

Proposed Rule 

A. ICD–9–CM Grouper Refinements, 

Effective January 1, 2014 

B. International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM) Conversion and Diagnosis 

Reporting on Home Health Claims 

C. Adjustment to the HH PPS Case-Mix 

Weights 

D. Rebasing the National, Standardized 60- 

day Episode Payment Amount, LUPA 

Per-Visit Payment Amounts, and 

Nonroutine Medical Supply (NRS) 

Conversion Factor 

1. Rebasing the National, Standardized 60- 

day Episode Payment Amount 

2. Rebasing the Low-Utilization Payment 

Adjustment (LUPA) Per-Visit Payment 

Amounts 

3. Rebasing the Nonroutine Medical 

Supply (NRS) Conversion Factor 

E. CY 2014 Home Health Payment Rate 

Update 

1. CY 2014 HH PPS Payment Update 

Percentage 

2. Home Health Care Quality Reporting 

Program 

3. Home Health Wage Index 

4. CY 2014 Annual Payment Update 

F. Outlier Policy 

G. Payment Reform: Home Health Study 

and Report 

H. Cost Allocation of Survey Expenses 

IV. Analysis and Responses to Public 

Comment 

A. ICD–9–CM Grouper Refinements, 

Effective January 1, 2014 

B. International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM) Conversion and Diagnosis 

Reporting on Home Health Claims 

1. International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM) Conversion 

2. Diagnosis Reporting on Home Health 

Claims 

C. Adjustment to the HH PPS Case-Mix 

Weights 

D. Rebasing the National, Standardized 60- 

day Episode Payment Amount, LUPA 

Per-Visit Payment Amounts, and 

Nonroutine Medical Supply (NRS) 

Conversion Factor 

1. Rebasing the National, Standardized 60- 

day Episode Payment Amount 

2. Rebasing the Low-Utilization Payment 

Adjustment (LUPA) Per-Visit Payment 

Amounts 

3. Rebasing the Nonroutine Medical 

Supply (NRS) Conversion Factor 

E. CY 2014 Rate Update 

1. CY 2014 HH PPS Payment Update 

Percentage 

2. Home Health Care Quality Reporting 

Program 

3. Home Health Wage Index 

4. CY 2014 Annual Payment Update 

a. National, Standardized 60-Day Episode 

Payment Rate 

b. CY 2014 National, Standardized 60-Day 

Episode Payment Rate 

c. CY 2014 National Per-Visit Rates 

d. CY 2014 Low-Utilization Payment 

Adjustment (LUPA) Add-On Factor 

e. CY 2014 Nonroutine Medical Supply 

(NRS) Conversion Factor and Relative 

Weights 

5. Rural Add-On 

F. Outlier Policy 

1. Background 

2. Regulatory Updates 

3. Statutory Updates 

4. Loss-Sharing Ratio and Fixed Dollar 

Loss (FDL) Ratio 

5. Outlier Relationship to the Home Health 

Study and Report 

G. Payment Reform: Home Health Study 

and Report 

H. Cost Allocation of Survey Expenses 

V. Collection of Information Requirements 

VI. Waiver of Delay in Effective Date 

VII. Regulatory Impact Analysis 

VIII. Federalism Analysis 

Regulations Text 

Acronyms 

In addition, because of the many terms to 

which we refer by abbreviation in this final 

rule, we are listing these abbreviations and 

their corresponding terms in alphabetical 

order below: 

ACA The Affordable Care Act. 

ACH LOS Acute care hospital length of 

stay. 

ADL Activities of daily living. 

AHRQ Agency for Healthcare Research and 

Quality. 

APU Annual payment update. 

BBA Balanced Budget Act of 1997 (Pub. L. 

105–33, enacted August 5, 1997). 

BBRA Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 1999 

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

1999). 

CAD Coronary artery disease. 

CAGR Compound Annual Growth Rate. 

CAH Critical access hospital. 

CAHPS® Consumer assessment of 

healthcare providers and systems. 

CBSA Core-based statistical area. 


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CASPER Certification and survey provider 

enhanced reports. 

CHF Congestive heart failure. 

CMI Case-mix index. 

CMP Civil monetary penalties. 

CMS Centers for Medicare & Medicaid 

Services. 

CoPs Conditions of participation. 

COPD Chronic obstructive pulmonary 

disease. 

CVD Cardiovascular disease. 

CY Calendar year. 

DG Diagnostic group. 

DHHS Department of Health and Human 

Services. 

DM Diabetes mellitus. 

DME Durable medical equipment. 

DRA Deficit Reduction Act of 2005 (Pub. L. 

109–171, enacted February 8, 2006). 

FDL Fixed dollar loss. 

FFP Federal financial participation. 

FI Fiscal intermediaries. 

FR Federal Register. 

FY Fiscal year. 

GEM General equivalency mapping. 

HAVEN Home assessment validation and 

entry system. 

HCC Hierarchical condition categories. 

HCIS Health care information system. 

HH Home health. 

HHAs Home health agencies. 

HHCAHPS® Home Health Care Consumer 

Assessment of Healthcare Providers and 

Systems Survey. 

HH PPS Home health prospective payment 

system. 

HHQRP Home Health Quality Reporting 

Program. 

HHRG Home health resource group. 

HIPAA Health Insurance Portability 

Accountability Act of 1996 (Pub. L. 104– 

191, enacted August 21, 1996). 

HIPPS Health insurance prospective 

payment system. 

ICD–9 International Classification of 

Diseases, 9th Edition. 

ICD–9–CM International Classification of 

Diseases, 9th Edition, Clinical 

Modification. 

ICD–10 International Classification of 

Diseases, 10th Edition. 

ICD–10–CM International Classification of 

Diseases, 10th Edition, Clinical 

Modification. 

ICF–IID Intermediate care facilities for 

individuals with intellectual disabilities. 

IH Inpatient hospitalization. 

IPPS Acute Inpatient Prospective Payment 

System 

IRF Inpatient rehabilitation facility. 

LTCH Long-term care hospital. 

LUPA Low-utilization payment adjustment. 

MAC Medicare Administrative Contractor. 

MAP Measure applications partnership. 

MedPAC Medicare Payment Advisory 

Commission. 

MEPS Medical Expenditures Panel Survey. 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

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

8, 2003). 

MSA Metropolitan statistical areas. 

MSS Medical Social Services. 

NF Nursing facility. 

NQF National Quality Forum. 

NRS Non-routine supply. 

OASIS Outcome & Assessment Information 

Set. 

OBRA Omnibus Budget Reconciliation Act 

of 1987 (Pub. L. 100–2–3, enacted 

December 22, 1987). 

OCESAA Omnibus Consolidated and 

Emergency Supplemental Appropriations 

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

1998). 

OES Occupational employment statistics. 

OIG Office of Inspector General. 

OT Occupational therapy. 

OMB Office of Management and Budget. 

P4R Pay-for-reporting. 

PAC–PRD Post-Acute Care Payment Reform 

Demonstration. 

PEP Partial episode payment [Adjustment]. 

POC Plan of care. 

PRRB Provider Reimbursement Review 

Board. 

PT Physical therapy. 

QAP Quality assurance plan. 

QIES CMS Health Care Quality 

Improvement System. 

PRRB Provider Reimbursement Review 

Board. 

RAP Request for anticipated payment. 

RF Renal failure. 

RFA Regulatory Flexibility Act (Pub. L. 96– 

354, enacted on September 19, 1980). 

RHHIs Regional home health 

intermediaries. 

RIA Regulatory impact analysis. 

SCHIP State Children’s Health Insurance 

Program 

SLP Speech-language pathology. 

SN Skilled nursing. 

SNF Skilled nursing facility. 

TEP Technical Expert Panel. 

UMRA Unfunded Mandates Reform Act of 

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

22, 1995). 

I. Executive Summary 

A. Purpose 

This rule updates the payment rates 

for home health agencies (HHAs) for 

calendar year (CY) 2014, as required 

under section 1895(b) of the Social 

Security Act (the Act), including the 

rebasing adjustments to the national, 

standardized 60-day episode payment 

rate, the national per-visit rates, and the 

NRS conversion factor, required under 

section 3131(a) of the Patient Protection 

and Affordable Care Act of 2010 (Pub. 

L 111–148), as amended by the Health 

Care and Education Reconciliation Act 

of 2010 (Pub. L 111–152) (collectively 

referred to as the ‘‘Affordable Care 

Act’’). This rule will also address: 

International Classification of Diseases, 

9th Edition (ICD–9) Grouper 

refinements; implementation of the 

International Classification of Diseases, 

10th Edition (ICD–10); a budget neutral 

adjustment to the case-mix weights; 

updates to the payment rates by the HH 

payment update percentage (for this 

final rule, the HH market basket); 

adjustments for geographic differences 

in wage levels; outlier payments; the 

submission of quality data; and 

additional payments for services 

provided in rural areas. This rule also 

clarifies state Medicaid program 

requirements related to the cost of HHA 

surveys. 

B. Summary of the Major Provisions 

In this final rule, we will remove 170 

diagnosis codes from assignment to 

diagnosis groups within the HH PPS 

Grouper, effective January 1, 2014. In 

addition, on October 1, 2014, we will 

begin the use of ICD–10–CM codes 

within the HH PPS Grouper. 

For CY 2014, we are adjusting the 

case-mix weights in order to reduce the 

average case-mix weight for CY 2012 

from 1.3464 to 1.0000, in a budget 

neutral manner. As required by section 

3131(a) of the Affordable Care Act, we 

are rebasing the national, standardized 

60-day episode payment amount, the 

national per-visit rates and the NRS 

conversion factor. The rebasing 

adjustments will occur over the next 

four years. The rebasing adjustments 

will reduce the national, standardized 

60-day episode payment amount in each 

year from CY 2014 to CY 2017 by 

$80.95, which is 3.5 percent of the 

national, standardized 60-day episode 

payment amount as of the date of 

enactment of the Affordable Care Act 

($2,312.94 in CY 2010). In each year 

from CY 2014 to CY 2017, the rebasing 

adjustments will increase the national 

per-visit payment amounts by 3.5 

percent of the national per-visit 

payment amounts in CY 2010 as 

described in section IV.D.2. The 

rebasing adjustments will reduce the 

NRS conversion factor in each year from 

CY 2014 to CY 2017 by 2.82 percent. We 

will use three LUPA add-on factors in 

calculating the LUPA add-on payment 

amount for LUPA episodes that are the 

only episode or the first episode in a 

sequence of adjacent episodes. We will 

update the home health wage index and 

increase payment rates for CY 2014 by 

2.3 percent as described in section 

IV.E.4. 

We will continue work on the home 

health study required by section 3131(d) 

of the Affordable Care Act, which will 

assess the costs associated with 

providing access to care to patients with 

high severity of illness, low income 

patients, and/or patients in medically 

underserved areas. Additionally, we 

will continue to use Outcome & 

Assessment Information Set (OASIS) 

data, claims data, and patient 

experience of care data, as forms of 

quality data to meet the requirement 

that HHAs submit data appropriate for 

the measurement of HH care quality for 

the annual payment update (APU) for 


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2014. We will implement two claimsbased measures of quality for HH 

patients who were recently hospitalized, 

as these patients are at an increased risk 

of additional acute care hospital use. We 

are also reducing the number of HH 

quality measures currently reported to 

HHAs. 

Lastly, we will review each state’s 

allocation of costs for HHA surveys for 

compliance with OMB Circular A–87 

principles and the statutes in 2014 with 

the goal of ensuring full compliance no 

later than July 2014. This rule will 

clarify that a state Medicaid program 

must provide that, in certifying HHAs, 

the state’s designated survey agency 

must carry out certain other 

responsibilities that already apply to 

surveys of nursing facilities (NF) and 

Intermediate Care Facilities for 

Individuals with Intellectual Disabilities 

(ICF–IID), including sharing in the cost 

of HHA surveys. For that portion of 

costs attributable to Medicare and 

Medicaid, we will assign 50 percent to 

Medicare and 50 percent to Medicaid. 

C. Summary of Costs and Benefits 

TABLE 1—SUMMARY OF COSTS, BENEFITS AND TRANSFERS

Provision description Total costs Total benefits Transfers 

CY 2014 HH PPS 

Payment Rate Update.

N/A ............... The benefits of this 

final rule include 

paying more accurately for the 

delivery of home 

health services.

The overall economic impact of this final rule is an estimated $200 million in decreased payments to HHAs. 

Cost Allocation of 

HHA Survey Expenses..

N/A ............... The benefits of this 

rule include clarifying that state 

Medicaid programs must share 

in the cost of HHA 

surveys. For that 

portion of costs 

attributable to 

Medicare and 

Medicaid, we 

would assign 50 

percent to Medicare and 50 percent to Medicaid..

If implemented in the beginning of FY 2014 we project that aggregate Medicare 

and Medicaid home health survey costs in FY 2014 would be approximately 

$37.2 million. As these costs would be assigned 50 percent to Medicare and 50 

percent to Medicaid for each state, the anticipated aggregate Medicaid share 

would amount to $18.6 million. The cost of surveys is treated as a Medicaid administrative cost, reimbursable at the professional staff rate of 75 percent. At 

this rate the maximum net state costs for Medicaid matching funds incurred in 

FY 2014 would be approximately $4.65 million, spread out across all states and 

2 territories. However, the proposed adherence date of July FY 2014 would reduce the Medicaid aggregate share to $4.65 million and the state Medicaid 

share to approximately $1.16 million. The federal Medicaid share will reflect the 

remaining $3.49 million, with an adherence date of July FY 2014. Some state 

Medicaid programs may currently pay for HHA surveys to some extent, but the 

amount is unknown. 

II. Background 

A. Statutory Background of the Home 

Health PPS 

The Balanced Budget Act of 1997 

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

5, 1997), significantly changed the way 

Medicare pays for Medicare HH 

services. Section 4603 of the BBA, 

added section 1895 of the Act, which 

mandated the development of the HH 

PPS. Until the implementation of a HH 

PPS on October 1, 2000, HHAs received 

payment under a retrospective 

reimbursement system. 

Section 1895 of the Act entitled 

‘‘Prospective Payment For Home Health 

Services’’ mandated the development of 

a HH PPS for all Medicare-covered HH 

services that were paid on a reasonable 

cost basis. Section 1895(b)(1) of the Act 

requires the Secretary to establish a HH 

PPS for all costs of HH services paid 

under Medicare. 

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

requires the following: (1) The 

computation of a standard prospective 

payment amount that includes all costs 

for HH services that would have been 

covered and paid for on a reasonable 

cost basis had the HH PPS not been in 

effect and that such amounts be initially 

based on the most recent audited cost 

report data available to the Secretary; 

and (2) adjustment of the standardized 

prospective payment amount to account 

for the effects of case-mix and wage 

levels among HHAs. 

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

addresses the annual update to the 

standard prospective payment amounts 

by the HH applicable percentage 

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

governs the payment computation. 

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

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of an appropriate 

case-mix change adjustment factor for 

significant variation in costs among 

different units of services. 

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

Act requires the establishment of wage 

adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. Under section 

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

may be the factors used under section 

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

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

Secretary the option to make additions 

or adjustments to the payment amount 

otherwise paid in the case of outliers 

due to unusual variations in the type or 

amount of medically necessary care. 

Section 3131(b)(2) of the Affordable 

Care Act, amended section 1895(b)(5) of 

the Act, so that if the Secretary provides 

for an outlier policy, total outlier 

payments in a given year would not 

exceed 2.5 percent of total payments 

projected or estimated and that the 

standard prospective payment (or 

amounts) are reduced by 5 percent. The 

provision also made permanent a 10 

percent agency-level outlier payment 

cap. 

In accordance with the statute, we 

published a final rule in the July 3, 2000 

Federal Register (65 FR 41128) to 

implement the HH PPS. The July 2000 

final rule established requirements for 

the new HH PPS for HH services as 

required by section 4603 of the BBA, as 

subsequently amended by section 5101 

of the Omnibus Consolidated and 

Emergency Supplemental 

Appropriations Act (OCESAA) for Fiscal 

Year 1999, (Pub. L. 105–277, enacted 

October 21, 1998); and by sections 302, 

305, and 306 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 


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

enacted November 29, 1999). The 

requirements include the 

implementation of a HH PPS for HH 

covered services, consolidated billing 

requirements, and a number of other 

related policies. The HH PPS described 

in that rule replaced the retrospective 

reasonable cost-based system that was 

used by Medicare for the payment of HH 

services under Part A and Part B. For a 

complete and full description of the HH 

PPS as required by the BBA, see the July 

2000 HH PPS final rule (65 FR 41128 

through 41214). 

Section 5201(c) of the Deficit 

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

109–171, enacted February 8, 2006) 

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

the Act, requiring HHAs to submit data 

for purposes of measuring health care 

quality, and links the quality data 

submission to the annual applicable 

percentage increase. This data 

submission requirement is applicable 

for CY 2007 and each subsequent year. 

If an HHA does not submit quality data, 

the HH payment update percentage 

increase is reduced by 2 percentage 

points. In the CY 2007 HH PPS final 

rule (71 FR 65884, 65935), we 

implemented the pay-for-reporting 

requirement of the DRA, which was 

codified at § 484.225(h) and (i). The HH 

quality reporting requirement was 

implemented on January 1, 2007. 

The Affordable Care Act made 

additional changes to the HH PPS. 

Section 3131(c) of the Affordable Care 

Act amended section 421(a) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173, enacted 

on December 8, 2003) as amended by 

section 5201(b) of the DRA. The 

amended section 421(a) of the MMA 

now requires, for HH services furnished 

in a rural area (as defined in section 

1886(d)(2)(D) of the Act) for episodes 

and visits ending on or after April 1, 

2010, and before January 1, 2016, that 

the Secretary increase, by 3 percent, the 

payment amount otherwise made under 

section 1895 of the Act. 

Section 3131(a) of the Affordable Care 

Act mandates that, starting in CY 2014, 

the Secretary must apply an adjustment 

to the national, standardized 60-day 

episode payment amount and other 

amounts applicable under section 

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

factors such as changes in the number 

of visits in an episode, the mix of 

services in an episode, the level of 

intensity of services in an episode, the 

average cost of providing care per 

episode, and other relevant factors. In 

addition, section 3131(a) of the 

Affordable Care Act mandates that this 

rebasing adjustment must be phased-in 

over a 4-year period in equal 

increments, not to exceed 3.5 percent of 

the payment amount (or amounts) as of 

the date of enactment (March 23, 2010) 

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

Act, and be fully implemented in CY 

2017. 

B. System for Payment of Home Health 

Services 

Generally, Medicare makes payment 

under the HH PPS on the basis of a 

national, standardized 60-day episode 

payment rate that is adjusted for the 

applicable case-mix and wage index. 

The national, standardized 60-day 

episode rate includes the six HH 

disciplines (skilled nursing, HH aide, 

physical therapy (PT), speech-language 

pathology (SLP), occupational therapy 

(OT), and medical social services 

(MSS)). Payment for non-routine 

medical supplies is no longer part of the 

national, standardized 60-day episode 

rate and is computed by multiplying the 

relative weight for a particular nonroutine supply (NRS) severity level by 

the NRS conversion factor (See section 

IV.D.4.e. of this final rule). Payment for 

durable medical equipment (DME) 

covered under the HH benefit is made 

outside the HH PPS. To adjust for casemix, the HH PPS uses a 153-category 

case-mix classification system to assign 

patients to a home health resource 

group (HHRG). The clinical severity 

level, functional severity level, and 

service utilization are computed from 

responses to selected data elements in 

the OASIS assessment instrument and 

are used to place the patient in a 

particular HHRG. Each HHRG has an 

associated case-mix weight, which is 

used in calculating the payment for an 

episode. Specifically, the 60-day 

episode base rate is multiplied by the 

case-mix weight when determining the 

payment for an episode. 

For episodes with four or fewer visits, 

Medicare pays national per-visit rates 

based on the discipline(s) providing the 

services. An episode consisting of four 

or fewer visits within a 60-day period 

receives what is referred to as a lowutilization payment adjustment (LUPA) 

episode. Medicare also adjusts the 

national, standardized 60-day episode 

payment rate for certain intervening 

events that are subject to a partial 

episode payment adjustment (PEP 

adjustment). For certain cases that 

exceed a specific cost threshold, an 

outlier adjustment may also be 

available. 

C. Updates to the HH PPS 

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

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. The August 29, 2007 

final rule with comment period set forth 

an update to the 60-day national 

episode rates and the national per-visit 

rates under the HH PPS for CY 2008. 

The CY 2008 HH PPS final rule 

included an analysis performed on CY 

2005 HH claims data, which indicated 

a 12.78 percent increase in the observed 

case-mix since 2000. Case-mix 

represents the variations in conditions 

of the patient population served by the 

HHAs. Subsequently, a more detailed 

analysis was performed on the 2005 

case-mix data to evaluate if any portion 

of the 12.78 percent increase was 

associated with a change in the actual 

clinical condition of HH patients. We 

examined data on demographics, family 

severity, and non-HH Part A Medicare 

expenditures to predict the average 

case-mix weight for 2005. We identified 

8.03 percent of the total case-mix 

change as real, and therefore, decreased 

the 12.78 percent of total case-mix 

change by 8.03 percent to get a final 

nominal case-mix increase measure of 

11.75 percent (0.1278 * (1—0.0803) = 

0.1175). 

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

underlying change in patient health 

status, we implemented a reduction, 

over 4 years, to the national, 

standardized 60-day episode payment 

rates. That reduction was to be 2.75 

percent per year for 3 years beginning in 

CY 2008 and 2.71 percent for the fourth 

year in CY 2011. In the CY 2011 HH PPS 

final rule (76 FR 68532), we updated our 

analyses of case-mix change and 

finalized a reduction of 3.79 percent, 

instead of 2.71 percent, for CY 2011 and 

deferred finalizing a payment reduction 

for CY 2012 until further study of the 

case-mix change data and methodology 

was completed. 

In the CY 2012 HH PPS final rule (76 

FR 68526), we updated the 60-day 

national episode rates and the national 

per-visit rates. In addition, as discussed 

in the CY 2012 HH PPS final rule (76 

FR 68528), our analysis indicated that 

there was a 22.59 percent increase in 

overall case-mix from 2000 to 2009 and 

that only 15.76 percent of that overall 

observed case-mix percentage increase 

was due to real case-mix change. As a 

result of our analysis, we identified a 

19.03 percent nominal increase in casemix. To fully account for the 19.03 

percent nominal case-mix growth, 

which was identified from 2000 to 2009, 

we finalized a 3.79 percent payment 

reduction in CY 2012 and a 1.32 percent 

payment reduction for CY 2013. 

In the CY 2013 HH PPS final rule (77 

FR 67078), we implemented a 1.32 


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percent reduction to the payment rates 

for CY 2013 to account for nominal 

case-mix growth from 2000 through 

2010. When taking into account the total 

measure of case-mix change (23.90 

percent) and the 15.97 percent of total 

case-mix change estimated as real from 

2000 to 2010, we obtained a final 

nominal case-mix change measure of 

20.08 percent from 2000 to 2010 (0.2390 

* (1—0.1597) = 0.2008). To fully 

account for the remainder of the 20.08 

percent increase in nominal case-mix 

beyond that which was accounted for in 

previous payment reductions, we 

estimated that the percentage reduction 

to the national, standardized 60-day 

episode rates for nominal case-mix 

change would be 2.18 percent. We 

considered proposing a 2.18 percent 

reduction to account for the remaining 

increase in measured nominal case-mix; 

however, we moved forward with the 

1.32 percent payment reduction to the 

national, standardized 60-day episode 

rates in the CY 2012 HH PPS final rule 

(76 FR 68532). 

III. Summary of the Provisions of the 

Proposed Rule 

The CY 2014 HH PPS proposed rule 

(78 FR 40272) included the following 

proposals and updates: 

A. ICD–9–CM Grouper Refinements, 

Effective January 1, 2014 

• We proposed to remove 170 ICD–9– 

CM diagnosis codes from assignment to 

one of our diagnosis groups within the 

HH PPS Grouper, effective January 1, 

2014. 

B. International Classification of 

Diseases, 10th Revision, Clinical 

Modification (ICD–10–CM) Conversion 

and Diagnosis Reporting on Home 

Health Claims 

• We notified the home health 

industry that on October 1, 2014, we are 

implementing the use of ICD–10–CM 

codes within our HH PPS Grouper. We 

provided the industry with a link to the 

CMS Web site that contains the draft HH 

PPS Grouper ICD–10–CM translation list 

along with a proposed schedule for 

releasing the draft and final ICD–10–CM 

HH PPS Groupers. 

• We notified HHAs that to ensure 

additional compliance with ICD–10–CM 

Coding Guidelines, we will be adopting 

additional claims processing edits for all 

HH claims effective October 1, 2014. 

The HH claims containing inappropriate 

principal or secondary diagnosis codes 

will be returned to the provider and will 

have to be corrected and resubmitted to 

be processed and paid. 

C. Adjustment to the HH PPS Case-Mix 

Weights 

• We analyzed preliminary 2012 

claims data, which showed an average 

case-mix weight for 2012 of 1.3517. We 

proposed to reduce the average case-mix 

weight for 2014 from 1.3517 to 1.0000. 

We proposed that the decrease in the 

weights from 1.3517 to 1.0000 would be 

added back into the national, 

standardized 60-day episode payment 

amount and serve as the starting point 

for the rebasing adjustment calculation. 

D. Rebasing the National, Standardized 

60-day Episode Payment Rate, LUPA 

Per-Visit Payment Amounts, and 

Nonroutine Medical Supply (NRS) 

Conversion Factor 

1. Rebasing the National, Standardized 

60-Day Episode Payment Amount 

In the proposed rule, we estimated 

that the 2013 average cost per episode 

was $2,559.59. The 2013 estimated 

average payment per episode was 

$2,963.65. When comparing the 2013 

costs to 2013 payments, we obtained a 

difference of ¥13.63 percent, or a 

reduction of 3.60 percent over four years 

in equal increments using a compound 

annual growth rate (CAGR) formula 

(($2,559.59/$2,963.65) 1/4 ¥1). Since the 

Affordable Care Act states that the 

adjustment(s) may be no more than 3.5 

percent in a given year, we proposed a 

reduction to the national, standardized 

60-day episode rate of 3.50 percent in 

each year from CY 2014 through CY 

2017. 

2. Rebasing the Low-Utilization 

Payment Adjustment (LUPA) Per-Visit 

Payment Amounts 

In the proposed rule, when comparing 

2013 estimated average costs per-visit to 

2013 payments per-visit for each of six 

disciplines, we obtained differences 

ranging from +19.48 percent for skilled 

nursing up to +33.11 percent for 

physical therapy. If the increases were 

phased-in over four years in equal 

increments using a CAGR formula, the 

annual increases would range from 

+4.55 percent for skilled nursing to 

+7.41 percent for physical therapy. 

Since the Affordable Care Act states that 

the adjustment(s) may be no more than 

3.5 percent in a given year, we proposed 

an increase to each of the six per-visit 

payment rates of 3.50 percent in each 

year from CY 2014 through CY 2017. 

3. Rebasing the Nonroutine Medical 

Supply (NRS) Conversion Factor 

In the proposed rule, when comparing 

the 2013 estimated average NRS 

payment per episode of $48.38 to the 

2013 estimated average NRS cost per 

episode of $43.58; we obtained a 

difference of ¥9.92 percent 

(($43.58¥$48.38)/$48.38). Phasing-in 

the 9.92 percent reduction over 4 years 

in equal increments using a CAGR 

formula would result in an annual 

reduction of 2.58 percent. Therefore, we 

proposed to reduce payments each year, 

from CY 2014 through CY 2017, by 2.58 

percent. 

E. CY 2014 Home Health Payment Rate 

Update 

We proposed to continue to use 

OASIS data, claims data, and patient 

experience of care data as forms of 

quality data to meet the reporting 

requirement that HHAs submit data 

appropriate for the measurement of 

home health care quality for CY 2014 

and each subsequent year thereafter 

until further notice. We proposed that 

the measures reported on Home Health 

Compare continue to meet the 

requirement to make data available to 

the public until further notice; we 

proposed to add two new claims-based 

measures: (1) Re-hospitalization During 

the First 30 Days of a Home Health Stay, 

and (2) Home Health Emergency 

Department Use Without Readmission; 

and to reduce the number of home 

health quality measures currently 

reported to HHAs individually. We 

stated that we plan to include 

information regarding the requirements 

of the HH Conditions of Participation 

(CoPs) related to submission of OASIS 

assessments and the necessity of 

submitting both start of episode and end 

of episode assessments in order to 

calculate quality measures. We did not 

propose changes to HH CAHPS and we 

stated that we plan to continue this 

requirement and data collection 

activities. 

In the proposed rule, we stated that 

we would update the HH PPS payment 

rates by the HH PPS payment update 

percentage of 2.4 percent and we 

proposed, consistent with long-standing 

policy, to update the home health wage 

index using the pre-floor, prereclassified hospital wage index for 

2014. We also proposed to offset the 

overall impact from the use of the 

updated wage index on the national, 

standardized 60-day episode payment 

rate and the national per-visit rates 

using a standardization factor. Finally, 

we proposed to create three LUPA addon factors, rather than a single LUPA 

add-on amount. 

F. Outlier Policy 

We did not propose changes to our 

outlier policy. 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 72261 

G. Payment Reform: Home Health Study 

and Report 

Section 3131(d) of the Affordable Care 

Act requires the Secretary to assess costs 

associated with providing access to care 

for patients with high severity of illness, 

low income patients, and/or patients in 

medically underserved areas. It also 

gives the Secretary the authority to 

analyze other factors in the HH PPS and 

allows for demonstration authority to 

test the PPS changes. Finally, it requires 

the Secretary to make recommendations 

for legislation or administrative action, 

if needed, in a Report to Congress due 

no later than March 1, 2014. We 

provided an update on the status of the 

Report to Congress in the proposed rule. 

H. Cost Allocation of Survey Expenses 

We proposed that Medicaid 

responsibilities for home health surveys 

be explicitly recognized in the state 

Medicaid program and that CMS will 

review each state’s allocation of costs 

for HHA surveys for adherence to OMB 

Circular A–87 principles in 2014, with 

the goal of ensuring full adherence no 

later than July 2014. For that portion of 

costs attributable to Medicare and 

Medicaid, CMS will assign 50 percent to 

Medicare and 50 percent to Medicaid. 

This is the standard method that CMS 

and states use in the allocation of 

expenses related to surveys of nursing 

homes. 

IV. Provisions of the Proposed Rule and 

Response to Comments 

We received approximately 84 timely 

responses, many of which contained 

multiple comments on the CY 2014 HH 

PPS proposed rule (78 FR 40272) from 

the public. We received comments from 

various trade associations, HHAs, 

individual registered nurses, physicians, 

clinicians, health care industry 

organizations, and health care 

consulting firms. The following 

sections, arranged by subject area, 

include a summary of the public 

comments received, and out responses. 

A. ICD–9–CM Grouper Refinements, 

Effective January 1, 2014 

As stated in the CY 2014 HH PPS 

proposed rule, CMS clinical staff (along 

with clinical and coding staff from Abt 

Associates (our support contractor) and 

3M (our HH PPS Grouper maintenance 

contractor), completed a thorough 

review of the ICD–9–CM codes included 

in our HH PPS Grouper. The HH PPS 

Grouper, which is used by the CMS 

OASIS submission system, is the official 

grouping software of the HH PPS. As a 

result of that review, we identified two 

categories of codes, made up of 170 

ICD–9–CM diagnosis codes, which we 

proposed to remove from assignment to 

one of our diagnosis groups within the 

HH PPS Grouper, effective January 1, 

2014. The first category (Category 1 in 

Table 2) included ICD–9–CM codes that, 

based upon clinical judgment, were ‘‘too 

acute’’, meaning that this condition 

could not be appropriately cared for in 

a HH setting. These codes likely reflect 

conditions the patient had prior to the 

HH admission (for example, while being 

treated in a hospital setting). It is 

anticipated that the condition 

progressed to a less acute state, or is 

completely resolved for the patient to be 

cared for in the home setting (and that 

often times another diagnosis code will 

have been a more accurate reflection of 

the patient’s condition in the home). 

The second category (Category 2 in 

Table 2) included codes that, based 

upon clinical judgment, reflect a 

condition that does not require HH 

intervention, would not impact the HH 

plan of care (POC), or would not result 

in additional resource use when 

providing HH services to the patient. 

Table 2 includes all 170 ICD–9–CM 

diagnosis codes that we proposed to 

remove from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper, effective January 1, 2014, along 

with the category classification. 

TABLE 2—ICD–9–CM CODES REMOVED FROM DIAGNOSIS GROUP ASSIGNMENT IN THE HH PPS GROUPER AS OF

JANUARY 1, 2014 

ICD–9–CM Code ICD–9–CM Long Description Category 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


sroberts on DSK5SPTVN1PROD with RULES
72262 Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 

TABLE 2—ICD–9–CM CODES REMOVED FROM DIAGNOSIS GROUP ASSIGNMENT IN THE HH PPS GROUPER AS OF

JANUARY 1, 2014—Continued 

ICD–9–CM Code ICD–9–CM Long Description Category 

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

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

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

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

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

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

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

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

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

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

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

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

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

obstruction.

1 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

obstruction.

1 

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

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

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

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

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

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

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

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

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

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

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

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

mention of obstruction.

1 

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

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

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

perforation, with obstruction.

1 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

with obstruction.

1 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 72263 

TABLE 2—ICD–9–CM CODES REMOVED FROM DIAGNOSIS GROUP ASSIGNMENT IN THE HH PPS GROUPER AS OF

JANUARY 1, 2014—Continued 

ICD–9–CM Code ICD–9–CM Long Description Category 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


sroberts on DSK5SPTVN1PROD with RULES
72264 Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 

TABLE 2—ICD–9–CM CODES REMOVED FROM DIAGNOSIS GROUP ASSIGNMENT IN THE HH PPS GROUPER AS OF

JANUARY 1, 2014—Continued 

ICD–9–CM Code ICD–9–CM Long Description Category 

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

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

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

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

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

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

873.63 ............................ Broken tooth—uncomplic ........................................................................................................................ 2 

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

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

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

Analysis of the most current, 

complete CY 2012 claims data (a full 

year of CY 2012 claims data versus the 

preliminary data from the first half of 

CY 2012 used for the CY 2014 HH PPS 

proposed rule) shows that the average 

case-mix weight before the removal of 

the codes in Table 2 was 1.3555. It is 

estimated that the removal of the 170 

codes in Table 2 results in an average 

case-mix weight for CY 2012 of 1.3464. 

As described above, clinical judgment is 

that these codes are ‘‘too acute,’’ 

meaning that this condition could not 

be appropriately cared for in a HH 

setting (Category 1) or would not impact 

the HH POC or result in additional 

resource use (Category 2). Therefore, the 

inclusion of these diagnosis codes in the 

Grouper was producing inaccurate 

overpayments. 

The following is a summary of the 

comments we received regarding the 

proposed ICD–9–CM Grouper 

Refinements. 

Comment: A few commenters agreed 

with our assessment that many of the 

conditions that we proposed to remove 

are too acute to be treated in a home 

health setting (category 1 codes from 

Table 2). 

Response: We thank the commenters 

for their support in our efforts to remove 

conditions that are ‘‘too acute’’ to be 

treated the HH setting from assignment 

to one of our diagnosis groups within 

the HH PPS Grouper. 

Comment: There were several 

commenters who believed that the 

removal of the category 1 ICD–9–CM 

codes (‘‘too acute’’) from our diagnosis 

groups would limit the scope of 

physician/medical practice in the home. 

Other commenters stated that removal 

of category 1 codes from assignment to 

one of our diagnosis groups could lead 

to increased hospital length of stay and 

could limit access to home health care, 

especially for patients living in rural 

areas. Other commenters believed that 

removal of category 1 diagnoses would 

mean a reduction of the accuracy of the 

information reported for payment and 

that physicians would be compelled to 

change the diagnosis codes upon 

hospital discharge for the post-acute 

management of the patient. 

Response: We recognize the valuable 

services being provided to Medicare 

beneficiaries in the home health 

environment and understand the goal of 

home health services is to help reduce 

hospitalizations, empower patients to be 

active participants in their health care, 

and to practice patient-centered care. 

The intent of the removal of category 1 

diagnosis codes from assignment to one 

of our diagnosis groups within the HH 

PPS Grouper is neither to limit access to 

home health care nor to limit the 

practice of appropriate health care in 

the home. 

We proposed to remove category 1 

ICD–9–CM diagnosis codes from our 

diagnosis groups to ensure greater 

compliance with ICD–9–CM Coding 

Guidelines and to assure home health 

providers are accurately describing the 

patient characteristics that impact the 

home health plan of care. Per the ICD– 

9–CM Coding Guidelines, ‘‘list first the 

ICD–9–CM code for the diagnosis, 

condition, problem, or other reason for 

the encounter/visit shown in the 

medical record to be chiefly responsible 

for the services provided.’’ For home 

health services, the diagnosis coding 

should reflect the reason the patient 

requires home health services and 

interventions. 

In the CY 2014 HH PPS proposed 

rule, the category 1 codes proposed to 

be removed from assignment to one of 

our diagnosis groups within the HH PPS 

Grouper are not conditions that would 

be treated in an individual’s home. For 

example, ICD–9–CM code, 447.2, 

Rupture of Artery, would be an 

emergency situation and treatment for 

such a condition could not be safely 

treated in the home environment. One 

commenter provided the following 

scenario: ‘‘your average COPDer has 

chronic obstructive asthma, they catch 

an infection and go into status 

asthmaticus and go to the hospital for 

treatment. After a couple of days, they 

are sent home with a home care referral. 

Wouldn’t the diagnosis be 493.21 

(chronic obstructive asthma with status 

asthmaticus)?’’ We agree that the 

staticus asthmaticus is a condition a 

hospital would treat during the hospital 

stay because it refers to a patient’s 

failure to respond to therapy 

administered during an asthmatic 

episode and is a life threatening 

complication that requires emergency 

care. However, once the patient is 

discharged from the hospital, the 

staticus asthmaticus is no longer active 

and the patient could be safely 

discharged back into the community. 

Clinically, a patient with active staticus 

asthmaticus could not be safely treated 

in the home environment, as is the case 

with all of the category 1 conditions. 

However, this is not to say that patients 

who have had these conditions, were 

treated for the acute presentation, 

exacerbation or complication, and have 

been discharged with a home health 

referral, are not eligible for home health 

services. In referring to the commenter’s 

clinical scenario above, an appropriate 

diagnostic code for a home care 

intervention could be reported as: COPD 

(496.0) or chronic obstructive asthma 

(493.2). In fact, patients who have had 

these conditions and have been treated 

in the inpatient or outpatient setting 

may benefit from home health services 

in treating the sequelae or aftercare that 

is needed for these conditions. 

It is our expectation that home health 

agencies, who receive referrals for 

patients who have been treated for these 

acute conditions, will continue to 

provide the aftercare services required. 

The home health care that is required by 

these patients is the aftercare services 

and interventions to help reduce any 

post-acute complications and 

readmissions. Home health providers 

are in the ideal position to help in the 

recovery of the individuals who have 


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Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 72265 

suffered from these acute conditions. 

Therefore, we do not expect that the 

removal of these proposed ICD–9–CM 

codes from one of our diagnosis groups 

will limit access to needed home health 

care services for those living in either 

urban or rural areas. We also do not 

believe that the scope of physician/

medical practice in the home 

environment will be limited by this 

proposal. We believe that a physician, 

using his or her best clinical judgment, 

would not make a home health care 

referral for the initial treatment of the 

listed conditions as these conditions 

would usually warrant more intensive 

interventions at presentation. We do 

believe that a physician would make a 

home health referral for the aftercare 

treatment that would be required as a 

result of these conditions or as a result 

of the initial treatment of these 

conditions. Many of the clinical 

scenarios provided by commenters 

addressed the home health 

interventions that were being provided 

for patients who had been treated in an 

inpatient or outpatient setting for these 

conditions. The referral for the home 

health services and interventions were 

actually for the aftercare services 

needed for these conditions. 

We do not support physicians 

changing diagnoses at hospital 

discharge but we do expect that they 

will continue to use their clinical 

expertise and judgment when making 

home health care referrals to meet the 

medically necessary aftercare needs of 

their patients. Additionally, it is the 

responsibility of the home health 

providers to contact, as necessary, any 

referring physician for clarification of 

all conditions that the prompted the 

home health referral and the services 

being requested for the post-acute 

management of these patients. 

Comment: We received a few 

comments expressing the concern for 

the increased administrative costs 

associated with the ICD–9–CM coding 

requirements. Other commenters were 

concerned that the removal of these 

codes would affect Part B claims and 

believed that denial rates would 

increase as a result. A few commenters 

believed that the only reason to remove 

these codes from assignment to one of 

our diagnosis groups within the HH PPS 

Grouper is to further reduce 

reimbursement. 

Response: We disagree that there are 

increased administrative costs or that 

this policy would impact Part B claims 

and result in claims denials. The basis 

for removal of these codes is to 

encourage compliance with ICD–9–CM 

coding guidelines and ensures that 

conditions that are either too acute to be 

treated in a home health setting or do 

not represent the resources assigned to 

a diagnosis group are removed to ensure 

appropriate reimbursement for home 

health services and not to simply reduce 

reimbursement. We recognize that by 

removing these ICD–9–CM codes from 

assignment to one of our diagnosis 

groups within the HH PPS Grouper 

some home health providers may have 

to change coding practices. However, 

compliance with the ICD–9–CM Coding 

Guidelines has been a longstanding 

policy. In our regulations at 45 CFR 

162.1002, the Secretary adopted the 

ICD–9–CM code set, including The 

Official ICD–9–CM Guidelines for 

Coding and Reporting. We believe there 

are ample, available resources in regards 

to the ICD–9–CM Coding Guidelines to 

support home health providers to 

determine the appropriate ICD–9–CM 

diagnosis codes for all healthcare 

documentation requirements. These free 

resources are available at the following 

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

Coding/ICD9ProviderDiagnosticCodes/ 

index.html?redirect=/ 

ICD9ProviderDiagnosticCodes/, http:// 

www.cms.gov/medicare-coveragedatabase/staticpages/icd-9-codelookup.aspx, or on the CDC’s Web site 

at: http://www.cdc.gov/nchs/data/icd9/ 

icd9cm_guidelines_2011.pdf. 

While physicians use their clinical 

judgment to determine the principal 

diagnosis (or diagnoses) of their 

patients, we do not require them to 

determine the actual codes associated 

with those diagnoses for inclusion on 

the OASIS assessment of home health 

claims. Our intent in removing category 

1 conditions is to ensure that all 

healthcare providers, including home 

health care providers, are following the 

ICD–9–CM Coding Guidelines to paint 

the most accurate picture of their 

patient population, as well as the 

services they are providing in the home 

health environment. We do not expect 

that there will be an increase in any 

denial of claims for appropriate, 

medically necessary, home care 

services. 

Comment: Several commenters stated 

that there is ‘‘no clinical evidence’’ to 

support the removal of some of the 170 

diagnosis codes. Most notably, some 

commenters believed that posthemorrhagic anemia, acute pancreatitis, 

abscess of the liver, and gastrointestinal 

disorders were appropriate diagnoses to 

treat in the home environment. These 

commenters stated patients with these 

diagnoses require ongoing home care for 

services such as home infusion of 

antibiotics and total parenteral 

nutrition, wound care, drain care, lab 

work, and symptom management. Other 

commenters stated the esophageal reflux 

and restless leg syndrome should 

remain in the HH PPS Grouper as these 

two conditions require increased 

nursing interventions for evaluation and 

monitoring, such as nutritional status 

and side effects from medications. 

Response: In the CY 2014 HH PPS 

proposed rule, we did state that the 

review of these ICD–9–CM diagnosis 

codes (those under Category 1 on Table 

2,) included CMS clinical staff 

(including doctors and nurses) as well 

as with the clinicians and certified 

coding staff from Abt Associates (our 

support contractor) and 3M (our HH 

PPS Grouper maintenance contractor). 

This review received input from a 

variety of clinicians to ensure that the 

proposed removal of any diagnosis 

codes would be done in a thoughtful, 

clinically responsible manner. 

Additionally, data analysis by Abt 

Associates reveals that most home 

health providers are appropriately 

coding the aftercare codes for the home 

care services required for these 

conditions after they have been 

stabilized from their acute state. The 

analysis reveals that most of the 162 

category 1 codes that we proposed to 

remove from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper are not commonly reported 

codes on the OASIS assessment (see 

Table 3). As a result, we do not believe 

that these codes will have a significant 

impact on the current coding patterns of 

a majority of home health care 

providers. 

TABLE 3—TOTAL NUMBER OF EPISODES FOR SELECTED ICD–9–CM DIAGNOSIS CODES, CY 2012 

ICD-9-CM code ICD-9-CM long description 

Number of 

episodes, CY 

2012 

003.1 .............................. Salmonella septicemia ............................................................................................................................ 24 

250.20 ............................ Diabetes with hyperosmolarity, type II or unspecified type, not stated as uncontrolled ........................ 1,056 

250.21 ............................ Diabetes with hyperosmolarity, type I [juvenile type], not stated as uncontrolled ................................. 34 


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TABLE 3—TOTAL NUMBER OF EPISODES FOR SELECTED ICD–9–CM DIAGNOSIS CODES, CY 2012—Continued 

ICD-9-CM code ICD-9-CM long description 

Number of 

episodes, CY 

2012 

250.22 ............................ Diabetes with hyperosmolarity, type II or unspecified type, uncontrolled .............................................. 466 

250.23 ............................ Diabetes with hyperosmolarity, type I [juvenile type], uncontrolled ........................................................ 29 

250.30 ............................ Diabetes with other coma, type II or unspecified type, not stated as uncontrolled ............................... 332 

250.31 ............................ Diabetes with other coma, type I [juvenile type], not stated as uncontrolled ......................................... 65 

250.32 ............................ Diabetes with other coma, type II or unspecified type, uncontrolled ..................................................... 60 

250.33 ............................ Diabetes with other coma, type I [juvenile type], uncontrolled ............................................................... 13 

282.42 ............................ Sickle-cell thalassemia with crisis ........................................................................................................... 29 

282.62 ............................ Hb-SS disease with crisis ....................................................................................................................... 382 

282.64 ............................ Sickle-cell/Hb-C disease with crisis ........................................................................................................ 49 

282.69 ............................ Other sickle-cell disease with crisis ........................................................................................................ 110 

285.1 .............................. Acute posthemorrhagic anemia .............................................................................................................. 26,547 

289.52 ............................ Splenic sequestration .............................................................................................................................. 9 

348.5 .............................. Cerebral edema ...................................................................................................................................... 237 

401.0 .............................. Malignant essential hypertension ............................................................................................................ 34,207 

414.12 ............................ Dissection of coronary artery .................................................................................................................. 49 

447.2 .............................. Rupture of artery ..................................................................................................................................... 145 

493.21 ............................ Chronic obstructive asthma with status asthmaticus .............................................................................. 7,765 

530.21 ............................ Ulcer of esophagus with bleeding ........................................................................................................... 442 

530.4 .............................. Perforation of esophagus ........................................................................................................................ 252 

530.7 .............................. Gastroesophageal laceration-hemorrhage syndrome ............................................................................. 407 

530.82 ............................ Esophageal hemorrhage ......................................................................................................................... 183 

531.00 ............................ Acute gastric ulcer with hemorrhage, without mention of obstruction .................................................... 1,334 

531.01 ............................ Acute gastric ulcer with hemorrhage, with obstruction ........................................................................... 62 

531.10 ............................ Acute gastric ulcer with perforation, without mention of obstruction ...................................................... 249 

531.11 ............................ Acute gastric ulcer with perforation, with obstruction ............................................................................. 20 

531.20 ............................ Acute gastric ulcer with hemorrhage and perforation, without mention of obstruction .......................... 109 

531.21 ............................ Acute gastric ulcer with hemorrhage and perforation, with obstruction ................................................. 25 

531.31 ............................ Acute gastric ulcer without mention of hemorrhage or perforation, with obstruction ............................. 49 

531.40 ............................ Chronic or unspecified gastric ulcer with hemorrhage, without mention of obstruction ......................... 1,105 

531.41 ............................ Chronic or unspecified gastric ulcer with hemorrhage, with obstruction ................................................ 24 

531.50 ............................ Chronic or unspecified gastric ulcer with perforation, without mention of obstruction ........................... 128 

531.51 ............................ Chronic or unspecified gastric ulcer with perforation, with obstruction .................................................. 4 

531.61 ............................ Chronic or unspecified gastric ulcer with hemorrhage and perforation, with obstruction ...................... 119 

531.60 ............................ Chronic or unspecified gastric ulcer with hemorrhage and perforation, without mention of obstruction 13 

531.71 ............................ Chronic gastric ulcer without mention of hemorrhage or perforation, with obstruction .......................... 41 

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

obstruction.

249 

532.00 ............................ Acute duodenal ulcer with hemorrhage, without mention of obstruction ............................................... 835 

532.01 ............................ Acute duodenal ulcer with hemorrhage, with obstruction ....................................................................... 40 

532.10 ............................ Acute duodenal ulcer with perforation, without mention of obstruction .................................................. 257 

532.11 ............................ Acute duodenal ulcer with perforation, with obstruction ......................................................................... 38 

532.20 ............................ Acute duodenal ulcer with hemorrhage and perforation, without mention of obstruction ...................... 92 

532.21 ............................ Acute duodenal ulcer with hemorrhage and perforation, with obstruction ............................................. 5 

532.31 ............................ Acute duodenal ulcer without mention of hemorrhage or perforation, with obstruction ......................... 27 

532.40 ............................ Chronic or unspecified duodenal ulcer with hemorrhage, without mention of obstruction .................... 562 

532.41 ............................ Chronic or unspecified duodenal ulcer with hemorrhage, with obstruction ............................................ 3 

532.50 ............................ Chronic or unspecified duodenal ulcer with perforation, without mention of obstruction ....................... 132 

532.51 ............................ Chronic or unspecified duodenal ulcer with perforation, with obstruction .............................................. 12 

532.60 ............................ Chronic or unspecified duodenal ulcer with hemorrhage and perforation, without mention of obstruction.57 

532.61 ............................ Chronic or unspecified duodenal ulcer with hemorrhage and perforation, with obstruction .................. 7 

532.71 ............................ Chronic duodenal ulcer without mention of hemorrhage or perforation, with obstruction ..................... 15 

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

obstruction.

73 

533.00 ............................ Acute peptic ulcer of unspecified site with hemorrhage, without mention of obstruction ...................... 663 

533.01 ............................ Acute peptic ulcer of unspecified site with hemorrhage, with obstruction ............................................. 23 

533.10 ............................ Acute peptic ulcer of unspecified site with perforation, without mention of obstruction ........................ 96 

533.11 ............................ Acute peptic ulcer of unspecified site with perforation, with obstruction ................................................ 4 

533.20 ............................ Acute peptic ulcer of unspecified site with hemorrhage and perforation, without mention of obstruction.65 

533.21 ............................ Acute peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction .................... 27 

533.31 ............................ Acute peptic ulcer of unspecified site without mention of hemorrhage and perforation, with obstruction.67 

533.40 ............................ Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, without mention of obstruction.693 

533.41 ............................ Chronic or unspecified peptic ulcer of unspecified site with hemorrhage, with obstruction .................. 17 

533.50 ............................ Chronic or unspecified peptic ulcer of unspecified site with perforation, without mention of obstruction.128 

533.51 ............................ Chronic or unspecified peptic ulcer of unspecified site with perforation, with obstruction ..................... 8 

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

mention of obstruction.

53 


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TABLE 3—TOTAL NUMBER OF EPISODES FOR SELECTED ICD–9–CM DIAGNOSIS CODES, CY 2012—Continued 

ICD-9-CM code ICD-9-CM long description 

Number of 

episodes, CY 

2012 

533.61 ............................ Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction.9 

533.71 ............................ Chronic peptic ulcer of unspecified site without mention of hemorrhage or perforation, with obstruction.72 

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

perforation, with obstruction.

266 

534.00 ............................ Acute gastrojejunal ulcer with hemorrhage, without mention of obstruction .......................................... 116 

534.01 ............................ Acute gastrojejunal ulcer, with hemorrhage, with obstruction ................................................................ 7 

534.10 ............................ Acute gastrojejunal ulcer with perforation, without mention of obstruction ............................................ 20 

534.11 ............................ Acute gastrojejunal ulcer with perforation, with obstruction ................................................................... 6 

534.20 ............................ Acute gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction ................ 15 

534.21 ............................ Acute gastrojejunal ulcer with hemorrhage and perforation, with obstruction ....................................... 2 

534.31 ............................ Acute gastrojejunal ulcer without mention of hemorrhage or perforation, with obstruction ................... 6 

534.40 ............................ Chronic or unspecified gastrojejunal ulcer with hemorrhage, without mention of obstruction ............... 103 

534.41 ............................ Chronic or unspecified gastrojejunal ulcer, with hemorrhage, with obstruction ..................................... 8 

534.50 ............................ Chronic or unspecified gastrojejunal ulcer with perforation, without mention of obstruction ................. 26 

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

534.60 ............................ Chronic or unspecified gastrojejunal ulcer with hemorrhage and perforation, without mention of obstruction.6 

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

534.71 ............................ Chronic gastrojejunal ulcer without mention of hemorrhage or perforation, with obstruction ................ 3 

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

with obstruction.

32 

535.01 ............................ Acute gastritis, with hemorrhage ............................................................................................................ 652 

535.11 ............................ Atrophic gastritis, with hemorrhage ........................................................................................................ 108 

535.21 ............................ Gastric mucosal hypertrophy, with hemorrhage ..................................................................................... 13 

535.31 ............................ Alcoholic gastritis, with hemorrhage ....................................................................................................... 61 

535.41 ............................ Other specified gastritis, with hemorrhage ............................................................................................. 332 

535.51 ............................ Unspecified gastritis and gastroduodenitis, with hemorrhage ................................................................ 659 

535.61 ............................ Duodenitis, with hemorrhage .................................................................................................................. 91 

535.71 ............................ Eosinophilic gastritis, with hemorrhage .................................................................................................. 3 

536.1 .............................. Acute dilatation of stomach ..................................................................................................................... 23 

537.3 .............................. Other obstruction of duodenum .............................................................................................................. 280 

537.4 .............................. Fistula of stomach or duodenum ............................................................................................................ 343 

537.6 .............................. Hourglass stricture or stenosis of stomach ............................................................................................ 14 

537.83 ............................ Angiodysplasia of stomach and duodenum with hemorrhage ................................................................ 304 

537.84 ............................ Dielulafoy lesion (hemorrhagic) of stomach and duodenum .................................................................. 50 

540.0 .............................. Acute appendicitis with generalized peritonitis ....................................................................................... 764 

540.1 .............................. Acute appendicitis with peritoneal abscess ............................................................................................ 458 

540.9 .............................. Acute appendicitis without mention of peritonitis .................................................................................... 656 

541. ................................ Appendicitis, unqualified ......................................................................................................................... 385 

542. ................................ Other appendicitis ................................................................................................................................... 43 

543.0 .............................. Hyperplasia of appendix (lymphoid) ....................................................................................................... 4 

557.0 .............................. Acute vascular insufficiency of intestine ................................................................................................. 1,453 

560.0 .............................. Intussusception ....................................................................................................................................... 145 

560.1 .............................. Paralytic ileus .......................................................................................................................................... 2,050 

560.2 .............................. Volvulus ................................................................................................................................................... 1,057 

560.81 ............................ Intestinal or peritoneal adhesions with obstruction (postoperative) (postinfection) ................................ 1,355 

560.89 ............................ Other specified intestinal obstruction ...................................................................................................... 1,310 

560.9 .............................. Unspecified intestinal obstruction ........................................................................................................... 12,860 

562.02 ............................ Diverticulosis of small intestine with hemorrhage ................................................................................... 230 

562.03 ............................ Diverticulitis of small intestine with hemorrhage ..................................................................................... 189 

562.12 ............................ Diverticulosis of colon with hemorrhage ................................................................................................. 2,699 

562.13 ............................ Diverticulitis of colon with hemorrhage ................................................................................................... 2,193 

567.0 .............................. Peritonitis in infectious diseases classified elsewhere ........................................................................... 30 

567.1 .............................. Pneumococcal peritonitis ........................................................................................................................ 8 

567.21 ............................ Peritonitis (acute) generalized ................................................................................................................ 213 

567.22 ............................ Peritoneal abscess .................................................................................................................................. 2,715 

567.23 ............................ Spontaneous bacterial peritonitis ............................................................................................................ 219 

567.29 ............................ Other suppurative peritonitis ................................................................................................................... 210 

567.31 ............................ Psoas muscle abscess ........................................................................................................................... 318 

567.38 ............................ Other retroperitoneal abscess ................................................................................................................. 230 

567.81 ............................ Choleperitonitis ........................................................................................................................................ 33 

567.82 ............................ Sclerosing mesenteritis ........................................................................................................................... 116 

567.89 ............................ Other specified peritonitis ....................................................................................................................... 107 

567.9 .............................. Unspecified peritonitis ............................................................................................................................. 910 

568.81 ............................ Hemoperitoneum (nontraumatic) ............................................................................................................ 265 

569.3 .............................. Hemorrhage of rectum and anus ............................................................................................................ 2,161 

569.83 ............................ Perforation of intestine ............................................................................................................................ 2,610 

569.85 ............................ Angiodysplasia of intestine with hemorrhage ......................................................................................... 196 


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TABLE 3—TOTAL NUMBER OF EPISODES FOR SELECTED ICD–9–CM DIAGNOSIS CODES, CY 2012—Continued 

ICD-9-CM code ICD-9-CM long description 

Number of 

episodes, CY 

2012 

569.86 ............................ Dieulafoy lesion (hemorrhagic) of intestine ............................................................................................ 15 

572.0 .............................. Abscess of liver ....................................................................................................................................... 1,134 

572.1 .............................. Portal pyemia .......................................................................................................................................... 25 

574.00 ............................ Calculus of gallbladder with acute cholecystitis, without mention of obstruction ................................... 1,850 

574.01 ............................ Calculus of gallbladder with acute cholecystitis, with obstruction .......................................................... 435 

574.10 ............................ Calculus of gallbladder with other cholecystitis, without mention of obstruction ................................... 1,205 

574.11 ............................ Calculus of gallbladder with other cholecystitis, with obstruction ........................................................... 184 

574.21 ............................ Calculus of gallbladder without mention of cholecystitis, with obstruction ............................................. 425 

574.30 ............................ Calculus of bile duct with acute cholecystitis, without mention of obstruction ....................................... 308 

574.31 ............................ Calculus of bile duct with acute cholecystitis, with obstruction .............................................................. 190 

574.41 ............................ Calculus of bile duct with other cholecystitis, with obstruction ............................................................... 81 

574.51 ............................ Calculus of bile duct without mention of cholecystitis, with obstruction ................................................. 371 

574.60 ............................ Calculus of gallbladder and bile duct with acute cholecystitis, without mention of obstruction ............. 187 

574.61 ............................ Calculus of gallbladder and bile duct with acute cholecystitis, with obstruction .................................... 125 

574.71 ............................ Calculus of gallbladder and bile duct with other cholecystitis, with obstruction ..................................... 41 

574.80 ............................ Calculus of gallbladder and bile duct with acute and chronic cholecystitis, without mention of obstruction.86 

574.81 ............................ Calculus of gallbladder and bile duct with acute and chronic cholecystitis, with obstruction ................ 36 

574.91 ............................ Calculus of gallbladder and bile duct without cholecystitis, with obstruction ......................................... 58 

575.0 .............................. Acute cholecystitis ................................................................................................................................... 4,728 

575.2 .............................. Obstruction of gallbladder ....................................................................................................................... 131 

575.3 .............................. Hydrops of gallbladder ............................................................................................................................ 20 

575.4 .............................. Perforation of gallbladder ........................................................................................................................ 90 

576.1 .............................. Cholangitis ............................................................................................................................................... 1,556 

576.2 .............................. Obstruction of bile duct ........................................................................................................................... 1,417 

576.3 .............................. Perforation of bile duct ............................................................................................................................ 21 

577.0 .............................. Acute pancreatitis .................................................................................................................................... 8,033 

578.0 .............................. Hematemesis .......................................................................................................................................... 287 

578.9 .............................. Hemorrhage of gastrointestinal tract, unspecified .................................................................................. 23,650 

998.11 ............................ Hemorrhage complicating a procedure ................................................................................................... 369 

998.12 ............................ Hematoma complicating a procedure ..................................................................................................... 2,337 

998.2 .............................. Accidental puncture or laceration during a procedure, not elsewhere classified ................................... 635 

Source: Medicare claims data for episodes ending in CY 2012 (as of June 30, 2013) for a 100 percent sample of beneficiaries for which we 

had a linked OASIS assessment. 

Furthermore, the National Guideline 

Clearinghouse, a public resource for 

evidence-based clinical practice 

guidelines, was also consulted to 

determine the most current standards of 

practice regarding these conditions. The 

evidence-based practice guidelines 

further lend support that the proposed 

category 1 diagnosis codes, including 

those mentioned by the commenters, are 

conditions that typically warrant initial 

acute care interventions either in the 

inpatient, outpatient or emergency 

department setting. Clinical practice 

guidelines for a variety of conditions 

can be found at the National 

Clearinghouse Guidelines Web site at 

the following: http://

www.guideline.gov/browse/by-topicdetail.aspx?id=11560&ct=1. 

We are in agreement with the 

commenters who stated that patients 

with these acute diagnoses require 

ongoing home care for services such as 

home infusion of antibiotics and total 

parenteral nutrition, wound care, drain 

care, lab work, and symptom 

management. These are aftercare 

services that are required by patients 

who have been diagnosed and initially 

treated for the listed diseases or 

diagnoses. These aftercare services are 

ideally provided by home health 

providers and these services can be 

safely administered in the home 

environment as long as Medicare 

beneficiaries meet home health care 

eligibility requirements. As discussed 

earlier, there are appropriate ICD–9–CM 

aftercare codes that can be listed on the 

OASIS assessment to more fully explain 

the home health care interventions 

being provided. We are stating that 

those codes should be listed on the 

OASIS assessment form to best explain 

the reasons for the home health 

encounter. The disease states 

precipitating these services can still be 

listed on the OASIS assessment, but 

they are not the primary reason for the 

home health interventions. Therefore, 

these ICD–9–CM diagnosis codes would 

not be part of the HH PPS Grouper as 

there are other aftercare diagnosis codes 

which are more appropriate to be listed 

as the reason for home health needs per 

ICD–9–CM Coding Guidelines. 

As for the ICD–9–CM diagnosis codes 

mentioned by the commenters, 

‘‘esophageal reflux’’ and ‘‘restless leg 

syndrome’’, that are classified as 

Category 2 in Table 2 (meaning these 

codes that would not require HH 

intervention, would not impact the HH 

plan of care, or would not result in 

additional resource use when providing 

HH services to the patient), these two 

codes listed as the primary diagnosis 

alone do not necessarily warrant home 

health interventions. The fact that an 

individual has been diagnosed with 

either of these chronic conditions does 

not provide sufficient cause for an 

increase in home health resource use. 

They can be listed on the OASIS 

assessment to more fully describe the 

home health patient, but the expectation 

is that a stable, chronic condition would 

not be listed as the primary reason for 

the home health referral or the need for 

home health interventions. However, for 

acute exacerbations or complications 

from these two conditions, there are 

other ICD–9–CM diagnosis codes within 

the HH PPS Grouper that more 

specifically identify the need for home 

health services and the interventions 

that would be required for their 

management. We are stating that 

providers should first list those 


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1https://www.cms.gov/Medicare/DemonstrationProjects/DemoProjectsEvalRpts/Downloads/IAH_

Solicitation.pdf 

appropriate ICD–9–CM diagnosis codes 

if they are the primary reason for home 

health services, have an impact on the 

home health plan of care or would 

result in additional home health 

resources. 

Comment: Some commenters made 

the recommendation that CMS should 

form a workgroup with other home 

health stakeholders to further determine 

whether these ICD–9–CM diagnosis 

codes should be removed from the HH 

PPS Grouper. A few commenters 

believed that we should delay removing 

these diagnosis codes until the 

implementation of ICD–10–CM on 

October 1, 2014. Several commenters 

acknowledged that most of these codes 

are inappropriate for use in the home 

health setting because of the high acuity 

level associated with the initial 

treatment of these conditions. 

Response: We believe that sufficient 

analysis and discussion has been 

conducted regarding the removal of 

these 170 ICD–9–CM diagnosis codes. In 

the CY 2014 HH PPS proposed rule, we 

noted that the review of these ICD–9– 

CM diagnosis codes included CMS 

clinical staff (including doctors and 

nurses) as well as with the clinicians 

and certified coding staff from Abt 

Associates (our support contractor) and 

3M (our HH PPS Grouper maintenance 

contractor). This review received input 

from a variety of clinicians to ensure 

that the proposed removal of any 

diagnosis codes would be done in a 

thoughtful, clinically responsible 

manner. We do not believe that delaying 

the effective date of this proposal to 

correspond to the implementation of 

ICD–10–CM is necessary because these 

codes are infrequently used diagnosis 

codes on the OASIS assessment and 

only a small number of home health 

providers will be impacted by their 

removal from the HH PPS Grouper. 

Comment: A few commenters 

believed that removal of these 170 ICD– 

9–CM diagnosis codes would have a 

detrimental impact on Accountable Care 

Organization (ACO) and Independence 

at Home (IAH) demonstration programs. 

Response: We disagree that the 

removal of these diagnosis codes would 

have a detrimental impact on current 

demonstration programs. For 

participation in IAH demonstration 

programs eligibility requirements are as 

stated: ‘‘Eligibility criteria are designed 

to target the most costly beneficiaries 

with advanced chronic illnesses and 

substantial disabilities. Beneficiaries 

must be entitled to Part A and enrolled 

in Part B, not enrolled in a Medicare 

Advantage plan or a Program for AllInclusive Care for the Elderly, and 

cannot be enrolled in a practice that is 

part of the Medicare Shared Savings 

Program or other shared savings 

demonstrations. Applicable 

beneficiaries are defined as Medicare 

FFS patients who have at least two 

chronic illnesses, such as congestive 

heart failure, diabetes, chronic 

obstructive pulmonary disease, 

ischemic heart disease, stroke, 

dementias such as Alzheimer’s disease, 

neurodegenerative diseases, and other 

diseases and conditions designated by 

the Secretary that result in high costs. 

Rather than specifying a list of chronic 

conditions, CMS, for purposes of this 

demonstration, is defining chronic 

disease or condition to mean a disease 

or medical condition that is expected to 

last for more than 1 year, limits what a 

person can do, and requires ongoing 

medical monitoring. Beneficiaries must 

also need human assistance with two or 

more activities of daily living (ADLs), 

have had a non-elective hospital 

admission within the last 12 months, 

and have used acute or sub-acute 

rehabilitation services within the last 12 

months. Although practices will report 

chronic conditions and ADL limitations, 

chronic conditions and ADLs are subject 

to medical record audit.1’’ The goal of 

ACOs is to provide coordinated care 

across various health care providers and 

care transitions. With this type of care 

model, the expectation is collaborative, 

coordinated care will result in high 

quality, cost-effective care. We expect 

that with each care transition, the 

appropriate ICD–9–CM codes, per ICD– 

9–CM Coding Guidelines, would be 

listed on comprehensive assessment and 

claims forms. Hospital at home 

programs typically focus on chronic 

conditions that typically have 

exacerbation risks such as congestive 

heart failure, chronic obstructive 

pulmonary disease and cellulitis. As 

such, removal of the ICD–9–CM 

diagnosis codes from assignment to one 

of our diagnosis groups within the HH 

PPS Grouper should not have an impact 

on programs such as ACO and IAH 

demonstrations. 

Comment: A few commenters stated 

that the removal of these 170 diagnosis 

codes from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper goes against the technological 

advancements of telemedicine and 

telehealth. Other commenters believed 

that this change could create a potential 

professional liability risk issue. 

Response: We do not believe the 

removal of these seldom used diagnosis 

codes from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper would impede any advances in 

technology or innovations in the 

delivery of care. Home health delivers 

care to those Medicare beneficiaries 

who are homebound but require 

ongoing health care services. We believe 

that the primary method for this care in 

the home health environment is handson care, meaning healthcare providers 

come to the individual’s home to 

provide the care and services needed 

based on the comprehensive assessment 

and home health plan of care in 

collaboration with the patient and the 

referring physician. Telehealth and 

telemedicine should be considered an 

adjunct to, not a replacement of, the 

variety of comprehensive home health 

care services available for eligible 

Medicare beneficiaries. We do 

encourage all healthcare providers, 

across all healthcare settings to be 

innovative in their delivery of services 

and to incorporate models of care to 

fully utilize technology to best meet the 

needs of their patient populations. 

Section 1895(e) of the Act governs the 

HH PPS and provides that telehealth 

services are outside the scope of the 

Medicare home health benefit and HH 

PPS. The law does not permit the 

substitution or use of a 

telecommunications system to provide 

any covered home health services paid 

under the home health PPS, or any 

covered home health service paid 

outside of the HH PPS. As stated in our 

regulations at § 409.48(c), a visit is an 

episode of personal contact with the 

beneficiary by staff of the home health 

agency (HHA), or others under 

arrangements with the HHA for the 

purposes of providing a covered service. 

The provision clarifies that there is 

nothing to preclude an HHA from 

adopting telemedicine or other 

technologies that they believe promote 

efficiencies, but that those technologies 

will not be specifically recognized or 

reimbursed by Medicare under the 

home health benefit. 

In addition, we do not believe that by 

removing the proposed ICD–9–CM 

diagnosis codes from assignment to one 

of our diagnosis groups within the HH 

PPS Grouper that there will be any 

increased liability risks on providers. 

We do believe that referring physicians 

will continue to use their best clinical 

judgment to diagnose, to make treatment 

recommendations, and to determine the 

appropriate services and resources 

needed for the delivery of quality, safe 

care for their patients. Collaboration and 

communication between referring 

physicians and home health providers 

are two factors to help minimize risk 


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when caring for Medicare beneficiaries 

who are receiving home health services. 

Comment: A couple of commenters 

stated that our removal of the 170 codes 

from assignment to one of our diagnosis 

groups within the HH PPS Grouper 

serves only to reduce overall payments 

by 0.5 percent, reducing overall 

payments by $100 million in 2014 

alone. 

Response: As outlined in the CY 2014 

HH PPS proposed rule, the removal of 

the 170 codes encourages compliance 

with ICD–9–CM coding guidelines and 

ensures that conditions that are either 

too acute to be treated in a home health 

setting or do not represent the resources 

assigned to a diagnosis group are 

removed from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper. We contend that the removal 

of these codes is appropriate, either 

because these conditions cannot be 

appropriately treated in a home health 

setting, or because these conditions do 

not impact the home health plan of care 

and result in overpayments to HHAs. 

Comment: A few commenters stated 

that the removal of these diagnosis 

codes may impact the accuracy of the 

HH PPS case-mix model. 

Response: We proposed to remove the 

170 codes from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper because we concluded that the 

codes were not reflecting actual 

conditions being treated or that the 

condition had no impact on resource 

use. We note that the HH PPS case-mix 

model was originally designed with 

general code categories. Since the basis 

for proposing to remove the 170 

diagnosis codes from assignment to one 

of our diagnosis groups within the HH 

PPS Grouper was that either (a) they 

were not reflecting the actual condition 

being treated in home health, or (b) the 

condition would not impact resource 

use, eliminating them should have 

minimal impact on the accuracy of the 

HH PPS case-mix model. The impact of 

any single diagnosis on a case mix 

assignment depends on the 

accumulation of points from other 

conditions. It is often the case that the 

clinical component in the case-mix 

model does not change because of the 

removal of one source of points. Those 

agencies that are treating patients with 

conditions in category 2, will no longer 

receive additional reimbursement for 

conditions that do not require the same 

level of resources as other conditions 

within that diagnosis group (see Table 

4). 

TABLE 4—AVERAGE RESOURCES FOR SELECTED ICD–9–CM DIAGNOSIS CODES COMPARED TO AVERAGE RESOURCES

FOR THE DIAGNOSIS GROUP, CY 2012 

ICD–9–CM Code ICD–9–CM long description Mean 

resources 

Mean resources for diagnosis group Number of 

episodes, 

CY 2012 

282.5 ................... Sickle-cell trait ............................................................................................ 521.62 493.49 340 

333.81 ................. Blepharospasm .......................................................................................... 565.55 598.95 110 

333.84 ................. Organic writers’ cramp ............................................................................... 111.76 598.95 1 

333.93 ................. Benign shuddering attacks ......................................................................... 595.90 598.95 4 

333.94 ................. Restless legs syndrome (RLS) .................................................................. 507.32 598.95 25,655 

530.81 ................. Esophageal reflux ...................................................................................... 499.01 510.45 726,692 

569.43 ................. Anal sphincter tear (healed) (old) .............................................................. 352.26 510.45 7 

873.63 ................. Open wound of tooth (broken) (fractured) (due to trauma), without mention of complication.447.74 635.52 21 

Source: Medicare claims data for episodes ending in CY 2012 (as of June 30, 2013) for a 100 percent sample of beneficiaries for which we 

had a linked OASIS assessment. 

Comment: A commenter stated that 

CMS should delay the removal of codes 

until after ICD–10–CM implementation 

similar to the delay granted to Inpatient 

Rehabilitation Facilities because the full 

cost ramifications cannot be predicted 

without a crosswalk of codes and values 

from ICD–9–CM to ICD–10–CM. 

Commenters also requested that the 

removal of the 170 diagnosis codes from 

assignment to one of our diagnosis 

groups within the HH PPS Grouper be 

done in a budget neutral manner. 

Response: To prevent additional 

inaccurate overpayments and because 

the payment impact has been analyzed, 

we do not agree that a delay in removing 

these codes until after ICD–10–CM 

implementation is warranted. As we 

stated above, we contend that the 

removal of these codes from assignment 

to one of our diagnosis groups within 

the HH PPS Grouper is appropriate 

either because these conditions cannot 

be appropriately treated in a home 

health setting, or because these 

conditions would not impact the home 

health plan of care and result in 

overpayments to HHAs. We will provide 

the ICD–10–CM codes and the 

diagnostic group to which the codes are 

assigned in the ICD–10–CM Grouper, 

which will be posted to our Web site in 

July 2014. 

Comment: A couple of commenters 

stated that their analysis of the impact 

showed a greater impact and contended 

that this demonstrates common use of 

these codes. 

Response: We based our payment 

impact analysis upon 2012 claims data 

and assumptions were included in our 

analysis whereby for certain conditions 

we believe that coding behavior 

adjustments would result in the 

assignment of another diagnosis code 

within the same diagnosis group leading 

to the same case-mix weight as what is 

currently awarded. 

Comment: A commenter stated that in 

2000, when the HH PPS was created, 

costs and revenues were based on 

appropriately identified ICD–9–CM 

codes, including the 170 proposed for 

deletion. 

Response: In 2000, the HH PPS 

identified ICD–9–CM codes and 

awarded points specific to orthopedic, 

neurologic and diabetes. A majority of 

these 170 codes were not included in 

the 2000 HH PPS. In addition, most of 

the diagnosis codes included in the 

2000 HH PPS were assigned at the code 

category level with the exception of 

certain orthopedic, neurologic and 

diabetic conditions within a particular 

code category which based upon 

clinical judgment and coding practices 

were inappropriate for home care. In the 

2008 refinement, we added additional 

diagnosis groups and specified the 

appropriate four and five digit diagnosis 

codes. In our review of the current 

diagnosis codes in preparation for 

transition to ICD–10–CM reporting, we 

found that these 170 codes were 

mistakenly included. 

Comment: A commenter agreed with 

our assessment that many of the 

conditions were too acute or did not 


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impact the plan of care but requested 

additional guidance from CMS in 

reducing coding errors by educating 

home health agencies on common 

coding errors, publish frequently asked 

questions and open door forums on this 

issue. 

Response: It is our intent to provide 

ongoing communication, collaboration 

and education with home health 

providers to ensure that adequate 

guidance is provided. This 

communication will not be limited to 

the release of Change Requests, which 

can be found on our home health Web 

site at http://www.cms.gov/Regulationsand-Guidance/Guidance/Transmittals/

index.html. Additionally, we encourage 

all interested stakeholders to participate 

in the CMS Home Health and Hospice 

Open Door Forums where questions, 

concerns and issues can be addressed 

with specialists within CMS. 

Information regarding Open Door 

Forums can be found on our Web site 

at http://www.cms.gov/Outreach-andEducation/Outreach/OpenDoorForums/

index.html. 

Final Decision: We are finalizing the 

removal of 170 ICD–9–CM diagnosis 

codes from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper as proposed, effective January 

1, 2014. 

B. International Classification of 

Diseases, 10th Revision, Clinical 

Modification (ICD–10–CM) Conversion 

and Diagnosis Reporting on Home 

Health Claims 

1. International Classification of 

Diseases, 10th Revision, Clinical 

Modification (ICD–10–CM) Conversion 

The compliance date for adoption of 

the ICD–10–CM and ICD–10–PCS 

Medical Data Code Set is October 1, 

2014, as announced in the September 5, 

2012 final rule, ‘‘Administrative 

Simplification: Adoption of a Standard 

for a Unique Health Plan Identifier; 

Addition to the National Provider 

Identifier Requirements; and a Change 

to the Compliance Date for the 

International Classification of Diseases, 

10th Edition (ICD–10–CM and ICD–10– 

PCS) Medical Data Code Sets’’ (77 FR 

54664). Under that final rule, the 

transition to ICD–10–CM is required for 

entities covered by the Health Insurance 

Portability and Accountability Act of 

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

on August 21, 1996). CMS, along with 

our support contractors, Abt Associates 

and 3M, have spent the last 2 years 

implementing a process for the 

transition from the use of ICD–9–CM 

diagnosis codes to ICD–10–CM 

diagnosis codes within the HH PPS 

Grouper. As we outlined in section IV.A 

in this final rule and also in the CY 2014 

HH PPS proposed rule (78 FR 40276), 

we began this process with a review of 

the ICD–9–CM codes included in our 

HH PPS Grouper and identified certain 

codes that should be removed from 

assignment to one of our diagnosis 

groups within the HH PPS Grouper, and 

thus will not be included in our 

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

CM codes. 

3M produced a translation list using 

the General Equivalency Mappings 

(GEMs) tool. That translation list, 

produced by the GEMs tool, was then 

reviewed and revised to ensure the 

included codes are appropriate for use 

in the HH setting, based upon ICD–10– 

CM coding guidance. Modifications 

included: 

• Elimination of codes with ‘‘initial 

encounter’’ extensions listed in the 

GEMs translation. ICD–10–CM codes 

that begin with S and T are used for 

reporting traumatic injuries, such as 

fractures and burns. These codes have a 

7th character that indicates whether the 

treatment is for an initial encounter, 

subsequent encounter or a sequela (a 

residual effect (condition produced) 

after the acute phase of an illness or 

injury has terminated). The GEMs 

translation mapped ICD–9–CM 

traumatic injury codes to ICD–10–CM 

codes with the 7th character for an 

initial encounter. This extension is 

intended to be used when the patient is 

receiving active treatment such as 

surgical treatment, an emergency 

department encounter, or evaluation 

and treatment by a new physician. 

These initial encounter extension codes 

are not appropriate for care in the HH 

setting and were deleted. Code 

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

Q and R indicate the patient is being 

treated for a subsequent encounter (care 

for the injury during the healing or 

recovery phase) and were included in 

the translation list in place of the initial 

encounter extensions. For example, 

S72.024A ‘‘Nondisplaced fracture of 

epiphysis (separation) (upper) of right 

femur, initial encounter for closed 

fracture’’ was deleted and S72.024D, 

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

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

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

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

for the reporting of aftercare provided 

by the HHA. 

• Elimination of codes for nonspecific conditions when the clinician 

should be able to identify a more 

specific diagnosis based on clinical 

assessment. The initial GEMs 

translation included non-specific codes, 

for example, ICD–10–CM code L02.519 

‘‘cutaneous abscess of unspecified 

hand’’. These have been deleted from 

the translation list whenever a more 

specific diagnosis could be identified by 

the clinician performing the initial 

assessment. The example code above 

(L02.519) was deleted because the 

clinician should be able to identify 

which hand had the abscess, and 

therefore, would report the injury using 

the code that specifies the right or left 

hand. 

• The diagnostic group (DG) 

assignment of ICD–10–CM codes in the 

translation replicates the ICD–9–CM 

assignment whenever possible. Since 

ICD–9–CM to ICD–10–CM translation is 

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

cases where the DG assignment was 

ambiguous. When there was a conflict 

(such as two ICD–9–CM codes being 

translated to a single ICD–10–CM code 

that covered both conditions), DG 

assignment was based on clinical 

appropriateness and comparisons of 

relative resource use data (when 

available), such that the code was 

assigned to single DG that included 

other codes with similar resource use. 

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

included in the HH PPS Grouper was 

developed based upon the process 

outlined above, and 3M, our HH PPS 

Grouper maintenance contractor, is in 

the process of building and testing a 

Grouper version for use starting October 

1, 2014, when OASIS–C1, the new 

version of the OASIS assessment which 

will use ICD–10–CM diagnosis codes, 

will be implemented. The draft 

translation list was made available on 

the CMS HHA Center Web site at 

http://www.cms.gov/Center/ProviderType/Home-Health-Agency-HHACenter.html. We plan to post the draft 

ICD–10–CM HH PPS Grouper via the 

CMS Web site on or before July 1, 2014. 

We also plan to share the draft ICD–10– 

CM HH PPS Grouper with those vendors 

that have registered as beta-testers in 

advance of posting the draft ICD–10 HH 

PPS Grouper on the CMS Web site. The 

purpose of early release to the beta 

testers is to identify any significant 

issues early in the process. Providers 

who are interested in enrolling as a beta 

site can obtain more information on the 

HH PPS Grouper Web site at http://

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

CaseMixGrouperSoftware.html. 

The following is a summary of the 

comments we received regarding the 

adoption of the International 

Classification of Diseases, 10th 

Revision, Clinical Modification (ICD– 

10–CM) Conversion. 

Comment: One commenter suggested 

that CMS consider providing additional 


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lead time for software vendors and 

agencies to test and make the systems 

changes necessary to submit ICD–10– 

CM claims on October 1, 2014. The 

commenter suggested that the draft 

Grouper be made available by May 1, 

2014 versus July 1, 2014. 

Response: In consultation with our 

support contractor a timeline was built 

for implementation of an ICD–10–CM 

Grouper. The timeline requires a 

translation list and final decisions on 

logic to be completed prior to the 

release of a draft Grouper. The 

translation list and final decisions on 

logic will not be completed early 

enough for us to commit to an earlier 

delivery date than July 1, 2014. 

Comment: One commenter stated that 

they are not able to fully assess the cost 

impact of the transition from ICD–9–CM 

to ICD–10–CM reporting without a 

crosswalk of codes and code values. 

Response: The diagnostic group 

assignment of ICD–10–CM codes in our 

draft list of codes replicates the ICD–9– 

CM assignment where possible. Because 

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

we cannot always directly and 

succinctly crosswalk ICD–9–CM codes 

to ICD–10–CM codes. However, we have 

provided the ICD–10–CM codes and the 

diagnostic group to which the codes 

were assigned. We plan to have the 

ICD–10–CM Grouper posted to our Web 

site in July 2014 for use by home health 

agencies. 

Comment: One commenter expressed 

concern that the elimination of certain 

non-specific ICD–10–CM codes would 

increase the administrative burden on 

home health agencies by requiring a 

higher level of expertise in coding and 

one commenter expressed concern 

about the administrative costs 

associated with the implementation of 

the ICD–10–CM reporting. 

Response: The only non-specific ICD– 

10–CM codes that were not included in 

our translation were those where the 

clinician could identify a more specific 

diagnosis during the initial assessment. 

We believe that requiring more specific 

coding does not increase administrative 

burden but rather encourages the 

reporting of a specific, more accurate, 

diagnosis based upon the assessment 

performed in compliance with ICD–10– 

CM coding guidelines that requires 

coding to the highest level of specificity. 

We note that transition to ICD–10–CM is 

required for entities covered by the 

Health Insurance Portability and 

Accountability Act of 1996 and the 

compliance date for adoption of the 

ICD–10–CM and ICD–10–PCS Medical 

Data Code Set is October 1, 2014, as 

announced in the Federal Register, 

September 5, 2012 final rule (77 FR 

54664), ‘‘Administrative Simplification: 

Adoption of a Standard for a Unique 

Health Plan Identifier; Addition to the 

National Provider Identifier 

Requirements; and a Change to the 

Compliance Date for the International 

Classification of Diseases, 10th Edition 

(ICD–10–CM and ICD–10–PCS) Medical 

Data Code Sets. The Secretary has 

announced that all entities, including 

HHAs, must be in compliance with 

adoption of ICD–10–CM and ICD–10– 

PCS Medical Data Code Set October 1, 

2014. 

2. Diagnosis Reporting on Home Health 

Claims 

Adherence to ICD–9–CM and ICD–10– 

CM coding guidelines when assigning 

diagnosis codes is required under 

HIPAA. 3M conducted analysis of 

OASIS records and claims from CY 2011 

and found that some HHAs were not 

complying with ICD–9–CM coding 

guidelines. Section 1.A.6 in the 2012 

ICD–9–CM Coding Guidelines require 

that the underlying condition be 

sequenced first followed by the 

manifestation. Wherever such a 

combination exists, there is a ‘‘use 

additional code’’ note at the etiology 

code, and a ‘‘code first’’ note at the 

manifestation code. These instructional 

notes indicate the proper sequencing 

order of the codes, etiology followed by 

manifestation. In most cases, the title of 

these manifestation codes will include 

‘‘in diseases classified elsewhere’’ or ‘‘in 

conditions classified elsewhere.’’ Codes 

with these phrases in the title are 

generally manifestation codes. ‘‘In 

diseases classified elsewhere’’ or ‘‘in 

conditions classified elsewhere’’ codes 

are never permitted to be used as first 

listed or principal diagnosis codes and 

they must be listed following the 

underlying condition. In ICD–10–CM, 

the same coding convention applies and 

can be found in section 1.A.13 of the 

ICD–10–CM guidance. Note, however, 

that there are also other manifestation 

codes that do not have ‘‘in diseases 

classified elsewhere’’ or ‘‘in conditions 

classified elsewhere’’ in their title. For 

such codes a ‘‘use additional code’’ note 

will still be present, and the rules for 

coding sequencing still apply. It should 

be noted that several dementia codes, 

which are not allowable as principal 

diagnoses per ICD–9–CM coding 

guidelines, are under the classification 

of ‘‘Mental, Behavioral and 

Neurodevelopmental Disorders.’’ 

According to section 1.A6 of the ICD– 

9–CM coding guidelines for ‘‘Mental, 

Behavioral and Neurodevelopmental 

Disorders’’, dementias that fall under 

this category are ‘‘most commonly a 

secondary manifestation of an 

underlying causal condition.’’ To ensure 

additional compliance with ICD–10–CM 

Coding Guidelines, we noted in the CY 

2014 HH PPS proposed rule that we will 

be adopting additional claims 

processing edits for all HH claims 

effective October 1, 2014. HH claims 

containing inappropriate principal or 

secondary diagnosis codes will be 

returned to the provider and will have 

to be corrected and resubmitted to be 

processed and paid. Additional details 

describing the specific edits that will be 

applied will be announced through a 

change request, an accompanying 

Medicare Learning Network article, and 

other CMS communication channels, 

such as the HH, Hospice, and DME 

Open Door Forum. 

Finally, effective October 1, 2014, 

with the implementation of ICD–10–CM 

diagnosis code reporting, we anticipate 

that HHAs will be able to report all of 

the conditions included in the HH PPS 

Grouper as a primary or secondary 

diagnosis. There will no longer be a 

need for any conditions to be reported 

in the payment diagnosis field because 

all of the ICD–10–CM codes included in 

our HH PPS Grouper will be appropriate 

for reporting as a primary or secondary 

condition. As such, we are retiring 

Appendix D of OASIS (also referred to 

as Attachment D), effective October 1, 

2014. All necessary guidance for 

providers is provided in the ICD–10–CM 

Coding Guidelines. 

No comments were received regarding 

the clarification on Diagnosis Reporting 

on Home Health Claims. 

C. Adjustment to the HH PPS Case-Mix 

Weights 

As described in section IV.D. of this 

rule, we are rebasing the national, 

standardized 60-day episode payment 

rate. In the CY 2014 proposed rule, we 

stated that a goal of rebasing is to reset 

the base payments under the HH PPS. 

When the HH PPS was created, we 

expected that the average case-mix 

weight would be around 1.0000, but 

analysis has shown that it has 

consistently been above 1.0000 since the 

start of the HH PPS. Therefore, as part 

of rebasing, for CY 2014, we proposed 

to use the 2012 case-mix weights, but 

lower them to an average case-mix 

weight of 1.0000. We also proposed to 

increase the national, standardized 60- 

day episode payment rate by the same 

factor used to lower the rates to 1.0000, 

making the downward adjustment to the 

weights budget neutral. As we noted in 

the proposed rule, in applying the same 

reduction factor to each weight we are 

still maintaining the relative values in 

the weight set. Preliminary CY 2012 

claims data on non-LUPA episodes 


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starting from January 1, 2012 to May 31, 

2012 showed that the average case-mix 

weight for non-LUPA episodes in 2012 

was 1.3517. In the CY 2014 proposed 

rule, we stated that as more 2012 data 

become available, we planned to update 

the estimated average case-mix weight 

for CY 2012 and adjust the case-mix 

weights and budget neutrality factor 

accordingly. 

The following is a summary of the 

comments we received regarding the 

proposed adjustment to the HH PPS 

case-mix weights. 

Comment: One commenter supported 

the case-mix update reset, particularly 

given the proposed changes to rebase 

the HH payments 

Response: We thank the commenter 

for the comment. 

Comment: Commenters stated that 

CMS did not account for the removal of 

the ICD–9–CM codes from the case-mix 

system, which is estimated to drop the 

average case-mix weight from 1.3517 to 

1.3417, in either the adjustment to the 

case-mix weights or the payment rates. 

Response: We find these comments 

compelling and we plan to change the 

adjustment to the weights so that it 

reflects the estimated average case-mix 

after the removal of the ICD–9–CM 

codes from assignment to one of our 

diagnosis groups within the HH PPS 

Grouper. See also section IV.D. where 

we discuss how using the average casemix in CY 2012, after the removal of the 

ICD–9–CM codes from assignment to 

one of our diagnosis groups within the 

HH PPS Grouper, is used in the 

national, standardized 60-day episode 

payment rate rebasing adjustment 

calculation. 

Comment: One commenter stated that 

the approach does not account for 

genuine increases in case-mix due to 

real increases in the severity of need 

since the inception of the HH PPS 

which are caused by earlier and sicker 

hospital discharges, technology 

improvements which allow for complex 

cases to be cared for at the home, 

improvements in accuracy of OASIS, 

and increased therapy needs which 

indicate a higher level of patient acuity. 

Other commenters stated that the 1.0000 

level set at the beginning of the HH PPS 

should have been higher and that 

patients’ severity, as well as their 

resource needs have changed since the 

HH PPS. 

Response: As we stated in the 

proposed rule, we are lowering the 

weights to an average of 1.0000 (by 

dividing each weight using the same 

divisor) so that the national, 

standardized 60-day episode payment 

rate is the average payment per episode. 

The lowering of the weights to 1.0000 is 

a way to reset the system. We note that 

in lowering the weights to average 

1.0000, we correspondingly inflate the 

national, standardized 60-day episode 

payment rate, of which the inflation 

includes both real and nominal casemix. The adjustment to the case-mix 

weights is therefore budget neutral. In 

other words, we are completely 

offsetting the reduction in the weights 

(to average value of 1.0000) by 

increasing the national, standardized 

60-day episode payment rate. Increases 

in the costs of patient care since the 

inception of the HH PPS, which would 

reflect treating patients with a higher 

average level of severity, are reflected in 

the FY 2011 cost data used in the 

rebasing calculation and accounted for 

in the rebasing adjustments. The data 

and methodology for calculating the 

rebasing adjustments are described in 

section IV.D. of this final rule. 

Comment: One commenter stated that 

while the proposed case-mix weight 

adjustments might be budget neutral in 

the aggregate, it would not be so on a 

weight-by-weight basis, and the impact 

on many agencies would be additional 

reductions in reimbursements, beyond 

the rebasing reductions. In addition, one 

commenter stated that the proposal to 

reduce each of the 153 Home Health 

Resource Groups (HHRGs) was arbitrary 

in its attempt to achieve an aggregate 

case-mix benchmark without regard for 

the impact of rebasing on specific 

clinical scenarios. Another commenter 

stated that CMS should either abandon 

or delay the case-mix weight 

adjustments and rebasing approach and 

spend the next year performing a 

realistic analysis of true HHA costs and 

beneficiary needs for home health 

services. Similarly, a commenter stated 

that CMS has not assessed whether the 

number of HHRGs is appropriate or 

whether the payment for each is 

adequate. Several commenters stated 

that CMS should complete an analysis 

of the adequacy of the case-mix weights 

this year and encouraged CMS to 

undertake a comprehensive review of 

the case-mix weights during the coming 

year for the CY 2015 rule. 

Response: The adjustment to the casemix weights was performed in a budget 

neutral way. We increased the national, 

standardized 60-day episode payment 

rate by the same factor used to lower the 

case-mix weights to 1.0000 to determine 

the starting point for rebasing, so the 

average payment for agencies is the 

same with the case-mix weights 

decreased as the average payment for 

agencies if the weights were not 

decreased to 1.0000 and the national, 

standardized 60-day episode payment 

was not increased. In the CY 2012 HH 

PPS final rule (76 FR 68526), we 

recalibrated the case-mix weights. We 

plan to examine the effects of the CY 

2012 recalibration as cost report data 

become available. In addition, we are 

currently in the process of reassessing 

the entire case-mix system. We recently 

awarded a new research and technical 

assistance contract to Abt Associates to 

examine the findings of the home health 

study, monitor potential impacts of 

rebasing and other recent policy 

changes, and develop payment reform 

options to ensure access to care for 

vulnerable populations and address 

payment vulnerabilities in the current 

payment system. 

Final Decision: Since the CY 2014 

proposed rule, we analyzed a full year 

of CY 2012 claims data (the most 

current, complete data available), rather 

than claims data from the first six 

months of CY 2012, and the results 

indicate that the average case-mix 

weight for non-LUPA episodes in 2012 

was 1.3547. However, since we are 

finalizing the removal of 170 ICD–9–CM 

diagnosis codes from the HH PPS 

grouper, effective January 1, 2014, we 

estimate the average case-mix weight for 

non-LUPA episodes in 2012 would 

decrease to 1.3464 with those codes 

removed. Therefore, for CY 2014, we 

will reduce the average case-mix weight 

for 2012 from 1.3464 to 1.0000. The CY 

2014 weights shown in Table 5 were 

obtained by dividing the CY 2013 

weights (which are the same weights as 

those finalized in CY 2012 rulemaking) 

by 1.3464. To offset the effect of 

resetting the case-mix weights such that 

the average is 1.0000, we inflate the 

national, standardized 60-day episode 

payment rate by the same factor (1.3464) 

used to decrease the weights. The result 

will be the starting point from which 

rebasing adjustments are implemented. 

As noted in the CY 2014 proposed 

rule, we plan to continue to evaluate 

and potentially revise the case-mix 

weights relative to one another as more 

recent utilization and cost report data 

become available. We also plan to 

continue to monitor case-mix growth 

(both real and nominal case-mix 

growth), and address it accordingly in 

the future. 


sroberts on DSK5SPTVN1PROD with RULES
72274 Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 

TABLE 5—FINAL CY 2014 CASE-MIX WEIGHTS

Payment group Description 

Clinical, functional, and 

service levels 

2013 HH 

PPS casemix weights 

2014 HH 

PPS casemix weights 

10111 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C1F1S1 ....... 0.8186 0.6080 

10112 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C1F1S2 ....... 0.9793 0.7273 

10113 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C1F1S3 ....... 1.1401 0.8468 

10114 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C1F1S4 ....... 1.3008 0.9661 

10115 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C1F1S5 ....... 1.4616 1.0856 

10121 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C1F2S1 ....... 1.0275 0.7631 

10122 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C1F2S2 ....... 1.1657 0.8658 

10123 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C1F2S3 ....... 1.3039 0.9684 

10124 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C1F2S4 ....... 1.4421 1.0711 

10125 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C1F2S5 ....... 1.5804 1.1738 

10131 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C1F3S1 ....... 1.1233 0.8343 

10132 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C1F3S2 ....... 1.2520 0.9299 

10133 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C1F3S3 ....... 1.3807 1.0255 

10134 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C1F3S4 ....... 1.5094 1.1211 

10135 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C1F3S5 ....... 1.6381 1.2167 

10211 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C2F1S1 ....... 0.8340 0.6194 

10212 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C2F1S2 ....... 1.0302 0.7652 

10213 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C2F1S3 ....... 1.2265 0.9109 

10214 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C2F1S4 ....... 1.4228 1.0567 

10215 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C2F1S5 ....... 1.6190 1.2025 

10221 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C2F2S1 ....... 1.0429 0.7746 

10222 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C2F2S2 ....... 1.2166 0.9036 

10223 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C2F2S3 ....... 1.3903 1.0326 

10224 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C2F2S4 ....... 1.5641 1.1617 

10225 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C2F2S5 ....... 1.7378 1.2907 

10231 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C2F3S1 ....... 1.1387 0.8457 

10232 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C2F3S2 ....... 1.3029 0.9677 

10233 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C2F3S3 ....... 1.4671 1.0896 

10234 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C2F3S4 ....... 1.6313 1.2116 

10235 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C2F3S5 ....... 1.7956 1.3336 

10311 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C3F1S1 ....... 0.9071 0.6737 

10312 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C3F1S2 ....... 1.1348 0.8428 

10313 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C3F1S3 ....... 1.3624 1.0119 

10314 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C3F1S4 ....... 1.5900 1.1809 

10315 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C3F1S5 ....... 1.8177 1.3500 

10321 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C3F2S1 ....... 1.1160 0.8289 

10322 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C3F2S2 ....... 1.3211 0.9812 

10323 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C3F2S3 ....... 1.5262 1.1335 

10324 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C3F2S4 ....... 1.7313 1.2859 

10325 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C3F2S5 ....... 1.9364 1.4382 

10331 .................... 1st and 2nd Episodes, 0 to 5 Therapy Visits ..................................................... C3F3S1 ....... 1.2118 0.9000 

10332 .................... 1st and 2nd Episodes, 6 Therapy Visits ............................................................ C3F3S2 ....... 1.4074 1.0453 

10333 .................... 1st and 2nd Episodes, 7 to 9 Therapy Visits ..................................................... C3F3S3 ....... 1.6030 1.1906 

10334 .................... 1st and 2nd Episodes, 10 Therapy Visits .......................................................... C3F3S4 ....... 1.7986 1.3359 

10335 .................... 1st and 2nd Episodes, 11 to 13 Therapy Visits ................................................. C3F3S5 ....... 1.9942 1.4811 

21111 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C1F1S1 ....... 1.6223 1.2049 

21112 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C1F1S2 ....... 1.8331 1.3615 

21113 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C1F1S3 ....... 2.0438 1.5180 

21121 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C1F2S1 ....... 1.7186 1.2764 

21122 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C1F2S2 ....... 1.9496 1.4480 

21123 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C1F2S3 ....... 2.1807 1.6197 

21131 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C1F3S1 ....... 1.7668 1.3122 

21132 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C1F3S2 ....... 2.0252 1.5042 

21133 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C1F3S3 ....... 2.2836 1.6961 

21211 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C2F1S1 ....... 1.8153 1.3483 

21212 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C2F1S2 ....... 2.0224 1.5021 

21213 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C2F1S3 ....... 2.2294 1.6558 

21221 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C2F2S1 ....... 1.9116 1.4198 

21222 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C2F2S2 ....... 2.1389 1.5886 

21223 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C2F2S3 ....... 2.3663 1.7575 

21231 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C2F3S1 ....... 1.9598 1.4556 

21232 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C2F3S2 ....... 2.2145 1.6448 

21233 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C2F3S3 ....... 2.4691 1.8339 

21311 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C3F1S1 ....... 2.0453 1.5191 

21312 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C3F1S2 ....... 2.2682 1.6846 

21313 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C3F1S3 ....... 2.4911 1.8502 

21321 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C3F2S1 ....... 2.1415 1.5905 

21322 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C3F2S2 ....... 2.3848 1.7712 

21323 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C3F2S3 ....... 2.6280 1.9519 

21331 .................... 1st and 2nd Episodes, 14 to 15 Therapy Visits ................................................. C3F3S1 ....... 2.1897 1.6263 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 72275 

TABLE 5—FINAL CY 2014 CASE-MIX WEIGHTS—Continued 

Payment group Description 

Clinical, functional, and 

service levels 

2013 HH 

PPS casemix weights 

2014 HH 

PPS casemix weights 

21332 .................... 1st and 2nd Episodes, 16 to 17 Therapy Visits ................................................. C3F3S2 ....... 2.4603 1.8273 

21333 .................... 1st and 2nd Episodes, 18 to 19 Therapy Visits ................................................. C3F3S3 ....... 2.7309 2.0283 

22111 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C1F1S1 ....... 1.6822 1.2494 

22112 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C1F1S2 ....... 1.8730 1.3911 

22113 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C1F1S3 ....... 2.0638 1.5328 

22121 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C1F2S1 ....... 1.7628 1.3093 

22122 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C1F2S2 ....... 1.9791 1.4699 

22123 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C1F2S3 ....... 2.1954 1.6306 

22131 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C1F3S1 ....... 1.9247 1.4295 

22132 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C1F3S2 ....... 2.1305 1.5824 

22133 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C1F3S3 ....... 2.3362 1.7351 

22211 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C2F1S1 ....... 1.8508 1.3746 

22212 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C2F1S2 ....... 2.0460 1.5196 

22213 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C2F1S3 ....... 2.2412 1.6646 

22221 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C2F2S1 ....... 1.9314 1.4345 

22222 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C2F2S2 ....... 2.1521 1.5984 

22223 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C2F2S3 ....... 2.3729 1.7624 

22231 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C2F3S1 ....... 2.0933 1.5547 

22232 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C2F3S2 ....... 2.3035 1.7109 

22233 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C2F3S3 ....... 2.5136 1.8669 

22311 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C3F1S1 ....... 2.0747 1.5409 

22312 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C3F1S2 ....... 2.2878 1.6992 

22313 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C3F1S3 ....... 2.5009 1.8575 

22321 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C3F2S1 ....... 2.1553 1.6008 

22322 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C3F2S2 ....... 2.3940 1.7781 

22323 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C3F2S3 ....... 2.6326 1.9553 

22331 .................... 3rd+ Episodes, 14 to 15 Therapy Visits ............................................................ C3F3S1 ....... 2.3172 1.7210 

22332 .................... 3rd+ Episodes, 16 to 17 Therapy Visits ............................................................ C3F3S2 ....... 2.5453 1.8904 

22333 .................... 3rd+ Episodes, 18 to 19 Therapy Visits ............................................................ C3F3S3 ....... 2.7734 2.0599 

30111 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C1F1S1 ....... 0.6692 0.4970 

30112 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C1F1S2 ....... 0.8718 0.6475 

30113 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C1F1S3 ....... 1.0744 0.7980 

30114 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C1F1S4 ....... 1.2770 0.9485 

30115 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C1F1S5 ....... 1.4796 1.0989 

30121 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C1F2S1 ....... 0.8421 0.6254 

30122 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C1F2S2 ....... 1.0263 0.7623 

30123 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C1F2S3 ....... 1.2104 0.8990 

30124 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C1F2S4 ....... 1.3945 1.0357 

30125 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C1F2S5 ....... 1.5787 1.1725 

30131 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C1F3S1 ....... 0.9352 0.6946 

30132 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C1F3S2 ....... 1.1331 0.8416 

30133 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C1F3S3 ....... 1.3310 0.9886 

30134 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C1F3S4 ....... 1.5289 1.1355 

30135 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C1F3S5 ....... 1.7268 1.2825 

30211 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C2F1S1 ....... 0.7361 0.5467 

30212 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C2F1S2 ....... 0.9591 0.7123 

30213 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C2F1S3 ....... 1.1820 0.8779 

30214 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C2F1S4 ....... 1.4049 1.0434 

30215 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C2F1S5 ....... 1.6278 1.2090 

30221 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C2F2S1 ....... 0.9091 0.6752 

30222 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C2F2S2 ....... 1.1136 0.8271 

30223 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C2F2S3 ....... 1.3180 0.9789 

30224 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C2F2S4 ....... 1.5225 1.1308 

30225 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C2F2S5 ....... 1.7269 1.2826 

30231 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C2F3S1 ....... 1.0022 0.7444 

30232 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C2F3S2 ....... 1.2204 0.9064 

30233 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C2F3S3 ....... 1.4386 1.0685 

30234 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C2F3S4 ....... 1.6568 1.2305 

30235 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C2F3S5 ....... 1.8751 1.3927 

30311 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C3F1S1 ....... 0.9324 0.6925 

30312 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C3F1S2 ....... 1.1609 0.8622 

30313 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C3F1S3 ....... 1.3893 1.0319 

30314 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C3F1S4 ....... 1.6178 1.2016 

30315 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C3F1S5 ....... 1.8463 1.3713 

30321 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C3F2S1 ....... 1.1054 0.8210 

30322 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C3F2S2 ....... 1.3154 0.9770 

30323 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C3F2S3 ....... 1.5254 1.1329 

30324 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C3F2S4 ....... 1.7353 1.2888 

30325 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C3F2S5 ....... 1.9453 1.4448 

30331 .................... 3rd+ Episodes, 0 to 5 Therapy Visits ................................................................ C3F3S1 ....... 1.1985 0.8902 


sroberts on DSK5SPTVN1PROD with RULES
72276 Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 

TABLE 5—FINAL CY 2014 CASE-MIX WEIGHTS—Continued 

Payment group Description 

Clinical, functional, and 

service levels 

2013 HH 

PPS casemix weights 

2014 HH 

PPS casemix weights 

30332 .................... 3rd+ Episodes, 6 Therapy Visits ........................................................................ C3F3S2 ....... 1.4222 1.0563 

30333 .................... 3rd+ Episodes, 7 to 9 Therapy Visits ................................................................ C3F3S3 ....... 1.6460 1.2225 

30334 .................... 3rd+ Episodes, 10 Therapy Visits ...................................................................... C3F3S4 ....... 1.8697 1.3887 

30335 .................... 3rd+ Episodes, 11 to 13 Therapy Visits ............................................................ C3F3S5 ....... 2.0935 1.5549 

40111 .................... All Episodes, 20+ Therapy Visits ....................................................................... C1F1S1 ....... 2.2546 1.6745 

40121 .................... All Episodes, 20+ Therapy Visits ....................................................................... C1F2S1 ....... 2.4117 1.7912 

40131 .................... All Episodes, 20+ Therapy Visits ....................................................................... C1F3S1 ....... 2.5419 1.8879 

40211 .................... All Episodes, 20+ Therapy Visits ....................................................................... C2F1S1 ....... 2.4364 1.8096 

40221 .................... All Episodes, 20+ Therapy Visits ....................................................................... C2F2S1 ....... 2.5936 1.9263 

40231 .................... All Episodes, 20+ Therapy Visits ....................................................................... C2F3S1 ....... 2.7238 2.0230 

40311 .................... All Episodes, 20+ Therapy Visits ....................................................................... C3F1S1 ....... 2.7140 2.0157 

40321 .................... All Episodes, 20+ Therapy Visits ....................................................................... C3F2S1 ....... 2.8712 2.1325 

40331 .................... All Episodes, 20+ Therapy Visits ....................................................................... C3F3S1 ....... 3.0014 2.2292 

D. Rebasing the National, Standardized 

60-day Episode Payment Amount, LUPA 

Per-Visit Payment Amounts, and 

Nonroutine Medical Supply (NRS) 

Conversion Factor 

1. Rebasing the National, Standardized 

60-Day Episode Payment Amount 

Section 3131(a) of the Affordable Care 

Act requires that starting in CY 2014, 

the Secretary must apply an adjustment 

to the national, standardized 60-day 

episode payment amount and other 

amounts applicable under section 

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

factors such as changes in the number 

of visits in an episode, the mix of 

services in an episode, the level of 

intensity of services in an episode, the 

average cost of providing care per 

episode, and other relevant factors. In 

addition, section 3131(a) of the 

Affordable Care Act requires that this 

rebasing must be phased-in over a 4- 

year period in equal increments, not to 

exceed 3.5 percent of the payment 

amount (or amounts) as of the date of 

enactment (March 23, 2010) under 

section 1895(b)(3)(A)(i)(III) of the Act, 

and be fully implemented by CY 2017. 

In the CY 2014 HH PPS proposed 

rule, we described our extensive 

analysis of cost report and claims data 

and proposed rebasing adjustments to 

the national, standardized 60-day 

episode payment amount, the LUPA 

per-visit payment amounts, and the NRS 

conversion factor. We used FY 2011 cost 

report data as of December 31, 2012; 

which was the latest, complete cost 

report data available at the time of the 

analysis. 

a. Trimming Methodology, Audit 

Results and Weighting 

In the CY 2014 HH PPS proposed 

rule, we described the trimming 

methodology used to obtain a more 

robust estimate of costs, which 

consisted of longitudinal and crosssectional trims. After applying the 

trimming methodology, 6,252 cost 

reports were left in the 2011 sample, out 

of 10,327 cost reports. These cost 

reports were then used to estimate the 

average cost per visit and average cost 

per episode for 2011. 

In addition, we described the results 

of the audits of 100 FY 2010 HHA 

Medicare cost reports. We stated that 

when comparing the pre-audit sample 

data to the post-audit sample data, we 

observed an average reduction of 8 to 9 

percent in the costs per visit across all 

disciplines, except medical social 

services which averaged a 5 percent 

reduction in the allowable costs per 

visit. These audited costs per visit 

across the disciplines reduced the 

average cost per episode by 7.8 percent 

when comparing the pre-audit data to 

the post-audit adjusted data. The results 

of the audits indicate that the trimmed 

sample used for this rule likely overestimates the average cost per visit and 

average cost per episode for providers. 

After applying the trimming 

methodology to the 2011 Medicare cost 

reports, we computed the estimated 

mean cost per visit per discipline by 

dividing the total costs for a discipline 

by the total number of visits in our 

sample. We then applied weights to the 

sample to ensure that the costs per visit, 

per discipline used to calculate the 

average costs per episode were 

nationally representative. Using the 

nationally-weighted average costs per 

visit from the trimmed FY 2011 HHA 

Medicare cost report sample and the 

visits per episode estimates for each 

discipline from 2011 national claims 

data, we estimated the 2011 average cost 

per episode. As shown in Table 6, we 

multiplied the average cost per visit by 

the average number of visits for each of 

the six disciplines and summed the 

results to generate an estimated 60-day 

episode cost for 2011 of $2,453.71. This 

methodology used to calculate the 

episode cost is consistent with the 

methodology used in setting the 60-day 

episode base rate for the HH PPS in 

2000. We note that the 2011 estimated 

cost per episode includes normal, PEP, 

and outlier episodes. 

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

Discipline 2011 Average 

costs per visit 

2011 Average 

number of 

visits 

2011 60-Day 

episode costs 

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

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

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

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

Speech–Language Pathology ...................................................................................................... 170.80 0.21 35.87 

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


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

Discipline 2011 Average 

costs per visit 

2011 Average 

number of 

visits 

2011 60-Day 

episode costs 

Total ...................................................................................................................................... ........................ 18.59 2,453.71 

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

b. Calculating the Estimated Average 

Cost per Episode 

In the CY 2014 HH PPS proposed 

rule, to determine the rebasing 

adjustment to the 60-day national, 

standardized episode payment amount, 

we compared the 2013 estimated 

average payment per episode to the 

2013 estimated average cost per episode. 

To calculate the 2013 estimated average 

cost per episode, we first applied an 

adjustment to account for the visit 

distribution change observed in claims 

data from 2011 to 2012. We compared 

the 2011 estimated cost per episode 

using the 2011 visit distribution to the 

2011 estimated cost per episode using 

the 2012 visit distribution. In the CY 

2014 HH PPS proposed rule, we stated 

that the 2011 estimated cost per episode 

is $2,453.71 when using the 2011 visit 

profile and is $2,443.34 when using the 

2012 visit profile. We calculated an 

adjustment factor to account for the visit 

differences between 2011 and 2012 (1 + 

(2,443.34–2,453.71)/2,453.71 = 0.9958). 

The 2012 visit profile in the CY 2014 

HH PPS proposed rule was calculated 

using preliminary CY 2012 claims data 

for episodes starting on or before May 

31, 2012. We also stated in the CY 2014 

HH PPS proposed rule that we planned 

to update the 2012 visit distribution as 

more data become available, and 

therefore, the estimated cost per episode 

may change slightly. Using the most 

current, complete CY 2012 data for this 

final rule (a full year of claims data), we 

re-examined the 2012 visit distribution 

and re-calculated the 2011 estimated 

cost per episode using the updated 2012 

visit profile ($2,448.95). The adjustment 

factor was also re-calculated to account 

for the change in the number of visits 

between 2011 and 2012 (1 + (2,448.95– 

2,453.71)/2,453.71 = 0.9981). The CY 

2011 visit distribution, the CY 2012 visit 

distribution using partial CY 2012 data 

as described in the CY 2014 HH PPS 

proposed rule, and the CY 2012 visit 

distribution using complete CY 2012 

data are shown in Table 7. We note that 

since complete CY 2013 claims data was 

not available at the time of this final 

rule, we did not make any adjustments 

for changes in the visit distribution from 

CY 2012 to CY 2013 as part of 

developing the estimated CY 2013 

average cost per episode. 

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

Discipline 

2011 Average 

number of visits per episode 

2012 Average 

number of visits per episode 

(published in 

CY 2014 HH 

PPS proposed 

rule) 

2012 Average 

number of visits per episode 

(using full CY 

2012 data) 

Skilled Nursing ............................................................................................................................. 9.43 9.39 9.44 

Home Health Aide ....................................................................................................................... 2.80 2.62 2.63 

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

Occupational Therapy .................................................................................................................. 1.15 1.15 1.16 

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

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

Total Number of Visits per Episode ..................................................................................... 18.59 18.41 18.46 

Source: CY 2011 Medicare claims data, CY 2012 Medicare claims data as of December 31, 2012 for episodes starting between January 1, 

2012 and May 31, 2012, and CY 2012 Medicare claims data (as of June 2013) for episodes ending on or before December 31, 2012 for which 

we had a linked OASIS assessment. 

After applying the adjustment to 

account for the visit distribution change 

between 2011 and 2012, we calculate 

the estimated average cost per episode 

for CY 2013 by multiplying the 

estimated, average cost per episode by 

the HH market basket for 2012 and by 

the HH market basket for 2013 (Table 8). 

When setting the 60-day episode base 

rate for the HH PPS in 2000, we also 

updated costs from cost reports by the 

HH market basket to reflect expected 

inflation. We note that the 2013 

estimated cost per episode shown in 

Table 8 reflects the updated 2012 visit 

profile, and therefore numbers have 

changed slightly from the CY 2014 HH 

PPS proposed rule. 

TABLE 8—2013 ESTIMATED COST PER EPISODE

2011 Estimated cost per episode 

Factor for 

2011–2012 

visit distribution difference 

2012 HH market basket 2013 HH market basket 

2013 Estimated cost per 

episode 

$2,453.71 ......................................................................................................... × 0.9981 × 1.024 × 1.023 = $2,565.51 


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c. Calculating the Estimated Average 

Payment per Episode 

To develop the 2013 estimated 

average payment per episode, in our 

updated analyses for this final rule, we 

start with the CY 2012 national, 

standardized 60-day episode payment 

rate and apply a number of factors. In 

the CY 2014 HH PPS proposed rule, we 

proposed to reset the average case-mix 

weight from 1.3517 to 1.0000 and 

increased the CY 2012 60-day episode 

payment rate by 1.3517. Since we are 

resetting the average case-mix weight 

from 1.3464 to 1.0000 (see section IV.C. 

of this rule), we increase the CY 2012 

60-day episode payment rate by 1.3464. 

As such, the numbers in Table 9 are 

different from the numbers in the CY 

2014 HH PPS proposed rule. The 60-day 

episode payment rate in CY 2012 was 

$2,138.52. By inflating the CY 2012 60- 

day episode payment rate by the budget 

neutrality factor to account for the 

downward adjustment of the weights to 

an average case-mix of 1.0000, we 

obtain the average CY 2012 payment per 

episode. Then by applying the CY 2013 

payment policy updates (the 1.32 

percent payment reduction for nominal 

case-mix growth and the 1.3 percent HH 

payment update percentage), we obtain 

the estimated average CY 2013 payment 

per episode. We note that the Medicare 

cost reports do not differentiate between 

normal, PEP, and outlier episodes in the 

reporting of costs per discipline. 

Therefore, the CY 2013 estimated 

average cost per episode includes costs 

for normal, PEP, and outlier episodes. 

To compare the episode payment to the 

average cost of an episode, we add the 

dollars from the 2.5 percent outlier pool 

back into the payment per episode. 

Later, in our calculation of the CY 2014 

national, standardized 60-day episode 

payment rate, we remove the outlier 

dollars (see Tables 20 and 21 in section 

IV.E.4.b. of this rule). 

TABLE 8—2013 ESTIMATED COST PER EPISODE

2012 National, standardized 60-day episode payment rate 

Budget neutrality factor to 

account for 

case-mix 

weight adjustment to 

1.0000 

2013 Payment 

reduction for 

nominal casemix growth 

2013 HH Payment update 

percentage 

Outlier adjustment 

2013 Estimated average 

payment per 

episode 

$2,138.52 ............................................................................. × 1.3464 × 0.9868 × 1.013 ÷ 0.975 =$2,952.03 

d. Calculating the Rebasing Adjustment 

to the National, Standardized 60-day 

Episode Payment Amount 

In the CY 2014 HH PPS proposed 

rule, we compared the 2013 estimated 

average payment per episode to the 

2013 estimated average cost per episode 

and obtained a difference of ¥13.63 

percent (($2,559.59¥$2,963.65)/ 

$2,963.65). We stated that phasing-in 

the ¥13.63 percent adjustment over 4 

years in equal increments would result 

in an annual reduction to the national, 

standardized 60-day payment rate of 

3.60 percent, determined using a 

compound annual growth rate (CAGR) 

formula (($2,559.59/$2,963.65) 1/4 ¥1 = 

¥0.0360). Given the 3.5 percent limit 

set in statute, we proposed to reduce the 

national, standardized 60-day episode 

payment amount by 3.5 percent in each 

year, 2014 through 2017. For this final 

rule, when comparing the updated 2013 

estimated average cost per episode and 

2013 estimated average payment per 

episode we obtained a difference of 

¥13.09 percent (($2,565.51— 

$2,952.03)/$2,952.03), as shown in 

Table 10. Phasing-in the ¥13.09 percent 

over 4 years in equal increments would 

result in an annual reduction of 3.45 

percent, determined using a CAGR 

formula. 

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

2013 Payment per episode 2013 Estimated 

cost per episode 

Percentage 

change 

$2,952.03 ..................................................................................................................................................... $2,565.51 ¥13.09 

In order to align episode payments 

with costs, we would implement a 

¥3.45 percent rebasing adjustment to 

the national, standardized 60-day 

episode payment rate each year from 

2014 through 2017. Our initial 

interpretation of section 3131(a) of the 

Affordable Care Act for the CY 2014 HH 

PPS proposed rule reflects how one 

would ideally rebase a payment system 

and supports a ¥3.45 percent rebasing 

adjustment to the national, standardized 

60-day episode payment rate. However, 

commenters stated that since the statute 

specifies that the rebasing adjustments 

‘‘may not exceed 3.5 percent of the 

amount (or amounts) applicable under 

clause (i)(III) as of the date of enactment 

of the Patient Protection and Affordable 

Care Act’’, the maximum adjustment of 

3.5 percent should be calculated using 

the CY 2010 payment rates. Upon 

further review of the specific language 

in the statute, we agree with the 

commenters. Therefore, as specified by 

statute, the rebasing adjustment is 

limited to 3.5 percent of the CY 2010 

national, standardized 60-day episode 

payment rate of $2,312.94 (74 FR 

58106), or $80.95. 

The ¥3.45 percent rebasing 

adjustment to the 2013 national, 

standardized 60-day payment rate 

described above exceeds the maximum 

adjustment specified by statute of 

$80.95. A ¥3.45 percent rebasing 

adjustment would result in a decrease of 

$99.56 for CY 2014 ($2,952.03 * 0.975 

(remove the outlier dollars that we put 

back in the rates for comparison 

purposes as described above) * 1.0026 

(wage index standardization factor as 

described in section IV.E.4.b of this final 

rule) * 0.0345 = $99.56). In addition, a 

¥3.45 percent rebasing adjustment for 

CY 2015 through 2017 would also 

exceed the maximum adjustment 

allowed under statute of $80.95. Given 

that a ¥3.45 percent adjustment for CY 

2014 through CY 2017 would result in 

larger dollar amount reductions than the 

maximum dollar amount allowed under 

section 3131(a) of $80.95, we are limited 

to implementing a reduction of $80.95 

to the national, standardized 60-day 

episode payment amount each year for 

CY 2014 through CY 2017. 


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2. Rebasing the Low Utilization 

Payment Adjustment (LUPA) Per-Visit 

Payment Amounts 

For episodes with four or fewer visits, 

Medicare pays on the basis of a national 

per-visit amount by discipline, referred 

to as a LUPA. 

a. Calculating the Rebasing Adjustment 

to the LUPA Per-Visit Amounts 

As stated in the CY 2014 HH PPS 

proposed rule, to determine the rebasing 

adjustment for the national per-visit 

payment rates, we compared the current 

national per-visit payment rates to the 

estimated cost per visit, per discipline. 

The 2013 estimated per-visit costs per 

discipline are shown in Table 11. The 

2011 per-visit costs per discipline are 

the same as those derived for the 

rebasing of the national, standardized 

60-day episode payment rate (see Table 

6). The average cost per-visit for NRS 

from the cost report sample is added to 

the 2011 estimated per-visit costs per 

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

rule for more information on the 

calculation of the average NRS cost per 

visit). The per-visit costs are then 

increased by the HH market basket in 

2012 and 2013 to obtain an estimate of 

the 2013 costs per visit, per discipline. 

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

Discipline 

2011 Estimated average 

cost per visit 

Average NRS 

cost per visit 

2012 HH market basket 2013 HH market basket 

2013 Estimated average 

cost per visit 

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

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

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

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

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

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

Similar to the methodology used to 

determine the rebasing adjustment to 

the national, standardized 60-day 

episode payment rate, we took the 

current 2013 national per-visit payment 

rates and, for comparison purposes 

only, put the dollars from the 2.5 

percent outlier pool back into the 

payment rates (see Table 12). This 

allows us to compare the CY 2013 cost 

per-visit, per-discipline on the Medicare 

cost reports (which includes normal and 

outlier episodes) to the CY 2013 

payment per-visit, per discipline. 

TABLE 12—2013 NATIONAL PER-VISIT PAYMENT RATES

Discipline 

2013 Per-visit 

payment rates 

(excluding 

outlier pool) 

Outlier adjustment 

2013 Per-visit 

payment rates 

(including 

outlier pool) 

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

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

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

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

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

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

When comparing the national pervisit payment rate, per discipline for 

LUPA episodes to the 2013 estimated 

average cost per-visit, per-discipline, we 

observe that costs per visit are higher 

than the 2013 national per-visit 

payment rates (see Table 13), ranging 

from +19.5 percent to +33.1 percent. 

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

COST PER VISIT

Discipline 2013 Per-visit 

payment rates 

2013 Estimated average 

cost per visit 

Percentage 

change 

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

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

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

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

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

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

We stated that phasing-in the 

adjustments, ranging from + 19.48 

percent to + 33.11 percent in Table 13 

above, over 4 years in equal increments, 

would result in annual increases 

ranging from 4.55 to 7.41 percent, 

determined using a compound annual 

growth rate (CAGR) formula. Given the 

3.5 percent limit set in statute, we 

proposed to increase the per-visit 

payment rates by 3.5 percent every year 

from 2014 to 2017 in order to better 


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align the national per-visit payment 

amounts with costs. However, the 

statute limits the rebasing adjustment 

that can be applied. As explained in 

more detail below, several commenters 

stated that since the statute specifies 

that the rebasing adjustments ‘‘may not 

exceed 3.5 percent of the amount (or 

amounts) applicable under clause (i)(III) 

as of the date of enactment of the Patient 

Protection and Affordable Care Act’’, the 

maximum adjustment of 3.5 percent 

should be calculated using the CY 2010 

payment rates. Upon further review of 

the specific language in the statute, we 

agree with the commenters. Therefore, 

because of the language in the statute, 

we are limited to increasing the national 

per-visit payment amounts by no more 

than the amounts outlined in Table 14 

below. 

TABLE 14—MAXIMUM ADJUSTMENTS TO THE NATIONAL PER-VISIT PAYMENT RATES, NOT TO EXCEED 3.5 PERCENT OF

THE AMOUNT(S) IN CY 2010 

Discipline 

2010 National 

per-visit payment rates 

Maximum 

3.5% adjustment to pervisit rates 

Skilled Nursing ......................................................................................................................................................... $113.01 $3.96 

Home Health Aide ................................................................................................................................................... 51.18 1.79 

Physical Therapy ..................................................................................................................................................... 123.57 4.32 

Occupational Therapy .............................................................................................................................................. 124.40 4.35 

Speech-Language Pathology .................................................................................................................................. 134.27 4.70 

Medical Social Services ........................................................................................................................................... 181.16 6.34 

Source: (74 FR 58107). 

The annual increases ranging from 

4.55 to 7.41 percent determined using a 

CAGR formula and the percentage 

changes in Table 13 above would 

exceed the maximum adjustments 

allowed under statute for CY 2014 

through 2017 (see Table 15 below). In 

addition, increasing the national pervisit payment rates by 3.5 percent each 

year, as proposed, would also exceed 

the maximum adjustments allowed 

under statute given that the rebasing 

adjustments cannot be more than 3.5 

percent of the CY 2010 national per-visit 

rates in any given year (see Table 15 

below). Therefore, we are limited to 

implementing the dollar amount 

increases to the national per-visit 

payment rates outlined in Table 14 

above each year, CY 2014 through CY 

2017. 

TABLE 15—CAGR AND PROPOSED 3.5 PERCENT DOLLAR INCREASES AND THE MAXIMUM ADJUSTMENTS TO THE

NATIONAL PER-VISIT PAYMENT RATES, NOT TO EXCEED 3.5 PERCENT OF THE AMOUNT(S) IN CY 2010 

Discipline 

2013 National 

per-visit payment rates 

Wage Index 

standardization 1

CAGR percent 

increase 

CAGR dollar 

amount increase 

Proposed 3.5 

percent dollar 

amount increase 

Maximum 

3.5% adjustment to pervisit rates 

Skilled Nursing ......................................... $114.35 $114.42 4.55 $5.21 $4.00 $3.96 

Home Health Aide .................................... 51.79 51.82 7.41 3.84 1.81 1.79 

Physical Therapy ..................................... 125.03 125.11 7.41 9.27 4.38 4.32 

Occupational Therapy .............................. 125.88 125.96 7.04 8.87 4.41 4.35 

Speech-Language Pathology ................... 135.86 135.94 6.80 9.24 4.76 4.70 

Medical Social Services ........................... 183.31 183.42 5.36 9.83 6.42 6.34 

1 Column 2 is multiplied by the wage index standardization factor for the national per-visit payment rates of 1.0006 as described in section 

IV.E.4.b. 

3. Rebasing the Nonroutine Medical 

Supply (NRS) Conversion Factor 

Payments for NRS are currently paid 

for by multiplying one of six severity 

levels by the NRS conversion factor. 

When the HH PPS was implemented on 

October 1, 2000, the national, 

standardized 60-day episode payment 

rate included an amount for NRS that 

was calculated based on costs from 

audited FY 1997 cost reports and the 

average cost of NRS unbundled and 

billed through Medicare Part B (65 FR 

41180). The NRS costs for all the 

providers in the audited cost report 

sample were weighted to represent the 

national population. That weighted total 

was divided by the number episodes for 

the providers in the audited cost report 

sample, to obtain an average cost per 

episode for NRS of $43.54. Added to 

this amount was $6.08 to account for the 

average cost of unbundled NRS billed 

through Medicare Part B, resulting in a 

total of $49.62 included in the national, 

standardized 60-day episode payment 

rate to account for NRS. 

As stated in our CY 2008 HH PPS 

proposed rule, after the HH PPS went 

into effect, we received comments and 

correspondence expressing concern 

about the cost of supplies for certain 

patients with ‘‘high’’ supply costs (72 

FR 25427, May 4, 2007). We 

acknowledged that, in general, NRS use 

is unevenly distributed across episodes 

of care. Therefore, we created an NRS 

conversion factor of $52.35 (the amount 

CMS originally included in the national, 

standardized 60-day episode payment 

rate of $49.62, updated by the market 

basket, and after an adjustment to 

account for nominal change in case-mix) 

that is further adjusted by one of six 

severity levels to ensure that the 

variation in NRS usage is more 

appropriately reflected in the HH PPS 

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

additional variables from OASIS items 

and targeting certain conditions 

expected to be predictors of NRS use 

based on clinical considerations, a 

classification algorithm puts cases into 

one of the six severity levels and a 

regression model was used to develop 

the payment weights associated with 

each severity level. For more detail on 

how the final six NRS severity levels 

and associated payment weights were 


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developed please see the CY 2008 HH 

PPS final rule (72 FR 49850, August 29, 

2007). The 2008 NRS conversion factor 

has been updated by HH payment 

update percentages in years 2009 

through 2013. The CY 2013 NRS 

conversion factor is $53.97 and CY 2013 

NRS payments range from $14.56 for 

severity level 1 to $568.06 for severity 

level 6 (77 FR 67102). 

a. Calculating the Rebasing Adjustment 

to the NRS Conversion Factor 

In rebasing the NRS conversion factor 

as described in the CY 2014 HH PPS 

proposed rule, we used the trimmed 

sample of 6,252 cost reports from FY 

2011, as described in section IV.D.1. of 

this rule, to calculate a visit-weighted 

estimate of NRS costs per visit. We 

additionally weight these estimates to 

be nationally representative based on 

the same factors described in section 

IV.D.1. of this rule (that is, facility type, 

urban/rural status, and facility size). 

The 2011 average NRS cost per visit was 

calculated to be $2.26. 

To calculate a 2011 estimated average 

NRS cost per episode for the CY 2014 

HH PPS proposed rule, we multiplied 

the average NRS costs per visit of $2.26 

by the average number of visits per 

episode of 18.59 from 2011 claims data 

for a 2011 estimated average NRS cost 

per episode of $42.01. This amount was 

then adjusted to reflect the change in 

the average number of visits from 18.59, 

using 2011 claims data, to 18.41, using 

preliminary 2012 claims data ((1+ 

((18.41–18.59)/18.59))= 0.9903). We 

then inflated the result by the 2012 and 

2013 HH market basket for a 2013 

estimated average NRS cost per episode 

of $43.58. For this final rule, using the 

more current, complete CY 2012 claims 

data, the average number of visits in 

2012 decreases to 18.46. Therefore, the 

adjustment for the change in the average 

number of visits per episode between 

CY 2011 and CY 2012 will be ((1+ 18.46 

– 18.59)/18.59)) = 0. 9930). We then 

inflate the result by the 2012 and 2013 

HH market basket for a 2013 estimated 

average NRS cost per episode of $43.53 

as shown in Table 16. 

TABLE 16—2013 ESTIMATED AVERAGE NRS COST PER EPISODE

2011 Estimated average NRS cost per episode 

Adjustment for 

change in average episode 

visits 

(2011 to 2012) 

2012 Market 

basket update 

(2.4) 

2013 Market 

basket update 

(2.3) 

2013 Estimated average 

NRS cost per 

episode 

$42.01 .............................................................................................................. × 0.9930 × 1.024 × 1.023 $43.70 

To compare the 2013 estimated 

average NRS cost per episode to 2013 

estimated average NRS payment per 

episode, for the CY 2014 HH PPS 

proposed rule we used preliminary 2012 

claims data for non-LUPA episodes and 

the CY 2013 NRS conversion factor of 

$53.97 to calculate the estimated 2013 

average NRS payment per episode of 

$48.38. For this final rule, using the 

more current, complete CY 2012 claims 

data shows that the distribution of 

episodes amongst the six severity levels 

differs from the distribution used when 

the NRS conversion factor and relative 

weights were established in CY 2008, as 

shown in Table 17. 

TABLE 17—PERCENTAGE OF EPISODES BY NRS SEVERITY LEVEL

Severity level Relative 

weight 

Percent of episodes, CY 

2008 final rule 

Percent of episodes, CY 

2012 

1 ................................................................................................................................................... 0.2698 63.7 69.3 

2 ................................................................................................................................................... 0.9742 20.6 16.7 

3 ................................................................................................................................................... 2.6712 6.7 6.4 

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

5 ................................................................................................................................................... 6.1198 3.2 3.0 

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

Source: The CY 2008 HH PPS Final Rule (72 FR 49852, August 29, 2007) and CY 2012 Medicare claims data (as of June 30, 2013) for nonLUPA HH episodes ending on or before December 31, 2012 for which we had a linked OASIS assessment. 

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

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

In the proposed rule, when comparing 

the 2013 estimated average NRS 

payment per episode of $48.38 to the 

2013 estimated average NRS cost per 

episode of $43.58; we obtained a 

difference of ¥9.92 percent (($43.58– 

$48.38)/$48.38). Phasing-in the 9.92 

percent reduction over 4 years in equal 

increments, using a CAGR formula, 

would result in an annual reduction of 

2.58 percent. Using the updated 

distribution of CY 2012 claims by 

severity level and the relative weights in 

Table 17 with the CY 2013 conversion 

factor of $53.97, the CY 2013 estimated 

average NRS payment per episode is 

$49.00. Comparing the 2013 estimated 

average NRS cost per episode to the 

2013 estimated average NRS payment 

per episode, we obtain a difference of 

¥10.82 percent (($43.70–$49.00)/

$49.00). Phasing-in the ¥10.82 percent 

adjustment over 4 years in equal 

increments, using a CAGR formula, will 

result in an annual reduction of 2.82 

percent, or $1.52 in CY 2014 ($53.97 x 

0.0282 = $1.52). This $1.52 does not 

exceed 3.5 percent of the CY 2010 NRS 

conversion factor, which is calculated to 

be $1.87 ($53.34 x 0.035). We noted in 

the CY 2014 HH PPS proposed rule that 

during our analysis of NRS costs and 

payments, we found that a significant 

number of providers listed charges for 

NRS on the home health claim, but 

those same providers did not list any 

NRS costs on their cost reports. 

Specifically, out of the 6,252 cost 

reports from FY 2011, as described in 

section IV.D.1.of this rule, 1,756 cost 

reports (28.1 percent) reported NRS 

charges in their claims, but listed $0 


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2 $2,952.03 * 0.975 (remove the outlier dollars 

that we put back in the rates for comparison 

purposes) * 1.0026 (wage index standardization 

factor as describe in section IV.E.4.b of this final 

rule) = $2,885.71. $2885.71¥$80.95 = $2,804.76. 

($2,804.76¥$2,885.71)/$2,885.71 = 2.81%) 

3MedPAC. ‘‘Chapter 2: Assessing payment 

adequacy and updating payments in fee-for-service 

Medicare.’’ Report to the Congress—Medicare 

Payment Policy. March 2013, p. 34. 

NRS costs on their cost reports. Given 

the need for extensive trimming of the 

cost reports as well as the findings from 

the audits and our analysis of NRS 

payments and costs, we are exploring 

possible additional edits to the cost 

report and quality checks at the time of 

submission to improve future cost 

reporting accuracy (78 FR 40290). For 

more information on the rebasing 

analyses performed, refer to the 

technical reports for both the proposed 

and final rules available on the CMS 

Home Health Agency (HHA) Center Web 

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

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

hha.asp. 

The following is a summary of the 

comments we received regarding the 

proposed rebasing adjustments to the 

National, Standardized 60-day Episode 

Payment Amount, LUPA Per-Visit 

Payment Amounts, and the (NRS) 

Conversion Factor. 

Comment: Commenters stated that the 

maximum allowable rebasing reduction 

should be calculated from the CY 2010 

standardized base amount, not the CY 

2013 average payment. The commenters 

stated that the Affordable Care Act 

refers to ‘‘the date of enactment’’ and 

since the Affordable Care Act was 

enacted on March 23, 2010, CY 2010 

payment amounts should be used when 

calculating the maximum allowable 

reduction for rebasing. In addition, 

commenters argued that the limit 

should be calculated using the national 

standardized episode payment rate, 

rather than the episode payment rate 

multiplied by the average case-mix. 

Response: While we interpreted the 

statutory language differently for the CY 

2014 HH PPS proposed rule and believe 

that the proposed rule reflects the how 

one would ideally rebase a payment 

system, upon further review, we agree 

with the commenters regarding the date 

of enactment and will use the CY 2010 

payment rates to determine whether any 

of the rebasing adjustments exceed 3.5 

percent. 

Comment: MedPAC was supportive of 

the proposed adjustments to the 

payment amounts, but expressed 

concerns that the proposed rebasing 

adjustment to the national, standardized 

60 day episode amount of ¥3.5 percent 

will be too modest and leave agencies 

with substantial profit opportunities. 

MedPAC stated that much of the annual 

rebasing reductions will be offset by the 

payment update for each year in 2014 to 

2017 and estimates that the cumulative 

net payment reduction to the national, 

standardized 60-day episode payment 

amount after four years will equal 

approximately 4 percent. MedPAC 

noted that the rebasing reductions are 

smaller than the net reductions 

implemented in 2010 through 2013, a 

period when the base rate was reduced 

by 7.6 percent, and noted that the fouryear cumulative net effect of the 

rebasing reductions is smaller than the 

4.89 percent estimated one-year 

payment reduction for CY 2011. 

MedPAC stated that they recommended 

to the Congress that the statute should 

be changed so that rebasing could be 

implemented in a shorter period and 

also recommended that the market 

basket updates be eliminated to bring 

costs closer to payments than the 

current approach. 

Response: We thank MedPAC for their 

comments. As MedPAC noted, we 

proposed a 3.5 percent reduction to the 

CY 2013 national, standardized 60-day 

episode payment rate for CY 2014 and 

an additional 3.5 percent in each year 

2015 through CY 2017. However, we do 

not have the statutory authority to either 

shorten the 4-year phase-in period or 

eliminate the annual payment updates. 

As brought to our attention by 

commenters, the maximum rebasing 

adjustment amounts are now calculated 

using 3.5 percent of the CY 2010 

payment rates. Consequently, for this 

final rule that requirement results in a 

$80.95 dollar reduction to the national, 

standardized 60-day episode payment 

amount in each year from CY 2014 

through CY 2017 as described in section 

IV.D.1.d above. This is equivalent to a 

2.81 percent reduction to the national, 

standardized 60-day episode payment 

rate for 2014 rather than a 3.45 percent 

reduction.2

Comment: Several commenters stated 

that CMS should not implement the 

proposed payment reductions. 

Commenters stated that the proposed 

payment reductions may impact quality 

of care and diminish health care system 

efficiency, as well as limit provider’s 

ability to participate in broader delivery 

system reform efforts. Specifically, 

commenters stated that home health 

care prevents hospital readmissions and 

is less costly than other post-acute 

settings, and that the rebasing 

adjustments may increase the use of 

more costly institutional care, like 

hospitals, which is against the goal of 

health care reform to improve outcomes 

and care coordination, prevent 

hospitalizations and re-hospitalizations, 

and reduce costs. A commenter stated 

that patient outcomes have improved 

and that spending in FY 2011 is similar 

to FY 1996, indicating that reductions 

are not needed. Another commenter 

stated that CMS should ensure that the 

final rebasing policy reflects the goals to 

improve patient care and outcomes, 

encourage coordination among 

providers, and appropriately manage the 

cost of care without harming patient 

affordability, quality, or access. 

Response: Section 3131(a) of the 

Affordable Care Act requires that the 

HH PPS payment amount(s) ‘‘shall be 

adjusted by a percentage determined 

appropriate by the Secretary to reflect 

factors such as the changes in the 

number of visits in an episode, the mix 

of services in an episode, the level of 

intensity of services in an episode, the 

average cost of providing care per 

episode, and other factors that the 

Secretary considers to be relevant.’’ In 

their 2013 Report to Congress, MedPAC 

stated that ‘‘the number and types of 

visits in a home health episode changed 

significantly after the HH PPS was 

introduced, although the payments were 

based on the older, higher level of use 

and costs’’.3 Furthermore, based on 

analysis of FY 2011 cost report data, the 

60-day episode costs, the per-visit rate 

costs, and NRS costs have changed since 

the start of the HH PPS (65 FR 41184) 

and CMS is implementing adjustments 

to the HH PPS payment amounts to 

reflect those changes. The goal of the 

adjustments is to align payment with 

costs, similar to what was done when 

setting the original base rate and pervisit amounts, and the methodology to 

determine the rebasing adjustment is 

very similar to the methodology used to 

set the original base rate and per-visit 

amounts. CMS plans to monitor the 

effects of the rebasing adjustments on 

access and quality of care for any 

unintended effects. 

Comment: One commenter stated that 

the differences between cost and 

payment may be related to fraud and 

abuse and that targeted efforts to 

address fraud or examination of 

Medicare eligibility policies rather than 

across the board cuts should be 

implemented. One commenter stated 

that instead of finalizing the rebasing 

proposal, CMS should start the 

development of a new payment 

methodology for the therapy component 

of the HH PPS that accurately bases 

payment on the severity of the patient 

and the necessary resources to treat the 

condition, rather than basing payment 

on thresholds. Other commenters stated 


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4MedPAC. ‘‘Chapter 9: Home Health Care 

Services.’’ Report to the Congress—Medicare 

Payment Policy. March 2013, p. 194–195. 

that CMS should either abandon or 

delay the case-mix weight adjustments 

and rebasing approach and spend the 

next year performing a realistic analysis 

of true home health agency costs and 

beneficiary needs for home health 

services. 

Response: Section 3131(a) of the 

Affordable Care Act requires a four year 

phase-in of rebasing, in equal 

increments, to start in CY 2014 and be 

fully implemented in CY 2017. 

Therefore, based on statutory 

requirements, rebasing cannot be 

delayed or eliminated once we have 

determined that rebasing is necessary. 

Differences between estimated episode 

costs and payments indicate a need to 

better align payment with costs and 

therefore, rebasing of the HH PPS 

payment amounts is needed. We intend 

to explore these commenters’ concerns 

in ongoing research. We recently 

awarded a contract to Abt Associates to 

explore the findings and any 

recommendations from the home health 

study mandated by section 3131(d) of 

the Affordable Care Act, reassess the 

case-mix system, monitor potential 

impacts of rebasing and other recent 

payment policy changes, and develop 

reform options to ensure continued 

access and quality of care as well as 

address potential vulnerabilities in the 

current payment system. 

Comment: Commenters stated that the 

proposed reductions puts the nation’s 

economic recovery at risk since it targets 

the home health sector and the home 

health care community has been a 

primary driver of job growth. 

Response: The impact of the rebasing 

adjustments for CY 2014 is estimated to 

be approximately ¥2.7 percent as 

described in section VII. However, the 

net impact for CY 2014, given all the 

payment changes for CY 2014, including 

the payment update percentage, is 

estimated at ¥1.05 percent. This net 

reduction over the four years is much 

smaller than some previous net 

reductions implemented in single 

payment years, such as the net 

reduction finalized in CY 2011. In CY 

2011, CMS estimated that the net impact 

of the payment policies for that year to 

be ¥4.89 percent. Yet, according to 

MedPAC, the home health industry did 

not seem to be adversely impacted as 

the number of home health agencies 

from 2010 to 2011 grew from 11,654 to 

12,199 and the number of home health 

episodes from 2010 to 2011 grew 

similarly, with 6.8 million episodes in 

2010 and 6.9 million episodes in 2011.4

Therefore, we do not expect that the 

rebasing adjustments for CY 2014 will 

have a significant impact but we will be 

monitoring the impact of rebasing on 

access to home health care. 

Comment: One commenter argued 

that language in section 3143 of the 

Affordable Care Act prohibits CMS from 

implementing rate rebasing as proposed 

because it will result in the reduction of 

guaranteed home health benefits, and 

that the guaranteed home health 

benefits include reasonable access to a 

provider that accepts Medicare 

payment. 

Response: Section 3143 of the 

Affordable Care Act reads that ‘‘Nothing 

in the provisions of, or amendments 

made by, this Act shall result in the 

reduction of guaranteed home health 

benefits under title XVIII of the Social 

Security Act.’’ We interpret this to mean 

that with regards to the statutory 

language at 1814(a)(2)(C), 1835(a)(2)(A), 

1861(m) and 1861(kk), there are to be no 

changes to the scope of coverage under 

the Medicare home health benefit. The 

Congress inserted the rebasing provision 

into section 1895 of the Act (Prospective 

Payment System of Home Health 

Services), which calls for the rebasing of 

the amount(s) applicable under that 

section of the Act. We fully intend to 

monitor the effects of any adjustment 

made to the payment amounts in this 

final rule for any unintended results, 

including any substantial impact on 

access to care. We also note that, as 

mandated in section 3131(a) of the 

Affordable Care Act, MedPAC will 

conduct a study on the rebasing 

implementation, which will include 

impact analysis on access to care, and 

submit a Report to Congress no later 

than January 1, 2015, along with any 

potential recommendations, if 

necessary. 

Comment: Commenters stated that the 

rebasing reductions will drive payments 

below costs in almost every state by 

2017, causing access issues and 

impacting quality of care. Commenters 

stated that by setting the payment at 

costs, it guarantees that 50 percent of 

the HHAs will be paid less than cost by 

CY 2017 and that a margin is needed to 

meet normal business operational 

needs, such as the need for capital 

funding, keeping staff and attracting 

new staff, and investment in new 

technologies and care delivery models. 

One commenter stated that there is no 

precedent in payment adjustments that 

call for the estimation of profit margins 

regardless of type of entity and the 

‘‘elimination of entire average, 

estimated margins’’ for the industry. 

The commenter recommended that CMS 

engage in an in-depth analysis and 

study of the economics at play in the 

home health marketplace in 

determining the level of profit/margin 

that is reasonable to offer and stated that 

home health agencies have little other 

revenue, such as commercial insurance 

revenue, to help counter reductions in 

Medicare payment and that agencies 

have little opportunity for margin 

outside of Medicare. 

Response: The rebasing methodology 

used to develop the proposed rebasing 

adjustments is very similar to the 

methodology used in 2000 where the 

episode rate and per-visit amounts were 

equated to the estimated costs per 

episode or per visit. Notably, in 2000, 

even though the episode and per-visit 

amounts were aligned with the expected 

cost for HH PPS episodes, there were 

high margins in the first year of the HH 

PPS, in large part due to HHAs 

providing fewer visits than anticipated. 

In addition, MedPAC stated in their 

March 2013 Report to the Congress, 

‘‘Margins have stayed high since 2001 

because annual increases in payment 

have exceeded growth in costs. The 

Commission’s review of the annual 

change in cost per episode suggests that 

cost growth has been minimal, typically 

less than 1 percent. In some years, a 

decline has been observed. Average 

payments per episode have generally 

increased from year to year, driven by 

market basket increases and increases in 

the average case-mix index.’’ 

While we calculated the proposed 

adjustments for rebasing by aligning 

payment to costs, we did not factor in 

potential opportunities for HHAs to 

increase efficiencies into the calculation 

of the rebasing adjustments. We also 

note that the rebasing adjustments to the 

national, standardized 60-day episode 

payment rate for CY 2014 through 2017 

will be lower than the proposed 

adjustments given that we cannot 

implement a reduction that exceeds 3.5 

percent of the CY 2010 national, 

standardized 60-day episode payment 

rate of $2,312.94 or a reduction greater 

than $80.95 in a given year. Similar to 

2000, we expect that in the upcoming 

years HHAs will increase efficiencies in 

some operating areas and institute 

mechanisms to better control costs. In 

their 2013 Report to Congress, MedPAC 

stated ‘‘low cost growth or no cost 

growth has been typical for home health 

care, and in some years we have 

observed a decline in cost per episode. 

The ability of HHAs to keep costs low 

has contributed to the high margins 

under the Medicare PPS.’’ 

In addition, the rebasing adjustments 

over the next four years will be partly 

offset by the HH PPS payment update 

percentage and, therefore, the net 


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5MedPAC. ‘‘Chapter 7: Skilled Nursing Facility 

Services.’’ Report to the Congress—Medicare 

Payment Policy. March 2011, p. 159. 

impact on HHAs will be smaller than 

payment reductions absorbed by the 

industry in previous years. We plan to 

monitor the impact of the rebasing 

adjustments for any unintended 

consequences. As noted above, as 

mandated in section 3131(a) of the 

Affordable Care Act, MedPAC will 

conduct a study on the rebasing 

implementation, which will include 

impact analysis on access to care, 

quality outcomes, the number of home 

health agencies, and rural, urban, forprofit, and non-profit agencies, and 

submit a Report to Congress no later 

than January 1, 2015, along with any 

potential recommendations. 

Comment: Commenters stated that the 

rural add-on only applies to episodes 

through December 2016 and therefore, 

the rural communities and frontier areas 

may be hit hard in 2017 by the 

combination of the rebasing adjustments 

and the expiration of the rural add-on 

policy. Commenters asked CMS to do a 

more thorough investigation of health 

care costs in rural areas. Commenters 

stated rural area HHAs experience 

higher costs in part due to longer drive 

times to reach rural residents. 

Response: Thank you for the 

comment. We plan to continue to 

explore the costs associated with rural 

areas. We are currently in the process of 

implementing a ‘‘Frontier Community 

Health Integration Project’’ 

demonstration that may be useful in 

providing information on whether there 

are substantial cost differences between 

urban and rural areas, driven primarily 

by increased transportation costs. 

However, we note that in their 2013 

Report to Congress, MedPAC stated that 

the use of the ‘‘broad targeted add-on, 

providing the same payment for all rural 

areas regardless of access, results in 

rural areas with the highest utilization 

drawing a disproportionate share of the 

add-on payments.’’ MedPAC stated that 

‘‘70 percent of the episodes that 

received the add-on payments in 2011 

were in rural counties with utilization 

significantly higher than the national 

average’’ and recommended that 

Medicare target payment adjustments 

for rural areas to those areas that have 

access challenges. We will take 

MedPAC’s recommendation into 

account when assessing cost differences 

between urban and rural areas. 

Comment: Commenters stated that the 

proposed rebasing policy will have 

unintended impacts for vulnerable 

patients, such as those with higher costs 

or more complex care needs. 

Commenters stated that CMS should not 

implement rebasing until the study 

required under section 3131(d) of the 

Affordable Care Act is completed and 

the report is delivered to the Congress. 

Commenters stated that the study 

directs CMS to look at the cost of 

treating certain subgroups and that the 

study was intended to be coupled with 

rebasing, stating that the CY 2014 

policies will be implemented just 

months before the statutory deadline for 

the Report to Congress on the study. The 

commenters asked CMS to consider the 

findings of the study and the risks 

associated with the rebasing 

adjustments for vulnerable populations 

and re-assess the proposed reductions. 

Some commenters stated that CMS 

should consider incorporating findings 

from the Visiting Nurse Associations of 

America (VNAA) Vulnerable Patient 

study into the rebasing methodology. 

Commenters stated that the VNAA 

Vulnerable Patient study found that 

Medicare home health episodes for 

patients with certain characteristics, 

such as those with poorly controlled 

chronic conditions, lower median 

household incomes or serious or frail 

status, have significantly lower 

reimbursement compared to cost than 

other patients. Commenters also cited 

types of beneficiaries which may be 

vulnerable, including but not limited to 

African and Hispanic home health 

beneficiaries and mentally-ill patients. 

Commenters stated that the CY 2014 HH 

PPS proposed rule needs to consider 

and adopt protective measures to ensure 

access to care for vulnerable patients. 

A commenter also asked if CMS 

considered the aging of the American 

and Medicare population, the increase 

in the awareness and acceptance of 

home health as a viable health care 

option, and the increase in incentives 

for hospitals to discharge patients 

earlier resulting in a higher patient 

acuity for home health patients in the 

rebasing analysis. The commenter 

recommended that CMS implement a 

study of the 1999 consultant’s report by 

the National Science Foundation to 

assess the comparability of patient 

needs presented in 1999 versus patient 

needs being present in 2013 and 

implement a research effort to look at 

the changes in home health care since 

2000. 

Response: We agree with the 

commenters that the case-mix system 

and home health study findings should 

be examined and addressed. However, 

the findings and recommendations of 

the study will not be final until spring 

of next year and section 3131(a) of the 

Affordable Care Act mandates that CMS 

implement rebasing starting in CY 2014. 

The home health study did take into 

account the findings from the VNAA 

Vulnerable Patient study and as noted, 

we recently awarded a contract to Abt 

Associates to perform follow-on work to 

the home health study. The contractor 

will further explore findings and 

recommendations from the home health 

study, reassess the case-mix system, 

monitor potential impacts of rebasing 

and other recent payment policy 

changes, and develop reform options to 

ensure continued access and quality of 

care for any vulnerable beneficiaries as 

well as address potential vulnerabilities 

in the current payment system. 

Comment: One commenter stated that 

there are negative margins associated 

with the provision of services to 

Medicaid, uninsured, and managed care 

patients and that positive Medicare 

margins are needed to subsidize the cost 

of providing services to these patients. 

Another commenter stated that the rule 

needs to consider the impact of 

expansion of Medicare Advantage plans 

and Fully Integrated Dual Advantage 

plans that will likely decrease Medicare 

revenues and profit margins. 

Response: While industry 

representatives contend that Medicare 

payments should subsidize payments 

from other payers (in large part 

Medicaid), we disagree. Medicare has 

never set payments so as to crosssubsidize other payers. Section 

1861(v)(1)(A) of the Act states ‘‘under 

the methods of determining costs, the 

necessary costs of efficiently delivering 

covered services to individuals covered 

by the insurance programs established 

by this title will not be borne by 

individuals not so covered, and the 

costs with respect to individuals not so 

covered will not be borne by such 

insurance programs.’’ As MedPAC 

stated in its March 2011 Report to 

Congress, cross-subsidization is not 

advisable for two significant reasons: 

‘‘Raising Medicare rates to supplement 

low Medicaid payments would result in 

poorly targeted subsidies. Facilities with 

high shares of Medicare payments— 

presumably the facilities that need 

revenues the least—would receive the 

most in subsidies from the higher 

Medicare payments, while facilities 

with low Medicare shares— presumably 

the facilities with the greatest need— 

would receive the smallest subsidies. 

Finally, increased Medicare payment 

rates could encourage states to further 

reduce their Medicaid payments and, in 

turn, create pressure to raise Medicare 

rates.5’’ 

In addition, we examined the 

proportion of Medicare-paid visits on 

the cost reports in our sample and found 

that the majority of visits recorded on 


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the cost report are Medicare-paid visits. 

As such, the average cost per visit is 

more representative of Medicare visit 

costs. We examined whether the average 

costs per visit may be different for 

Medicare versus other payers by 

examining the relationship between the 

providers’ average costs per visit and 

the provider’s proportion of visits that 

were paid by Medicare. Specifically, we 

grouped providers with similar 

proportions of Medicare visits (for 

example, those with 60–70 percent of 

visits as Medicare-paid visits and other 

10 percentage point groupings) and 

examined the average costs per visit 

across the groups. We did not see a 

consistent relationship between costs 

and the Medicare share of visits, either 

across disciplines or across the provider 

groups. 

Comment: Several commenters 

opposed the use of 6,252 out of 10,327 

cost reports for rebasing. One 

commenter stated that there were about 

10 percent of home health agencies that 

participate in the Medicare program that 

did not submit cost reports and 

therefore, did not have their cost data 

included in the rebasing analysis and 

one commenter stated that the majority 

of the agencies trimmed were small 

agencies, which will be severely 

impacted by rebasing. Commenters 

stated that this level of trimming was 

not necessary to gain reliable data and 

stated that over 9,000 cost reports were 

reliable and useable. Commenters noted 

that for the Hospital Outpatient 

Prospective Payment System (OPPS), 

CMS only removed 25 percent of cost 

reports. Commenters recommended 

CMS revisit the trim methodology to 

include as many cost reports as 

possible. 

Response: We appreciate the 

commenter’s concern on the number of 

providers used in (or excluded from) the 

HHA rebasing analysis. As stated in the 

CY 2014 HH PPS proposed rule, 1,629 

of the 10,327 cost reports were missing 

data on total Medicare costs or Medicare 

payments and 375 cost reports either 

had missing visits when costs were 

reported or missing costs when visits 

were reported. Otherwise stated, 

approximately 20 percent of the 10,327 

Medicare cost reports were incomplete. 

Of the remaining 8,323 completed 

Medicare cost reports, approximately 75 

percent were included in the rebasing 

analysis. In the CY 2014 HH PPS 

proposed rule (78 FR 40285), we 

provided a complete description of the 

methods used to trim the cost reports. 

We performed analysis on both the 

trimmed and untrimmed sample. We 

found that using the trimmed sample 

resulted in an estimated average cost per 

episode that was much higher than the 

estimated cost per episode using the 

untrimmed cost report sample. The 

estimated average cost per episode using 

the untrimmed cost report sample was 

$1,883.63 compared to $2,453.71 using 

the trimmed cost report sample. If CMS 

were to use the untrimmed cost report 

sample, the percentage for the rebasing 

reduction, if there was no statutory 

limit, would likely have been much 

larger than with the trimmed sample. 

With regards to the comment about the 

exclusions of agencies that didn’t 

submit cost report data or the 

disproportionate exclusion of agencies 

that were small, as described in section 

IV.D.1. of this rule, the per-visit costs 

obtained from the cost reports in our 

sample were weighted to be nationally 

representative by facility type, urban/

rural status, and facility size. Therefore, 

the costs per visit used to calculate the 

estimated episode cost should be 

nationally representative and 

appropriately reflect small agencies. 

Many of the edits applied are similar 

to those edits applied in other PPS 

systems and by MedPAC (including but 

not limited to, the exclusion of 

providers with missing Medicare 

Payments, missing Medicare costs, 

missing Medicare episodes, and reports 

that are less than 10 months or greater 

than 14 months). We continue to believe 

that our trimming methodology and our 

weighting methodology is technically 

appropriate and produces a nationallyrepresentative costs per visit and costs 

per episode. 

Comment: Some commenters stated 

that the data used for rebasing are 

outdated and that 2012 cost report data 

should be used, arguing that the CY 

2012 cost reports portray a more 

accurate picture of providers’ financial 

state. A number of commenters cited 

that 2012 cost reports would better 

capture agency costs, such as but not 

limited to, those associated with the full 

implementation of face-to-face and 

therapy requirements and the CY 2012 

recalibration. Commenters stated that 

the 2012 cost reports reflect declining 

average revenue, increased costs, and 

lower average margins, particularly 

among small home health agencies, and 

that Medicare margins have been 

declining over the years. 

Response: We disagree with the 

commenter’s claim that the cost reports 

used are not the most current, complete 

data available for rebasing. As of June 

30, 2013, there were over 10,000 FY 

2011 freestanding and hospital-based 

HHA cost reports of which over 90 

percent are settled. Also, as of June 30, 

2013, there are only about 6,800 FY 

2012 freestanding and hospital-based 

cost reports of which roughly only 60 

percent are settled. Therefore, the FY 

2011 cost report data is the most 

complete data available at the time of 

the rebasing analysis. 

In response to the commenter’s claims 

that the CY 2012 cost reports portray a 

more accurate picture of providers’ 

financial state, we calculated the 

average costs per visit for a matched 

sample of 2011 and 2012 providers 

using our rebasing sample of cost 

reports described in section IV.D.1 and 

in the CY 2014 HH PPS proposed rule 

(78 FR 40284) and preliminary 2012 

home health agency Medicare cost 

report data (approximately 5,700 2012 

cost reports). We found that the average 

costs per visit for all disciplines (home 

health aide, medical social services, 

occupational therapy, physical therapy, 

skilled nursing, and speech-language 

therapy) remained virtually unchanged 

(see Table 18), while the total number 

of visits per episode from 2011 to 2012 

dropped from 18.59 to 18.39, as shown 

in Table 7. This drop in total visits from 

2011 to 2012 with virtually no changes 

in the costs per visit suggest that the 

2012 estimated cost per episode may be 

less than the cost per episode estimated 

using FY 2011 cost report data. 

TABLE 18—AVERAGE COST PER VISIT, 2011 AND 2012 

2011 2012 

Skilled Nursing ......................................................................................................................................................... $ 133.65 $ 133.71 

Physical Therapy ..................................................................................................................................................... 161.05 162.81 

Occupational Therapy .............................................................................................................................................. 158.80 159.22 

Speech-Language Pathology .................................................................................................................................. 170.20 173.06 

Medical Social Services ........................................................................................................................................... 220.91 219.74 


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TABLE 18—AVERAGE COST PER VISIT, 2011 AND 2012—Continued 

2011 2012 

Home Health Aide ................................................................................................................................................... 69.79 65.63 

Source: FY 2011 Medicare cost report data as of December 31, 2012 and FY 2012 Medicare cost report data as of June 30, 2013 for providers who were included in the rebasing sample described in section IV.D.1.a. and for which a FY 2012 cost report was on file. We weighted 

the average costs per visit in 2012 by size, ownership type, and urban-rural status to mimic the distribution of providers in the 2011 claims used 

for weighing the 2011 average costs per visit used for rebasing. 

In addition, the calculations of the 

proposed CY 2014 rebasing adjustments 

include a 2.4 percent and a 2.3 percent 

increase to account for the market 

basket CY 2012 and CY 2013 updates, 

respectively. These updates reflect the 

latest forecast of the HHA market basket 

available at the time of rate setting. 

However, the actual (reflecting 

historical data rather than a forecast) 

HHA market basket increase for 2012 is 

now measured to be 1.7 percent (0.7 

percentage points lower than the 

forecasted increase for CY 2012 of 2.4 

percent). Preliminary data also suggests 

the CY 2013 market basket update of 2.3 

percent was overstated by roughly 0.5 

percentage points. The home health 

market basket percentage increases can 

be found here: http://www.cms.gov/

Research-Statistics-Data-and-Systems/

Statistics-Trends-and-Reports/

MedicareProgramRatesStats/

Downloads/mktbskt-summary.pdf. We 

would note that the CY 2012 market 

basket update was based on the 2003- 

based HHA market basket while the 

Web site reference above includes the 

2010-based HHA market basket 

increase, which is used for CY 2013 and 

subsequent years. 

Comment: Several commenters stated 

that CMS should include all home 

health service costs in its calculation of 

the cost of care. Commenters stated that 

the overhead costs of hospital-based 

home health agencies were not factored 

into the cost calculations and also listed 

several costs that they stated are not 

reflected in the 2011 cost reports, such 

as new resources needed for the growth 

of Accountable Care Organizations 

(ACOs), bundled payment initiatives, 

Independence at Home program, 

hospital readmissions reduction 

program, wage and employee health 

benefit changes, mandatory employer 

costs/penalties, HIPAA compliance, 

work with physicians related to PECOS, 

and implementation and administration 

of OASIS–C. Numerous commenters 

also stated that the CY 2011 cost reports 

did not reflect new regulatory 

obligations, such as the costs associated 

with therapy and face-to-face 

requirements, HH CAHPS survey 

requirements and the upcoming 

implementation of ICD–10–CM. 

Several commenters disagreed with 

CMS’ exclusion of non-allowable costs 

which they state are part of operating a 

business, such as bad debt, taxes, 

franchise fees, fundraising costs in a 

non-profit, marketing costs and business 

development costs, full administrative 

and general costs including those that 

are non-reimbursable under Medicare 

cost reimbursement principles, and 

formal and informal home office costs, 

respiratory therapy, nutritionist, 

dietician services, health information 

technology, telehealth, computerized 

information technology, and 

documentation time. 

Response: Overhead costs of hospitalbased home health agencies were 

factored into the cost calculations as we 

used cost measures where both direct 

service and indirect (such as, 

administrative and general) costs have 

been allocated to the appropriate cost 

centers. Please see page 17 of the 

technical report titled ‘‘Analyses in 

Support of Rebasing & Updating the 

Medicare Home Health Payment Rates— 

CY 2014 Home Health Prospective 

Payment System Proposed Rule’’ 

available on the CMS Home Health 

Agency (HHA) Center Web site at: 

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

The 2011 HHA Medicare cost reports 

used in the rebasing analysis reflect the 

costs of complying with longstanding 

regulatory requirements, such as 

HIPAA, and the implementation of 

OASIS–C on January 1, 2010, and HH 

CAHPS survey requirements in the 

fourth quarter of CY 2010. In addition, 

the face-to-face encounter requirement 

mandated by the Affordable Care Act 

was implemented on January 1, 2011 

(with a compliance deadline of April 1, 

2011) and therefore, the costs of the 

face-to-face encounter requirement are 

likewise accounted for in the 2011 cost 

reports used for rebasing. The therapy 

reassessment requirements were 

implemented on April 1, 2011. We 

believe that the 2011 cost reports would 

reflect the costs of complying with the 

new therapy reassessment requirements 

as agencies should have begun altering 

their documentation practices and 

therapist oversight activities early in 

2011 to comply with the reassessment 

requirements. Nevertheless, we did 

perform analysis of preliminary 2012 

cost report data and found virtually no 

changes in the costs-per-visit. This in 

conjunction with the drop in visits from 

2011 to 2012 suggests that the 2012 

estimated cost-per-episode may be less 

than the estimated 2011 cost per 

episode. While we acknowledge that the 

costs of implementing ICD–10–CM code 

set, effective October 1, 2014, and of 

educating physicians on enrollment in 

PECOS are not reflected in the cost 

reports we used, we did use the most 

current, complete cost report data 

available at the time of issuing this rule 

to calculate the rebasing adjustments. 

Section 3131(a) of the Affordable Care 

Act requires us to rebase payments 

starting in CY 2014 to be fully phasedin by CY 2017. As stated earlier, as of 

June 30, 2013, there are only about 

6,800 FY 2012 freestanding and 

hospital-based cost reports of which 

roughly only 60 percent are settled. 

Therefore, the FY 2011 cost report data 

is most complete data currently 

available and was the data used for the 

rebasing analysis. We note that while 

participation in ACOs, bundled 

payment initiatives and the 

‘‘Independence at Home’’ program are 

encouraged, participation is likely to 

occur among agencies that believe they 

can ‘‘work smarter’’ to achieve the aims 

of those programs. As with other 

voluntary programs, agencies self-select 

into them for a variety of reasons, and 

not only reasons related to possible 

costs of participation. Further, the 

hospital readmission reduction program 

is aimed at keeping patients with certain 

conditions from being re-hospitalized 

within 30 days of discharge and reduces 

payments to hospitals with excess 

readmissions. HHAs do not receive 

reduced payment when excess 

readmissions occur at a particular 

hospital. However, we would expect 

that HHAs would continue to provide 

quality care so that readmissions are 

minimized. In addition, we note that the 

hospital readmissions reduction 

program could create an incentive for 

hospitals to make more use of home care 

as a way to help prevent hospital 

readmissions. 


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With regards to the costs included in 

the rebasing methodology, section 

1861(v)(1)(A) states that ‘‘The 

reasonable cost of any services shall be 

the cost actually incurred, excluding 

therefrom any part of incurred cost 

found to be unnecessary in the efficient 

delivery of needed health services.’’ We 

also note that section 1895(e) of the Act 

governs the HH PPS and states that 

telehealth services are outside the scope 

of the Medicare home health benefit and 

home health PPS. This provision does 

not provide coverage or payment for 

Medicare home health services provided 

via a telecommunications system. The 

law does not permit the substitution or 

use of a telecommunications system to 

provide any covered home health 

services paid under the home health 

PPS, or any covered home health service 

paid outside of the home health PPS. As 

set forth in 42 CFR 409.48(c), a visit is 

an episode of personal contact with the 

beneficiary by staff of the home health 

agency (HHA), or others under 

arrangements with the HHA for the 

purposes of providing a covered service. 

The provision clarifies that there is 

nothing to preclude an HHA from 

adopting telemedicine or other 

technologies that they believe promote 

efficiencies, but that those technologies 

will not be specifically recognized or 

reimbursed by Medicare under the 

home health benefit. 

Although commenters took issue with 

certain non-reimbursable costs not being 

included in the cost calculations, we 

note that the home health agency 

Medicare cost report form has 

undergone little to no revision since 

1985. Prior to the interim payment 

system (1997–2000), providers were 

paid at cost for the direct and indirect 

costs associated with providing skilled 

nursing, home health aide, physical 

therapy, speech-language pathology, 

occupational therapy, and medical 

social services along with routine and 

non-routine medical supplies. While 

HHAs were receiving cost-based 

reimbursement, the number of agencies, 

users and services expanded rapidly in 

the early 1990s, indicating that nonreimbursable costs were not substantial 

enough to discourage new agencies from 

entering the market. When the HH PPS 

was implemented in 2000, nonreimbursable costs were not considered, 

nor did the industry comment on the FY 

2000 HH PPS proposed rule that they 

were concerned about non-reimbursable 

costs being excluded from the cost 

calculations. After HH PPS 

implementation, the number of agencies 

grew once again from approximately 

7,500 agencies in 2000 to over 12,000 in 

2011. We continue to believe that the 

cost calculations performed for 

determining the rebasing adjustments 

mandated by the Affordable Care Act 

are appropriate and reflect the direct 

and indirect costs of home health 

services rendered to Medicare 

beneficiaries. 

Comment: One commenter stated that 

there was an ‘‘order of operations’’ issue 

in the methodology used for rebasing. 

The commenter stated that when CMS 

first increased the estimated payment 

rate to account for the weight reductions 

(that is, the resetting of the average 

weight to 1.0000), it significantly 

increased the base to which the 3.5 

percent cut was applied. If the same 

percentage cut were made to the lower 

pre-neutralized standardized rate, the 

3.5 percent cut would have been about 

1 percent lower, or $28.92 an episode. 

The commenter thought that CMS 

should restore this amount to the base 

rate. 

Response: The starting point to which 

the rebasing adjustments are applied is 

the CY 2013 estimated average payment 

per episode, which we compare to the 

CY 2013 estimated average costs per 

episode. The increase in the CY 2012 

national, standardized 60-day episode 

payment rate by the budget neutrality 

factor is used to estimate CY 2012 

average payment. The CY 2012 average 

payment is then adjusted by the CY 

2013 adjustments (nominal case-mix 

reduction and HH payment update 

percentage). The increase in the base 

rate must occur before the rebasing 

adjustments are applied, not afterwards, 

as the rebasing adjustment is calculated 

by comparing average payments to 

average costs. We also note that the 

rebasing adjustments cannot exceed 3.5 

percent of the CY 2010 payment 

amounts in absolute terms. 

Comment: One commenter stated that 

CMS’ approach ignores regional 

differences in home health operating 

margins. Another commenter stated that 

the methodology ignores the diversity in 

the home care industry and the 

populations they serve and that the 

populations served varies by geography, 

patient characteristics, case-mix, size, 

and payer makeup. The commenter 

stated that under the current rebasing 

methodology, CMS is making a false 

assumption that all home care agencies 

are operating under similar conditions 

with similar populations, and agencies 

with smaller margins will not be able to 

accommodate the lower payment rates. 

A commenter encouraged CMS to make 

distinctions between hospital-based and 

freestanding agencies, between for-profit 

and nonprofit agencies, and between the 

resource costs of urban and rural 

agencies, and that CMS should consider 

setting rates based upon averages among 

each of the primary groups of HH 

providers. 

Response: We disagree with the 

commenters claims that our rebasing 

adjustment methodology ignores the 

diversity in the home care industry and 

the populations they serve. First, our 

approach reflects case-mix which takes 

into consideration the characteristics of 

the patients. As always, we welcome 

suggestions for additional measures that 

could potentially improve the case-mix 

adjustment as we continue in our case 

mix research. Second, as described in 

section IV.D.1. of this rule, we used 

urban/rural classification, size class, 

and agency type (nonprofit, for-profit, 

government, and facility-based) weights 

to estimate the national average cost per 

visit. In addition, the payment system 

reflects geographic variation in cost by 

adjusting payments using the wage 

index and by rural agency payment 

adjustments. CMS does not design 

payment rates for different sizes of 

agencies for several reasons, including 

that this would weaken incentives for 

efficient organization of the home health 

industry by agency size and could 

impair the program’s ability to benefit 

from economies of scale that affect 

agency costs. 

In addition, we note that in their 2013 

Report to Congress, MedPAC stated, 

‘‘The need to reset the base rate in 

Medicare is particularly acute because 

high margins exist across the range of 

agency types. Urban, rural, for-profit, 

and nonprofit agencies have margins in 

excess of 12 percent. While some 

agencies have margins significantly 

lower than average, the Commission’s 

review of agencies in 2007 found that 

these differences are primarily due to 

their higher costs. These higher costs do 

not appear to be related to patient 

severity, as low-margin agencies, for 

most measures, did not serve more 

severely ill patients.’’ 

Comment: One commenter stated that 

the total Medicare cost and the number 

of episodes should have been used to 

calculate the average cost per episode 

instead of the methodology used by 

CMS and that the actual payment 

should have been obtained from cost 

report data, not simulated. The 

commenter also stated that the wage 

index adjustment was not taken into 

account. 

Response: The methodology used the 

average costs per visit (obtained from 

the Medicare cost reports) multiplied by 

the number of Medicare visits per 

episode (obtained from the Medicare 

claims) by discipline to calculate the 

average cost per episode. We believe 


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6 Due to rounding, there is a 0.01 percentage point 

difference between the calculated and reported 

numbers. 

that Medicare claims are a more reliable 

data source; although we note that visit 

per episode counts on Medicare claims 

and on Medicare cost reports were 

similar. The methodology in this rule is 

the same methodology used for the 

implementation of the HH PPS base 

payment rate in FY 2001. In addition, 

we note that the regulations at 42 CFR 

484.215(b) state: ‘‘CMS determines the 

national mean utilization for each of the 

six disciplines using home health 

claims data’’ in calculating the national, 

standardized 60-day episode payment 

amount. We continue to believe that our 

methodology was, and continues to be, 

technically appropriate and best reflects 

national costs per episode. Lastly, we 

disagree with the commenter’s claim 

that we did not take into account the 

wage index adjustment. As stated in the 

CY 2014 HH PPS proposed rule (78 FR 

40296), we apply a standardization 

factor (1.0017) to eliminate the effects of 

variation in area wage adjustments 

among different home health agencies in 

a budget neutral manner. 

Comment: Commenters stated that the 

CY 2014 HH PPS proposed rule doesn’t 

offer the mathematical calculation CMS 

used to divide the 13.63 percent 

difference between payments and costs 

into four reductions of 3.6 percent, 

stating that 13.63 divided by 4 is 3.4075. 

Commenters asked for an explanation of 

the calculation, indicating that a 

correction may be needed. 

Response: We calculated the 3.6 

percent reduction in the CY 2014 HH 

PPS proposed rule using a CAGR 

formula. The CAGR formula used to get 

the 3.6 percent annual reduction for 

each of the four years was ($2,559.59/

$2,963.65) 1/4–1. The initial target 

aggregate reduction was determined to 

be 13.63 percent, which the statute 

requires to be phased-in over a four year 

period (2014–2017) in equal increments. 

The annual reduction necessary to yield 

13.63 percent after 4 years is 3.6 

percent, because (1–0.036)4 = 1–0.1363.6

This method reflects compounding 

growth rates over time. We note that 

while we calculated a 3.6 percent 

reduction for the CY 2014 HH PPS 

proposed rule, as we discussed earlier 

in this section, the Affordable Care Act 

mandates that the rebasing adjustment 

to the amount (or amounts) be no more 

than 3.5 percent of the 2010 payment 

amounts. As noted previously, the 

maximum adjustment for rebasing the 

national, standardized 60-day payment 

rate has been determined to be $80.95. 

Comment: One commenter stated that 

when developing the rebasing 

adjustment, CMS double counted factors 

that have already been accounted for in 

other reimbursement reductions since 

the enactment of the Affordable Care 

Act while excluding other factors that 

should have been considered. The 

commenter stated that CMS adjusted 

reimbursement rates multiple times 

based on the same factors. The 

commenter stated that the number of 

visits in a home health episode was 

already addressed. The commenter 

stated that between 1998 and 2001, the 

average number of home health visits 

per episode dropped from 31.6 to 21.4 

and remained at this level through 2009 

and that market forces have already 

corrected imbalances in the number of 

visits in a home health episode. The 

commenter also stated that in the CY 

2013 HH PPS rule, CMS already 

considered case-mix data and 

determined that no further adjustment 

was necessary. The commenter stated 

that adjusting reimbursement rates 

based on case-mix or the mix of services 

again would be ‘‘double counting.’’ In 

addition, the commenter stated that 

CMS already accounted for the level of 

intensity of services in a home health 

episode through the case-mix payment 

reductions and further reducing it 

would be double counting. 

Response: As we stated above, in their 

2013 Report to Congress, MedPAC 

stated that ‘‘the number and types of 

visits in a home health episode changed 

significantly after the home health PPS 

was introduced, although the payments 

were based on the older, higher level of 

use and costs’’ (p. 34). The episode 

payment amount has not been updated 

to reflect the change in the number of 

visits since the start of the HH PPS and 

therefore, CMS is not double counting 

the change in the number of visits. CMS 

is also not double counting the mix of 

services or level of intensity of services 

in the episode. The average number of 

visits per discipline per episode used 

when setting the base rate in 2000 is 

different from the average number of 

visits per discipline using 2011 claims 

data (Table 19). In addition, as indicated 

by the cost per visit per discipline 

differences between the per visit rates 

used to develop the 2000 base rate and 

the per visit rates calculated from FY 

2011 data, the intensity of the services 

in the episode likely have also changed. 

CMS has not previously updated the 

national, standardized episode payment 

rate to reflect the total visit changes per 

episode, the change in the mix of 

services, and the change in the intensity 

of services. The case-mix reductions 

which the commenter mentions were 

implemented to align the payment with 

patient severity and to account for the 

nominal increases in the reported casemix, changes not related to real 

increases in patient severity, by home 

health agencies. The goal of rebasing is 

to align the national, standardized 

payment rate and other applicable 

amounts with episode costs, similar to 

what was done when developing the 

episode payment rate in 2000. Given the 

differences in episode payment and 

costs and the differences in the assumed 

composition of visits and intensity 

when developing the base rate versus 

the composition of visits and intensity 

reflected in the 2011 cost report and 

claims data, CMS proposed that a 

rebasing adjustment be applied to the 

national, standardized episode payment 

amount for rebasing. 

TABLE 19—AVERAGE NUMBER OF VISITS, CY 1998 AND CY 2011 

Average 

number of visits used to 

develop 2000 

base rate (CY 

1998 claims 

data) 

Average 

number of visits from CY 

2011 claims 

data 

Home Health Aide ................................................................................................................................................... 13.4 2.80 

Medical Social Services ........................................................................................................................................... 0.32 0.14 

Occupational Therapy .............................................................................................................................................. 0.53 1.15 

Physical Therapy ..................................................................................................................................................... 3.05 4.86 


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TABLE 19—AVERAGE NUMBER OF VISITS, CY 1998 AND CY 2011—Continued 

Average 

number of visits used to 

develop 2000 

base rate (CY 

1998 claims 

data) 

Average 

number of visits from CY 

2011 claims 

data 

Skilled Nursing ......................................................................................................................................................... 14.08 9.43 

Speech-Language Pathology .................................................................................................................................. 0.18 0.21 

Source: 65 FR 41171 and CY 2011 Medicare claims data. 

Comment: A commenter stated that 

the methodology relies on proxies for 

payment and cost determinations when 

the information is readily available from 

cost report data. The commenter stated 

that the proxies CMS used are different 

than the actual episode costs and 

payments on the cost report and the 

combined difference between the actual 

and proxy calculation should lead to a 

lower rebasing adjustment than the 

adjustment proposed. The commenter 

recommended that CMS use direct data 

rather than the proxies used in the CY 

2014 HH PPS proposed rule. The 

commenter also stated that the 

methodology fails to account for and 

address the wide range in revenue/cost 

per episode experienced by HHAs and 

that a single payment rate adjusted with 

the current ‘‘weak’’ adjusters leads to 

payment inaccuracies that require a rate 

‘‘cushion’’ to maintain access to care. 

The commenter stated that CMS should 

look at all ways of calculating average 

costs of home health services, such as 

look into the median instead of the 

mean, and look into the multiple 

options for forecasting cost and payment 

trends. The commenter stated that all 

calculation options should be explored 

and evaluated and the option that 

would result in the ‘‘the greatest degree 

of financial stability’’ should be 

implemented. Another commenter 

urged CMS to ensure the methodology 

used to determine the rebasing 

adjustments is accurate. 

Response: We believe that Medicare 

home health care providers overall have 

benefited from a substantial rate 

‘‘cushion’’ under the HH PPS, as margin 

estimates over the years demonstrate. 

Because the margin has been so large, 

while we have seen little change in 

patient characteristics and relatively 

little change in aggregate resources used 

to care for the patients, we infer that 

access to care does not appear to be a 

problem. Furthermore, we have had no 

direct indications of access problems. 

Although it is possible that reducing the 

large rate ‘‘cushion’’ could create 

financial pressures, we believe many 

circumstances and considerations other 

than patient clinical status enter into the 

decision of the amount of resources per 

episode; the multiplicity of such factors 

is suggested by the large portion of 

variability in resources or margins 

unexplained by statistical models in 

recent studies of potential case mix 

variables. Our statistical analysis of 

margins suggests that many of these 

factors are agency-related, and therefore 

they may need examination by agencies 

to ensure efficient service delivery. 

Outlier payments are also available to 

agencies for those episodes whose 

imputed cost exceeds a threshold 

amount for each case-mix group HHRG 

due to unusual variations in the type or 

amount of medically necessary care. We 

anticipate that continuing studies of 

improvements to the case mix 

adjustment methodology will lead to a 

stronger case mix adjustment before the 

rebasing phase-in is complete. We 

welcome suggestions for new measures 

that are suitable for incorporation into 

the case mix adjuster. 

With regards to the comment about 

using the median rather than the mean, 

the median is typically used in order to 

avoid having extreme values unduly 

influence the measure of the typical 

value. We have already trimmed the 

cost report sample to avoid having 

extreme values influence the average 

value to some degree. We also do not 

believe the upper and lower values, 

after the trimming, are skewing the 

mean but rather that the upper and 

lower values reflect legitimate payments 

obtained from cleaned up data and 

therefore, the mean should be used. 

Also, using an average accounts 

precisely for the costs incurred by the 

industry because the mean times the 

number of units equals the total costs. 

With a median, one may be accounting 

for more or less than the industry’s total 

costs. In addition, the median calculated 

by the commenter was likely done at the 

agency level rather than the episode 

level, giving smaller agencies with 

higher costs more weight than the 

episode level average. In the rebasing 

methodology for this final rule, CMS 

makes use of the fact that much of the 

utilization is in lower-cost, large 

agencies, which would not be reflected 

if the median was used. 

We disagree with the commenter’s 

suggestion that the Medicare claims data 

is a proxy and should not be used to 

calculate the average costs per episode. 

We believe that Medicare claims are a 

more reliable data source and its use is 

consistent with the methodology used 

in setting the 60-day episode base rate 

for the HH PPS in 2000. In addition, we 

note that in at 42 CFR 484.215(b), ‘‘CMS 

determines the national mean 

utilization for each of the six disciplines 

using home health claims data’’ in 

calculating the national, standardized 

60-day episode payment amount and we 

believe that the use of claims data to 

calculate the average estimated payment 

more accurately reflects the actual 

payment agencies received. 

Comment: A commenter stated that 

fraudulent payment should be excluded 

from the payment history statistics and 

recommended that CMS ‘‘restart’’ the 

rebasing efforts, consulting with specific 

working groups comprised of industry 

and patient advocacy groups. 

Response: Section 3131(a) of the ACA 

mandates that rebasing be implemented 

starting in CY 2014 so the rebasing 

adjustments must be implemented 

beginning on January 1, 2014. We note 

that claims in CY 2011 and CY 2012 that 

were subsequently denied before the 

creation of the Standard Analytical Files 

(SAF) used for this analysis were 

excluded. 

Comment: One commenter stated that 

in the CY 2014 HH PPS proposed rule, 

there was no indication whether the 

audited HHAs were provided appeals 

rights and that the limited audit is 

unreliable for use in calculating 

payment rates. The commenter 

recommended that CMS continue to 

reject a downward adjustment to the 

average costs per visit calculation as a 

result of the audit findings since the 

HHAs audited do not represent the 

universe of HHAs, the auditors’ findings 

were not subject to review, and cost 

report auditing is ‘‘an ancient process 

which hasn’t been done for years’’. In 


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addition, a commenter stated that the 8 

percent of costs were disallowed for 

unspecified reasons. Another 

commenter stated that home health 

agencies have no incentives for ensuring 

the accuracy of their cost reports and 

the data is inaccurate and not 

representative of the costs that agencies 

actually incur and that there is no way 

to determine the accuracy of the reports 

that CMS included in the sample. 

Commenters stated that the cost report 

does not separate costs between payers 

and the costs solely attributed to 

Medicare cannot be isolated and are 

higher than the costs for other payers. 

Response: We contracted with a 

Medicare Administrative Contractor 

(MAC) to conduct audits on 2010 

Medicare cost reports of 100 home 

health agencies. Since two providers did 

not provide the information needed to 

complete the audit, the MAC audited 98 

HHA cost reports. As stated in the CY 

2014 HH PPS proposed rule, the audited 

providers overstated their costs by about 

8 percent. The overstatement of their 

costs was due to the inappropriate 

inclusion of costs, including but not 

limited to, excess salary expense and/or 

excess owner’s compensation, private 

duty nursing costs, luxury auto 

expenses, non-allowable costs for 

marketing/advertising/public relations, 

Federal Tax returns for an HHA owner, 

landscaping fees for an HHA owner’s 

home, and lobbying expenses. We note 

that any HHA that received an 

adjustment based on the audit of their 

cost report was sent a revised Notice of 

Program Reimbursement (NPR) letter. 

With each NPR, there was an 

attachment explaining the appeal rights 

to the provider. To date, none of the 

freestanding HHAs or the hospital-based 

HHAs filed an appeal. 

We disagree with the commenters’ 

claim that home health agencies have no 

incentives for ensuring the accuracy of 

their cost reports and that the CR data 

are inaccurate and not representative of 

the costs that agencies actually incur. 

Each HH cost report is required to be 

certified by the Officer or Director of the 

home health agency. Specifically, the 

HHA Medicare Cost Report (MCR) Form 

(CMS–1728–94) states the following: 

‘‘I HEREBY CERTIFY that I have read the 

above statement and that I have examined the 

accompanying Home Health Agency Cost 

Report and the Balance Sheet and Statement 

of Revenue and Expenses prepared by ll 

(provider name(s) and number(s) for the cost 

report beginning ll and ending ll, and 

that to the best of my knowledge and belief, 

it is a true, correct and complete report 

prepared from the books and records of the 

provider in accordance with applicable 

instructions, except as noted. I further certify 

that I am familiar with the laws and 

regulations regarding the provision of health 

care services, and that the services identified 

in this cost report were provided in 

compliance with such laws and regulations.’’ 

We also note that the HHA MCR 

referenced statement above includes the 

following: 

‘‘Misrepresentation or falsification of any 

information contained in this cost report may 

be punishable by criminal, civil and 

administrative action, fine and/or 

imprisonment under federal law. 

Furthermore, if services identified in this 

report were provided or procured through the 

payment directly or indirectly of a kickback 

or were otherwise illegal, criminal, civil and 

administrative action, fines and/or 

imprisonment may result.’’ 

As always, we encourage providers to 

fill out the Medicare cost reports as 

accurately as possible. 

Comment: Another commenter stated 

that CMS should look at the impact of 

the rebasing reductions on agencies that 

already have either negative or low 

margins. A commenter stated that 

MedPAC projected a smaller margin for 

freestanding HHAs than CMS calculated 

and that while the CMS projection is not 

an overall Medicare margin, the 

comparison shows the risks of CMS’ 

approach to rebasing. The commenter 

stated that they projected a smaller 

margin in 2013 than CMS projected and 

suggested that the rebasing adjustment 

be no more than 1.75 percent in the 

aggregate in each of the years of rebasing 

phase-in. In addition, commenters 

performed their own impact analysis 

and provided the results of their 

analysis in the comment. Commenters 

stated that their analysis showed that 47 

of the 50 States as well as District of 

Columbia will experience negative 

margins by 2017 if the rebasing 

adjustments are implemented, thereby 

causing access issues. Commenters 

stated that some states have negative 

margins currently or may have negative 

margins as early as CY 2014 if the 

rebasing adjustments are implemented. 

Providers from various states, such as 

but not limited to New Hampshire, 

North Carolina, South Carolina, Indiana, 

New Jersey, New York, Kansas, 

Michigan, Washington, Massachusetts, 

Pennsylvania, Virginia, Rhode Island, 

Connecticut, Texas, Hawaii, and 

California, stated that many if not all of 

the agencies in their state will have 

negative margins by 2017 if the rebasing 

adjustments are implemented. 

Commenters stated that they project that 

nearly three quarters of all home health 

agencies nationwide will experience net 

operating losses and that the national 

average Medicare margin will drop to 

¥9.77 percent in 2017. A number of 

commenters stated that the rebasing cut 

is reminiscent of the actual impact of 

the interim payment system, which 

‘‘wiped out 31 percent of home health 

agencies between 1997 and 2000.’’ 

Commenters stated that small to 

medium sized businesses would be 

disproportionately affected by the 

rebasing adjustments, including those 

operating in medically-underserved 

areas, and that this impact should have 

been assessed and quantified by CMS. 

Commenters also stated that hospitalbased home health providers will be 

disproportionately affected by the 

rebasing cuts and that they treat patients 

with higher acuity or who are more 

complex. Commenters stated that 

hospital-based agencies already have 

negative margins and HHAs should be 

given an opportunity to generate a 

margin needed for ongoing investments 

to improve care. Other commenters 

stated that non-profit agencies would be 

adversely affected by the rebasing 

adjustments. 

Response: It is important to note that 

the commenters’ views on the impact of 

the rebasing reductions on margin are 

starkly different from MedPAC’s 

predictions of HHA Medicare margins. 

As stated in their comment, MedPAC 

estimates that the cumulative net 

payment reduction to the national, 

standardized 60-day episode payment 

amount after four years will equal 

approximately 4 percent. MedPAC 

expressed concerns that the rebasing 

reductions were too modest and will do 

little to reduce home health agencies’ 

unusually high profitability under 

Medicare, stating that payments are at 

an inappropriately high level for all 

agencies. In addition, in their 2013 

Report to Congress, MedPAC 

recommended that rebasing should be 

implemented in two years and that the 

payment updates be eliminated. 

MedPAC stated in their 2013 Report to 

Congress, ‘‘The Patient Protection and 

Affordable Care Act of 2010 includes 

reductions in payments for home health 

care, but these policies will leave home 

health agencies with margins well in 

excess of cost. Overpaying for home 

health services has negative financial 

consequences for the federal 

government and raises the Medicare 

premiums beneficiaries pay.’’ 

We conducted analysis similar to that 

of the National Association for Home 

Care and Hospice (NAHC) on Medicare 

margins for 2011 as result of comments 

received (8,623 usable 2011 cost 

reports). We found that approximately 

30 percent of HHAs reported having a 

negative margin in 2011. In addition, 10 

percent of HHAs had negative margins 

for at least two of the past five years 


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(from 2007–2011), while 5 percent of 

HHAs, half of which were hospitalbased HHAs, were operating with 

negative margins for all of the past five 

years (from 2007–2011). We question 

how an HHA can still be operating after 

at least 5 years with negative margins 

and whether these HHAs have 

incentives to report negative margins 

(such as cost shifting/allocation by 

hospitals amongst their various units). If 

we assume no behavior change, similar 

to analysis completed by NAHC, the 

data suggest that approximately 70 

percent of HHAs would be operating 

with negative margins by 2017 when we 

take into account the proposed 3.5 

percent reduction to the national, 

standardized 60-day payment rate and 

other proposed payment changes in the 

proposed rule. However, we also 

performed an analysis examining the 

accuracy of margin predictions. For our 

analysis, we developed margin 

predictions using prior year cost report 

data and predicted margins for future 

years given the policy changes finalized 

for the future years. We then compared 

the predicted margin to the actual 

margin calculated. Specifically, we used 

2007, 2008, 2009, and 2010 cost report 

data and predicted margins one, two, 

and three years later. We then used cost 

report data to calculate the actual 

margins for those years. Our analysis 

showed that the actual margin is 

approximately three percentage points 

higher than the predicted median 

margin for each additional year of 

prediction. For example, using 2008 

cost report data and predicting margins 

for 2009, 2010, and 2011, applying the 

payment policies implemented in each 

year and increasing costs by the full 

market basket update each year, the 

actual median margins were three, six, 

and nine percentage points higher than 

the predicted median margin, 

respectively. Similarly, the percentage 

of providers estimated to have negative 

margins is overestimated by five 

percentage points per year of prediction, 

on average. As such, we estimate that if 

the proposed payment changes were 

finalized, approximately 43 percent— 

not 70 percent— of providers would 

have negative margins in CY 2017 and 

that of the 43 percent of providers 

predicted to have negative margins, 77 

percent of these providers already 

reported negative margins in 2011. 

We note that the final rebasing 

adjustment to the national, standardized 

60-day episode payment rate after 

incorporating complete 2012 claims 

data and comments received is an 

approximate reduction of 2.8 percent for 

2014–2017 and the overall impact of all 

of the rebasing adjustments is about 

¥2.7 percent. Re-running the margins 

analysis using the finalized payment 

changes and adjusting our predicted 

margins to account for differences we 

observed between previous predicted 

margins and actual margins, we 

estimated that approximately 40 percent 

of providers will have negative margins 

in CY 2017 and that of the 40 percent 

of providers predicted to have negative 

margins, 83 percent of these providers 

already reported negative margins in 

2011. 

With regards to comments about the 

interim payment system, we note that in 

their 2013 Report to Congress, MedPAC 

stated that during the interim payment 

system (1997–2000), when payments 

dropped by about 50 percent in two 

years, many agencies exited the 

program. However, new agencies 

entered the program (about 200 new 

agencies a year) and existing agencies 

expanded their service areas to enter 

markets left by exiting agencies. This is 

due in part to the low capital 

requirements for home health care 

services that allow the industry to react 

rapidly when the supply of agencies 

changes or contracts. Reviews of access 

found that access to care remained 

adequate during this period despite a 

substantial decline in the number of 

agencies (Liu et al. 2003). 

Comment: Commenters stated that 

CMS should look at the impact of 

rebasing on LUPA episodes. A 

commenter stated that patients receiving 

LUPAs may be vulnerable beneficiaries 

and that agencies with higher LUPA 

numbers may have lower or negative 

overall margins. In addition, the 

commenter stated that if the normal 

episodes are rebased to estimated cost, 

but the LUPA episodes are paid at less 

than cost, the overall effect on agencies 

with any LUPA episodes will be 

negative margins. One commenter stated 

that CMS should study LUPA services 

and payment and adjust overall 

payment to at least cover the costs 

incurred by agencies serving the 

patients. Specifically, commenters 

stated that the rebasing adjustments for 

LUPA per visit payments should be 

higher than 3.5 percent a year and that 

the 3.5 percent limit in the Affordable 

Care Act refers to the overall impact of 

the rebasing changes, not the individual 

rebasing adjustment amounts. Another 

commenter stated that CMS should 

closely review the statutory provision to 

determine whether there is flexibility to 

further raise the LUPA payments and if 

not, to seek legislative authority that 

would permit payments to be raised to 

the estimated level of cost, stating that 

LUPA episodes guard against the 

incentive to get a full 60-day episode 

payment for episodes with low visit 

counts. In contrast, one commenter 

stated that they were concerned the 

proposed increases to LUPA episodes 

may encourage HHAs to stint therapy 

services to Medicare beneficiaries 

receiving care and further exacerbate the 

issue of cherry-picking in post-acute 

care settings. Commenters stated that 

CMS should make changes to LUPA 

payments separately from other policies 

in the rule and commenter cited the 

LUPA add-on payment as an example. 

A commenter suggested that CMS could 

eliminate the outlier adjustment in 

calculating the per-visit rates since 

outlier payments have been significantly 

below the 2.5 percent target for the last 

several years. Other commenters 

suggested that CMS rebase the system or 

fix the LUPA system by adding LUPA 

floor or non-LUPA episode percentage 

caps at the agency level instead of 

implementing reductions. 

Response: We believe that the better 

reading of the statute requires us to 

apply rebasing adjustments to the 

individual payment amounts, not 

aggregate amounts. Therefore, we are 

applying the rebasing adjustments to the 

individual payment amounts. In 

addition, given the interpretation of the 

3.5 percent limit as of the date of 

enactment of the Affordable Care Act, as 

mentioned by a commenter, the LUPA 

per-visit amounts will be increased by 

the maximum dollar limit calculated 

using CY 2010 payment amounts, as 

shown in Table 14. This results in 

slightly lower increases to the LUPA 

rates than originally proposed in the CY 

2014 HH PPS proposed rule. We share 

commenters’ concerns about the 

incentive issues surrounding LUPA 

payments. We re-examined our LUPA 

add-on methodology but did not find a 

basis for revising our proposal for 

rebasing the add-on. We note that we 

plan to monitor LUPA episodes and 

further examine LUPA-related payment 

policies in the new contract awarded to 

Abt Associates to perform follow-on 

work for the home health study and 

monitor impacts of rebasing and other 

recent payment changes. 

Comment: Several commenters stated 

that they were concerned that the costs 

of NRS for hospital-based home health 

agencies were not captured since Form 

CMS–2552–10 doesn’t allow the 

reporting of these Medicare costs. 

Response: NRS costs for hospitalbased HHAs were included in 

calculation of the 2011 average NRS cost 

per visit. These costs are to be reported 

on CMS form 2552–10, worksheet H, 

line 12. 


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Comment: A commenter stated that in 

the CY 2014 HH PPS proposed rule, 

CMS states that there are a significant 

number of agencies that did not 

properly report NRS cost on their cost 

report, yet CMS seemed to use their data 

in rebasing the NRS Conversion Factor. 

The commenter urged CMS to either 

recalculate the NRS rebasing using 

validated, accurate data, or hold off on 

rebasing the NRS Conversion Factor 

until better data becomes available. 

Response: In the CY 2014 HH PPS 

proposed rule, we noted that a 

significant number of HHAs (1,756) 

listed charges for NRS on the home 

health claim, but did not list any NRS 

costs on the cost report (78 FR 40290). 

As we stated in the CY 2014 HH PPS 

proposed rule, we calculated the 

average NRS cost per visit using the 

same cost report sample used to 

calculate the other adjustments to the 

national, standardized 60-day episode 

payment amount and the national pervisit rates, thus maintaining a consistent 

approach (78 FR 40289). We remind the 

industry again that each home health 

cost report is required to be certified by 

the Officer or Director the home health 

agency. We also welcome suggestions 

for improving compliance and accuracy 

on cost reports within the current cost 

reporting forms. 

Comment: Commenters stated that the 

CY 2014 HH PPS proposed rule did not 

include a detailed and cumulative 

quantitative analysis of the impact and 

economic effects of the proposed 

provisions nor a cumulative cost 

analysis or quantification of the rule’s 

projected future costs that is required 

for any economically significant 

regulation under Executive Orders 

13563 and 12866. Commenters also 

stated that CMS should take into 

account the other Affordable Care Act 

mandated reductions (adjustments to 

the home health market basket updates, 

productivity adjustments, and outlier 

payment reduction), case-mix 

reductions, and sequestration, when 

developing the rebasing adjustments. A 

commenter stated that the impact 

analysis should look at access to care 

and should describe the locales where 

care is provided rather than gross 

aggregate impacts. The commenter 

stated that the impact analysis should 

look at the overall impact on the 

financial viability of HHAs rather than 

on the reduction in revenue and should 

look at the overall impact on Medicare 

spending in all relevant sectors, such as 

the inpatient hospitalization and skilled 

nursing facility care. Another 

commenter stated that CMS should 

consider the role that HHAs play in 

reducing the overall costs of health care 

by treating patients in a lower cost 

setting than institutional care. Many 

commenters stated that a multi-year 

analysis of the impact of the payment 

cuts should be performed, instead of a 

one-year impact analysis. 

Response: Executive Orders 13563 

and 12866 require us to assess the costs, 

benefits, and transfer effects of 

rulemaking. Because the most 

quantifiable impact of the rule is the 

transfer effect associated with Medicare 

payments (revenues), we focus our 

analysis on the impact of various policy 

proposals on payments from one year to 

the next. While we acknowledge that 

many factors and statutory requirements 

affect home health agencies, given the 

lack of data on local market conditions 

and individual provider’s operations, 

we cannot provide the detailed analysis 

suggested by the commenters. We note 

that the net reduction in payments to 

HHAs in this final rule of 1.05 percent 

for CY 2014 is less than the net 

reduction in the proposed rule of 1.5 

percent and less than the net reductions 

in prior years, notably the ¥4.89 

percent net reduction in payments to 

HHAs in CY 2011. 

Executive Order 13563 specifies, to 

the extent practicable, agencies should 

assess the costs of cumulative 

regulations. However, given potential 

utilization pattern changes, wage index 

changes, changes to the market basket 

forecasts, and unknowns regarding 

future policy changes, we believe it is 

neither practicable nor appropriate to 

forecast the cumulative impact of the 

rebasing adjustments on Medicare 

payments to HHAs for future years at 

this time. Changes to the Medicare 

program may continue to be made as a 

result of the Affordable Care Act, or new 

statutory provisions. Although these 

changes may not be specific to the HH 

PPS, the nature of the Medicare program 

is such that the changes may interact, 

and the complexity of the interaction of 

these changes would make it difficult to 

predict accurately the full scope of the 

impact upon HHAs for future years 

beyond CY 2014. 

Comment: Commenters stated that 

contrary to the Regulatory Flexibility 

Act (RFA), the CY 2014 HH PPS 

proposed rule doesn’t include a detailed 

analysis of its impact on small 

businesses. A commenter also cited the 

Data Quality Act, stating there are 

detailed analytic requirements on 

federal agencies prior to issuing 

economically significant regulations. 

Commenters noted that the CY 2014 HH 

PPS proposed rule was of sufficient 

concern to the U.S. Small Business 

Administration that it felt compelled to 

issue a Regulatory Alert to HHAs and 

other small businesses to submit 

comments on the CY 2014 HH PPS 

proposed rule. Another commenter 

stated that most home health agencies 

meet the U.S. Small Business 

Administration’s definition of a small 

business and that the smallest home 

health agencies already have net 

negative Medicare margins and serve a 

disproportionate share of vulnerable 

patient populations. A commenter 

submitted a report on the impact of 

home health rebasing on small business 

as well as a state level impact analysis 

of rebasing performed by two 

contractors. 

Response: The RFA requires agencies 

to analyze options for regulatory relief 

of small entities, if a rule has a 

significant impact on a substantial 

number of small entities. For purposes 

of the RFA, small entities include small 

businesses, nonprofit organizations, and 

small governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to $34.5 

million in any 1 year. For the purposes 

of the RFA, we estimate that almost all 

HHAs are small entities as that term is 

used in the RFA. The economic impact 

assessment is based on estimated 

Medicare payments (revenues) and 

HHS’s practice in interpreting the RFA 

is to consider effects economically 

‘‘significant’’ only if greater than 5 

percent of providers reach a threshold of 

3 to 5 percent or more of total revenue 

or total costs. However, the estimated 

impact for CY 2014 in the CY 2014 HH 

PPS proposed rule was ¥1.5 percent, 

under the threshold of 3–5 percent to be 

considered significant. Included in table 

33 in section VII is an estimate of the 

impacts according to HHA type, area, 

and number of first episodes. According 

to the impact table for this final rule, the 

overall estimated impact is ¥1.05 

percent, with HHAs that have less than 

100 first episodes experiencing 

estimated decreases in Medicare 

revenues of ¥1.27 percent and HHAs 

with 1,000 or more first episodes 

experiencing estimated decreases in 

Medicare revenues of ¥0.90 percent. 

While commenters mentioned the 

Data Quality Act (section 515(a) of the 

Treasury and General Government 

Appropriations Act for Fiscal Year 2001 

(Pub. L. 106–554)) in public comments, 

they did not state that CMS was not in 

compliance. The Data Quality Act 

directed the OMB to issue governmentwide guidelines that provide policy and 

procedural guidance to federal agencies 

for ensuring and maximizing the 

quality, objectivity, utility, and integrity 

of information, including statistical 


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information, disseminated by federal 

agencies. We believe that we have 

complied with section 3131(a) of the 

Affordable Care Act in a straightforward 

and transparent manner and that we 

adhered to the principles of the Data 

Quality Act by ensuring that the 

information provided to the industry 

was of sufficient quality, objectivity, 

utility, and integrity. We provided the 

industry with detailed information on 

our calculations in the preamble of the 

CY 2014 HH PPS proposed rule as well 

supporting documentation in the form 

of a public use file and a technical 

rebasing report posted on the HHA 

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

Center/Provider-Type/Home-HealthAgency-HHA-Center.html. 

Comment: Another commenter 

recommended that CMS develop a 

detailed plan for monitoring the impact 

of any HH PPS payment reductions 

(such as by examining measures relating 

to beneficiary access, quality of care and 

beneficiary experience of care) and that 

CMS commit to reporting to 

Congressional Committees of 

jurisdiction, the Medicare Payment 

Advisory Commission, and the public 

the results of this ongoing monitoring 

effort. The commenter stated that CMS 

should use authority available to the 

agency to ensure Medicare beneficiaries 

have appropriate access to home health. 

Response: As we noted above, we 

recently awarded a contract to Abt 

Associates that will, among other things, 

develop and implement a system for 

monitoring access to care. We will make 

every effort to ensure that beneficiaries, 

and in particular vulnerable patient 

populations, continue to have access to 

quality home health care. We believe 

the four year phase-in of the rebasing 

adjustment will lessen any impact on 

access as HHAs develop ways to 

increase efficiencies while maintaining 

quality of care. As mandated in section 

3131(a) of the Affordable Care Act and 

also noted above, MedPAC will conduct 

a study on the rebasing implementation, 

which will include an impact analysis 

on access to care, and submit a Report 

to Congress no later than January 1, 

2015, along with any potential 

recommendations, if necessary. 

Final Decisions: 

Based on comments received, and 

section 3131(a) statutory language 

describing the maximum adjustment 

amounts for rebasing, we are finalizing 

a $80.95 reduction to the national, 

standardized 60-day episode payment 

rate in each year, CY 2014 through CY 

2017. Section 3131(a) of the Affordable 

Care Act requires that the rebasing 

adjustment must be phased-in over a 4- 

year period in equal increments, not to 

exceed 3.5 percent of the payment 

amount (or amounts) as of the date of 

enactment (March 23, 2010). As 

described earlier, the maximum 

adjustment for the national, 

standardized 60-day payment rate is 

calculated to be $80.95 ($2,312.94 * 

0.035). When determining the CY 2014 

base payment amount, we will apply the 

$80.95 reduction to the CY 2013 base 

payment amount (which has been 

increased due to the resetting of the 

case-mix weights to 1.0000). Please see 

Section E for more details on the 

finalized CY 2014 payment rates. For 

CY 2015 through CY 2017, we will 

apply a $80.95 reduction to the previous 

year’s base payment amount prior to the 

annual HH PPS payment update 

percentage. 

Similar to the rebasing adjustment for 

the national, standardized 60-day 

payment rate, we are finalizing equal 

dollar adjustments to the per-visit 

payment amounts for CY 2014 through 

CY 2017, as shown in Tables 14 and 15. 

The adjustments to the national per-visit 

payment rates are capped at 3.5 percent 

of the national per-visit payment 

amounts in CY 2010, which are lower 

than the CY 2013 per-visit amounts. 

Therefore, the maximum adjustments to 

the national per-visit payment rates 

allowed by statute, and finalized in this 

final rule, are lower than the 

adjustments we proposed. 

We are finalizing a reduction to the 

NRS conversion factor in each year from 

2014 through 2017 of 2.82 percent, or 

$1.52 in CY 2014. Taking into account 

the statutory language stating that the 

amount of any adjustment for the year 

may not exceed 3.5 percent of the 

amount as of the date of enactment of 

the Affordable Care Act, we determined, 

as described in the preamble language 

above, that the final reduction to the 

NRS conversion factor of 2.82 percent in 

CY 2014 would not exceed 3.5 percent 

of the CY 2010 NRS conversion factor of 

$53.34 (53.34 * 0.035 = $1.87). In 

addition, we believe there is a very low 

likelihood that future adjustments of 

¥2.82 percent in CY 2015 through 2017 

would ever exceed the statutory limit. 

As such, we are finalizing a reduction 

to the NRS conversion factor of 2.82 

percent each year from CY 2014 through 

CY 2017. 

Section IV.E.4 contains the finalized 

payment rates for CY 2014 for the 

National, Standardized 60-day Episode 

Payment Amount, LUPA Per-Visit 

Payment Amounts, and Nonroutine 

Medical Supply (NRS) Conversion 

Factor, accounting for the rebasing 

adjustments. 

E. CY 2014 Home Health Payment Rate 

Update 

1. CY 2014 HH Market Basket Update 

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

amended by section 3401(e) of the 

Affordable Care Act, adds new clause 

(vi) which states, ‘‘After determining the 

home health market basket percentage 

increase . . . the Secretary shall reduce 

such percentage . . . for each of 2011, 

2012, and 2013, by 1 percentage point. 

The application of this clause may 

result in the home health market basket 

percentage increase under clause (iii) 

being less than 0.0 for a year, and may 

result in payment rates under the 

system under this subsection for a year 

being less than such payment rates for 

the preceding year.’’ Therefore, as 

mandated by the Affordable Care Act, 

for CYs 2011, 2012, and 2013, the HH 

market basket update was reduced by 1 

percentage point. For CY 2014, there is 

no such percentage reduction. 

Therefore, the HH PPS payment update 

percentage increase to the CY 2014 

payment rates will be the full HH 

market basket update. 

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

requires that the standard prospective 

payment amounts for CY 2014 be 

increased by a factor equal to the 

applicable HH market basket update for 

those HHAs that submit quality data as 

required by the Secretary. The HH PPS 

market basket update for CY 2014 is 2.3 

percent. This is based on Global Insight 

Inc.’s third quarter 2013 forecast, 

utilizing historical data through the 

second quarter of 2013. The HH market 

basket was rebased and revised in CY 

2013. A detailed description of how we 

derive the HHA market basket is 

available in the CY 2013 HH PPS final 

rule (77 FR 67080, 67090). 

The following is a summary of the 

comments we received regarding the 

home health market basket update. 

Comment: A commenter supports 

CMS’s proposal to provide a full market 

basket increase. The commenter further 

requests that CMS support future market 

basket increases, which are important to 

HHAs feeling the impact of several years 

of market basket reductions. The 

commenter also states that providers are 

preparing for a productivity adjustment 

cut effective in 2015. 

Response: We appreciate the 

comment in support of using the full 

market basket update. The reductions to 

the market basket updates in previous 

years had been required by various 

statutes. Likewise, the productivity 

adjustment that would begin in CY 2015 

is a statutory requirement and as such, 

we do not have the authority to waive 


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the application of the productivity 

adjustment. 

Final Decision: For CY 2014, as 

required by section 1895(b)(3)(B) of the 

Act, the HH PPS payment update 

percentage will be 2.3 percent. 

e. Home Health Care CAHPS® Survey 

(HHCAHPS®) 

In the CY 2013 HH PPS final rule (77 

FR 67094), we stated that the HH quality 

measures reporting requirements for 

Medicare-certified agencies includes the 

CAHPS® HH Care (HHCAHPS®) Survey 

for the CY 2013 APU. We maintained 

the stated HHCAHPS® data 

requirements for CY 2013 that were set 

out in the CY 2012 HH PPS final rule, 

and in the CY 2013 HH PPS final rule, 

for the continuous monthly data 

collection and quarterly data 

submission of HHCAHPS® data. 

(1) Background and Description of 

HHCAHPS®

As part of the HHS’ Transparency 

Initiative, we have implemented a 

process to measure and publicly report 

patient experiences with home health 

care, using a survey developed by the 

Agency for Healthcare Research and 

Quality’s (AHRQ’s) Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS®) program and 

endorsed by the NQF in March 2009 

(NQF Number 0517). The HHCAHPS®

survey is part of a family of CAHPS®

surveys that asks patients to report on 

and rate their experiences with health 

care. The Home Health Care CAHPS®

(HHCAHPS®) survey presents home 

health patients with a set of 

standardized questions about their 

home health care providers and about 

the quality of their home health care. 

Prior to this survey, there was no 

national standard for collecting 

information about patient experiences 

that will enable valid comparisons 

across all HHAs. The history and 

development process for HHCAHPS®

has been described in previous rules 

and it also available on the official 

HHCAHPS® Web site at https://

homehealthcahps.org and in the 

annually-updated HHCAHPS® Protocols 

and Guidelines Manual, which is 

downloadable from https://

homehealthcahps.org. 

For public reporting purposes, we 

report five measures from the 

HHCAHPS® Survey—three composite 

measures and two global ratings of care 

that are derived from the questions on 

the HHCAHPS® survey. The publicly 

reported data are adjusted for 

differences in patient mix across HHAs. 

We update the HHCAHPS® data on 

Home Health Compare on 

www.medicare.gov quarterly. Each 

HHCAHPS® composite measure consists 

of four or more individual survey items 

regarding one of the following related 

topics: 

• Patient care (Q9, Q16, Q19, and 

Q24); 

• Communications between providers 

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

and Q23); and 

• Specific care issues on medications, 

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

Q12, Q13, and Q14). 

The two global ratings are the overall 

rating of care given by the HHA’s care 

providers (Q20), and the patient’s 

willingness to recommend the HHA to 

family and friends (Q25). 

The HHCAHPS® survey is currently 

available in English, Spanish, Chinese, 

Russian, and Vietnamese. The OMB 

Number on these surveys is the same 

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

the Home Health Care CAHPS® Web 

site, https://homehealthcahps.org. We 

will continue to consider additional 

language translations of the HHCAHPS®

in response to the needs of the home 

health patient population. 

All of the requirements about home 

health patient eligibility for the 

HHCAHPS® survey and conversely, 

which home health patients are 

ineligible for the HHCAHPS® survey are 

delineated and detailed in the 

HHCAHPS® Protocols and Guidelines 

Manual, which is downloadable at 

https://homehealthcahps.org. Home 

health patients are eligible for 

HHCAHPS® if they received at least two 

skilled home health visits in the past 2 

months, which are paid for by Medicare 

or Medicaid. 

Home health patients are ineligible for 

inclusion in HHCAHPS® surveys if one 

of these conditions pertains to them: 

• Are under the age of 18; 

• Are deceased prior to the date the 

sample is pulled; 

• Receive hospice care; 

• Receive routine maternity care only; 

• Are not considered survey eligible 

because the state in which the patient 

lives restricts release of patient 

information for a specific condition or 

illness that the patient has; or 

• No Publicity patients, defined as 

patients who on their own initiative at 

their first encounter with the HHAs 

make it very clear that no one outside 

of the agencies can be advised of their 

patient status, and no one outside of the 

HHAs can contact them for any reason. 

We stated in previous rules that 

Medicare-certified HHAs are required to 

contract with an approved HHCAHPS®

survey vendor. Medicare-certified 

agencies also must provide on a 

monthly basis a list of their patients 

served to their respective HHCAHPS®

survey vendors. Agencies are not 

allowed to influence at all how their 

patients respond to the HHCAHPS®

survey. 

HHCAHPS® survey vendors are 

required to attend introductory and all 

update trainings conducted by CMS and 

the HHCAHPS® Survey Coordination 

Team, as well as to pass a post-training 

certification test. We now have 

approximately 30 approved HHCAHPS®

survey vendors. The list of approved 

HHCAHPS® survey vendors is available 

at https://homehealthcahps.org. 

(2) HHCAHPS® Oversight Activities 

We stated in prior final rules that all 

approved HHCAHPS® survey vendors 

are required to participate in 

HHCAHPS® oversight activities to 

ensure compliance with HHCAHPS®

protocols, guidelines, and survey 

requirements. The purpose of the 

oversight activities is to ensure that 

approved HHCAHPS® survey vendors 

follow the HHCAHPS® Protocols and 

Guidelines Manual. As stated 

previously in the CY 2010, CY 2011, CY 

2012, and CY 2013 final rules, all 

approved survey vendors must develop 

a Quality Assurance Plan (QAP) for 

survey administration in accordance 

with the HHCAHPS® Protocols and 

Guidelines Manual. An HHCAHPS®

survey vendor’s first QAP must be 

submitted within 6 weeks of the data 

submission deadline date after the 

vendor’s first quarterly data submission. 

The QAP must be updated and 

submitted annually thereafter and at any 

time that changes occur in staff or 

vendor capabilities or systems. A model 

QAP is included in the HHCAHPS®

Protocols and Guidelines Manual. The 

QAP must include the following: 

• Organizational Background and Staff 

Experience 

• Work Plan 

• Sampling Plan 

• Survey Implementation Plan 

• Data Security, Confidentiality and 

Privacy Plan 

• Questionnaire Attachments 

As part of the oversight activities, the 

HHCAHPS® Survey Coordination Team 

conducts on-site visits to all approved 

HHCAHPS® survey vendors. The 

purpose of the site visits is to allow the 

HHCAHPS® Coordination Team to 

observe the entire HHCAHPS® Survey 

implementation process, from the 

sampling stage through file preparation 

and submission, as well as to assess data 

security and storage. The HHCAHPS®

Survey Coordination Team reviews the 

HHCAHPS® survey vendor’s survey 

systems, and assesses administration 


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protocols based on the HHCAHPS®

Protocols and Guidelines Manual posted 

at https://homehealthcahps.org. The 

systems and program site visit review 

includes, but is not limited to the 

following: 

• Survey management and data 

systems; 

• Printing and mailing materials and 

facilities; 

• Telephone call center facilities; 

• Data receipt, entry and storage 

facilities; and 

• Written documentation of survey 

processes. 

After the site visits, HHCAHPS®

survey vendors are given a defined time 

period in which to correct any 

identified issues and provide follow-up 

documentation of corrections for 

review. HHCAHPS® survey vendors are 

subject to follow-up site visits on an asneeded basis. 

In the CY 2013 HH PPS final rule (77 

FR 67094, 67164), we codified the 

current guideline that all approved 

HHCAHPS® survey vendors fully 

comply with all HHCAHPS® oversight 

activities. We included this survey 

requirement at § 484.250(c)(3). 

(3) HHCAHPS® Requirements for the CY 

2015 APU 

In the CY 2013 HH PPS final rule (77 

FR 67094), we stated that for the CY 

2015 APU, we will require continued 

monthly HHCAHPS® data collection 

and reporting for 4 quarters. The data 

collection period for CY 2015 APU 

includes the second quarter 2013 

through the first quarter 2014 (the 

months of April 2013, through March 

2014). HHAs are required to submit 

their HHCAHPS® data files to the 

HHCAHPS® Data Center for the second 

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

October 17, 2013; for the third quarter 

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

2014; for the fourth quarter 2013 by 

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

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

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

are firm; no exceptions are permitted. 

We will continue to exempt HHAs 

receiving Medicare certification on or 

after April 1, 2013, from the full 

HHCAHPS® reporting requirement for 

the CY 2015 APU because these HHAs 

will not have been Medicare-certified 

throughout the period of April 1, 2012 

through March 31, 2013. These HHAs 

do not need to complete a HHCAHPS®

Participation Exemption Request form 

for the CY 2015 APU. 

We require that all HHAs that had 

fewer than 60 HHCAHPS®-eligible 

unduplicated or unique patients in the 

period of April 1, 2012, through March 

31, 2013 are exempt from the 

HHCAHPS® data collection and 

submission requirements for the CY 

2015 APU. Agencies with fewer than 60 

HHCAHPS®-eligible, unduplicated or 

unique patients in the period of April 1, 

2012, through March 31, 2013 are 

required to submit their patient counts 

on the HHCAHPS® Participation 

Exemption Request form for the CY 

2015 APU, posted on https://

homehealthcahps.org on April 1, 2013, 

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

2014. This deadline is firm, as is true of 

all quarterly data submission deadlines. 

(4) HHCAHPS® Requirements for the CY 

2016 APU 

For the CY 2016 APU, we require 

continued monthly HHCAHPS® data 

collection and reporting for 4 quarters. 

The data collection period for the CY 

2016 APU includes the second quarter 

2014 through the first quarter 2015 (the 

months of April 2014 through March 

2015). HHAs will be required to submit 

their HHCAHPS® data files to the 

HHCAHPS® Data Center for the second 

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

October 16, 2014; for the third quarter 

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

2015; for the fourth quarter 2014 by 

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

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

e.d.t. on July 16, 2015. These deadlines 

will be firm; no exceptions will be 

permitted. 

We will exempt HHAs receiving 

Medicare certification after the period in 

which HHAs do their patient count 

(April 1, 2013 through March 31, 2014) 

on or after April 1, 2014, from the full 

HHCAHPS® reporting requirement for 

the CY 2016 APU, because these HHAs 

will not have been Medicare-certified 

throughout the period of April 1, 2013, 

through March 31, 2014. These HHAs 

will not need to complete a HHCAHPS®

Participation Exemption Request form 

for the CY 2016 APU. 

We require that all HHAs that had 

fewer than 60 HHCAHPS®-eligible 

unduplicated or unique patients in the 

period of April 1, 2013, through March 

31, 2014 are exempt from the 

HHCAHPS® data collection and 

submission requirements for the CY 

2016 APU, upon completion of the 

Participation Exemption Request form. 

Agencies with fewer than 60 

HHCAHPS-eligible, unduplicated or 

unique patients in the period of April 1, 

2013, through March 31, 2014, will be 

required to submit their patient counts 

on the HHCAHPS® Participation 

Exemption Request form for the CY 

2016 APU posted on https://

homehealthcahps.org on April 1, 2014, 

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

This deadline will be firm, as will be all 

of the quarterly data submission 

deadlines. 

(5) HHCAHPS® Reconsiderations and 

Appeals Process 

HHAs should monitor their respective 

HHCAHPS® survey vendors to ensure 

that vendors submit their HHCAHPS®

data on time, by accessing their 

HHCAHPS® Data Submission Reports 

on https://homehealthcahps.org. This 

will help HHAs ensure that their data 

are submitted in the proper format for 

data processing to the HHCAHPS® Data 

Center. 

We will continue the HHCAHPS®

reconsiderations and appeals process 

that we have finalized and that we have 

used for the CY 2012 APU and for the 

CY 2013 APU. We have described the 

HHCAHPS® reconsiderations process 

requirements in the Technical Direction 

Letter that CMS sends to the affected 

HHAs, on or about the first Friday in 

September. HHAs have 30 days from 

their receipt of the Technical Direction 

Letter informing them that they did not 

meet the HHCAHPS requirements for 

the CY period, to send all 

documentation that supports their 

requests for reconsideration to CMS. It 

is important that the affected HHAs 

send in comprehensive information in 

their reconsideration letter/package 

because CMS will not contact the 

affected HHAs to request additional 

information or to clarify incomplete or 

inconclusive information. If clear 

evidence to support a finding of 

compliance is not present, the 2 percent 

reduction in the APU will be upheld. If 

clear evidence of compliance is present, 

the 2 percent reduction for the APU will 

be reversed. We will notify affected 

HHAs by about mid-December. If we 

determine to uphold the 2 percent 

reduction, the HHA may further appeal 

the 2 percent reduction via the Provider 

Reimbursement Review Board (PRRB) 

appeals process. 

The following is a summary of the 

comments we received regarding 

HHCAHPS®: 

Comment: We received a comment 

that supported HHCAHPS® as a useful 

tool for quality improvement and for 

empowering patients as equal partners 

in their plans of health care. This 

commenter said that member providers 

have used the HHCAHPS® survey to 

identify high-risk patients and to 

provide additional care support to them 

in managing their illnesses. 

Response: We are very happy to hear 

these statements of support for 

HHCAHPS® and to learn about how 

providers are using the survey for 

quality improvement. 


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Comment: We received a comment 

that HHCAHPS® is an unfunded 

administrative burden on HHAs as a 

mandate that requires significant time to 

work with CMS’s approved vendor 

selected by the provider. 

Response: The collection of the 

patient’s perspectives of care data for 

similar CAHPS® surveys, such as 

Hospital CAHPS®, follow the same 

model where providers pay the 

approved survey vendors for the 

HHCAHPS® data collection, and CMS 

pays for the HHCAHPS® survey vendor 

approval process, survey vendor 

training, technical support and 

assistance for home health agencies and 

for the vendors, monitoring and 

oversight of the vendors, and data 

analysis and public reporting of the 

HHCAHPS® survey data. HHAs are 

strongly encouraged to report their 

respective HHCAHPS® costs on their 

cost reports but should note that the 

HHCAHPS® costs are not reimbursable 

under the HH PPS. CMS strongly 

encourages HHAs to shop around for the 

best cost value for them before choosing 

and contracting with an approved 

HHCAHPS® vendor to conduct the 

HHCAHPS® survey on their behalf. 

Comment: We received comments 

that CMS requires the use of external 

CMS-approved vendors but holds the 

home health agencies responsible for 

assuring that these vendors perform 

properly. These commenters 

emphasized that CMS should change 

this policy and monitor the performance 

of the outside vendors and penalize the 

vendors, not the home health agencies, 

if the vendors fail to perform. 

Response: We believe that HHAs must 

monitor their vendors to ensure that 

vendors submit data on time, by using 

the information that is available to them 

on the HHCAHPS® Data Submission 

Reports. This will also ensure that data 

is submitted in the proper format, and 

will subsequently be successfully 

submitted to the HHCAHPS® Data 

Center. 

If CMS or the CMS Data Warehouse 

contractor become aware that an 

HHCAHPS vendor has significant issues 

that would put HHAs at risk for not 

meeting the APU requirements, CMS 

and the CMS Contractor will 

immediately alert the affected HHAs. 

The intent of this alert is to provide 

these agencies with sufficient time to 

switch vendors and to ensure that the 

HHAs will not be penalized if their data 

collection activities are interrupted 

because of circumstances outside of 

their control. HHAs are strongly 

encouraged to call email hhcahps@

rti.org or telephone RTI, the federal 

contractor, at (866) 354–0954, to change 

vendors and to ensure that their 

HHCAHPS® data collection will 

continue. HHAs are always advised to 

check the official HHCAHPS® Web site, 

https://homehealthcahps.org for all 

information about HHCAHPS®. In the 

event that CMS has found problems 

with a vendor, we would also note this 

next to the vendor name on the vendor 

list that is posted on https://

homehealthcahps.org. If we find that a 

vendor does not comply with 

HHCAHPS® protocols and guidelines 

for the implementation of the 

HHCAHPS® survey, or correct their 

deficiencies in a timely manner, then 

we will remove that vendor from the 

approved list. 

Final Decision: We are not 

recommending any changes as a result 

of comments received. 

f. Summary of Changes in CY 2014 for 

the HHCAHPS® Survey 

For the CY 2014 HH PPS Final Rule, 

we are finalizing the proposed 

requirements for HHCAHPS® as 

proposed in the CY 2014 HH PPS 

Proposed Rule. 

g. For Further Information on the 

HHCAHPS® Survey 

We strongly encourage HHAs to learn 

about the survey and view the 

HHCAHPS® Survey Web site at the 

official Web site for the HHCAHPS® at 

https://homehealthcahps.org. HHAs can 

also send an email to the HHCAHPS®

Survey Coordination Team at 

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

information about HHCAHPS®. 

2. Home Health Quality Reporting 

Program (HHQRP) 

a. General Considerations Used for 

Selection of Quality Measures for the 

HHQRP 

The successful development of the 

HH Quality Reporting Program 

(HHQRP) that promotes the delivery of 

high quality healthcare services is our 

paramount concern. We seek to adopt 

measures for the HHQRP that promote 

efficient and safer care. Our measure 

selection activities for the HHQRP takes 

into consideration input we receive 

from the Measure Applications 

Partnership (MAP), convened by the 

National Quality Forum (NQF). The 

MAP is a public-private partnership 

comprised of multi-stakeholder groups 

convened for the primary purpose of 

providing input to CMS on the selection 

of certain categories of quality and 

efficiency measures, as required by 

section 1890A(a)(3) of the Social 

Security Act (the Act). By February 1st 

of each year, the NQF must provide that 

input to CMS. Input from the MAP is 

located at http://www.qualityforum.org/ 

Setting_Priorities/Partnership/Measure_

Applications_Partnership.aspx. For 

more details about the pre-rulemaking 

process, see the FY 2013 IPPS/LTCH 

PPS final rule at 77 FR 53376 (August 

31, 2012). We also take into account 

national priorities, such as those 

established by the National Priorities 

Partnership at http:// 

www.qualityforum.org/npp/, the HHS 

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

secretary/about/priorities/

priorities.html, and the National 

Strategy for Quality Improvement in 

Healthcare located at http:// 

www.ahrq.gov/workingforquality/nqs/

nqsplans.pdf. 

To the extent practicable, we have 

sought to adopt measures that have been 

endorsed by the national consensus 

organization, under contract to endorse 

standardized healthcare quality 

measures pursuant to section 1890 of 

the Act, recommended by multistakeholder organizations, and 

developed with the input of providers, 

purchasers/payers, and other 

stakeholders. 

b. Background and Quality Reporting 

Requirements 

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

states that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ 

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

of the Act states that ‘‘for 2007 and each 

subsequent year, in the case of a home 

health agency (HHA) that does not 

submit data to the Secretary in 

accordance with subclause (II) with 

respect to such a year, the HH market 

basket percentage increase applicable 

under such clause for such year shall be 

reduced by 2 percentage points.’’ This 

requirement has been codified in 

regulations at § 484.225(i). HHAs that 

meet the quality data reporting 

requirements are eligible for the full HH 

market basket percentage increase. 

HHAs that do not meet the reporting 

requirements are subject to a 2 

percentage point reduction to the HH 

market basket increase. 

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

further states that ‘‘[t]he Secretary shall 

establish procedures for making data 

submitted under sub clause (II) available 

to the public. Such procedures shall 

ensure that a HHA has the opportunity 

to review the data that is to be made 


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public with respect to the agency prior 

to such data being made public.’’ 

As codified at § 484.250(a), we 

established that the quality reporting 

requirements could be met by the 

submission of OASIS assessments and 

HH Care Consumer Assessment of 

Healthcare Providers and Systems 

Survey (HHCAHPS®). CMS has 

provided quality measures to HHAs via 

the Certification and Survey Provider 

Enhanced Reports (CASPER) reports 

available on the CMS Health Care 

Quality Improvement System (QIES) 

since 2002. A subset of the HH quality 

measures has been publicly reported on 

the HH Compare Web site since 2003. 

The CY 2012 HH PPS final rule (76 FR 

68576), identifies the current HH QRP 

measures. The selected measures that 

are made available to the public can be 

viewed on the HH Compare Web site 

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

HHCompare/Home.asp. 

As stated in the CY 2012 and CY2013 

HH PPS final rules (76 FR 68575 and 77 

FR 67093, respectively), we finalized 

that we will also use measures derived 

from Medicare claims data to measure 

HH quality. 

c. OASIS Data Submission and OASIS 

Data for Annual Payment Update 

The HH conditions of participation 

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

comprehensive assessment must be 

updated and revised (including the 

administration of the OASIS) no less 

frequently than: (1) The last 5 days of 

every 60 days beginning with the startof-care date, unless there is a beneficiary 

elected transfer, significant change in 

condition, or discharge and return to the 

same HHA during the 60-day episode; 

(2) within 48 hours of the patient’s 

return to the home from a hospital 

admission of 24 hours or more for any 

reason other than diagnostic tests; and 

(3) at discharge. 

It is important to note that to calculate 

quality measures from OASIS data, 

there must be a complete quality 

episode, which requires both a Start of 

Care (initial assessment) or Resumption 

of Care OASIS assessment and a 

Transfer or Discharge OASIS 

assessment. Failure to submit sufficient 

OASIS assessments to allow calculation 

of quality measures, including transfer 

and discharge assessments, is failure to 

comply with the CoPs. 

HHAs do not need to submit OASIS 

data for those patients who are excluded 

from the OASIS submission 

requirements under the HH CoPs § 484.1 

through § 484.265. As described in the 

December 23, 2005 Medicare and 

Medicaid Programs: Reporting Outcome 

and Assessment Information Set Data as 

Part of the Conditions of Participation 

for Home Health Agencies final rule (70 

FR 76202), we define the exclusion as 

those patients: 

• Receiving only nonskilled services; 

• For whom neither Medicare nor 

Medicaid is paying for HH care (patients 

receiving care under a Medicare or 

Medicaid Managed Care Plan are not 

excluded from the OASIS reporting 

requirement); 

• Receiving pre- or post-partum 

services; or 

• Under the age of 18 years. 

As set forth in the CY 2008 HH PPS 

final rule (72 FR 49863), HHAs that 

become Medicare-certified on or after 

May 31 of the preceding year are not 

subject to the OASIS quality reporting 

requirement nor any payment penalty 

for quality reporting purposes for the 

following year. For example, HHAs 

certified on or after May 31, 2013 are 

not subject to the 2 percentage point 

reduction to their market basket update 

for CY 2014. These exclusions only 

affect quality reporting requirements 

and do not affect the HHA’s reporting 

responsibilities as announced in the 

December 23, 2005 final rule, Medicare 

and Medicaid Programs; Reporting 

Outcome and Assessment Information 

Set Data as Part of the Conditions of 

Participation for Home Health Agencies 

(70 FR 76202). 

d. Home Health Care Quality Reporting 

Program Requirements for CY 2014 

Payment and Subsequent Years 

(1) Submission of OASIS Data 

For CY 2014, we proposed to consider 

OASIS assessments submitted by HHAs 

to CMS in compliance with HH CoPs 

and Conditions for Payment for 

episodes beginning on or after July 1, 

2012, and before July 1, 2013 as 

fulfilling one portion of the quality 

reporting requirement for CY 2014. This 

time period will allow for 12 full 

months of data collection and will 

provide us with the time necessary to 

analyze and make any necessary 

payment adjustments to the payment 

rates for CY 2014. We proposed to 

continue this pattern for each 

subsequent year beyond CY 2014, 

considering OASIS assessments 

submitted in the time frame between 

July 1 of the calendar year 2 years prior 

to the calendar year of the Annual 

Payment Update (APU) effective date 

and July 1 of the calendar year 1 year 

prior to the calendar year of the APU 

effective date as fulfilling the OASIS 

portion of the quality reporting 

requirement for the subsequent APU. 

The following is a summary of the 

comments we received regarding the 

submission of OASIS assessments to 

fulfill one portion of the quality 

reporting requirement for CY 2014 

Payment and Subsequent Years. 

Comment: Several commenters 

supported the proposals regarding 

considering OASIS assessments as 

fulfilling one portion of the quality 

reporting requirement for CY2014 and 

each subsequent year. We received no 

comments in opposition. 

Response: We appreciate the 

commenters’ support for the proposals. 

Final Decision: After considering all 

of the comments we received, we are 

finalizing the proposals as proposed. 

CMS will consider OASIS assessments 

submitted by HHAs to CMS in 

compliance with the HH CoPs and 

Conditions for Payment for episodes 

beginning on or after July 1, 2012, and 

before July for episodes beginning on or 

after July 1, 2012, and before July 1, 

2013 as fulfilling one portion of the 

quality reporting requirement for CY 

2014. We will also continue this pattern 

for each subsequent year beyond CY 

2014, considering OASIS assessments 

submitted for episodes beginning on 

July 1st of the calendar year 2 years 

prior to the calendar year of the APU 

effective date and ending June 30th of 

the calendar year 1 year prior to the 

calendar year of the APU effective date 

as fulfilling the OASIS portion of the 

HH quality reporting requirement. HHA 

OASIS assessments will be considered 

complete if they comply with the HH 

CoPs and Conditions for Payment that 

apply to the applicable year. 

(2) Home Health Rehospitalization and 

Emergency Department (ED) Use 

Without Readmission Claims-Based 

Measures 

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

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

Emergency Department Use without 

Hospital Readmission during the first 30 

days of HH. These measures were 

included on the Measures Under 

Consideration list reviewed by the MAP 

in December 2012 and the MAP 

supported the direction of both 

measures. The Rehospitalization during 

the first 30 days of HH measure 

estimates the risk-standardized rate of 

unplanned, all-cause hospital 

readmissions for patients who had an 

acute inpatient hospitalization in the 5 

days before the start of their HH stay 

and were admitted to an acute care 

hospital during the 30 days following 

the start of the HH stay. The Emergency 

Department Use without Readmission 

measure estimates the risk-standardized 

rate of unplanned, all-cause use of an 

emergency department for patients who 


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had an acute inpatient hospitalization in 

the 5 days before the start of a HH stay 

and used an emergency department, yet 

were not admitted to an acute care 

hospital during the 30 days following 

the start of a HH stay. 

We worked to develop a set of quality 

measures to report on HH patients who 

are recently hospitalized as these 

patients are at an increased risk of acute 

care hospital use, either through 

inpatient admission or emergency 

department use without inpatient 

admission. Addressing unplanned 

hospital readmissions is a high priority 

for HHS as our focus continues on 

promoting patient safety, eliminating 

healthcare associated infections, 

improving care transitions, and 

reducing the cost of healthcare. 

Readmissions are costly to the Medicare 

program and have been cited as 

sensitive to improvements in 

coordination of care and discharge 

planning for patients. Rates of 

rehospitalization remain substantial 

with 14.4 percent of HH patients 

experiencing an unplanned 

rehospitalization in the first 30 days of 

care. Currently, HHAs focus on 

measures of acute care hospitalization 

(applied to all HH patients) as a measure 

of their effectiveness. We will continue 

to publicly report the Acute Care 

Hospitalization and Emergency 

Department Use without Hospitalization 

measures, as these measures apply to all 

home health patients and will continue 

to be useful in selecting a home health 

agency. The rehospitalization measures 

will allow HHAs to further target 

patients who entered HH after a 

hospitalization. 

The measures of acute care utilization 

by previously hospitalized patients are 

developed out of the NQF endorsed 

claims-based measures: (1) Acute Care 

Hospitalization (NQF #0171); and (2) 

Emergency Department Use without 

Hospitalization (NQF #0173) to better 

capture acute care hospitalizations and 

use of an emergency department for 

patients who are recently discharged 

from the hospital. These 

rehospitalization measures are 

harmonized with NQF-endorsed 

Hospital-Wide Risk-Adjusted All-Cause 

Unplanned Readmission Measure (NQF 

#1789) (see http://

www.qualityforum.org/Publications/

2012/07/Patient_Outcomes_All-Cause_

Readmissions_Expedited_Review_

2011.aspx) finalized for the Hospital 

IQR Program in the FY 2013 IPPS/LTCH 

PPS Final Rule (77 FR 53521 through 

53528). Further, to the extent 

appropriate, the HH rehospitalization 

measures are harmonized with this 

measure and other measures of 

readmission rates developed for postacute care (PAC) settings. 

We intend to seek NQF endorsement 

of the: (1) Rehospitalization during the 

first 30 days of HH; and (2) Emergency 

Department Use without Readmission 

during the first 30 days of HH measures. 

We proposed to begin reporting 

feedback to HHAs on performance on 

these measures in CY 2014. These 

measures will be added to Home Health 

Compare for public reporting in CY 

2015. Additional details pertaining to 

these measures, including technical 

specifications, can be found at the HH 

Quality Initiative Web page located at 

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

HHQIQualityMeasures.html. 

We solicited public comment on our 

proposed quality measures: (1) 

Rehospitalization during the first 30 

days of HH; and (2) Emergency 

Department Use without Hospital 

Readmission during the first 30 days of 

HH. We also proposed to provide 

feedback to HHAs on performance of 

these measures in CY 2014. The 

following is a summary of the comments 

we received regarding these two quality 

measures: 

Comment: Several commenters stated 

that they support the addition of the 

proposed quality measures to the 

HHQRP. One commenter specifically 

supported the proposal for reporting 

feedback to HHAs on performance of 

these measures in CY 2014. We also 

received a number of comments stating 

that, according to the Measures 

Application Partnership (MAP) report 

from January of 2013, the proposed 

quality measures required further 

development and encouraging CMS to 

submit them for NQF endorsement prior 

to full implementation and public 

reporting. 

Response: We appreciate the 

commenters’ support for the addition of 

the proposed quality measures to the 

HHQRP. We are finalizing the proposal 

to provide feedback to HHAs on 

performance of these measures in CY 

2014. In December 2012, the MAP 

supported the direction of both 

measures because they address the PAC/ 

LTC core concept of avoidable 

admissions. The MAP did acknowledge 

that the measures should be 

appropriately risk adjusted to 

accommodate variations in population. 

The risk model was developed and then 

minimally changed as a result of 

comment to this rule. The final list of 

risk factors will be posted on cms.gov by 

December 6, 2013. We plan to submit 

the two quality measures for NQF 

endorsement by the submission 

deadline of December 6, 2013. These 

measures will be added to Home Health 

Compare for public reporting in 

CY2015. 

Comment: One commenter requested 

that CMS clarify what course of action 

it would take if NQF fails to endorse the 

proposed quality measures. The 

commenter also stated that their 

understanding of section 1890 of the Act 

is that CMS is required to use endorsed 

measures in its quality reporting 

programs. 

Response: As noted in the response to 

the previous comment, we plan to 

submit the measures for NQF 

endorsement in the fourth quarter of CY 

2013. However, based on our 

interpretation of section 1895(b)(3)(B)(v) 

of the Act, we may adopt measures for 

the HHQRP that are not NQF-endorsed. 

If NQF does not endorse the proposed 

quality measures, CMS will consider 

NQF’s rationale for not endorsing the 

measures and decide how to proceed. 

Comment: Several commenters stated 

that the proposed quality measures are 

too similar to the existing Acute Care 

Hospitalization and Emergency 

Department Use without Hospitalization 

measures. Several additional 

commenters were uncertain about how 

the proposed measures differ from the 

measures of Acute Care Hospitalization 

and ED Use currently published on 

Home Health Compare or were unaware 

that the Acute Care Hospitalization and 

ED Use without Hospitalization are 

currently part of the HHQRP measure 

set. These commenters recommended 

that CMS modify the proposed measures 

so that they are more similar to the 

existing measures. We also received a 

number of comments stating that if we 

finalize the proposed quality measures 

we should consider removing the 

existing Acute Care Hospitalization and 

Emergency Department Use without 

Hospitalization measures from the 

HHQRP because publicly reporting all 

four measures might be confusing for 

HHAs and the public. 

Response: The two quality measures 

we proposed are different from the 

existing NQF-endorsed Acute Care 

Hospitalization and ED Use without 

Hospitalization measures. The proposed 

quality measures specifically target the 

previously hospitalized home health 

population, whereas the existing, NQFendorsed Acute Care Hospitalization 

and Emergency Department Use without 

Hospitalization measures evaluate home 

health agencies on their care for all of 

their Medicare patients. While the 

proposed quality measures apply only 

to patients who were hospitalized in the 

five days prior to starting home health, 

which includes only about 35 percent of 


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HH patients, the Acute Care 

Hospitalization and Emergency 

Department Use without Hospitalization 

measures apply to the entire home 

health population covered by original 

Medicare. In addition, the Acute Care 

Hospitalization measure includes 

hospitalizations that occur during the 

first 60 days of home care, and the 

proposed Rehospitalization measure 

only applies to the first 30 days of home 

care. We believe that the two quality 

measure sets can be used in conjunction 

to evaluate home health care quality, 

and that, by comparing home health 

agencies on both sets of claims-based 

measures, consumers can gain a more 

complete and accurate picture of how 

much acute care is used by patients of 

the agencies. 

Comment: One commenter requested 

that CMS clarify the source of a statistic 

cited in the proposed rule, namely the 

14.4 percent of HH patients 

experiencing an unplanned 

rehospitalization in the first 30 days of 

HH care and also requested that CMS 

clarify the reason for the difference 

between the national average rate of 

unplanned rehospitalization in the first 

30 days of HH care (14.4 percent) and 

the national average rate for the Acute 

Care Hospitalization rate published on 

Home Health Compare (17 percent). 

Response: We appreciate the 

comments. The statistic that 14.4 

percent of HH patients experience an 

unplanned rehospitalization in the first 

30 days of HH care is calculated by 

applying the specifications for the 

Rehospitalization during the first 30 

days of HH measure to 12 months of feefor-service Medicare claims (July 2011 

through June 2012). The 

Rehospitalization during the first 30 

days of HH measure is only calculated 

for Medicare fee-for-service patients 

because encounter data is available 

through fee-for-service claims. The 17 

percent national average hospitalization 

rate represents hospitalizations during 

the first 60 days of home health for all 

Medicare fee-for-service patients, 

calculated according to the 

specifications for the Acute Care 

Hospitalization measure. 

Comment: One commenter stated that 

CMS appears to take the position that 

14.4 percent of HH patients 

experiencing an unplanned 

rehospitalization in the first 30 days of 

HH care is an unacceptable number. The 

commenter noted that a portion of those 

readmissions may be unavoidable. 

Response: We thank the commenter 

for the comment. We agree with the 

commenter that some readmissions to 

the hospital and emergency department 

visits may not be preventable. We 

believe that HHAs can provide the 

highest quality care and coordination of 

care for their patients so that the rate of 

preventable readmissions is reduced. 

Comment: With regards to the 

Emergency Department Use without 

Hospital Readmission during the first 30 

days of HH measure, one commenter 

stated that CMS should take into 

account the increase in the number of 

urgent care centers in certain areas of 

the country, which could skew the 

performance rates for the Emergency 

Department Use without Hospital 

Readmission during the first 30 days of 

HH measure across different HHAs 

across the country. 

Response: We appreciate the 

comment. We are investigating the 

impact of urgent care centers on these 

measures. While we expect that urgent 

care sometimes substitutes for 

Emergency Department use, the 

availability of urgent care centers 

should similarly impact all agencies in 

an area similarly, and thus performance 

on the ED Use without Hospital 

Readmission measure should still be 

meaningfully compared among agencies 

in the same area. 

Comment: One commenter expressed 

concern that the proposed quality 

measures do not consider the length of 

time that the patient has been receiving 

HH care before requiring 

rehospitalization or treatment in the 

emergency department. 

Response: We appreciate the 

commenter’s concern. We examined the 

relationship between time in home 

health and hospitalizations and found 

that home health patients experience a 

nearly constant hazard of 

hospitalization per day. By measuring 

rehospitalizations over a fixed 30 day 

window (rather than over the entire 

home health episode) the relationship 

between length of stay and 

rehospitalization is mitigated. While we 

acknowledge that other approaches 

could also be appropriate, we chose the 

fixed measurement window approach 

for simplicity and to be consistent with 

the existing NQF endorsed measures of 

Acute Care Hospitalization and ED Use. 

Comment: One commenter stated that 

they do not support the five-day 

timeframe used to specify the eligible 

patient population and encouraged 

further analysis of how the time interval 

between hospital discharge and home 

health admission impacts subsequent 

patient outcomes. The commenter 

expressed particular concern that some 

hospitals may delay home health 

admission until 3 days after hospital 

discharge in an attempt to maximize 

DRG reimbursement. 

Response: We appreciate the 

commenter’s feedback. We believe that 

the five-day timeframe used to specify 

the eligible patient population for the 

measures is appropriate. Shortening the 

5 day window is undesirable for several 

reasons. First, it would exclude some 

patients from the measures who are not 

cared for in any other post-acute setting. 

Additionally, a shorter window (such as 

a two-day window to be consistent with 

the CoPs) may encourage agencies to 

delay the start of care for particularly 

unstable patients so that they are not 

held accountable for the 

rehospitalization of such patients. 

Comment: One commenter asked how 

short Skilled Nursing Facility (SNF) 

stays occurring between hospital 

discharge and start of HH care are 

accounted for in the measures. 

Response: The measure specifications 

exclude patients who receive care from 

another post-acute setting, such as a 

SNF or an IRF between hospital 

discharge and start of home health are 

excluded from both measures. 

Comment: One commenter stated that 

HHAs may not be entirely responsible 

for a patient’s return to an emergency 

room or inpatient acute care facility, 

since HHAs follow orders prescribed by 

the physician. The commenter stated 

that an HHA does not have the authority 

to override the physician’s decision to 

admit the HH patient to an inpatient 

acute care facility. 

Response: We appreciate the 

commenter’s concern. We understand 

that Emergency Department use or 

Hospitalization is sometimes necessary. 

We do believe, however, that the care 

that a patient receives from a HHA can 

reduce the need for that patient to be 

readmitted to the hospital. 

Comment: We received a number of 

comments stating that agencies should 

not be held responsible for patients who 

are readmitted to an acute-care setting 

within 30 days of entering HH, if these 

patients have been discharged from 

home health for appropriate reasons (for 

example, the patient is no longer 

homebound or is no longer in need of 

skilled services) within the 30-day 

period. One commenter requested that 

CMS clarify whether patients 

discharged from HH care within the 30- 

day measurement period would be 

included or excluded from the proposed 

quality measures. 

Response: We appreciate the 

comments. We believe that the care and 

education provided by HHAs can have 

a positive impact on the health status 

and self-care processes of many of the 

these patients, even if they were 

discharged due to appropriate reasons 

such as no longer being homebound 


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and/or no longer in need of skilled care. 

Therefore home health care can reduce 

the likelihood of hospital readmission 

even after the patient is discharged from 

the HHA. Thus, as documented in the 

measure specifications, patients who are 

discharged from home health within the 

30-day observation period are counted 

in the denominators of the quality 

measures. 

Comment: Two commenters stated 

that they are concerned about the 

impact of the increasing use of 

‘‘observation stays’’ in lieu of inpatient 

admission on the rates of the proposed 

quality measures, since there may be 

significant variation in the use of 

observation stays versus inpatient 

admission within a state, region, or the 

United States. 

Response: We appreciate the 

commenters’ concern. Observation stays 

that begin in a hospital emergency 

department will be captured on the 

Emergency Department Use without 

Hospital Readmission during the first 30 

days of HH measure rather than in the 

Rehospitalization measure, as these 

events are billed to Medicare as 

outpatient services rather than inpatient 

services. 

Comment: Two commenters 

expressed support for the proposed 

exclusions for both measures. We also 

received a number of comments stating 

that it is unclear whether and how CMS 

excludes planned hospitalizations from 

the proposed quality measures. 

Response: We appreciate the 

commenters’ support for the exclusions. 

Additionally, we would like to point out 

that the specifications for the measures 

clarify that the measures exclude 

planned hospitalizations using the same 

algorithm as the NQF-endorsed 

Hospital-Wide All-Cause Unplanned 

Readmission (HWR) measure. This 

algorithm identifies planned 

hospitalizations based on diagnostic and 

procedural information available on 

claims data. Those specifications can be 

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

Quality-Initiatives-Patient-AssessmentInstruments/HomeHealthQualityInits/

HHQIQualityMeasures.html. 

Comment: One commenter requested 

that CMS clarify the term ‘‘riskstandardized’’ as it is used in the 

proposed rule to describe the proposed 

quality measures. 

Response: We would like to clarify 

that the term ‘‘risk-standardized,’’ 

which appears in the section of the 

proposed rule that describes the 

proposed quality measures, is 

interchangeable with ‘‘risk-adjusted,’’ 

that is, the quality measures are riskadjusted to account for beneficiary 

factors that may affect rates of 

hospitalization but are outside of the 

HHA’s control. 

Comment: Several commenters 

expressed concerns that the proposed 

quality measures do not appropriately 

take into account other settings where 

the patient may have received care. 

Response: We appreciate the 

commenters’ concern. The 

specifications for the measures exclude 

home health stays in which the patient 

received treatment in another setting 

between hospital discharge and the start 

of home health as these patients’ 

outcomes may be affected by this 

intervening care. In addition, the risk 

adjustment model takes into account 

settings in which the beneficiary 

received care prior to hospitalization by 

examining Medicare fee-for-service 

claims in the 30 days prior to the start 

of the HH stay. We believe that the 

measures appropriately take into 

account other settings. 

Comment: Several commenters stated 

that they support the proposed 

approach to risk adjustment. 

Additionally, we received a number of 

comments stating that CMS should 

include other risk factors in the risk 

adjustment model. One commenter 

stated that it is unclear why certain 

OASIS items have been included and 

others have been excluded. 

Response: We appreciate the 

commenters’ support for the risk 

adjustment approach. We also 

appreciate the comment that additional 

data derived from OASIS may be useful 

as risk adjustment factors for the 

measures. Currently, CMS has chosen to 

include all the Activities of Daily Living 

(ADLs) information that is readily 

available on Medicare claims as risk 

adjustment factors, including composite 

measures of Dressing Upper or Lower 

Body, Bathing, Toileting, Transferring, 

and Ambulation. However, 

incorporating additional OASIS data 

elements into the risk adjustment model 

would require the ability to match 

OASIS assessments to claims accurately, 

which is currently infeasible. 

Comment: One commenter stated that 

CMS should take into account 

additional patient characteristics such 

as race, ethnicity, and religion, which 

may influence a patient’s preference to 

be hospitalized, in the risk adjustment 

model. 

Response: While risk-adjustment is 

used to ensure that measured rates are 

comparable across agencies with 

different patient populations, CMS 

believes that adjusting for race, 

ethnicity, or religion would obscure 

disparities in outcomes between more 

advantaged and less advantaged groups. 

We note, however, that we have 

examined disparities between 

subpopulations defined by race, age, 

and gender for the measures; this 

information was included in the 

technical brief posted for public 

comment through the Measures 

Management Blueprint process on the 

CMS Quality Measures Public Comment 

from June 25, 2013 to August 26, 2013. 

Comment: One commenter stated that 

CMS should make public a clear list of 

the risk adjustment factors used to 

calculate the proposed measures. 

Response: The technical 

specifications that were available for 

these measures at the time we issued the 

proposed rule included a list of types of 

risk factors that were included in a 

preliminary risk-adjustment model. We 

subsequently minimally refined the risk 

adjustment model in response to the 

public comments received during the 

Measures Management Blueprint 

process. The refinements involved 

statistical categorization and were not 

substantive; the types of risk factors are 

unchanged from those noted in the 

technical specifications. By December 6, 

2013, we will post the final technical 

specifications on the Home Health 

Quality Initiative page, which will 

include a list of all risk adjustment 

factors and model coefficients for each 

factor. 

Comment: Several commenters stated 

that they support alignment of the 

proposed quality measures with the 

readmission measures of hospitals and 

other post-acute care providers. We also 

received several comments stating that 

CMS should adopt disease-specific 

readmission measures to align disease 

specific quality improvement efforts in 

HHAs with hospitals and across care 

settings. Several commenters stated that 

the proposed quality measures do not 

align with the Hospital 30-day 

Readmission measure, which only 

includes three causes—Myocardial 

Infarction (MI), Heart Failure (HF), and 

Pneumonia. 

Response: We appreciate the support 

for the alignment of the quality 

measures with the readmission 

measures of hospitals and other postacute care providers. Currently, the 

measures align with the NQF-endorsed 

Hospital-Wide All Cause Unplanned 

Readmission measure. We also 

appreciate the recommendation to 

develop disease-specific readmission 

measures across care settings. We will 

take into account the recommendation 

to develop disease-specific readmission 

measures across care settings as part of 

future measure development work. 

Comment: Several commenters stated 

that they support the use administrative 


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claims data to calculate the proposed 

quality measures. 

Response: We thank the commenters 

for their support. 

Comment: We received a number of 

comments stating that CMS should seek 

broader input from the home health care 

community and public when 

developing the proposed quality 

measures and home health quality 

measures in general. 

Response: We thank the commenters 

for the comment. We do seek input from 

the home health community and the 

general public through the CMS Quality 

Measures Public Comment Page on 

cms.gov. Development of all four home 

health claims-based measures, including 

the two proposed measures, was also 

informed by outreach conducted for the 

2011 Home Health Value-based 

Purchasing Report to Congress, 

including expert interviews and a 

listening session. Additionally, the 

home health measures technical expert 

panel (initially convened in late 2010) 

reviewed and discussed the measures. 

To maintain transparency in future 

measure development work, CMS will 

continue to seek input from the public. 

Final Decision: After consideration of 

the comments received, we are 

finalizing the adoption of the two 

claims-based measures: (1) Rehospitalization during the first 30 days 

of HH; and (2) Emergency Department 

Use without Hospital Readmission 

during the first 30 days of HH. We will 

provide feedback to HHAs on their 

measure rates in CY 2014. 

(3) Elimination of Stratification by 

Episode Length Process Measures 

We are exploring ways to reduce the 

number of HH quality measures 

reported to HHAs on confidential 

CASPER reports. We proposed to reduce 

the total number of measures on the 

CASPER reports by beginning to report 

only all-episodes measures for 9 process 

measures currently also stratified by 

episode length. We solicited comments 

on this proposal to simplify the 

reporting of process measures, which is 

based on the recommendation from the 

MAP to achieve greater parsimony in 

these measures. Currently there are 97 

quality measures included on the 

CASPER reports, of which 45 are 

process measures. This reduction will 

decrease the total number of HH quality 

measures to 79 and reduce the number 

of process measures from 45 to 27. This 

change will enable HHAs to obtain the 

information they require for quality 

improvement activities related to the 

process measures in a less burdensome 

manner. Reducing the number of 

measures also facilitates the future 

development and implementation of 

other superior HH measures. 

Nine measures currently stratified by 

episode length on CASPER reports 

include: 

• Depression Interventions 

Implemented. 

• Diabetic Foot Care and Patient/

Caregiver Education Implemented. 

• Heart Failure Symptoms Addressed. 

• Pain Interventions Implemented. 

• Treatment of Pressure Ulcers Based 

on Principles of Moist Wound Healing 

Implemented. 

• Pressure Ulcer Prevention 

Implemented. 

• Drug Education on All Medications 

Provided to Patient/Caregiver. 

• Potential Medication Issues 

Identified and Timely Physician 

Contact. 

• Falls Prevention Steps 

Implemented. 

For each of these nine measures, three 

versions of each measure are currently 

included on CASPER reports. The three 

versions are: (1) Short term episodes of 

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

(3) all episodes of care. We proposed to 

eliminate the stratification by episode 

length, so that these measures are 

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

Thus, we proposed to eliminate the 

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

care’’ measures from CASPER reports. 

This will remove 18 process measures 

from the current CASPER reports. Of 

note, only the ‘‘short term episodes of 

care’’ measures are currently reported 

on HH Compare. These will be replaced 

with the analogous ‘‘all episodes of 

care’’ measures. 

No data will be lost in the elimination 

of the ‘‘short and long term episodes of 

care’’ measures as the ‘‘all episodes of 

care’’ measures capture all care 

interventions, regardless of episode 

length. Using only the ‘‘all episodes of 

care’’ measures will substantially 

increase the number of HHAs eligible 

for public reporting of these measures. 

The following is a summary of the 

comments we received regarding the 

proposal to eliminate stratification by 

episode length process measures. 

Comment: Several commenters stated 

that they support this proposal. We 

received no comments in opposition. 

We also received a few comments 

requesting that CMS give HHAs 

continued access to HHQRP data files to 

allow them to calculate their own shortterm and long-term rates and to 

benchmark their performance on those 

rates against other HHAs. 

Response: We appreciate the 

commenters’ feedback. We understand 

that the HHAs need access to detailed 

data to inform their quality 

improvement efforts. However, the 

CASPER system currently does not 

support access to patient-level data for 

process measures so agencies will not be 

able to calculate separate rates for shortterm versus long-term patients. We will 

examine adding such functionality to 

future revisions of CASPER reports. 

Final Response: After consideration of 

the comments received, we are 

finalizing policies related to the 

reduction of the number of process 

measures as proposed. We will reduce 

the total number of measures on the 

CASPER reports by reporting only allepisode measures for 9 process 

measures currently also stratified by 

episode length. We will eliminate the 

stratification by episode length by 

removing the ‘‘short term’’ and ‘‘long 

term episodes of care’’ measures from 

the CASPER reports so that the 

measures are only reported for all 

episodes of care. The ‘‘short term 

episodes of care’’ measures currently 

publicly reported on Home Health 

Compare will be replaced with the 

analogous ‘‘all episodes of care’’ 

measures. 

To summarize, we are finalizing the 

proposals to continue to use a HHA’s 

submission of OASIS assessments for 

episodes between July 1 of the calendar 

year two years prior to the calendar year 

of the APU effective date and June 30 of 

the calendar year one year prior to the 

calendar year of the APU effective date 

as fulfilling one portion of the quality 

reporting requirement for each payment 

year; to adopt two claims-based 

measures: (1) Rehospitalization during 

the first 30 days of HH; and (2) 

Emergency Department Use without 

Hospital Readmission during the first 30 

days of HH, to begin reporting feedback 

to HHAs on performance on these 

measures in CY 2014; and to reduce the 

number of process measures reported on 

the CASPER reports by eliminating the 

stratification by episode length for 9 

process measures. 

3. Home Health Wage Index 

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

of the Act require the Secretary to 

provide appropriate adjustments to the 

proportion of the payment amount 

under the HH PPS that account for area 

wage differences, using adjustment 

factors that reflect the relative level of 

wages and wage-related costs applicable 

to the furnishing of HH services. For CY 

2014, as in previous years, we are 

proposing to base the wage index 

adjustment to the labor portion of the 

HH PPS rates on the most recent prefloor and pre-reclassified hospital wage 

index. We will apply the appropriate 

wage index value to the labor portion of 


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the HH PPS rates based on the site of 

service for the beneficiary (defined by 

section 1861(m) of the Act as the 

beneficiary’s place of residence). 

Previously, we determined each HHA’s 

labor market area based on definitions 

of metropolitan statistical areas (MSAs) 

issued by the OMB. We have 

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

adjust the labor portion of the HH PPS 

rates. We believe the use of the prefloor, pre-reclassified hospital wage 

index data results in an appropriate 

adjustment to the labor portion of the 

costs, as required by statute. 

In the CY 2006 HH PPS final rule for 

(70 FR 68132), we began adopting 

revised labor market area definitions as 

discussed in the OMB Bulletin No. 03– 

04 (June 6, 2003). This bulletin 

announced revised definitions for MSAs 

and the creation of micropolitan 

statistical areas and core-based 

statistical areas (CBSAs). The bulletin is 

available online at 

www.whitehouse.gov/omb/bulletins/

b03-04.html. In addition, OMB 

published subsequent bulletins 

regarding CBSA changes, including 

changes in CBSA numbers and titles. 

The OMB bulletins are available at 

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

bulletins/index.html. 

For CY 2014, as in previous years, we 

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

base for the wage index adjustment to 

the labor portion of the HH PPS rates. 

However, the FY 2014 pre-floor, prereclassified hospital wage index does 

not reflect OMB’s new area delineations, 

based on the 2010 Census (outlined in 

OMB Bulletin 13–01, released on 

February 28, 2013), as those changes 

were not published until the Hospital 

Inpatient Prospective Payment System 

(IPPS) proposed rule (78 FR 27553) was 

in advanced stages of development. We 

intend to make changes to the FY 2015 

hospital wage index based on the 

newest CBSA changes in the FY 2015 

IPPS proposed rule. Therefore, if CMS 

incorporates OMB’s new area 

delineations, based on the 2010 Census, 

in the FY 2015 hospital wage index, 

those changes will also be reflected in 

the CY 2015 HH wage index. 

Finally, we will continue to use the 

methodology discussed in the CY 2007 

HH PPS final rule (71 FR 65884) to 

address those geographic areas in which 

there were no IPPS hospitals, and thus, 

no hospital wage data on which to base 

the calculation of the HH PPS wage 

index. For rural areas that do not have 

IPPS hospitals, and therefore, lack 

hospital wage data on which to base a 

wage index, we will use the average 

wage index from all contiguous CBSAs 

as a reasonable proxy. For rural Puerto 

Rico, we do not apply this methodology 

due to the distinct economic 

circumstances that exist there, but 

instead continue using the most recent 

wage index previously available for that 

area (from CY 2005). For urban areas 

without IPPS hospitals, we use the 

average wage index of all urban areas 

within the state as a reasonable proxy 

for the wage index for that CBSA. For 

CY 2014, the only urban area without 

IPPS hospital wage data is HinesvilleFort Stewart, Georgia (CBSA 25980). 

The wage index values are available 

on the CMS Web site at http://

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

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

The following is a summary of the 

comments we received regarding the 

home health wage index. 

Comment: Several commenters 

expressed concern that HHAs compete 

with hospitals and hospices for skilled 

clinicians, yet the wage indices for 

home health, hospice, and hospitals 

vary widely within a specific geographic 

region. While hospitals can reclassify to 

neighboring CBSAs or take advantage of 

the rural floor, HHAs do not have this 

ability. Commenters believed that this 

results in inadequate home health cost 

adjustments that negatively impact 

HHAs ability to recruit and retain 

nurses and therapists in a highly 

competitive health care labor market. 

Commenters suggested that CMS 

develop regulatory and legislative 

remedies to the continuing problem of 

wage index disparity. Commenters urge 

CMS to implement a policy to limit the 

wage index variations between provider 

types within CBSAs and adjacent 

markets. Commenters requested that 

CMS allow HHAs the same 

reclassification as hospitals if they 

provide services in the same service 

area. Commenters suggest that rural 

floors be set for HHAs. 

Response: As previously stated in the 

CY 2009 HH PPS final rule, (74 FR 

58105), the regulations that govern the 

HH PPS do not provide a mechanism for 

allowing HHAs to seek geographic 

reclassification or to utilize the rural 

floor provisions that exist for IPPS 

hospitals. The rural floor provision in 

section 4410 of the Balanced Budget Act 

of 1997 (BBA) (Pub. L. 105–33) is 

specific to hospitals. The 

reclassification provision found in 

section 1886(d)(10) of the Act is also 

specific to hospitals. 

Comment: A commenter believed that 

using the pre-floor, pre-reclassified 

hospital wage index is inadequate for 

adjusting home health costs. The 

commenter cites the unpredictable yearto-year swings in wage index values. 

The commenter stated that CMS’s 

decision to switch from MSAs to CBSAs 

seven years ago has had serious 

financial ramifications for HHAs in 

various parts of the country. The 

commenter questioned the accuracy and 

completeness of hospital cost reports. 

Response: We believe that adjusting 

payments based on the CBSA areas is 

the best available method of 

compensating for differences in labor 

markets. The HH PPS used a 50/50 

blend of the MSA-based and the CBSAbased wage indexes in CY 2006. Since 

CY 2007, the HH PPS has utilized the 

CBSA-based wage index in its entirety. 

In regard to the accuracy and 

completeness of hospital cost reports, 

we utilize efficient mechanisms to 

ensure the accuracy of the hospital cost 

report data and resulting wage index. 

The HH PPS uses the pre-floor, prereclassified hospital wage index. This 

wage index is calculated based on cost 

report data from hospitals paid under 

the IPPS. All IPPS hospitals are required 

to complete the wage index survey 

(Worksheet S–3, Parts II and III) of their 

Medicare cost reports. Our 

intermediaries perform desk reviews on 

all hospitals’ Worksheet S–3 wage data, 

and we run edits on the wage data to 

further ensure the accuracy and validity 

of the wage data. In addition, HHAs may 

submit comments on the hospital wage 

index during the annual IPPS 

rulemaking. We believe that our review 

processes result in an accurate 

collection of wage data. 

Comment: A commenter requested 

that CMS publish the methodology for 

arriving at the wage index used by the 

HH PPS. 

Response: The HH PPS uses the prefloor, pre-reclassified hospital wage 

index. The methodology for calculating 

the pre-floor, pre-reclassified hospital 

wage index is published annually in the 

IPPS final rule. The FY 2014 IPPS final 

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

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/FY2014- 

IPPS-Final-Rule-Home-Page.html. 

Comment: A commenter urged CMS 

to expedite its review of the wage index 

and implement a system that not only 

recognizes variations between localities, 

but also treats all provider types within 

a local market equitably. Until such a 

system is in place, the commenter urged 

CMS to implement and adjust the 2014 

wage index in such a way as to limit the 

wage index disparity between provider 

types within a given CBSA to no more 

than 10 percent. A commenter 

recommended that until the wage index 


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can be adjusted, that HHAs be given 

interim wage index parity adjustments 

similar to that which hospitals in the 

same geographic area receive. 

Response: The hospital wage index is 

updated in a budget neutral manner. 

Establishing limits on how much a wage 

index may increase or decrease from 

year-to-year is not consistent with 

budget neutrality. As noted above, the 

geographic reclassifications and 

adjustments that hospitals may apply 

for are not available to providers other 

than hospitals. 

Comment: A commenter stated that 

differences in the occupational 

personnel pool and costs between 

hospitals and HHAs make use of the 

hospital wage index inappropriate in 

the home health setting. The commenter 

further stated that using the hospital 

wage index is inappropriate because 

hospitals benefit from institutional 

efficiencies which HHAs are not 

afforded. The commenter asked CMS to 

develop a home health specific wage 

index. The commenter stated that until 

CMS develops a home health specific 

wage index, he will support CMS’ 

proposal to incorporate OMB’s new area 

delineations in the CY 2015 HH wage 

index as the improved specificity 

should provide some relief. In addition, 

several other commenters recommended 

that CMS reform or implement a new 

HH wage index system. 

Response: Our previous attempts at 

either proposing or developing a home 

health specific wage index were not 

well received by the home health 

industry. Generally, the volatility of the 

home health wage data, and the 

resources needed to audit and verify 

those data, make it difficult to ensure 

that such a wage index accurately 

reflects the wages and wage-related 

costs applicable providing home health 

services. We believe that a HH specific 

wage index should be more reflective of 

the wages and salaries in a specific area, 

be based upon stable data sources, and 

significantly improve our ability to 

determine HH payments without being 

overly burdensome. 

Comment: A commenter noted that 

dropping critical access hospitals 

(CAHs) from the calculation of the wage 

index, beginning in 2004, compromises 

the accuracy and appropriateness of 

using a hospital wage index to 

determine the labor costs of HHAs 

providing services in rural areas. 

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

not include data from CAHs, we believe 

it reflects the relative level of wages and 

wage-related costs applicable to 

providing home health services. 

Final Decision: For CY 2014, we will 

use the FY 2014 pre-floor, prereclassified hospital wage index as the 

wage index adjustment to the labor 

portion of the HH PPS rates. 

4. CY 2014 Payment Update 

a. National, Standardized 60-Day 

Episode Payment Rate 

The Medicare HH PPS has been in 

effect since October 1, 2000. As set forth 

in the July 3, 2000 final rule (65 FR 

41128), the base unit of payment under 

the Medicare HH PPS is a national, 

standardized 60-day episode payment 

rate. As set forth in 42 CFR 484.220, we 

adjust the national, standardized 60-day 

episode payment rate by a case-mix 

relative weight and a wage index value 

based on the site of service for the 

beneficiary. 

To provide appropriate adjustments to 

the proportion of the payment amount 

under the HH PPS to account for area 

wage differences, we apply the 

appropriate wage index value to the 

labor portion of the HH PPS rates. The 

labor-related share of the case-mix 

adjusted 60-day episode rate will 

continue to be 78.535 percent and the 

non-labor-related share will continue to 

be 21.465 percent as set out in the CY 

2013 HH PPS final rule (77 FR 67068). 

The CY 2014 HH PPS rates use the same 

case-mix methodology as set forth in the 

CY 2008 HH PPS final rule with 

comment period (72 FR 49762) and 

adjusted as described in section III.C. of 

this rule. The following are the steps we 

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

(1) Multiply the national 60-day 

episode rate by the patient’s applicable 

case-mix weight. 

(2) Divide the case-mix adjusted 

amount into a labor (78.535 percent) 

and a non-labor portion (21.465 

percent). 

(3) Multiply the labor portion by the 

applicable wage index based on the site 

of service of the beneficiary. 

(4) Add the wage-adjusted portion to 

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

rate, subject to any additional applicable 

adjustments. 

In accordance with section 1895(b)(3)(B) 

of the Act, this document constitutes the 

annual update of the HH PPS rates. 

Section 484.225 sets forth the specific 

annual percentage update methodology. 

In accordance with § 484.225(i), for a 

HHA that does not submit HH quality 

data, as specified by the Secretary, the 

unadjusted national prospective 60-day 

episode rate is equal to the rate for the 

previous calendar year increased by the 

applicable HH market basket index 

amount minus two percentage points. 

Any reduction of the percentage change 

will apply only to the calendar year 

involved and will not be considered in 

computing the prospective payment 

amount for a subsequent calendar year. 

Medicare pays the national, 

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

percentage payment approach. The split 

percentage payment approach includes 

an initial percentage payment and a 

final percentage payment as set forth in 

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

may base the initial percentage payment 

on the submission of a request for 

anticipated payment (RAP) and the final 

percentage payment on the submission 

of the claim for the episode, as 

discussed in § 409.43. The claim for the 

episode that the HHA submits for the 

final percentage payment determines 

the total payment amount for the 

episode and whether we make an 

applicable adjustment to the 60-day 

case-mix and wage-adjusted episode 

payment. The end date of the 60-day 

episode as reported on the claim 

determines which calendar year rates 

Medicare will use to pay the claim. 

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

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A partial episode payment 

adjustment as set forth in § 484.205(d) 

and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

b. CY 2014 National, Standardized 60- 

Day Episode Payment Rate 

The CY 2014 national, standardized 

60-day episode payment rate will be 

$2,869.27 as calculated in Table 20. To 

determine the CY 2014 national, 

standardized 60-day episode payment 

rate, we start with the CY 2013 average 

payment per episode ($2,952.03) 

calculated in section IV.D.1. of this rule. 

We remove the 2.5 percent for outlier 

payments that we put back in the rates 

as described in section IV.D.1. of this 

rule, and subsequently apply a 

standardization factor of 1.0026 to the 

national, standardized 60-day episode 

rate to ensure budget neutrality in 

episode payments using the 2014 wage 

index. The application of a 

standardization factor was also done 

when setting the initial national, 

standardized 60-day episode payment 

rate for the HH PPS in 2000 per section 

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

required that the 60-day episode base 


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rate and other applicable amounts be 

standardized in a manner that 

eliminates the effects of variations in 

relative case mix and area wage 

adjustments among different home 

health agencies in a budget neutral 

manner. To calculate the 

standardization factor, we simulated 

total payments for non-LUPA episodes 

using the 2014 wage index and 

compared it to our simulation of total 

payments for non-LUPA episodes using 

the 2013 wage index. By dividing the 

total payments using the 2014 wage 

index by the total payments using the 

2013 wage index, we obtain a 

standardization factor of 1.0026. We 

note that since we are implementing the 

adjustment to the case-mix weights in a 

budget neutral manner, there is no 

standardization factor needed to ensure 

budget neutrality in episode payments 

using the 2014 case-mix relative values. 

We then apply the $80.95 reduction 

(which is 3.5 percent of the CY 2010 

national, standardized 60-day episode 

rate of $2,312.94) and, lastly, we update 

payments by the CY 2014 HH payment 

update percentage of 2.3 percent. 

TABLE 20—CY 2014 60-DAY NATIONAL, STANDARDIZED 60-DAY EPISODE PAYMENT AMOUNT

CY 2013 

Estimated average payment per episode 

Outlier adjustment factor Standardization 

factor 

CY 2014 Rebasing adjustment 

CY 2014 HH 

market basket 

update 

CY 2014 National, 

standardized 60- 

day episode payment 

$2,952.03 ........................................................... × 0.975 ............. × 1.0026 ........... ¥$80.95 × 1.023 ........... = $2,869.27 

The CY 2014 national, standardized 

60-day episode payment rate for an 

HHA that does not submit the required 

quality data is updated by the CY 2014 

HH market basket update (2.3 percent) 

minus 2 percentage points and is shown 

in Table 21. 

TABLE 21—FOR HHAS THAT DO NOT SUBMIT THE QUALITY DATA—CY 2014 NATIONAL, STANDARDIZED 60-DAY EPISODE

PAYMENT AMOUNT

CY 2013 

Estimated average payment per episode 

Outlier adjustment factor Standardization 

factor 

CY 2014 Rebasing adjustment 

CY 2014 HH 

Market basket 

update minus 2 

percentage 

points 

CY 2014 National, 

standardized 60- 

day episode payment 

$2,952.03 ........................................................... × 0.975 ............. × 1.0026 ........... ¥$80.95 × 1.003 ............ = $2,813.18 

c. National Per-Visit Rates 

The national per-visit rates are used to 

pay LUPAs and are also used to 

compute imputed costs in outlier 

calculations. The per-visit rates are paid 

by type of visit or HH discipline. The 

six HH disciplines are as follows: 

• Home health aide (HH aide); 

• Medical Social Services (MSS); 

• Occupational therapy (OT); 

• Physical therapy (PT); 

• Skilled nursing (SN); and 

• Speech-language pathology (SLP). 

To calculate the CY 2014 national pervisit rates, we start with the CY 2013 

national per-visit rates. We then apply 

a wage index budget neutrality factor of 

1.0006 to ensure budget neutrality for 

LUPA per-visit payments after applying 

the 2014 wage index, and increase each 

of the six per-visit rates by the 

maximum rebasing adjustments 

described in section IV.D of this rule. 

We calculate the wage index budget 

neutrality factor by simulating total 

payments for LUPA episodes using the 

2014 wage index and comparing it to 

simulated total payments for LUPA 

episodes using the 2013 wage index. We 

note that the LUPA per-visit payments 

are not calculated using case-mix 

weights and therefore, there is no casemix standardization factor needed to 

ensure budget neutrality in LUPA 

payments. Finally, the per-visit rates for 

each discipline are then updated by the 

CY 2014 HH payment update percentage 

of 2.3 percent. The national per-visit 

rates are adjusted by the wage index 

based on the site of service of the 

beneficiary. The per-visit payment 

amounts for LUPAs are separate from 

the LUPA add-on payment amount, 

which is paid for episodes that occur as 

the only episode or initial episode in a 

sequence of adjacent episodes. The CY 

2014 national per-visit rates are shown 

in Tables 22 and 23. 

TABLE 22—CY 2014 NATIONAL PER-VISIT PAYMENT AMOUNTS FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY

DATA

HH Discipline type CY 2013 Per-visit 

payment 

Wage index 

budget neutrality factor 

CY 2014 Rebasing adjustment 

CY 2014 HH 

Market basket 

update 

CY 2014 Per-visit 

payment 

Home Health Aide ............................................. $51.79 × 1.0006 .......... + $1.79 × 1.023 .......... $54.84 

Medical Social Services .................................... 183.31 × 1.0006 .......... + 6.34 × 1.023 .......... 194.12 

Occupational Therapy ....................................... 125.88 × 1.0006 .......... + 4.35 × 1.023 .......... 133.30 

Physical Therapy .............................................. 125.03 × 1.0006 .......... + 4.32 × 1.023 .......... 132.40 

Skilled Nursing .................................................. 114.35 × 1.0006 .......... + 3.96 × 1.023 .......... 121.10 

Speech-Language Pathology ............................ 135.86 × 1.0006 .......... + 4.70 × 1.023 .......... 143.88 


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The CY 2014 per-visit payment rates 

for an HHA that does not submit the 

required quality data are updated by the 

CY 2014 HH payment update percentage 

(2.3 percent) minus 2 percentage points 

and is shown in Table 23. 

TABLE 23—CY 2014 NATIONAL PER-VISIT PAYMENT AMOUNTS FOR HHAS THAT DO NOT SUBMIT THE REQUIRED

QUALITY DATA

HH Discipline type CY 2013 Per-visit 

rates 

Wage index 

budget neutrality factor 

CY 2014 Rebasing adjustment 

CY 2014 HH 

Market basket 

update minus 2 

percentage 

points 

CY 2014 Per-visit 

rates 

Home Health Aide ........................................... $51.79 × 1.0006 ......... + $1.79 × 1.003 ........... $53.77 

Medical Social Services ................................... 183.31 × 1.0006 ......... + 6.34 × 1.003 ........... 190.33 

Occupational Therapy ...................................... 125.88 × 1.0006 ......... + 4.35 × 1.003 ........... 130.70 

Physical Therapy ............................................. 125.03 × 1.0006 ......... + 4.32 × 1.003 ........... 129.81 

Skilled Nursing ................................................. 114.35 × 1.0006 ......... + 3.96 × 1.003 ........... 118.73 

Speech-Language Pathology .......................... 135.86 × 1.0006 ......... + 4.70 × 1.003 ........... 141.06 

d. Low-Utilization Payment Adjustment 

(LUPA) Add-On Factor 

For episodes with four or fewer visits, 

Medicare pays on the basis of a national 

per-visit amount by discipline, referred 

to as a LUPA. As stated in our CY 2008 

HH PPS proposed rule, after the HH PPS 

went into effect, we received comments 

and correspondence suggesting that the 

LUPA payment rates do not adequately 

account for the front-loading of costs in 

an episode. Commenters suggested that 

because of the small number of visits in 

a LUPA episode, HHAs have little 

opportunity to spread the costs of 

lengthy initial visits over a full episode 

(72 FR 25424). In response to comments 

received, we conducted an initial 

descriptive analysis of visit log data 

from prior to the establishment of the 

HH PPS, showing that initial visits were 

25 to 50 percent longer than subsequent 

visits in LUPA episodes that occur as 

the only or initial episode. These results 

indicated that payment for LUPA 

episodes may not offset the full cost of 

initial visits. Therefore, as specified in 

the CY 2008 HH PPS final rule, LUPA 

episodes that occur as the only episode 

or an initial episode in a sequence of 

adjacent episodes are adjusted by 

applying an additional amount to the 

LUPA payment before adjusting for area 

wage differences (72 FR 49849). 

The CY 2008 LUPA add-on amount 

was calculated using a large 

representative sample of claims from 

2005 (72 FR 49848). The analysis 

examined minute data for skilled 

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

Medicare CoPs at § 484.55(a)(1) and 

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

allowed to conduct the initial 

assessment visit. The analysis showed 

that the average excess of minutes for 

the first visit in LUPA episodes that 

were the only episode or an initial 

LUPA in a sequence of adjacent 

episodes was 38.5 minutes for the first 

visit if SN, 25.1 minutes for the first 

visit if PT, and 22.6 minutes for the first 

visit if SLP. Those excess minutes were 

then expressed as a proportion of the 

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

minutes, 45.6 minutes, and 48.6 

minutes for SN, PT, and SLP, 

respectively). These proportions (90.6 

percent, 55.0 percent, and 46.5 percent 

for SN, PT, and SLP, respectively) were 

used to inflate the LUPA per-visit 

payment rates. Finally, using an 

appropriate set of weights representing 

the share of LUPA first visits for SN 

(77.8 percent), PT (21.7 percent) and 

SLP (0.5 percent), we calculated a LUPA 

add-on payment amount of $87.93 for 

LUPA episodes that occur as the only 

episode or an initial episode in a 

sequence of adjacent episodes (Table 

24). When the LUPA add-on payment 

amount was implemented in CY 2008, 

to account for the additional payment to 

LUPA episodes and maintain budget 

neutrality, a reduction was made to the 

national, standardized 60-day episode 

payment rate (72 FR 49849). 

TABLE 24—CALCULATION OF THE LUPA ADD-ON AMOUNT, CY 2008 

Skilled nursing Physical therapy Speech-Language 

pathology 

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

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

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

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

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

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

For this final rule we used the same 

methodology used to establish the 

LUPA add-on amount for CY 2008. 

Specifically, we updated the analysis 

using 100 percent of LUPA episodes and 

a 20 percent sample of non-LUPA first 

episodes from CY 2012 claims data. The 

analysis shows that the average excess 

of minutes for the first visit in LUPA 

episodes that were the only episode or 

an initial LUPA in a sequence of 

adjacent episodes are 37.27 minutes for 

the first visit if SN, 31.69 minutes for 

the first visit if PT, and 31.56 minutes 

for the first visit if SLP. The average 

minutes for all non-first visits in nonLUPA episodes are 44.10 minutes for 

SN, 47.30 minutes for PT, and 50.37 

minutes for SLP. Those excess minutes 

expressed as a proportion of the average 

minutes for all non-first visits in nonLUPA episodes are 84.51 percent for 

SN, 67.00 percent for PT, and 62.66 

percent for SLP. We used these 

proportions to inflate the LUPA per-visit 

payment rates in Table 22 of $121.10 for 

SN, $132.40 for PT, and $143.88 for 


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SLP. We then calculated a set of weights 

representing the share of LUPA first 

visits for SN (81.97 percent), PT (17.61 

percent) and SLP (0.42 percent) and 

using these weights, we calculated a 

LUPA add-on payment amount of 

$99.89 for LUPA episodes that occur as 

the only episode or an initial episode in 

a sequence of adjacent episodes. 

In lieu of a single LUPA add-on 

payment amount of $99.89, to ensure 

that the LUPA add-on amount equitably 

reflects the excess cost for an initial visit 

for each of the three disciplines (SN, PT, 

and SLP), we proposed to multiply the 

per-visit payment amount for the first 

SN, PT, or SLP visit in LUPA episodes 

that occur as the only episode or an 

initial episode in a sequence of adjacent 

episodes by 1 + the proportional 

increase in minutes for an initial visit 

over non-initial visits. Using complete 

CY 2012 claims data, the LUPA add-on 

factors are calculated to be: 1.8451 for 

SN; 1.6700 for PT; and 1.6266 for SLP. 

For example, for LUPA episodes that 

occur as the only episode or an initial 

episode in a sequence of adjacent 

episodes, if the first skilled visit is SN, 

the payment for that visit will be 

$223.44 (1.8451 multiplied by $121.10). 

For more information on the analyses 

performed to update the LUPA add-on 

amount, please refer to the technical 

report titled ‘‘Analyses in Support of 

Rebasing & Updating the Medicare 

Home Health Payment Rates—CY 2014 

Home Health Prospective Payment 

System Final Rule’’ available on the 

CMS Home Health Agency (HHA) 

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

Center/Provider-Type/Home-HealthAgency-HHA-Center.html?redirect=/

center/hha.asp. 

The following is a summary of the 

comments we received regarding the 

LUPA add-on factors. 

Comment: We received one comment 

that was supportive of the proposed 

LUPA add-on factors and no comments 

in opposition. 

Response: We appreciate the 

commenter’s support and we believe 

that proposed creation of three LUPA 

add-on factors will result in more 

accurate LUPA add-on payments 

reflecting the discipline that performed 

the initial assessment visit. 

Final Decision: We are finalizing three 

LUPA add-on factors to be used in 

calculating the LUPA add-on payment 

amount. Those three factors are 1.8451 

for skilled nursing, 1.6700 for physical 

therapy and 1.6266 for speech-language 

pathology when that discipline is the 

first skilled visit in a LUPA episode that 

occurs as the only episode or an initial 

episode in a sequence of adjacent 

episodes. 

e. Nonroutine Medical Supply 

Conversion Factor Update 

Payments for NRS are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. To determine the CY 

2014 NRS conversion factor, we start 

with the 2013 NRS conversion factor 

($53.97) and apply the 2.82 percent 

rebasing adjustment calculated in 

section IV.D.3. of this rule (1–0.0282 = 

0.9718). We then update the conversion 

factor by the CY 2014 HH market basket 

update (2.3 percent). We do not apply 

a standardization factor as the NRS 

payment amount calculated from the 

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

payment amount is computed. The NRS 

conversion factor for CY 2014 is $53.65 

as shown in Table 25. 

TABLE 25—CY 2014 NRS CONVERSION FACTOR FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY DATA

CY 2013 NRS conversion factor 2014 Rebasing 

adjustment 

2014 HH market 

basket update 

CY 2014 NRS 

conversion factor 

$53.97 ........................................................................................................................ × 0.9718 × 1.023 = $53.65 

Using the CY 2014 NRS conversion 

factor ($53.65), the payment amounts for 

the six severity levels are shown in 

Table 26. 

TABLE 26—CY 2014 NRS PAYMENT AMOUNTS FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY DATA

Severity level Points (scoring) Relative 

weight 

NRS Payment 

amount 

1 .................................................................................... 0 .................................................................................... 0.2698 $14.47 

2 .................................................................................... 1 to 14 .......................................................................... 0.9742 52.27 

3 .................................................................................... 15 to 27 ........................................................................ 2.6712 143.31 

4 .................................................................................... 28 to 48 ........................................................................ 3.9686 212.92 

5 .................................................................................... 49 to 98 ........................................................................ 6.1198 328.33 

6 .................................................................................... 99+ ................................................................................ 10.5254 564.69 

For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2013 NRS conversion factor 

($53.97) and apply the ¥2.82 percent 

rebasing adjustment calculated in 

section IV.D.3. of this rule (1¥0.0282= 

0.9718). We then update the NRS 

conversion factor by the CY 2014 HH 

market basket update of 2.3 percent, 

minus 2 percentage points. The CY 2014 

NRS conversion factor for HHAs that do 

not submit quality data is shown in 

Table 27. 

TABLE 27—CY 2014 NRS CONVERSION FACTOR FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY DATA

CY 2013 NRS Conversion factor 2014 Rebasing 

adjustment 

CY 2014 HH market basket update 

minus 2 percentage points 

CY 2014 NRS 

Conversion factor 

$53.97 ........................................................................................................................ × 0.9718 × 1.003 $52.61 


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The payment amounts for the various 

severity levels based on the updated 

conversion factor for HHAs that do not 

submit quality data are calculated in 

Table 28. 

TABLE 28—CY 2014 NRS PAYMENT AMOUNTS FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY DATA

Severity level Points (scoring) Relative 

weight 

NRS Payment 

amount 

1 .................................................................................... 0 .................................................................................... 0.2698 $14.19 

2 .................................................................................... 1 to 14 .......................................................................... 0.9742 51.25 

3 .................................................................................... 15 to 27 ........................................................................ 2.6712 140.53 

4 .................................................................................... 28 to 48 ........................................................................ 3.9686 208.79 

5 .................................................................................... 49 to 98 ........................................................................ 6.1198 321.96 

6 .................................................................................... 99+ ................................................................................ 10.5254 553.74 

5. Rural Add-On 

Section 421(a) of the MMA required, 

for HH services furnished in a rural 

areas (as defined in section 

1886(d)(2)(D) of the Act), for episodes or 

visits ending on or after April 1, 2004, 

and before April 1, 2005, that the 

Secretary increase the payment amount 

that otherwise will have been made 

under section 1895 of the Act for the 

services by 5 percent. 

Section 5201 of the DRA amended 

section 421(a) of the MMA. The 

amended section 421(a) of the MMA 

required, for HH services furnished in a 

rural area (as defined in section 

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

January 1, 2006 and before January 1, 

2007, that the Secretary increase the 

payment amount otherwise made under 

section 1895 of the Act for those 

services by 5 percent. 

Section 3131(c) of the Affordable Care 

Act amended section 421(a) of the MMA 

to provide an increase of 3 percent of 

the payment amount otherwise made 

under section 1895 of the Act for HH 

services furnished in a rural area (as 

defined in section 1886(d)(2)(D) of the 

Act), for episodes and visits ending on 

or after April 1, 2010, and before 

January 1, 2016. 

Section 421 of the MMA, as amended, 

waives budget neutrality related to this 

provision, as the statute specifically 

states that the Secretary shall not reduce 

the standard prospective payment 

amount (or amounts) under section 1895 

of the Act applicable to HH services 

furnished during a period to offset the 

increase in payments resulting in the 

application of this section of the statute. 

The following is a summary of the 

comments we received regarding HH 

services provided in rural areas. 

Comment: A commenter noted that 

heavy mileage, travel time, poor roads 

and other factors increase the expense of 

serving rural patients and stated that 

decreasing Medicare payments will 

impact HHA’s ability to serve rural 

beneficiaries. 

Response: We believe that Medicare 

home health services are integral to the 

healthcare of many beneficiaries, 

including those who reside in rural 

areas. For episodes and visits ending on 

or after April 1, 2010, and before 

January 1, 2016, payments for services 

provided to patients in rural areas are 

increased by 3 percent as required by 

section 3131(c) of the Affordable Care 

Act. 

Comment: A commenter recommends 

that CMS implement a population 

density factor by zip code during the 

calculation of the labor portion of the 

payment amount to account for 

increased costs of providing services in 

less densely populated (primarily rural) 

areas. The commenter states that the 

population density adjustment would 

reduce excess reimbursement for 

services provided in densely populated 

urban areas and congregate living 

facilities. The commenter recommends 

that the adjustment be budget neutral or 

perhaps result in a cost savings. 

Response: We do not have evidence 

that a population density adjustment is 

appropriate. While rural HHAs cite the 

added cost of long distance travel to 

provide care for their patients, urban/

non-rural HHAs cite added costs 

associated with needed security 

measures and traffic volume. 

Final Decision: For CY 2014, HH 

payment rates for services provided to 

beneficiaries in rural areas will be 

increased by 3 percent as mandated by 

section 3131(c) of the Affordable Care 

Act. The 3 percent rural add-on is 

applied to the national, standardized 60- 

day episode payment rate, national pervisit rates, and NRS conversion factor 

when HH services are provided in rural 

(non-CBSA) areas. Refer to Tables 29 

through 32 for these payment rates. 

TABLE 29—CY 2014 PAYMENT AMOUNTS FOR 60-DAY EPISODES FOR SERVICES PROVIDED IN A RURAL AREA

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

CY 2014 National, standardized 60-day episode payment rate Multiply by the 3 

percent rural addon 

CY 2014 Rural national, standardized 

60-day episode 

payment rate 

CY 2014 National, standardized 60-day episode payment rate Multiply by the 3 

percent rural addon 

CY 2014 Rural 

national, standardized 60-day episode payment rate 

$2,869.27 ............................. × 1.03 $2,955.35 $2,813.18 ............................ × 1.03 $2,897.58 

TABLE 30—CY 2014 PER-VISIT AMOUNTS FOR SERVICES PROVIDED IN A RURAL AREA

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

HH Discipline type CY 2014 Pervisit rate 

Multiply by the 3 percent rural add-on CY 2014 Rural 

per-visit rate 

CY 2014 Pervisit rate Multiply by the 3 percent rural add-on CY 2014 Rural 

per-visit rate 

HH Aide ...................... $54.84 × 1.03 .......................... $56.49 $53.77 × 1.03 .......................... $55.38 

MSS ............................ 194.12 × 1.03 .......................... 199.94 190.33 × 1.03 .......................... 196.04 


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TABLE 30—CY 2014 PER-VISIT AMOUNTS FOR SERVICES PROVIDED IN A RURAL AREA—Continued 

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

HH Discipline type CY 2014 Pervisit rate 

Multiply by the 3 percent rural add-on CY 2014 Rural 

per-visit rate 

CY 2014 Pervisit rate Multiply by the 3 percent rural add-on CY 2014 Rural 

per-visit rate 

OT ............................... 133.30 × 1.03 .......................... 137.30 130.70 × 1.03 .......................... 134.62 

PT ............................... 132.40 × 1.03 .......................... 136.37 129.81 × 1.03 .......................... 133.70 

SN ............................... 121.10 × 1.03 .......................... 124.73 118.73 × 1.03 .......................... 122.29 

SLP ............................. 143.88 × 1.03 .......................... 148.20 141.06 × 1.03 .......................... 145.29 

TABLE 31—CY 2014 NRS CONVERSION FACTOR FOR SERVICES PROVIDED IN RURAL AREAS

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

CY 2014 Conversion factor 

Multiply by the 3 

percent rural addon 

CY 2014 Rural 

conversion factor CY 2014 Conversion factor 

Multiply by the 3 

percent rural addon 

CY 2014 Rural 

conversion factor 

$53.65 ................................... × 1.03 $55.26 $52.61 .................................. × 1.03 $54.19 

TABLE 32—CY 2014 NRS PAYMENT AMOUNTS FOR SERVICES PROVIDED IN RURAL AREAS

For HHAs that DO submit quality data 

(CY 2014 NRS conversion 

factor=$55.26) 

For HHAs that DO NOT submit 

quality data 

(CY 2014 NRS conversion 

factor=$54.19) 

Severity level Points 

(Scoring) Relative 

weight 

Total NRS 

payment 

amount for 

rural areas 

Relative 

weight 

Total NRS 

payment 

amount for 

rural areas 

1 ....................................................... 0 ....................................................... 0.2698 $14.91 0.2698 $14.62 

2 ....................................................... 1 to 14 .............................................. 0.9742 53.83 0.9742 52.79 

3 ....................................................... 15 to 27 ............................................ 2.6712 147.61 2.6712 144.75 

4 ....................................................... 28 to 48 ............................................ 3.9686 219.30 3.9686 215.06 

5 ....................................................... 49 to 98 ............................................ 6.1198 338.18 6.1198 331.63 

6 ....................................................... 99+ ................................................... 10.5254 581.63 10.5254 570.37 

F. Outlier Policy 

1. Background 

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

for the provision of an addition or 

adjustment to the national, standardized 

60-day case-mix and wage-adjusted 

episode payment amounts in the case of 

episodes that incur unusually high costs 

due to patient care needs. Prior to the 

enactment of the Affordable Care Act, 

section 1895(b)(5) of the Act stipulated 

that projected total outlier payments 

could not exceed 5 percent of total 

projected or estimated HH payments in 

a given year. In the Medicare Program; 

Prospective Payment System for Home 

Health Agencies final rule published on 

July 3, 2000 (65 FR 41188 through 

41190), we described the method for 

determining outlier payments. Under 

this system, outlier payments are made 

for episodes whose estimated costs 

exceed a threshold amount for each 

HHRG. The episode’s estimated cost is 

the sum of the national wage-adjusted 

per-visit payment amounts for all visits 

delivered during the episode. The 

outlier threshold for each case-mix 

group or PEP adjustment is defined as 

the 60-day episode payment or PEP 

adjustment for that group plus a fixeddollar loss (FDL) amount. The outlier 

payment is defined to be a proportion of 

the wage-adjusted estimated cost 

beyond the wage-adjusted threshold. 

The threshold amount is the sum of the 

wage and case-mix adjusted PPS 

episode amount, payment amount for 

NRS, and the wage-adjusted FDL 

amount. The proportion of additional 

costs over the outlier threshold amount 

paid as outlier payments is referred to 

as the loss-sharing ratio. 

2. Regulatory Update 

In the CY 2010 HH PPS final rule (74 

FR 58080 through 58087), we discussed 

excessive growth in outlier payments, 

primarily the result of unusually high 

outlier payments in a few areas of the 

country. Despite program integrity 

efforts associated with excessive outlier 

payments in targeted areas of the 

country, we discovered that outlier 

expenditures still exceeded the 5 

percent, target and, in the absence of 

corrective measures, would continue do 

to so. Consequently, we assessed the 

appropriateness of taking action to curb 

outlier abuse. To mitigate possible 

billing vulnerabilities associated with 

excessive outlier payments and adhere 

to our statutory limit on outlier 

payments, we adopted an outlier policy 

that included a 10 percent agency-level 

cap on outlier payments. This cap was 

implemented in concert with a reduced 

FDL ratio of 0.67. These policies 

resulted in a projected target outlier 

pool of approximately 2.5 percent. (The 

previous outlier pool was 5 percent of 

total HH expenditures.) For CY 2010, we 

first returned 5 percent of these dollars 

back into the national, standardized 60- 

day episode payment rates, the national 

per-visit rates, the LUPA add-on 

payment amount, and the NRS 

conversion factor. Then, we reduced the 

CY 2010 rates by 2.5 percent to account 

for the new outlier pool of 2.5 percent. 

This outlier policy was adopted for CY 

2010 only. 

3. Statutory Update 

As we noted in the CY 2011 HH PPS 

final rule (75 FR 70397 through 70399), 

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

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

the Act. As amended, the provision, 


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‘‘Adjustment for outliers,’’ states that 

‘‘The Secretary shall reduce the 

standard prospective payment amount 

(or amounts) under this paragraph 

applicable to HH services furnished 

during a period by such proportion as 

will result in an aggregate reduction in 

payments for the period equal to 5 

percent of the total payments estimated 

to be made based on the prospective 

payment system under this subsection 

for the period.’’ In addition, section 

3131(b)(2) of the Affordable Care Act 

amended section 1895(b)(5) of the Act 

by re-designating the existing language 

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

revising it to state that the Secretary, 

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

addition or adjustment to the payment 

amount otherwise made in the case of 

outliers because of unusual variations in 

the type or amount of medically 

necessary care. The total amount of the 

additional payments or payment 

adjustments made under this paragraph 

with respect to a fiscal year or year may 

not exceed 2.5 percent of the total 

payments projected or estimated to be 

made based on the prospective payment 

system under this subsection in that 

year.’’ 

As such, beginning in CY 2011, our 

HH PPS outlier policy is that we reduce 

payment rates by 5 percent and target 

up to 2.5 percent of total estimated HH 

PPS payments to be paid as outliers. To 

do so, we first returned the 2.5 percent 

held for the target CY 2010 outlier pool 

to the national, standardized 60-day 

episode payment rates, the national per 

visit rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

for CY 2010. Then, we reduced the rates 

by 5 percent as required by section 

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

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

Act. For CY 2011 and subsequent 

calendar years we target up to 2.5 

percent of estimated total payments to 

be paid as outlier payments, and apply 

a 10 percent agency-level outlier cap. 

4. Loss-Sharing Ratio and Fixed Dollar 

Loss (FDL) Ratio 

For a given level of outlier payments, 

there is a trade-off between the values 

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

the number of episodes that can receive 

outlier payments, but makes it possible 

to select a higher loss-sharing ratio, and 

therefore, increase outlier payments for 

outlier episodes. Alternatively, a lower 

FDL ratio means that more episodes can 

qualify for outlier payments, but outlier 

payments per episode must then be 

lower. 

The FDL ratio and the loss-sharing 

ratio must be selected so that the 

estimated total outlier payments do not 

exceed the 2.5 percent aggregate level 

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

the Act). Historically, we have used a 

value of 0.80 for the loss-sharing ratio 

which, we believe, preserves incentives 

for agencies to attempt to provide care 

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

percent of the additional estimated costs 

above the outlier threshold amount. We 

did not propose a change to the losssharing ratio in the HH PPS proposed 

rule (78 FR 40301). In the CY 2011 HH 

PPS final rule (75 FR 70398), in 

targeting total outlier payments as 2.5 

percent of total HH PPS payments, we 

implemented an FDL ratio of 0.67, and 

we maintained that ratio in CY 2012. 

Simulations based on CY 2010 claims 

data completed for the CY 2013 HH PPS 

final rule showed that outlier payments 

were estimated to comprise 

approximately 2.18 percent of total HH 

PPS payments in CY 2013, and as such, 

we lowered the FDL ratio from 0.67 to 

0.45. We stated that lowering the FDL 

ratio to 0.45, while maintaining a losssharing ratio of 0.80, achieved an 

effective balance of compensating for 

high-cost episodes while allowing more 

episodes to qualify as outlier payments 

(77 FR 67080). The national, 

standardized 60-day episode payment 

amount is multiplied by the FDL ratio. 

That amount is wage-adjusted to derive 

the wage-adjusted FDL amount, which 

is added to the case-mix and wageadjusted 60-day episode payment 

amount to determine the outlier 

threshold amount that costs have to 

exceed before Medicare will pay 80 

percent of the additional estimated 

costs. 

For this final rule, simulating 

payments using more complete CY 2012 

claims data (a full year of data rather 

than preliminary data from the first half 

of 2012) and the CY 2013 payment rates 

(77 FR 67100 through 67105); we 

estimate that outlier payments in CY 

2013 would comprise 1.79 percent of 

total payments. Based on simulations 

using CY 2012 claims data, the CY 2014 

payments rates in section IV.E., and an 

FDL ratio of 0.45; we estimate that 

outlier payments in CY 2014 would 

comprise approximately 1.86 percent of 

total HH PPS payments in CY 2014. 

Given the increases to the CY 2014 

national per-visit payment rates and the 

national, standardized 60-day episode 

payment rate as a result of making the 

case-mix adjustment in section IV.C 

budget neutral and the starting point for 

the rebasing calculations in section 

IV.D, our analysis estimates a 0.07 

percentage point increase in outlier 

payments as a percent of total HH PPS 

payment. We further estimate that by 

the end of the 4-year phase-in period 

required by the Affordable Care Act, 

estimated outlier payments as a percent 

of total HH PPS payments will be 

approximately 2.07 percent. We did not 

propose a change to the FDL ratio or 

loss-sharing ratio for CY 2014 as we 

believed that maintaining an FDL of 

0.45 and a loss-sharing ratio of 0.80 are 

appropriate given the percentage of 

outlier payments is estimated to 

increase as a result of the increasing the 

national per-visit amounts through the 

rebasing adjustments and the claims 

data showing any utilization changes 

that may have resulted from decreasing 

the FDL of 0.45 in CY 2013 would not 

be available for analysis until next year. 

5. Outlier Relationship to the HH 

Payment Study 

As we discuss in section IV.G. of this 

final rule, section 3131(d) of the 

Affordable Care Act requires CMS to 

conduct a study and report on 

developing HH PPS payment revisions 

that will ensure access to care and 

payment for patients with high severity 

of illness. Our Report to Congress 

containing this study’s 

recommendations is due no later than 

March 1, 2014. Section 3131(d)(1)(A)(iii) 

of the Affordable Care Act, in particular, 

states that this study may include 

analysis of potential revisions to outlier 

payments to better reflect costs of 

treating Medicare beneficiaries with 

high levels of severity of illness. 

Although we did not propose any 

changes to the outlier policy, the 

following is a summary of the comments 

we received regarding outlier payments. 

Comment: Several commenters stated 

that estimated outlier payments as a 

percent of total payments for CY 2014 

is below the budgeted amount of 2.5 

percent and that the FDL ratio and/or 

loss-sharing ratio should be set so that 

estimated outlier payments as a percent 

of total payments would reach 2.5 

percent. One commenter stated that 

because the national, standardized 60- 

day episode payment rate is increased 

as a result of the adjustment to the casemix weights in section IV.C., fewer 

episodes qualify for outlier payments, 

contributing to estimated outlier 

payments falling short of 2.5 percent of 

total payments. 

Response: We did not propose a 

change to the FDL ratio for CY 2014 as 

the claims data showing any utilization 

changes that may have resulted from an 

FDL of 0.45 would not be available for 

analysis until next year. In addition, we 


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7This analysis simulated payments using CY 

2012 claims data and CY 2012 payment rates. The 

simulations did not take into account the 10- 

percent outlier cap. Some episodes may have 

qualified for outlier payments in the simulations, 

but were not paid accordingly if the HHA was at 

or over its 10 percent cap on outlier payments as 

a percent of total payments. 

note that the percentage of outlier 

payments is estimated to increase as a 

result of both increasing the national 

per-visit amounts over the next four 

years (which will increase an episode’s 

imputed costs) and as a result of 

decreasing the national, standardized 

60-day episode payment rate over the 

next four years (which will decrease the 

fixed-dollar loss threshold amount). We 

are also concerned that if we decreased 

the FDL ratio or increased the losssharing ratio we could potentially pay 

more than 2.5 percent of estimated total 

payments as outlier payments and that 

episodes without unusual variations in 

the type or amount of medically 

necessary care would qualify for outlier 

payments, which is contrary to the 

intent of the policy. Consequently, for 

the above stated reasons, we believe that 

we should not make any changes/

revisions to our outlier payment 

methodology at this time. 

Comment: One commenter 

recommended that CMS eliminate 

outlier payments in their entirety and 

return the 2.5 percent withhold to the 

base payment rates. 

Response: We are required in section 

1895(b)(5)(A) of the Act, to include an 

outlier pool of an amount that is 2.5 

percent. We do believe that the statute 

allows the Secretary the discretion as to 

whether or not to have an outlier policy 

under the HH PPS. To date, analysis on 

the outlier policy has not been 

conducted. We plan to look into 

whether or not an outlier policy remains 

to be appropriate as well as ways to 

maintain an outlier policy for episodes 

that incur unusually high costs due to 

patient care needs without qualifying 

episodes of care that do not meet that 

criteria or are potentially fraudulent. We 

recently awarded a new contract to 

address any findings from the home 

health study required by section 3131(d) 

of the Affordable Care Act, monitor the 

potential impact of the rebasing 

adjustments and other recent payment 

changes, and develop payment options 

to ensure ongoing access to care for 

vulnerable populations, which may 

include potential revisions to the outlier 

payment methodology to better reflect 

costs of treating Medicare beneficiaries 

with high levels of severity of illness. 

Comment: A few commenters stated 

that they do not believe that the 10 

percent agency-level cap on outlier 

payments is an effective fraud fighting 

policy and recommended that CMS 

exempt certain HHAs that serve highcost patients with multiple clinical 

issues from the10 percent agency-level 

cap. 

Response: The 10 percent agencylevel cap on outlier payments is a 

statutory requirement in section 

1895(b)(5)(B) of the Act and thus we do 

not have the authority to rescind this 

policy or exempt HHAs from this 

provision. 

Final Decision: We are finalizing no 

change to the FDL ratio or loss sharing 

ratio for CY 2014. However, we will 

continue to monitor outlier payments 

and continue to explore ways to 

maintain an outlier policy for episodes 

that incur unusually high costs due to 

patient care needs without qualifying 

episodes of care that do not meet that 

criteria. 

The Office of Inspector General (OIG) 

released a Management Implications 

Report in August of 2013 that concluded 

there is a ‘‘systemic weakness that 

results in Medicare coverage of 

unnecessary home health care for 

diabetic patients’’. The OIG report noted 

that investigations show that the 

majority of beneficiaries involved in 

fraudulent schemes have a primary 

diagnosis of diabetes that OIG Special 

Agents found falsified medical records 

documenting patients having hand 

tremors and poor vision that preventing 

them from drawing insulin in a syringe, 

visually verifying the correct dosage, 

and injecting the insulin themselves, 

when the patients did not in fact suffer 

those symptoms. 

In light of the OIG report, we 

conducted analysis and simulations 

performed on CY 2012 claims data. We 

found that nearly 44 percent of the 

episodes that would qualify for outlier 

payments had a primary diagnosis of 

diabetes and 16 percent of episodes that 

would quality for outlier payments had 

a primary diagnosis of ‘‘Diabetes 

mellitus without mention of 

complication, type II or unspecified 

type, not stated as uncontrolled.’’ Our 

simulations also estimated that 

approximately 81 percent of outlier 

payments would be paid to proprietary 

agencies and that approximately twothirds of outlier payments would be 

paid to HHAs located in Florida (27 

percent), Texas (24 percent) and 

California (15 percent). 

We conducted additional analyses on 

episodes in our simulations that would 

have resulted in outlier payments over 

$10,000. Of note, 95 percent of episodes 

that would have resulted in outlier 

payments over $10,000 were for patients 

with a primary diagnosis of diabetes or 

long-term use of insulin, most were 

concentrated in Florida, Texas, New 

York and California and Oklahoma, and 

on average, these outlier episodes had 

160 skilled nursing visits in a 60-day 

episode of care.7 Given that nearly half 

of all outlier cases in our simulation that 

would qualify for outlier payments have 

a primary diagnosis of diabetes and the 

OIG’s assertion that there is a ‘‘systemic 

weakness that results in Medicare 

coverage of unnecessary home health 

care for diabetic patients’’ and 

investigations show that the majority of 

beneficiaries involved in fraudulent 

schemes have a primary diagnosis of 

diabetes, we believe that our current 

outlier payment methodology needs to 

be re-examined and potentially revised. 

With nearly 16 percent of episodes 

simulated to qualify for outlier 

payments having a primary diagnosis of 

‘‘Diabetes mellitus without mention of 

complication, type II or unspecified 

type, not stated as uncontrolled’’ we 

believe that episodes that do not have 

unusual variations in the type or 

amount of medically necessary care are 

qualifying for outlier payments, 

potentially through suspect fraudulent 

billing practices, which is contrary to 

the intent of the policy. As we have 

noted in the past (74 FR 580085), we are 

committed to addressing potentially 

fraudulent activities, especially those in 

areas where we see suspicious outlier 

payments. As we noted above, we plan 

to examine potential revisions to the 

outlier payment methodology through a 

new contract awarded to Abt Associates 

to address these findings and also any 

findings from the home health study 

required by section 3131(d) of the 

Affordable Care Act. 

G. Payment Reform: Home Health Study 

and Report 

Section 3131(d) of the Affordable Care 

Act requires the Secretary to conduct a 

study on HHA costs involved with 

providing ongoing access to care to lowincome Medicare beneficiaries or 

beneficiaries in medically underserved 

areas, and in treating beneficiaries with 

varying levels of severity of illness 

(specifically, beneficiaries with ‘‘high 

levels of severity of illness’’). Section 

3131(d) of the Affordable Care Act also 

gives the Secretary the authority to 

explore methods to revise the HH PPS 

to account for costs related to patient 

severity of illness or to improving 

beneficiary access to care and examine 

the potential impacts of any potential 

revisions to the payment system. 


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As we stated in the CY 2013 HH PPS 

proposed rule (77 FR 41572), we 

awarded an initial contract to L&M 

Policy Research in the fall of 2010 to 

perform exploratory work for the study 

on the vulnerable patient populations 

(that is, low-income Medicare 

beneficiaries, beneficiaries in medically 

underserved areas, and beneficiaries 

with high levels of severity of illness). 

The contractor performed a literature 

review of potential HH PPS payment 

vulnerabilities and access issues, 

established and convened technical 

expert panel (TEP) meetings and open 

door forums to help define the 

vulnerable patient populations and to 

gain insight on access issues these 

populations may face, and performed 

preliminary analysis looking at resource 

costs versus Medicare reimbursement. 

In September 2011, we awarded a 

subsequent contract to L&M Policy 

Research, along with subcontractors 

Avalere Health, Mathematica Policy 

Research, and Social & Scientific 

Systems, to develop an analytic plan, 

perform detailed analysis, and if 

appropriate, develop recommendations 

for changes to the HH PPS. In 2012, 

L&M completed preliminary analyses on 

HHA costs associated with providing 

care for vulnerable patient populations. 

L&M presented their findings at a TEP 

meeting in December 2012 and received 

extensive feedback on our analyses. 

L&M refined their analytic approach 

based on feedback from the TEP meeting 

and is in the process of completing the 

refined analyses. In addition to 

examining the costs of providing care to 

vulnerable patient populations, survey 

data was collected and analyzed to 

assess whether the vulnerable patient 

populations experience access issues 

and identify potential factors that may 

prevent access to care. Since the CY 

2014 HH PPS proposed rule, L&M 

presented the survey findings and the 

analyses of HHA costs to the technical 

expert panel during a webinar and 

received their feedback. The survey 

findings and the analyses of HHA costs 

are currently being reviewed and have 

not yet been finalized. 

The findings from the analysis of 

HHA costs and the survey on access to 

care for vulnerable patient populations 

may be used to develop 

recommendations on how to revise the 

current HH PPS to better account for 

costs and ensure access to care for these 

beneficiaries. Methods to revise the 

current HH PPS could include payment 

adjustments for services that involve 

either more or fewer resources, changes 

to reflect resources involved with 

providing HH services to low-income 

Medicare beneficiaries or Medicare 

beneficiaries residing in medically 

underserved area, and ways outlier 

payments could be revised to reflect 

costs of treating Medicare beneficiaries 

with high severity of illness. In 

addition, as part of the study, L&M may 

analyze operational issues involved 

with potential implementation of 

potential revisions to the HH payment 

system. 

The Affordable Care Act requires that 

the Secretary submit a Report to 

Congress regarding the study no later 

than March 1, 2014. The report may 

contain recommendations for revisions 

to the HH PPS, recommendations for 

legislation and administrative action, 

and recommendations for whether 

further research is needed. The Congress 

also provided CMS with the authority to 

conduct a separate demonstration 

project to perform additional research 

and further explore recommendations 

from the study. We plan to provide 

updates regarding our progress on the 

HH study in future rulemaking and 

open door forums. 

The following is a summary of the 

comments we received regarding the 

Payment Reform: Home Health Study 

and Report. 

Comment: One commenter stated that 

physical therapists and other home 

health clinicians should be active 

participants in the collection of analysis 

of data gathering in the study and that 

CMS should provide updates to the 

stakeholder community on the plan and 

design of the study. 

Response: We are currently in the 

process of reviewing the study findings 

but thank the commenter for their 

interest in being part of the study. We 

plan to provide updates to the industry 

and stakeholder community once 

findings are finalized. 

Comment: Several commenters 

encouraged CMS to review the study 

results and address any clear access or 

cost concerns identified in the study in 

the 2014 rule through the grouper, the 

case-mix weights, and/or the outlier 

calculations. Some commenters 

encouraged CMS to incorporate the 

findings from the VNAA Vulnerable 

Patient Study into the case-mix system 

for CY 2014. Multiple commenters 

stated that the findings of CMS’ home 

health study and the VNAA Vulnerable 

Patient Study should be taken into 

account when finalizing the rebasing 

provisions. 

Many commenters supported CMS’ 

research on costs for vulnerable 

populations and stated that it is mainly 

the not-for-profit HHAs that treat the 

most vulnerable patients and that 

Medicare does not fully cover the cost 

of these patients. One commenter 

recommended that CMS expedite the 

study research and incorporate suitable 

adjustments to the HH PPS to ensure 

that beneficiaries with high levels of 

severity of illness or other vulnerable 

populations have appropriate access to 

home health services. 

Response: In September 2013, we 

awarded a contract to perform follow-on 

work for the home health study. The 

new contract with Abt Associates will 

examine the findings of the home health 

study, monitor potential impacts of 

rebasing and other recent policy 

changes, and develop payment reform 

options to ensure access to care for 

vulnerable populations and address 

payment vulnerabilities in the current 

payment system. Given the statutory 

mandate that the rebasing adjustments 

must be implemented starting at the 

beginning of CY 2014, we are required 

to implement the reductions before the 

study findings will be finalized. 

However, we will continue to assess the 

case-mix system and improve the casemix system as necessary. 

Final Decision: We appreciate the 

comments on the home health study 

and will take the comments into 

consideration for the follow-on work 

under the new contract. 

H. Cost Allocation of Survey Expenses 

In the CY 2013 HH PPS proposed rule 

(77 FR 41548), we proposed to amend 

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

that Medicaid state plans explicitly 

include Medicaid’s appropriate 

contribution to the cost of HH surveys. 

We proposed to add a reference to 

HHAs, along with NFs and ICFs/IIDs at 

§ 431.610(g). 

Surveys are required for determining 

a provider’s or supplier’s compliance 

with program participation 

requirements and the HHA surveys 

benefit both Medicare and Medicaid 

programs where the HHAs seek such 

dual certification. Thus, in accordance 

with OMB Circular A–87, the costs for 

surveys of HHAs that are certified for 

both Medicare and Medicaid should be 

shared between Medicare, Medicaid and 

state-only programs in proportion to the 

benefits received. However, to provide 

more time for dialogue with states and 

for any necessary adjustments to state 

Medicaid programs, we removed the 

proposed provision at § 431.610(g) in 

the CY 2013 HH PPS final rule (77 FR 

67068). In the CY 2014 HH PPS 

proposed rule we again proposed to 

amend § 431.610(g) with additional 

explanation of our proposal and with 

updated cost information. 

We noted that a state Medicaid 

program must provide that, in certifying 


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HHAs, the state’s designated survey 

agency must carry out certain other 

responsibilities that already apply to 

surveys of nursing facilities and 

Intermediate Care Facilities for 

Individuals with Intellectual Disabilities 

(ICF–IID), including sharing in the cost 

of HHA surveys. Section 431.610(g) 

provides for the availability of federal 

financial participation (FFP) in the cost 

of such surveys, except for expenditures 

that the survey agency makes that are 

attributable to the state’s overall 

responsibilities under state law and 

regulations. We believe that the 

principles articulated in OMB Circular 

A–87 require that HHA survey costs be 

allocated to Medicaid, Medicare and 

state-only programs in proportion to the 

benefits received. However, we also 

explained that the proposed amendment 

to § 431.610(g) would add clarity, and 

that the proposed rule would offer states 

and the public additional opportunity to 

comment or pose questions that will 

further aid adherence to the appropriate 

cost allocation principles. We further 

invited public comment on our 

proposed methods to ensure compliance 

with these requirements. Specifically, 

we proposed to review each state’s 

allocation of costs for HHA surveys for 

adherence to OMB Circular A–87 

principles and the statutes with the goal 

of ensuring full adherence by each state 

no later than July 2014. For that portion 

of costs attributable to Medicare and 

Medicaid, we proposed to assign 50 

percent to Medicare and 50 percent to 

Medicaid. This is the standard 50/50 

method that CMS and states have used 

effectively for many years in the 

allocation of expenses related to surveys 

of SNF/NF nursing homes, an approach 

we consider to be more straight-forward 

and economical compared with 

calculation of unique percentages that 

vary state-to-state and year-by-year. 

Most importantly, we explained that a 

50/50 method best reflects the reality 

that Medicare and Medicaid 

requirements for home health agencies 

are generally the same and each 

program benefits from the regulations. 

An alternative to the proposed 50/50 

method for allocating each state’s 

Medicare/Medicaid HHA survey costs 

would be to fix each state’s Medicaid 

share each year based on the proportion 

of Medicaid funding for HH services in 

the state compared to the combined 

Medicare and Medicaid total funding in 

the most recent years for which the data 

are reasonably complete. This is the 

method adopted for the disbursement of 

civil monetary penalties (CMPs) in the 

CY 2013 HH PPS final rule (77 FR 

67078). However, the effective date of 

HHA CMPs is not until July 1, 2014. Our 

preparations for imposing such CMPs in 

2014 indicate that the annual data 

collection and calculations necessary for 

that methodology are (a) more 

complicated and burdensome than 

necessary, (b) involve an inherent data 

lag that could create uncertainty for 

states and CMS in preparing state 

survey agency budgets, (c) sufficiently 

variable from year to year to create 

further uncertainty for states, (d) unable 

to anticipate the effects of substantial 

expansion of Medicaid under the 

Affordable Care Act (which could 

increasingly enlarge the state Medicaid 

share) and (e) will not recognize that 

both Medicare and Medicaid programs 

benefit from the regulations. Therefore, 

we expressed our belief that the more 

efficient and advantageous method, for 

both CMS and states, would be the 50/ 

50 allocation method that has been used 

successfully for many years in the 

allocation of survey costs for SNF and 

NF. We invited comment not only on 

the 50/50 allocation method for the 

costs of HHA survey expenses, but on 

whether the method of distribution for 

CMP receipts back to states and to the 

U.S. Treasury should be changed to the 

same 50/50 methodology. 

Based on such a 50/50 ratio for each 

state, and based upon the projected 

national HHA survey budget for FY 

2014 of $37.2 million, if implemented in 

the beginning of FY 2014, the 

anticipated aggregate share for Medicaid 

would amount to $18.6 million. The 

cost of surveys is treated as a Medicaid 

administrative cost, reimbursable at the 

professional staff rate of 75 percent. 

Therefore, the state Medicaid share 

would be approximately $4.65 million 

on an annualized basis. The $4.65 

million cost would be spread out over 

the 53 states/jurisdictions that currently 

conduct surveys under section 1864 of 

the Act. However, the adherence date of 

July FY 2014 would reduce the 

Medicaid aggregate share to 

approximately $4.65 million (for 3 

months of the annual $18.6 million 

aggregate cost) and the state Medicaid 

share to approximately $1.16 million 

(25 percent of expenses for the last 

quarter of FY 2014). 

We received a total of 7 pertinent 

comments from 5 organizations 

regarding the Cost Allocation of Survey 

Expenses proposal. The following is a 

summary of the comments we received. 

Comment: Two organizations 

supported the proposed cost allocation 

and the proposed 50/50 split between 

Medicare and Medicaid for that 

proportion of the overall expense 

attributed to those programs. The 

commenters noted that the 50/50 split 

has been in long-standing use for the 

allocation of survey costs for skilled 

nursing facilities that are dually 

certified for Medicare and Medicaid. 

Response: These comments reflect the 

allocation methodology proposed in the 

notice of proposed rule-making. We 

concur with the comments. 

Comment: Another commenter agreed 

with the preamble statement that costs 

should be allocated in proportion to 

benefits received, but disputed that the 

costs should be split 50/50 between 

Medicare and Medicaid. The commenter 

expressed the belief that Medicaid 

receives less than 50 percent of the 

benefit on the grounds that (a) OASIS 

(Outcome and Assessment Information 

Set) drives much of S&C activity, and no 

State uses OASIS in rate setting; (b) 

Medicare requires that beneficiaries be 

homebound, in contrast to Medicaid 

home health policy mandates; (c) 

Medicare and its survey activities are 

focused on a medical model in contrast 

to Medicaid’s focus on support for 

activities of daily living and heavy 

reliance on home health aides rather 

than skilled nurses; and (d) about 77 

percent of the commenter’s state 

Medicaid home health beneficiaries are 

under age 65, with children 

representing 34 percent of those 

beneficiaries receiving Medicaid home 

health services. 

Response: We appreciate the 

distinctions between Medicare and 

Medicaid that the commenter makes, 

but do not agree that these distinctions 

are particularly relevant to the issue of 

survey expenses. Medicare and 

Medicaid pay for survey expenses to 

assess a provider’s compliance with 

Conditions of Participation (CoPs). 

HHAs providing services under 

Medicaid’s home health benefit must 

meet the CoPs for Medicare, as specified 

at § 440.70(d). As articulated in the State 

Operations Manual at 2202.3E, if home 

care is provided by an entity required to 

meet the Medicare CoPs for any reason, 

then the entity must apply all the 

requirements of the CoPs, including the 

comprehensive assessment and OASIS 

data reporting requirements, to all 

patients of the agency, including 

patients treated under a Medicaid 

waiver or state plan, as applicable, with 

certain minor exceptions. 

In short, the CoPs expressed in 42 

CFR part 484 benefit both Medicare and 

Medicaid patients. For example, the 

regulations begin with a focus on proper 

organization of the HHA and 

qualifications of personnel. The first full 

CoP delineates patient rights that apply 

equally to Medicare and Medicaid 

patients, such as informing patients of 

their rights in advance, the right to file 


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a grievance and to have a grievance 

investigated, the right to be informed 

and participate in planning care and 

treatment, the right to have medical 

records held confidentially, and the 

right to have his or her property treated 

with respect. An entire CoP (§ 484.36) is 

dedicated to home health aides, an area 

that the commenter observes is 

particularly important for Medicaid. 

Similarly, § 484.55 obliges HHAs to 

conduct a timely and comprehensive 

assessment of the care and support 

needs of each individual. This is a basic 

expectation regardless of whether it is 

viewed through the lens of a medical 

model or daily living and support 

model. 

With regard to OASIS, some states do 

indeed use OASIS in their HHA ratesetting methodology, but such use is 

immaterial to the question at hand, 

since the survey process is concerned 

with application of the CoPs and quality 

of care, not enforcement of payment 

policy or the calculation of payment 

rates. Further, OASIS is an integral part 

of the comprehensive assessment 

process required at § 484.55. The 

comprehensive assessment regulation 

requires that HHAs use a standard core 

data set, that is, OASIS, when 

evaluating adult, non-maternity 

Medicare and Medicaid patients (except 

those receiving exclusively homemaker 

or chore services). OASIS data must be 

collected and reported for Medicaid as 

well as Medicare beneficiaries in 

accordance with § 484.20. 

Because the focus of the survey 

process is on compliance with the CoPs, 

and the CoPs apply to all patients 

served by the HHA, it is largely 

immaterial whether the majority of the 

work for either Medicare or Medicaid is 

done by registered nurses or home 

health aides, whether a medical model 

or daily living and support model 

predominates, or whether the majority 

of the clientele is under or over the age 

of 65. 

It is arguably the case that certain 

specific standards tend to apply to some 

groups more than to others. For 

example, § 484.55(c) requiring drug 

regimen review may most benefit those 

patients taking many medications, while 

§ 484.34 governing medical social work 

may most benefit individuals who face 

challenging social and emotional factors 

related to health problems. However, 

the preponderance of standards benefits 

almost all patients regardless of 

payment source. This is particularly 

true of the most common area identified 

for deficiency citations by surveyors as 

a result of the onsite survey process. In 

FY 2012, for example, the most 

frequently-cited deficiencies were for 

failure to ensure that a written plan of 

care was established and periodically 

reviewed (8.6 percent of all agencies 

surveyed), the assessment included a 

review of all medications (6.1 percent), 

the plan of care covered applicable 

diagnoses and required services and 

visits (6.0 percent), a record of past and 

current findings was maintained (5.2 

percent), and that care was provided in 

accordance with commonly-accepted 

professional standards (3.9 percent). 

Therefore, while there are differences 

between Medicare and Medicaid 

coverage, we do not agree that such 

differences materially affect the extent 

to which the CoPs benefit Medicare 

compared to Medicaid beneficiaries 

when the regulations are taken as a 

whole. 

Comment: Another commenter stated 

that the proposed rule would result in 

a loss of federal funds for the state and 

comes at a very inconvenient time, since 

the state survey agency’s state funding 

in the past 3 years has been levelfunded in the state budget while the 

survey agency’s responsibilities have 

grown, the Medicare portion of survey 

agency funding has been reduced 

considerably, and the proposed rule 

would require changes in the state 

accounting system, which would add 

costs that should be recognized by CMS. 

Response: We very much appreciate 

the extraordinary fiscal constraints 

under which most states have recently 

labored. We also acknowledge that 

federal budget sequestration resulted in 

a decrease in federal funding for the 

Medicare portion of state survey agency 

responsibilities. Neither observation, 

however, directly affects the question of 

whether Medicare and Medicaid should 

both contribute to the cost of surveys, in 

accordance with the accounting 

principles articulated in OMB Circular 

A–87. We appreciate that there is some 

fiscal impact for states, but note that the 

Medicaid impact is mitigated by two 

major factors. First, Medicaid’s share is 

treated as a Medicaid administrative 

cost, reimbursable at the professional 

staff rate of 75 percent. This means that 

the state Medicaid cost is limited to 25 

percent of the Medicaid share. Second, 

we sought to provide states with 

considerable preparatory time. As 

discussed in the preamble, we first 

published a notice of proposed rulemaking on this topic in 2012 (CY 2013 

HH PPS proposed rule (77 FR 41548)), 

but postponed action on a final rule in 

order to provide more time for states. 

Further, in our latest proposal we 

delayed the proposed enforcement date 

until July 1, 2014 to offer even more 

preparatory time for states. In various 

national calls and meetings with state 

survey agencies over the past two years, 

we also communicated our intent to 

issue and finalize the proposal to ensure 

that Medicaid contributes its fair share 

of the cost of HHA surveys. The 

combined effect has been to provide 

states with almost 2 years advance 

notice of CMS enforcement. We believe 

that the FY 2013 reduction in Medicare 

funding for state survey work reinforces 

the need to ensure that all appropriate 

payment sources are contributing their 

fair share of survey expenses, rather 

than expecting Medicare to shoulder a 

disproportionate share. 

We appreciate that some states may 

need to make minor accounting system 

changes and will work with such states 

to accomplish the changes 

expeditiously. We expect that 

arrangements for Medicaid fair share 

contributions to the cost of the HHA 

surveys can easily be built on the 

procedures and requirements that are 

already in place for states to receive 

Medicaid federal financial participation 

for certain existing activities, such as 

the cost of surveys in nursing facilities. 

States already track the survey hours 

and costs associated with home health 

surveys. The 50/50 methodology 

specified in this rule for allocating 

expenses between Medicare and 

Medicaid simplifies the cost accounting. 

Further, states are already required 

under § 431.610(h)(2) to remove from 

federal reimbursement claims the costs 

of surveying for HHA compliance with 

state-only laws and regulations. We 

therefore expect that there already exists 

the appropriate infrastructure for proper 

cost accounting, but that some states 

may need to establish additional, 

internal cost accounting codes. We plan 

to work with states to make any 

accounting system changes in state cost 

accounting systems that are necessary to 

ensure there are proper audit trails and 

data to support claims for federal 

reimbursement. 

Comment: Another commenter 

observed that there was a number of 

different methods that CMS could use to 

arrive at an appropriate split between 

Medicare and Medicaid contributions, 

such as the proportion of aggregate 

Medicare or Medicaid spending to the 

combined total spending of the two 

programs. The commenter also stated 

that the volume of survey activity in a 

state should inform the cost-share 

assigned to a state. 

Response: We discussed the aggregate 

spending method in our notice of 

proposed rule-making, and explained 

that we were proposing the 50/50 split 

as an administratively simpler and 

appropriate alternative that has been in 

long-standing use with respect to 


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surveys of SNF and NF. The commenter 

did not recommend the aggregate 

method, nor did any other commenter, 

but simply expressed the aggregate 

method as an acceptable alternative. We 

are therefore retaining the proposed 50/ 

50 cost-allocation methodology. With 

regard to the comment that survey 

activity in a state should inform the 

cost-share assigned to a state, our 

methodology would incorporate that 

principle. The amount of Medicaid 

funding for HHA surveys in each state 

would be based on 50 percent of the 

total cost of surveys in the particular 

state in question that is attributable to 

the Medicare and Medicaid share of 

total cost (exclusive of any state-only 

cost attributable to state licensure 

requirements). 

Response Based on No Comments: 

CMS received no comments on whether 

the method of distribution for CMP 

receipts back to the states and to the 

U.S. Treasury should be changed to the 

same 

50/50 methodology. If CMS does 

propose a change in the CMP receipt 

distribution methodology, we will 

propose the change in the CY 2015 HH 

PPS proposed rule. 

Final Decision: After careful 

consideration of the comments, we 

conclude that it is appropriate and 

warranted to publish in this final rule 

the regulatory changes we proposed to 

ensure that state Medicaid programs 

include explicit provision to contribute 

to the cost of HHA surveys in 

accordance with OMB Circular A–87, 

with the costs that are attributable to 

Medicare and Medicaid shared on a 

50/50 basis between the two programs. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

Unless otherwise noted, to derive 

average costs we used data from the U.S. 

Bureau of Labor Statistics for all salary 

estimates. The salary estimates include 

the cost of fringe benefits, calculated at 

35 percent of salary, which is based on 

the March 2011 Employer Costs for 

Employee Compensation report by the 

Bureau. 

In the July 3, 2013, proposed rule we 

solicited public comment on each of the 

section 3506(c)(2)(A)-required issues for 

the following information collection 

requirements (ICRs). A summary of the 

public comments we received, and our 

responses, can be found in sections 

IV.E.2 and IV.H of this preamble. This 

final rule does not revise any of the 

proposed rule’s PRA-related 

requirements or burden estimates, 

except to clarify that existing state plan 

provisions already address Medicaid 

coverage for state survey costs and states 

will not have the burden of submitting 

a State Plan Amendment (SPA) when 

they ensure that Medicaid contributes 

its fair share to the cost of HHA surveys 

(described below in V.B). 

A. ICRs Regarding OASIS 

The information collection 

requirements and burden estimates 

associated with OASIS have been 

approved by OMB under OCN 0938– 

0760. While OASIS is discussed in 

preamble section IV.E.2.a, this rule does 

not revise any of its information 

collection requirements or burden 

estimates and, therefore, does not 

require additional OMB review under 

the authority of the Paperwork 

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

et seq.). 

B. Cost Allocation of Home Health 

Agency (HHA) Survey Expenses 

(§ 431.610) 

In § 431.610(g), HHAs have been 

added to the survey agency provision 

concerning state Medicaid programs. 

Since CMS already requires that state 

survey agencies have qualified 

personnel perform onsite inspections as 

appropriate, we believe that the 

requirement to use qualified staff is met 

in the current state Medicaid plans. As 

explained in the preamble (see section 

IV.H, Cost Allocation of Survey 

Expenses, of this final rule) and in the 

CY 2014 HH PPS proposed rule (78 FR 

40302), we also expect that state 

Medicaid programs will provide for the 

appropriate Medicaid share of expenses 

for the conduct of HHA surveys. This is 

a budgeting and accounting task. Since 

state Medicaid plans already provide for 

the necessary relations with state survey 

agencies, we do not believe it will be 

necessary for states to submit a state 

plan amendment. We believe the 

responsibilities for Medicaid home 

health survey costs may be met through 

appropriate budgeting and accounting 

adjustments within the context of each 

state’s current Medicaid plan. This rule 

will not revise any budget-related 

recordkeeping or reporting requirements 

or estimates for state Medicaid agencies 

and, therefore, does not require 

additional OMB review under the 

authority of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.). 

C. ICRs Regarding Home Health Care 

CAHPS® (HHCAHPS®) Survey 

In the proposed rule, CMS proposed 

to add the OMB number to the 

HHCAHPS Participation Exemption 

Request Form. CMS did not receive any 

comments about the proposed change, 

and CMS is moving forward with 

adding the OMB number to the 

Participation Exemption Request Form. 

This is discussed in the preamble in the 

section about the Home Health CAHPS 

(HHCAHPS) survey in the Quality 

Reporting Requirement section at 

IV.E.2.e. CMS implements the 

HHCAHPS® Survey to measure and to 

publicly report patients’ experiences 

with home health care they receive from 

Medicare-certified agencies. Section 

484.250, Patient Assessment Data, 

requires that HHAs submit to CMS, 

HHCAHPS® data in order to administer 

the payment rate methodologies 

described in §§ 484.215, 484.230, and 

484.235. The burden associated with 

this is the time and effort put forth by 

the HHAs to submit the HHCAHPS®

data, the patients’ burden to respond to 

the HHCAHPS® survey, and the cost to 

the HHAs to pay for the HHCAHPS®

survey vendors to collect the data on 

their behalf. This burden is currently 

accounted for under OCN 0938–1066 

(CMS–10275). 

CMS allows Medicare-certified home 

health agencies that serve 59 or fewer 

HHCAHPS® eligible patients, to request 

an exemption from participating in the 

HHCAHPS® survey. Currently, we have 

posted the HHCAHPS® Participation 

Exemption Request (PER) Form for the 

CY 2015 Annual Payment Update on 

https://homehealthcahps.org. The form 

is only to be used if home health 

agencies have 59 or fewer HHCAHPS®

eligible patients in the count period that 

is referenced for a given calendar year. 

For the CY 2015 annual payment 

update, home health agencies with 59 or 

fewer HHCAHPS® patients in the period 

of April 2012 through March 2013 are 

exempt from participation in the 

HHCAHPS® Survey from April 2013 


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through March 2014, if they complete 

the HHCAHPS Participation Exemption 

Request Form for the CY 2015 Annual 

Payment Update, and the counts are 

verified in the CMS database for the 

same period. While the HHCAHPS®

Participation Exemption Request Form 

is in use without an OMB control 

number, we are revising OCN 0938– 

1066 by adding the form and our 

estimated burden to that the control 

number. 

The HHCAHPS® PER Form for the CY 

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

15 minutes to complete the form since 

it only has a few items to complete 

including one item concerning the 

count of HHCAHPS® eligible patients in 

an annual period. We believe that it will 

take an additional 20 minutes to count 

the patients and to verify the count. The 

annualized aggregated total burden to 

completion of the form is 1,170 hr ((15 

min + 20 min)/60 × 2,000 Medicarecertified home health agencies) at a total 

estimated cost of $36,400 for 2,000 

home health agencies. 

In deriving these figures, we used the 

following hourly labor rates and time to 

complete each task: $36.27/hr and 20 

min (.33 hr) for a home health care 

agency director to check the work on the 

Participation Exemption Request Form 

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

executive assistant to perform the 

patient count and to complete the form. 

This amounts to $18.20 per respondent 

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

2,000) total. 

D. Submission of PRA-Related 

Comments 

We have submitted a copy of this rule 

to OMB for its review of the rule’s 

information collection and 

recordkeeping requirements. These 

requirements are not effective until they 

have been approved by the OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

paperwork collections referenced above, 

access CMS’ Web site at www.cms.gov/ 

Regulations-and-Guidance/Legislation/

PaperworkReductionActof1995/, or call 

the Reports Clearance Office at 410– 

786–1326. 

We invite public comments on these 

information collection requirements. If 

you comment on these information 

collection and recordkeeping 

requirements, please submit your 

comments to the Office of Information 

and Regulatory Affairs, Office of 

Management and Budget, Attention: 

CMS Desk Officer, (CMS–1450–F) Fax: 

(202) 395–6974; or Email: OIRA_

submission@omb.eop.gov. 

PRA-specific comments must be 

received on/by January 2, 2014. 

VI. Waiver of Delay in Effective Date 

In the absence of an appropriation for 

FY 2014 or a Continuing Resolution, the 

federal government shut down on 

October 1, 2013. During the funding 

lapse, which lasted from October 1, 

2013 through October 16, 2013, only 

excepted operations continued, which 

largely excluded work on this final rule. 

Accordingly, most of the work on this 

final rule was not completed in 

accordance with our usual schedule for 

final calendar-year-based payment rules, 

which aims for an issuance date of 

November 1 followed by an effective 

date of January 1 to ensure that the 

policies are effective at the start of the 

calendar year to which they apply. We 

ordinarily provide a 60-day delay in the 

effective date of final rules after the date 

they are issued. The 60-day delay in 

effective date can be waived, however, 

if the agency finds for good cause that 

the delay is impracticable, unnecessary, 

or contrary to the public interest, and 

the agency incorporates a statement of 

the findings and its reasons in the rule 

issued. We believe it would be contrary 

to the public interest to delay the 

effective date of the HH PPS, HH PPS 

Grouper refinements, rebasing, and 

quality reporting portions of this final 

rule. The HH PPS is a calendar-year 

payment system, and we typically issue 

the final rule by November 1 of each 

year to ensure that the payment policies 

for the system, associated HH PPS 

Grouper, and quality reporting 

requirements are effective on January 1, 

the first day of the calendar year to 

which the policies are intended to 

apply. Likewise, the HH PPS rebasing is 

required by section 3131(a) of the 

Affordable Care Act to be effective for 

the entirety of calendar year 2014. If the 

effective date of this final rule were to 

be delayed by 60 days, the policies 

adopted in this final rule would not be 

effective until January 21, 2014. This 

would be contrary to the public’s 

interest in ensuring that home health 

agencies and state survey agencies 

receive appropriate payments in a 

timely manner. For these reasons we 

find that the delayed effective date is 

both impracticable and contrary to the 

public interest, and we are waiving such 

delay in the effective date of this final 

rule. 

VII. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (UMRA, March 22, 1995; 

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

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This final 

rule has been designated as 

economically significant, under section 

3(f)(1) of Executive Order 12866, and 

thus is a major rule under the 

Congressional Review Act. Accordingly, 

we have prepared a regulatory impact 

analysis (RIA) that to the best of our 

ability presents the costs and benefits of 

the rulemaking. Also, the rule has been 

reviewed by OMB. 

B. Statement of Need 

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

the Secretary to establish a HH PPS for 

all costs of HH services paid under 

Medicare. In addition, section 

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

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary, and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage levels 

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

the Act addresses the annual update to 

the standard prospective payment 

amounts by the HH applicable 

percentage increase. Section 1895(b)(4) 

of the Act governs the payment 

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

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

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

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

the establishment of appropriate casemix adjustment factors for significant 

variation in costs among different units 

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


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of the Act requires the establishment of 

wage adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. 

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

Secretary the option to make changes to 

the payment amount otherwise paid in 

the case of outliers because of unusual 

variations in the type or amount of 

medically necessary care. Section 

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

HHAs to submit data for purposes of 

measuring health care quality, and links 

the quality data submission to the 

annual applicable percentage increase. 

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

requires that HH services furnished in a 

rural area for episodes and visits ending 

on or after April 1, 2010, and before 

January 1, 2016, receive an increase of 

3 percent the payment amount 

otherwise made under section 1895 of 

the Act. 

Section 3131(a) of the Affordable Care 

Act mandates that starting in CY 2014, 

the Secretary must apply an adjustment 

to the national, standardized 60-day 

episode payment rate and other 

amounts applicable under section 

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

factors such as changes in the number 

of visits in an episode, the mix of 

services in an episode, the level of 

intensity of services in an episode, the 

average cost of providing care per 

episode, and other relevant factors. In 

addition, section 3131(a) of the 

Affordable Care Act mandates that 

rebasing must be phased-in over a 4- 

year period in equal increments, not to 

exceed 3.5 percent of the amount (or 

amounts) as of the date of enactment 

(2010) under section 1895(b)(3)(A)(i)(III) 

of the Act, and be fully implemented in 

CY 2017. 

C. Overall Impact 

The update set forth in this rule 

applies to Medicare payments under HH 

PPS in CY 2014. Accordingly, the 

following analysis describes the impact 

in CY 2014 only. We estimate that the 

net impact of the proposals in this rule 

is approximately $200 million in 

decreased payments to HHAs in CY 

2014. The impact of the 2014 wage 

index would be a decrease of $50 

million. However, we applied a 

standardization factor to the rates as 

discussed earlier. Therefore, the net 

effect of the 2014 wage index is zero 

dollars. The ¥$200 million impact 

reflects the distributional effects of the 

2.3 percent HH payment update 

percentage ($440 million increase), the 

effects of the rebasing adjustments to the 

national, standardized 60-day episode 

payment amount, the national per-visit 

payment rates, and the NRS conversion 

factor for an impact of ¥2.73 percent 

($520 million decrease), and the effects 

of the ICD–9–CM HH PPS Grouper 

refinements of ¥0.62 percent ($120 

million decrease). The $200 million in 

decreased payments is reflected in the 

last column of the first row in Table 33 

as a 1.05 percent decrease in 

expenditures when comparing CY 2013 

payments to estimated CY 2014 

payments. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to $34.5 

million in any 1 year. For the purposes 

of the RFA, we estimate that almost all 

HHAs are small entities as that term is 

used in the RFA. Individuals and states 

are not included in the definition of a 

small entity. The economic impact 

assessment is based on estimated 

Medicare payments (revenues) and 

HHS’s practice in interpreting the RFA 

is to consider effects economically 

‘‘significant’’ only if greater than 5 

percent of providers reach a threshold of 

3 to 5 percent or more of total revenue 

or total costs. As we discussed in the 

preamble of this final rule in response 

to comments (section IV.D), the majority 

of HHAs’ visits are Medicare-paid visits 

and therefore the majority of HHAs’ 

revenue consists of Medicare payments. 

Based on our analysis, we conclude that 

the policies finalized in this rule will 

not result in an estimated total impact 

of 3 to 5 percent or more on Medicare 

revenue for greater than 5 percent of 

HHAs. Therefore, the Secretary has 

determined that this final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Further detail is presented in Table 33 

below, by HHA type and area. 

Executive Order 13563 specifies, to 

the extent practicable, agencies should 

assess the costs of cumulative 

regulations. However, given potential 

utilization pattern changes, wage index 

changes, changes to the market basket 

forecasts, and unknowns regarding 

future policy changes, we believe it is 

neither practicable nor appropriate to 

forecast the cumulative impact of the 

rebasing adjustments on Medicare 

payments to HHAs for future years at 

this time. Changes to the Medicare 

program may continue to be made as a 

result of the Affordable Care Act, or new 

statutory provisions. Although these 

changes may not be specific to the HH 

PPS, the nature of the Medicare program 

is such that the changes may interact, 

and the complexity of the interaction of 

these changes would make it difficult to 

predict accurately the full scope of the 

impact upon HHAs for future years 

beyond CY 2014. We note that the 

rebasing adjustments to the national, 

standardized 60-day episode payment 

rate and the national per-visit rates are 

capped at the statutory limit of 3.5 

percent of the CY 2010 amounts (as 

described in the preamble in section 

IV.D) for each year, 2014 through 2017. 

The NRS rebasing adjustment will be 

¥2.82 percent in each year, 2014 

through 2017. As described in section 

IV.D of the preamble, the ¥2.82 percent 

rebasing adjustment will not exceed the 

statutory limit in CY 2014 and there is 

a very low likelihood that future 

adjustments of ¥2.82 percent in CY 

2015 through 2017 would exceed the 

statutory limit. 

In addition, section 1102(b) of the Act 

requires us to prepare a RIA if a rule 

may have a significant impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 604 

of RFA. For purposes of section 1102(b) 

of the Act, we define a small rural 

hospital as a hospital that is located 

outside of a metropolitan statistical area 

and has fewer than 100 beds. This final 

rule applies to HHAs. Therefore, the 

Secretary has determined that this rule 

will not have a significant economic 

impact on the operations of small rural 

hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2013, that 

threshold is approximately $141 

million. This final rule is not 

anticipated to have an effect on state, 

local, or tribal governments in the 

aggregate, or by the private sector, of 

$141 million or more in CY 2014. 

D. Detailed Economic Analysis 

This final rule sets forth updates to 

the HH PPS rates contained in the CY 

2013 HH PPS final rule. The impact 

analysis of this rule presents the 

estimated expenditure effects of policy 

changes in this rule. We use the latest 

data and best analysis available, but we 

do not make adjustments for future 


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changes in such variables as number of 

visits or case-mix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare HH 

benefit, based primarily on Medicare 

claims from 2012. We note that certain 

events may combine to limit the scope 

or accuracy of our impact analysis, 

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

resulting from other changes in the 

impact time period assessed. Some 

examples of such possible events are 

newly-legislated general Medicare 

program funding changes made by the 

Congress, or changes specifically related 

to HHAs. In addition, changes to the 

Medicare program may continue to be 

made as a result of the Affordable Care 

Act, or new statutory provisions. 

Although these changes may not be 

specific to the HH PPS, the nature of the 

Medicare program is such that the 

changes may interact, and the 

complexity of the interaction of these 

changes could make it difficult to 

predict accurately the full scope of the 

impact upon HHAs. 

Table 33 represents how HHA 

Medicare revenues are likely to be 

affected by the policy changes in this 

rule. For this analysis, we used linked 

CY 2012 HH claims and OASIS 

assessments; the claims are for dates of 

service that ended in CY 2012. The first 

column of Table 33 classifies HHAs 

according to a number of characteristics 

including provider type, geographic 

region, and urban and rural locations. 

The second column shows the payment 

effects of the wage index. The third 

column shows the effects of the 

standardization factor. The forth column 

shows the effects of the ICD–9–CM 

Grouper scoring changes. The fifth 

column displays the effects of the 

rebasing adjustments to the national, 

standardized 60-day episode payment 

rate, the national per-visit payment 

rates, and NRS conversion factor as well 

as the effects of the LUPA add-on 

factors. The sixth column shows the 

effects of the market basket increase. 

The seventh column shows the payment 

effects of all the finalized policies. 

Overall, HHAs are anticipated to 

experience a 1.05 percent decrease in 

payment in CY 2014, with freestanding 

HHAs anticipated to experience a 1.10 

percent decrease in payments while 

facility-based HHAs and non-profit 

HHAs are anticipated to experience a 

0.58 percent and a 0.49 percent decrease 

in payments, respectively. Governmentowned HHAs are anticipated to 

experience a 0.92 percent decrease in 

payments and proprietary HHAs are 

anticipated to experience a 1.27 percent 

decrease in payments. Rural HHAs are 

anticipated to experience a decrease in 

estimated payments ranging from 0.45 

percent for facility-based non-profit 

HHAs to 1.08 for freestanding 

government-owned HHAs. Urban HHAs 

are anticipated to experience a decrease 

in estimated payments, ranging from 

0.47 percent for freestanding non-profit 

HHAs to 1.29 percent for freestanding 

proprietary HHAs. The overall impact in 

the South is estimated to be a 1.56 

percent decrease in payments whereas 

the overall impact to the ‘‘Other’’ 

category (for example, Puerto Rico, 

Guam, U.S. Virgin Islands), is estimated 

at 0.14 percent increase in payments. 

The Pacific census region is estimated to 

receive a 0.34 percent increase in 

payments for CY 2014; however, in 

contrast, the West South Central census 

region is estimated to receive a 1.74 

percent decrease in payments for CY 

2014. Finally, HHAs with less than 100 

first episodes are anticipated to 

experience a 1.27 percent decrease in 

payments compared to a 0.90 percent 

decrease in payments in CY 2014 for 

HHAs with 1,000 or more first episodes. 

A substantial amount of the variation in 

the estimated impacts of the proposals 

in this final rule in different areas of the 

country can be attributed to variations 

in the CY 2014 wage index used to 

adjust payments under the HH PPS. 

Instances where the impact, due to the 

rebasing adjustments, is less than others 

can be attributed to differences in the 

incidence of outlier payments and 

LUPA episodes, which are paid using 

the national per-visit payment rates that 

are subject to payment increases due to 

the rebasing adjustments. We note that 

some individual HHAs within the same 

group may experience different impacts 

on payments than others due to the 

distributional impact of the CY 2014 

wage index, the extent to which HHAs 

utilized the 170 ICD–9–CM codes that 

will be removed from scoring points in 

the HH PPS Grouper as of January 1, 

2014, and the degree of Medicare 

utilization. 

TABLE 33—HOME HEALTH AGENCY POLICY IMPACTS FOR CY 2014, BY FACILITY TYPE AND AREA OF THE COUNTRY

Number of 

agencies 

CY 2014 

Wage index 

(%) 

Standardization 

(%) 

ICD–9–CM 

Grouper scoring changes 

(%) 

Rebasing 1

(%) 

CY 2014 HH 

Payment update percentage 

(%) 

Impact of all 

CY 2014 policies 

(%) 

All Agencies ................. 11,620 ¥0.25 0.25 ¥0.62 ¥2.73 2.30 ¥1.05 

Facility Type and Control 

Free-Standing/Other 

Vol/NP ...................... 1,057 0.10 0.22 ¥0.40 ¥2.71 2.30 ¥0.49 

Free-Standing/Other 

Proprietary ................ 8,967 ¥0.37 0.25 ¥0.71 ¥2.74 2.30 ¥1.27 

Free-Standing/Other 

Government .............. 421 ¥0.24 0.25 ¥0.50 ¥2.73 2.30 ¥0.92 

Facility-Based Vol/NP .. 813 0.01 0.24 ¥0.33 ¥2.72 2.30 ¥0.50 

Facility-Based Proprietary .......................... 117 ¥0.17 0.25 ¥0.52 ¥2.77 2.30 ¥0.91 

Facility-Based Government .......................... 245 ¥0.34 0.25 ¥0.39 ¥2.75 2.30 ¥0.93 

Subtotal: Freestanding ............. 10,445 ¥0.27 0.25 ¥0.65 ¥2.73 2.30 ¥1.10 

Subtotal: Facilitybased ................. 1,175 ¥0.04 0.24 ¥0.35 ¥2.73 2.30 ¥0.58 

Subtotal: Vol/NP ... 1,870 0.07 0.23 ¥0.38 ¥2.71 2.30 ¥0.49 

Subtotal: Proprietary .................. 9,084 ¥0.37 0.25 ¥0.71 ¥2.74 2.30 ¥1.27 


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TABLE 33—HOME HEALTH AGENCY POLICY IMPACTS FOR CY 2014, BY FACILITY TYPE AND AREA OF THE COUNTRY— 

Continued 

Number of 

agencies 

CY 2014 

Wage index 

(%) 

Standardization 

(%) 

ICD–9–CM 

Grouper scoring changes 

(%) 

Rebasing 1

(%) 

CY 2014 HH 

Payment update percentage 

(%) 

Impact of all 

CY 2014 policies 

(%) 

Subtotal: Government .................. 666 ¥0.28 0.25 ¥0.45 ¥2.74 2.30 ¥-0.92 

Facility Type and Control: Rural 

Free-Standing/Other 

Vol/NP ...................... 205 ¥0.01 0.25 ¥0.31 ¥2.75 2.30 ¥0.52 

Free-Standing/Other 

Proprietary ................ 142 ¥0.12 0.25 ¥0.43 ¥2.77 2.30 ¥0.77 

Free-Standing/Other 

Government .............. 468 ¥0.29 0.26 ¥0.58 ¥2.77 2.30 ¥1.08 

Facility-Based Vol/NP .. 262 0.10 0.24 ¥0.34 ¥2.75 2.30 ¥0.45 

Facility-Based Proprietary .......................... 35 0.18 0.24 ¥0.53 ¥2.77 2.30 ¥0.58 

Facility-Based Government .......................... 153 ¥0.21 0.26 ¥0.34 ¥2.77 2.30 ¥0.76 

Facility Type and Control: Urban 

Free-Standing/Other 

Vol/NP ...................... 915 0.11 0.22 ¥0.40 ¥2.70 2.30 ¥0.47 

Free-Standing/Other 

Proprietary ................ 8,652 ¥0.38 0.25 ¥0.72 ¥2.74 2.30 ¥1.29 

Free-Standing/Other 

Government .............. 170 ¥0.32 0.26 ¥0.54 ¥2.74 2.30 ¥1.04 

Facility-Based Vol/NP .. 551 ¥0.01 0.24 ¥0.33 ¥2.72 2.30 ¥0.52 

Facility-Based Proprietary .......................... 82 ¥0.25 0.26 ¥0.51 ¥2.77 2.30 ¥0.97 

Facility-Based Government .......................... 92 ¥0.40 0.25 ¥0.42 ¥2.73 2.30 ¥1.00 

Facility Location: Urban or Rural 

Rural ............................. 1,158 ¥0.11 0.25 ¥0.46 ¥2.76 2.30 ¥0.78 

Urban ........................... 10,462 ¥0.26 0.25 ¥0.62 ¥2.73 2.30 ¥1.06 

Facility Location: Region of the Country 

North ............................ 874 0.47 0.20 ¥0.36 ¥2.70 2.30 ¥0.09 

Midwest ........................ 3,107 ¥0.52 0.25 ¥0.53 ¥2.76 2.30 ¥1.26 

South ............................ 5,727 ¥0.61 0.26 ¥0.77 ¥2.74 2.30 ¥1.56 

West ............................. 1,862 0.62 0.23 ¥0.46 ¥2.69 2.30 0.00 

Other ............................ 50 0.64 0.23 ¥0.22 ¥2.81 2.30 0.14 

Facility Location: Region of the Country (Census Region) 

New England ................ 334 0.12 0.23 ¥0.41 ¥2.72 2.30 ¥0.48 

Mid Atlantic .................. 540 0.68 0.18 ¥0.33 ¥2.69 2.30 0.14 

East North Central ....... 2,343 ¥0.54 0.25 ¥0.56 ¥2.76 2.30 ¥1.31 

West North Central ...... 764 ¥0.44 0.25 ¥0.43 ¥2.75 2.30 ¥1.07 

South Atlantic ............... 2,122 ¥0.71 0.27 ¥0.63 ¥2.73 2.30 ¥1.50 

East South Central ....... 440 ¥0.41 0.26 ¥0.57 ¥2.78 2.30 ¥1.20 

West South Central ...... 3,165 ¥0.58 0.26 ¥0.99 ¥2.73 2.30 ¥1.74 

Mountain ...................... 672 ¥0.30 0.26 ¥0.45 ¥2.71 2.30 ¥0.90 

Pacific ........................... 1,190 0.98 0.21 ¥0.47 ¥2.68 2.30 0.34 

Facility Size (Number of 1st Episodes) 

<100 episodes .............. 2,881 ¥0.33 0.25 ¥0.72 ¥2.77 2.30 ¥1.27 

100 to 249 .................... 2,617 ¥0.41 0.26 ¥0.78 ¥2.75 2.30 ¥1.38 

250 to 499 .................... 2,577 ¥0.42 0.26 ¥0.77 ¥2.74 2.30 ¥1.37 

500 to 999 .................... 1,878 ¥0.28 0.25 ¥0.65 ¥2.73 2.30 ¥1.11 

1,000 or More .............. 1,667 ¥0.18 0.24 ¥0.54 ¥2.72 2.30 ¥0.90 

Source: CY 2012 Medicare claims data for episodes ending on or before December 31, 2012 (as of June 2013) for which we had a linked 

OASIS assessment. 


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1The impact of rebasing includes the rebasing adjustments to the national, standardized 60-day episode payment rate (¥2.81 percent), the 

national per-visit rates (+3.45 percent), and the NRS conversion factor (¥2.82%). It also includes the impact of the LUPA add-on factors. The 

estimated impact of the NRS conversion factor rebasing adjustment is an overall ¥0.05 percent decrease in estimated payments to HHAs. The 

estimated impact of the LUPA add-on factors is an overall 0.01 percent increase in payments to HHAs. 

REGION KEY: 

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

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

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

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

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

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

E. Alternatives Considered 

As described the proposed rule (78 FR 

40307), we noted that additional factors 

were considered, but not incorporated 

into the methodology for calculating the 

rebasing adjustments. One such factor 

was a downward adjustment to the costs 

per-visit as a result of the findings from 

the audits of 98 Medicare HH cost 

reports. The results of the audits 

showed that agencies over-reported 

costs by an average of about 8 percent. 

More information on the analysis of the 

audit results can be found in the report 

titled: ‘‘Analyses in Support of Rebasing 

& Updating the Medicare Home Health 

Payment Rates—CY 2014 Home Health 

Prospective Payment System Proposed 

Rule’’ available on the CMS Home 

Health Agency (HHA) Center Web site 

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

Given this finding, we considered 

downward adjusting the costs on the 

cost report in order to better align 

payment with the agencies’ true costs. 

We also considered updating costs by 

the HH payment update percentage 

(adjusted market basket) rather than the 

full HH market basket. In 2012 and 

2013, HH payments were increased by 

the HH market basket minus one 

percentage point, as mandated by the 

Affordable Care Act. Furthermore, the 

Affordable Care Act mandates that CMS 

remove 5 percent of the national, 

standardized 60-day episode payment 

rate to fund the 2.5 percent outlier pool. 

We considered setting our target 

national, standardized 60-day episode 

payment rate for rebasing at 5 percent 

below the estimated cost per episode 

that we derived from the 2011 cost 

reports. 

We did not incorporate any of the 

options discussed above as those 

changes would not impact the final 

rebasing adjustments to the national, 

standardized 60-day episode payment 

rate or national per-visit payment rates 

as those adjustments are at the statutory 

limit (no more than 3.5 percent of the 

CY 2010 payment rates). We note that if 

we implemented the rebasing 

adjustments using the methodology 

described in the CY 2014 HH PPS 

proposed rule, the effects from the 

rebasing adjustments would have been a 

3.4 percent reduction in payments to 

HHAs in CY 2014 compared to CY 2013 

rather than a 2.7 percent reduction 

described above. We estimate that a 2.7 

percent reduction versus a 3.4 percent 

reduction in payments results in an 

increase in payments to HHAs of $140 

million for CY 2014 and $1.1 billion 

through 2017. 

In addition to the rebasing 

adjustments, we considered 

implementing a prospective reduction 

for nominal case-mix growth for CY 

2014. In the past, various sources have 

suggested implementing a prospective 

nominal case-mix growth adjustment, 

which would attempt to predict the 

amount of nominal case-mix growth in 

future years and implement a reduction 

to prevent possible overpayments due to 

nominal case-mix growth. To date, we 

have implemented nominal case-mix 

growth adjustments retrospectively. 

That is, we use the most recent, 

complete data available—typically two 

to three years prior to the payment 

year—to identify nominal case-mix 

growth, and implement a payment 

reduction to account for the observed 

growth. The payment reductions to date 

for nominal case-mix growth do not 

attempt to re-coup overpayments made 

in previous years due to nominal casemix growth. We plan to continue to 

monitor case-mix growth (both real and 

nominal case-mix growth) as more data 

become available. 

F. Cost Allocation of Survey Expenses 

We project that aggregate Medicare 

and Medicaid HH survey costs in FY 

2014 will be approximately $37.2 

million. As these costs will be assigned 

50 percent to Medicare and 50 percent 

to Medicaid for each state, the 

anticipated aggregate Medicaid share 

would amount to $18.6 million, if 

implemented at the beginning of 

FY2014. However, the enforcement date 

of July FY 2014 will reduce the 

Medicaid aggregate share to 

approximately $4.65 million. The cost 

of surveys is treated as a Medicaid 

administrative cost, reimbursable at the 

professional staff rate of 75 percent. 

Therefore, the states’ portion of the 

Medicaid HH survey costs incurred in 

FY 2014, with an adherence date of July 

FY 2014, will be approximately $1.16 

million (25 percent of the aggregate $4. 

65 million Medicaid cost for the last 

quarter of the FY), spread out across all 

states and two territories. Furthermore, 

the Federal Medicaid share will reflect 

the remaining $3.49 million, with an 

adherence date of July FY 2014. While 

we regard Medicaid fair share of costs 

to reflect an existing cost allocation 

principle, the methods for making the 

appropriate determinations have not 

been clear. Therefore, in this rule we 

delineate those methods and provide 

that the Medicaid responsibility be 

reflected in the state Medicaid Program. 

G. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http://

www.whitehouse.gov/omb/circulars_

a004_a-4), in Tables 34 and 35, we have 

prepared an accounting statement 

showing the classification of the 

transfers associated with the provisions 

of this final rule. Table 34 provides our 

best estimate of the decrease in 

Medicare payments under the HH PPS 

as a result of the changes presented in 

this final rule. 

TABLE 34—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS, FROM THE CY 2013 HH PPS TO THE

CY 2014 HH PPS 

Category Transfers 

Annualized Monetized Transfers .............................................................. ¥$200 million 


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72320 Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Rules and Regulations 

TABLE 34—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS, FROM THE CY 2013 HH PPS TO THE

CY 2014 HH PPS—Continued 

Category Transfers 

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

Table 35 provides our best estimate of 

the changes in the classification of the 

cost allocation of survey expenses. 

TABLE 35—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS RELATING TO THE MEDICARE AND

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

Category Transfers 

Federal Medicaid HH Survey & Certification Costs 

Annualized Monetized Transfers .............................................................. $3.49 Million* 

From Whom to Whom? ............................................................................ Federal Government (Medicaid) to Federal Government (Medicare) 

State Medicaid HH Survey & Certification Costs 

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

From Whom to Whom? ............................................................................ State Governments (Medicaid) to Federal Government (Medicare) 

* HH survey and certification costs reflect an adherence date of July FY 2014. 

H. Conclusion 

In conclusion, we estimate that the 

net impact of this rule is approximately 

$200 million in CY 2014 savings. The 

¥$200 million reflects the 

distributional effects of an updated 

wage index ($50 million decrease), a 

standardization factor to ensure budget 

neutrality in episode payments using 

the 2014 wage index ($50 million 

increase), the 2.3 percent HH payment 

update percentage ($440 million 

increase), the rebasing adjustments 

required by section 3131(a) of the 

Affordable Care Act of ¥2.73 percent 

($520 million decrease), and the ICD–9– 

CM HH PPS Grouper refinements of 

¥0.62 percent ($120 million decrease). 

VII. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a final rule that 

imposes substantial direct requirement 

costs on state and local governments, 

preempts state law, or otherwise has 

Federalism implications. We have 

reviewed this final rule under the 

threshold criteria of Executive Order 

13132, Federalism, and have 

determined that it will not have 

substantial direct effects on the rights, 

roles, and responsibilities of states, local 

or tribal governments. 

List of Subjects in 42 CFR Part 431 

Grant programs-health, Health 

facilities, Medicaid, Privacy, and 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR part 

431 as set forth below: 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

■ 2. Section 431.610 is amended by 

revising paragraph (g) introductory text 

to read as follows: 

§ 431.610 Relations with standard-setting 

and survey agencies. 

* * * * * 

(g) Responsibilities of survey agency. 

The plan must provide that, in 

certifying NFs, HHAs, and ICF–IIDs, the 

survey agency designated under 

paragraph (e) of this section will — 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program). 

Dated: November 12, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: November 18, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–28457 Filed 11–22–13; 4:15 pm] 

BILLING CODE 4120–01–P 


sroberts on DSK5SPTVN1PROD with RULES